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A bloodtest to predict your lifespan...
http://www.guardian.co.uk/science/2011/oct/11/blood-test-predict-when-you-die
LMAO..."Your trusted source for news..."
http://newsbusters.org/blogs/brent-baker/2011/10/11/diane-sawyer-claims-wall-street-protests-have-spread-more-thousand-coun#ixzz1aTrDENZ8
I am hoping by the end of the year we get back to an average of a 40-45 to 1 G/S ratio. I expect the price of gold to go back up to $1850-$1950 by the end of the year.
An average of $42 for silver for the month of December hopefully.
AGQ in the 220-260 range.
It all depends on what they decide to do with Europe.
Nice! What are your short-, mid-, long-term targets?
Germany pushes for Greece Default:
http://www.telegraph.co.uk/finance/financialcrisis/8819195/German-push-for-Greek-default-risks-EMU-wide-snowball.html
I took out the credit line on $105
Here's my "OTHER STOCK OF MERIT":
SMKY
Smoky Market Foods has just started its operations, as an online seller of smoked salmon fillets (other products to get added as oven capacity is increased), which are touted as being the most healthy prepared salmon money can buy - and I have tried it, and it is absolutely delicious.
SMKY is now actively marketing their salmon through Weight Watchers and will be putting out a Groupon in the Chicago market next week. They are also working on starting operations in Canada, which will serve as a conduit to get their products to Asia and Europe as well.
Try to food here: http://www.smokymarket.com and use the promo code PR927 to get 25% off your order.
As for the stock, on October 1st, it got upgraded to the OTCQB tier on Pink Sheets, and should be uplisted to OTCBB sometime in November.
The stock has had a nice run to around .50, and has since pulled back and consolidated in the .20s. It appears that it may have found good support at .20, and should be able to move higher again with the OTCBB uplisting and other company events.
With its very small float, it can move pretty fast once volume comes in, and the OTCBB uplisting should help bring in some larger equity investors.
Good post, I have read some about the peak silver issue. It will def. peak when you factor in a western depression, the demand hardly fades, for instance in 2008 only dropping 1.5%. While the supply of silver in a depression drops tremendously from the lack of base metal mining.
New Ihub Wiki Board:
http://investorshub.advfn.com/boards/board.aspx?board_id=22463
Peak Silver Revisited: Impacts of a Global Depression, Declining Ore Grades & a Falling EROI
The world is about to peak in global silver production. This will not occur due to a lack of silver to mine, but rather as a result of the peaking of world energy resources, declining ore grades, and a falling Energy Returned On Invested – EROI. The information below will describe a future world that very few have forecasted and even less are prepared. This is an update to my previous article Peak Silver and Mining by a Falling EROI. In my first article I stated that global silver production may peak in 2009 if we were to enter a worldwide depression. We did not have the global depression as massive central bank printing and bailouts have thus far postponed the inevitable.
The world has entered a plateau of global oil production over the past 5-6 years. A higher oil price has not brought on more supply to offset depletion rates from existing fields. From the graphs above we see a correlation between global silver supply and oil production, especially in the latter part of the 20th century. Up until the late 1800’s and early 1900’s the majority of energy used in mining silver came from human and animal labor. It is truly amazing just how much silver was produced in the United States at this time without the use of oil and modern mining practices (information provided later in the article). This all changed as global oil production as well as the technique of open-pit mining increased.
The 3 Big Energy Game Changers for Silver Mining
There are a number of some very large open-pit mining projects supplying silver that are forecasted to go into production within the next several years as well as others by the end of the decade. It is astounding to see these 25-45 year extended forecasts by these mining companies without any consideration of what the energy environment will be like in 2015-2020 or later. It seems like everyone in the sector assumes there will be ample supplies of energy at commercially viable prices.
This is where the trouble begins. There are three negative energy game changers that will impact the mining industry going forward. They are: (1) the Peaking of global oil production, (2) the Land Export Model and (3) the falling EROI – Energy Returned On Invested. Of the three, I believe the falling EROI will be the most devastating. Before explaining why this is the case, let’s take a look at each.
