Once again we agree- Drumlummon Mine was a huge hit to these guys and you are right it was all greed first in and I'm first out. They had to take an impairment on their filings-it's just silly they only allocated $700,000 for entire 2nd half exploration into the Caladay. Then got rid of the contract people and went inhouse with their exploratory drilling and stayed near the infrastructure and the SMP. Talking about running a solid operation into the dirt-it's their own faults their production costs are way to high over $17.63 to $18.50 last Q of 13'. Since 2011 China has been reducing their metal buying and that will continue through 2014 and into IMO 2015 as well. Which means silver prices will continue to fall along with US buffoonery fiscal policies with relationship to the dollars strengths and weaknesses correlating with future higher interest rates. 6-8 months ago I thought it was a prudent idea in light of their circumstances to curtail labor and run the SMP. But, I didn't expect them to do cut back and eliminate the expert contract exploratory drill crews going inhouse with Miner 3's and losing that valuable elements called...time and lost footage. I know they think its smart to stay near infrastructure exploring Caladay-but in long run it's not serving them well for the majority of ore is so much further from the infrastructure and SMP of where they are drilling at. Throw in the screwy Royal funding that replaced the Hale-and for more $ what do you get?
The production of their silver is impressive still- but with super high production costs your margins makes them cash poor and weak-without being able to seriously explore and sink shafts the way there supposed to be done. Right now silver is being propped up the last few months because miners were screaming bloody sunday because their costs were to high and barely breaking even let alone turning small profits. When greedy bankers and Wall Streets come and take your mines and then force feed extravagant loans and rates over leveraging your assets-eventually your costs become to high to produce if the spot markets drop. I predicted this would happen and way way to many mines were victims of themselves by taking kool aid banks up on their offers of overpriced financing packages...which would destroy them in the end WHEN...not IF...spot rates decrease. They always do Montanore old buddy...and there are going to be a slew of mines closing this year and next because of this exact thing I am speaking of. You can't control open spot rates and when the biggest player in the market China decides hey man I'm cutting back this is what you get. It was foolish for the expansion of some mines taking illogical money when the times were good-problem was they thought the good times would keep rolling. Let's just say-we're both lucky we bailed when we did-but with our years of experience we saw Sprott coming and changing of the guard and what meant for us. It was time to go-and go we did. They need to make some serious capital changes to their operating costs-especially when Hecla is sitting at a sweet $9.50 cash basis with by-product and still sinking that 8500 ft Shaft 4 in the LF that will increase their production up to 5 million OZ's yearly- That doesn't include their recent foray into gold which has been quite successful. I think this mine has been used, abused and squandered since Tom left. I may not ever take a deep position again until I see major operational changes, reduction of costs, correct explorations and budgets geared for that and either new management that can show me they are on the right path. Right now, these guys do not have what it takes to get the job done IMO.