Peak Global Oil Production
According to JODI’s global oil production figures represented HERE in a post on theOilDrum.com, it looks like the global peak of convention crude/condensate and natural gas liquids took place in 2006:
Global oil production has increased steadily since the early 1980’s and has now been in a bumpy plateau for the past 5-6 years even with much higher oil prices. It is true that there are more projects and oil fields slated to come online in the next several years, but much of the increase will be offset by depletion in existing fields. To add insult to injury, the majority of oil that is exported throughout the world is being supplied by countries that are also increasing their own domestic oil consumption. This is a double-edged sword for dependent oil importing nations— which leads us to the Export Land Model.
Export Land Model
The Export Land Model developed by geologist Jeffery Brown and others shows how oil- exporting countries suffer higher declines of exports due to increased domestic consumption. As the nation increases its own oil consumption for their expanding economy, this causes exports to fall even greater than declines in oil production alone. This becomes apparent when we look at what is taking place in Saudi Arabia.
In 1980, Saudi Arabia produced approximately the same amount of oil it is presently. However the kingdom is exporting 2+ mbd (million barrels a day) less oil. The right side graph above reveals that as domestic consumption has increased (black line), exports have declined. By 2020, Saudi Arabia’s domestic consumption is forecasted to reach 5.9 mbd of oil equivalent, including natural gas, which will decrease the country’s exports even further (Jadwa Investment’s “Saudi Arabia’s coming oil and Fiscal Challenge”).
If we add up all the other exporting oil countries and consider what the future percentage loss from this model might be, the drop in oil exports will be significant indeed. Here we can see that the peaking of global oil production, plus the declining oil exports described above by the Export Land Model, puts a serious dent in the ability for future growth in the world economies. If the world economies are unable to grow, neither will the supply of base metals and silver.
These two energy constraints are in themselves bad enough news for the global economy and the mining industry. Unfortunately the third is by far the most devastating. The falling EROI measures what amount of that oil will be available for market. It is also described as the net energy that remains after production costs are considered.
The Falling EROI: Energy Returned on Invested
In my opinion, the EROI —Energy Returned On Invested— is by far the most important aspect confronting our economy, society and world at large. Ironically, the EROI of oil and natural gas has been falling ever since man drilled his first well.
According to work done by Cutler Cleveland of Boston University, the EROI of U.S. oil and gas was 100/1 in 1930. It fell to 30/1 by 1970, and hit 11/1 by 2000. Oil was so abundant during the 30’s in the States that it only took the cost of 1 barrel of oil to produce 100 barrels for market. By 2000, it has declined nearly tenfold.
The graph on the right side shows the falling Global oil and gas EROI (by Gagnon, Hall & Brinker) to be 18/1 in 2006. They plot with a solid black line that a possible 1:1 EROI projection may be by the mid 2030 decade. As this EROI ratio continues to decline, it puts a huge stress on the world economies by increased energy costs while providing less net energy for the market.
There has been so much misinformation put out by different organizations as to the amount of oil and natural gas reserves that it is has totally confused the investing community and the public. Whenever I get into a debate about peak oil or oil reserves there is always someone who brings up the notion that the United States is sitting on trillions of barrels of shale oil. This is the subject of a whole other article, but to get to the point, shale oil as a savior of the inevitable United States (or World) Energy Crisis is a pipe dream. Here are the three biggest lies propagated in the U.S. energy industry:
1) 1950’s - Nuclear energy…..too cheap to meter.
2) 2000’s – Shale Oil trillion+ barrels of U.S. reserves
3) 2000’s - Shale Gas 100 years worth of U.S. supply
To explain why there is a great deal of hype in shale oil and gas, take a look at the graph below.
Shale oil is much more expensive to extract than light sweet crude in Saudi Arabia. Many say that increased technology will bring more oil to the market, but it does so at a lower EROI. The lower the EROI, the less net energy is available for market. With less net energy, there is less growth.
Furthermore the depletion rates of a typical shale well in the North Dakota Bakken Field are 75-80% by the second year. Shale gas depletion is even worse, with fields reported from the Texas Barnett Field declining 60% in the first year. The notion that the U.S. will be able to increase oil production significantly with shale oil turns out to be a red herring when you figure that these severe depletion rates make it impossible to do so.
Another nail in the coffin for shale oil is its low EROI. The figures on the right side of the graph above show the different EROI ratios for conventional and nonconventional energy sources. The only thing worse on the EROI scale than shale oil (5:1) is tar sands (2-4:1). Why are these EROI ratios so important and ultimately devastating to the world economy and silver mining? The next graph provides the answer.
As we can see from the left side of the global oil peak, everything is rosy; high EROI ratios with a majority of net energy already consumed by the world economies. Once we slide over to the other side, the picture gets downright scary. Even though there is a great deal of oil on the downward side of the peak, the majority of it gets consumed in the production of the energy itself. Once it costs more to produce a barrel than you get in return, the game is over.
Unfortunately, there is more to it than that. There is a minimum EROI that a modern society needs to sustain itself. All the EROI ratios listed above are figured from the point the oil & gas comes out of the well. We have to remember the oil & gas has to be transported and refined and the interstate-highway system and infrastructure has to been maintained. All of these are costs that are subtracted out of that EROI ratio. This is explained in detail by Charles Hall & David Murphy HERE. The bare minimum a modern society needs is an EROI of 3:1….but if you want the luxuries of art, entertainment, medicine, education or etc; the ratio has to be higher still.
The graph above is one possible forecast of net energy. The creator of the graph has produced another showing a more gradual slope of net energy. I have had several conversations and email exchanges with other geologists and engineers who believe the graph presented above is a more realistic representation than the second. I agree.
Peak Oil is Here Whether You Believe it or Not
The list of countries presently past peak is long. If we consider a good portion of these countries are in areas of the world that do not have much in the way of regulations or environmentalists, peak oil still took place. It is true that there is still some oil in the U.S. being kept from the market by environmentalists and the government, but in the end….it doesn’t change the overall picture all that much.
Lastly, for those of you who believe the information above is controlled by the Illuminati, Bilderbergs or whomever and there is still plenty of oil in wells capped all over the country, there is nothing that can be written or said to change your mind. As illustrated by the data, peak oil is here whether you believe it or not.
As the world is currently peaking in oil production, the United States passed its peak forty years ago in 1971. The same can be said for overall silver production. The U.S. extracted the majority of its high grade silver by the middle of the 20th century. Today, the U.S. has to resort to mining a great deal more total ore to produce the same or less silver than it did years ago. This process is occurring throughout the world. In my first article (link provided at the top of this article) most of the information on ore grades came from Gavin Mudd and his work on the Australian mining industry as well as data on declining global gold ore grades. To continue to understand this ongoing process, I choose to focus on the United States as the USGS – U.S. Geological Survey – has kept some very detailed records of historical mining activity in the States.
CASE STUDY: United States Past Silver Production and Falling Ore Grades
In the early days, miners and investors sought out the best quality and highest ore grades they could find. The higher the ore grade, the higher the profit. Today, there is a great deal of excitement when mining companies release drill results with higher ore grades than expected. Yet, these same ore grades would have been embarrassing to the prospector and investor just 100 years ago. How the passage of time makes us forget what life was like just a short while ago…
The majority of the top eight silver ore-producing states in the country peaked in annual silver production before the 1940’s. Only Idaho and Nevada had higher peaks after 1950.
Colorado had the highest annual silver production of all 50 states with 25.8 million ounces produced in 1893, almost 120 years ago. New Mexico peaked in 1885, Montana in 1892, California in 1921, Utah in 1925, and Arizona in 1937. Even though Idaho had its true peak in 1966 at 19.8 million ounces, it surpassed its previous record by only 200,000 ounces, which occurred in 1937. Nevada peaked late in the game due to two factors: 1) it has recently become the largest gold producer in the country currently, providing nearly 75% of nation’s gold. (with gold mining comes by-product silver), and 2) due to the McCoy/Cove Mine, which single-handedly mined 11 of the 27.4 million ounces Nevada produced at its all time peak in 1997.
Not only did the McCoy/Cove Mine help Nevada to become the second-highest silver producer in U.S. history, it also accounted for 35% of all silver extracted from the state between 1987 and 2003.
The record silver production in Nevada as well as the McCoy/Cove mine are now gone. In its last recorded year of production, the McCoy/Cove Mine produced 596 oz of silver in 2006. That’s correct, a mere 596 oz (that year it was still producing some gold). According to the Major Mines of Nevada 2010 publication just released, Nevada only produced 7.3 million ounces of silver in 2010…a 70% decline in just 13 years from its peak.
From the late 1800’s to 1950’s the same eight states listed above produced the lion’s share of silver in the country. Very few people who are asked will know which state was the largest producer at this time. Most when asked will say Idaho, Utah or Colorado. I was quite surprised to find out that Montana outperformed them all by producing 775 million ounces by 1950.
Montana produced the most silver in the country at this time due to the richness of copper in the state, where silver was a by-product. According to the MONTANA MINING NEWS MINING JOURNAL dated 8/30/1930:
Anaconda Copper Mining Company is confining work at the Flathead Mine, near Kalispell, Montana, to development, because of the present metal prices, according to a reported statement by Jack Dugan, superintendent. Thirty men are employed in extracting 40 tons daily, of ore, said to average 50 ounces of silver, per ton.
This is an example of the kind of high grade ores they were pulling out of Montana back in 1930. Impressive as it was, this was not the average. To give you an idea of the difference of 75 years, Montana produced 9.3 million ounces of silver in 1935 at an average ore grade of 3.45 oz/ton. In 2010 there were only two mines producing silver as a by-product of copper. The larger producer is the only publicly traded company in Montana and it produced a little more than 1 million ounces of silver at an average ore grade of 0.87 oz/ton or a 75% decline.
The USGS provides Mineral Yearbooks for the states back until 1932. One can imagine what the ore grades must have been in 1892 when Montana produced its most silver in one year at 19 million ounces.
Idaho: the Largest Silver Producer in the Country’s History
The one state that sticks out like a sore thumb in the graph above is Idaho. It is the only state that has produced over a billion ounces silver by 1990 with the majority of it after 1950. Even with this significant production, Idaho wasn’t able to escape the negative aspects of falling ore grades.
In the late 1800’s and early 1900’s a larger percentage of silver came from a grade called “Dry and Siliceous Ore”. During this time, between 40-50% of silver produced in the country came from this type of ore. To give you an example in 1922, 46.8% of silver in the U.S. came from dry and siliceous ore. The percentage dropped over the next decade— falling some years into the teens (especially during the 1930’s depression). By 1935, it climbed back to 40%.
This is the sort of ore that primary silver mines are made of as it contains the most silver per ton. Idaho had some of the richest dry and siliceous ore grades in the country. The graph below represents how much this sort of ore grade has declined since the 1940’s.
The reason why this graph only shows data up until 1980 for Idaho and 1989 for the U.S. is due to the fact that information was withheld from the USGS due to proprietary reasons by the mining companies. Furthermore, this is also true for individual state reporting of detailed silver statistics after 1990. In the early days the states provided the USGS with so much information on gold and silver that many of the gold-silver reports were over 200-300 pages. Today the Silver Yearbooks barely fill 15 pages.
To bridge the gap to the present day, we can look at what has taken place in the largest publicly traded mining company in the state. Hecla’s Lucky Friday Mine in Idaho produced 3.3 million ounces in 2010 at an average ore grade of 10.25 oz per ton. The chart below compares the difference from the same mine in 1965.
Here we can see that Hecla has only produced a little more than 100,000 ounces of silver than it did in 1965 but has to process almost double the amount of total ore. This insidious decline of silver ore grades over the years seems subtle to the mining industry that is focused on quarterly results, but becomes an increasingly difficult problem now that the world suffers from peak oil and a falling EROI.
The United States: Produced 25% of all Global Silver 1900-1950
When the U.S. was the Saudi Arabia of the world in oil production at the early and middle part of the 20th century, it was also the second-largest silver producer in the world behind Mexico. Of the 10.5 billion ounces of silver produced by the world from 1900-1950, the United States accounted for 2.7 billion (or 26%) of the total amount.
This historical graph is relevant due to the fact that in next 60 years from 1951-2010 the U.S. only produced 2.58 billion ounces of silver… with significantly falling ore grades shown below.
The chart above represents total ore from mining gold, silver, copper, lead and zinc. The majority of silver comes from base metal mining in which zinc/lead provides the highest percentage compared to copper and gold. In 75 years, the total ore grade of silver has fallen nearly 92% while actual production has remained basically flat. This is due to the fact that all base metal ore grades in the U.S. are falling as well.
For example, copper has shown a huge decrease in ore grade since the early 1900’s. In 1906 the average ore grade for copper was 2.5%. By 1935 the average copper ore grade had fallen to 1.89% and in 2009 the United States produced copper at 0.43% a ton. This is a decline of 77%.
The Falling EROI and Declining Ore Grades
On top of declining ore grades and adding insult to injury, is the falling EROI of energy. When the U.S. and the world were tapping into high quality concentrated ore grades in the early years, they did so with the majority of human and animal labor. This kind of labor was not only very efficient but it also utilizing a higher EROI. The open-pit mining practices employed today are in fact quite the opposite….extracting metal at a much lower EROI.
For example, people today have this misguided opinion that modern farming is very efficient. They see one farmer on a huge tractor working hundreds or thousands of acres of agricultural land. They do not factor in all the energy it costs to plant, fertilize, harvest and process the crop. This does not include all the energy and technology it takes to develop hybrid seeds, the manufacturing of the tractor and equipment as well as many other aspects that go into modern farming. In reality, the pre-industrial farmer with horse and plow was extremely more efficient that his modern counterpart.
FOOD EROI’s
Hunter Gatherer = 10/1
Pre-Industrial farmer = 10/1
Modern high-tech farmer = 1/10
The pre-industrial farmer with horse and plow was able to produce 10 calories (of food) for market for every 1 calorie of energy (food) consumed by the operation. Today, the modern farmer needs to consume 10 calories of energy to provide only 1 calorie of food for market. If we consider this ratio, the modern farmer is 98.8% less efficient than the simple farmer with horse and plow.
The only reason why modern farming practices have been successful at this horrible rate of efficiency is due to the high EROI of energy over the past 100 years. Now that the EROI is falling considerably, it is putting severe pressure on the agricultural industry. This will also be true for the mining industry.
Base metals are extracted by either open-pit or underground mining. Of the two, open-pit mines account for the larger percentage of metal produced in the world. (Surface Mining Methods and Equipment) The technique of open-pit mining utilizes huge excavators and large haul trucks to move the ore from the mine. There is a great deal of energy consumed in the development, manufacturing, maintenance and operation of these huge earth moving machines in the mining industry.
It is difficult to estimate an EROI ratio for open pit mining as the end product is metal and not energy. That being said, a simple rule of thumb can be assumed if we take the negative EROI of modern farming as an example. The larger and more complex the machine used in industry, the more inefficient its production as it pertains to the EROI.
Now that we understand the past and present EROI ratios in the agricultural sector, we can see why the early miners and prospectors were much more efficient in producing silver than the huge open-pit mining operations of today when we consider all the energy involved. As the world’s energy sources start to decline in the future and the falling EROI destroys an ever increasing portion of the net energy available for market, the number of open-pit mines will decline as well. As this process takes place, the peak in global mining will occur due the fact that human or animal labor cannot equal the extraction rate of diesel powered earth-moving machines. What is taking place in the mining industry today is the WORST OF BOTH WORLDS… declining ore grades on top of a falling EROI of energy.
The Coming Global Depression: Another Nail in the Coffin for Peak Silver
The world hasn’t suffered an economic depression for almost 80 years. The Kondratieff-Wave analysts who study business cycles say we are now overdue for a depression. Even though this is true, they are correct for the wrong reasons. Business cycles have occurred because humans were able to constantly grow and expand their economies. It was due to the 10/1 EROI of the pre-industrial farmers that enabled the rest of the economy to grow and flourish. After several generations of booms, we had the busts.
As we moved into the modern-industrial economy cheap energy with a high EROI allowed the world economies to grow exponentially—allowing these business cycles to continue. Today we are at the top Boom part of the cycle. The big Bust and depression have been postponed due to the ability of central banks to print money and financial institutions to invent hundreds of trillions of dollars worth of derivatives to hedge overly inflated assets. When the global depression finally arrives, we will never return to anything like we enjoyed before. This bust will be the depression that ends all global depressions.
If we consider what took place during the last depression, base metal & silver mining activity fell off a cliff. The interesting thing to note in the next two graphs below as global silver production declined, gold production actually increased.
Global silver production declined 38% from 1929 to 1932, whereas gold production actually increased 24% in these three years. It took eight years before the world was able to increase silver production over its 1929 figure. Gold on the other hand, increased its global production a staggering 80% during the same time.
This time will truly be different. The world will not be able to increase its gold production anywhere near the percentage it did in the 1930’s. There is a good chance that actual global gold production will decline as the supply chains break down disrupting the highly technical method of refining and processing gold. Another reason may be due to its dependence on copper production as part of its supply. When economies collapse, so does the demand for base metals such as copper, zinc and lead. This is the reason why silver production suffers greater during a depression than gold.
Here we see just how much difference there is in the base metal mining percentage between gold and silver. Zinc & Lead account for the larger portion of the base metal percentage of silver mining, whereas copper production provided 15% of all the gold produced in the world in 2010….or 75% of the base metal pie.
When the world’s central banks are unable to continue to prop up the global economies with money printing, economic growth will drop considerably. China is starting to show signs of an economy heading into a brick wall. Base metal production will decline significantly in the following years cutting back the production of silver as well. If history is a good reference, the future global supply of silver can decline between 20-40%.
A Brief look at World Silver Production
Over the past decade global silver production has increased on average between 2-3% per year. In 2010, according to the World Silver Survey, global silver production reached 735 million ounces of silver. In the first half of 2011 some of the top silver-producing countries have increased their production while others have seen declines. The top producing silver mine in the world, BHP Billiton’s Cannington, has seen its production decrease from 18.9 million oz in the first half of 2010 to only 15.5 million ounces in the first half of 2011 (an 18% decline). Cannington — like all mines— suffers from falling ore grades.
In 2000, Canningtion mined 1.6 million tons of ore and produced 30 million ounces of silver at an average ore grade of 636 g/t. By 2011, it mined 3.1 million tons of ore (or 92% more) just to produce an additional 5 million ounces than it did eleven years ago. What is occurring at Cannington is typical of mines throughout the world.
If we take a look at global silver supply, only a handful of countries have increased their production significantly over the past several decades. Out of all the countries listed in the graph below since 1985, China has had the largest percentage increase. China increased its estimated production from only 2.5 million ounces in 1985 to 99 million oz (or +3,850%) by 2010. The other countries that have increased their production in order of highest percentage are, Bolivia from 3.6 mil oz to 41 mil oz (+1,039%), Argentina from 2.1 mil oz to 20.6 mil oz (+880%), Chile from 16.6 mil oz to 41 mil oz (+147%), Peru from 58.2 mil oz to 116.1 mil oz (+100%), and finally Mexico from 73.2 mil oz to 128 mil oz (+75%), in the same time period. Even though Mexico is the number one silver producer in the world, it had the lowest percentage increase of all six countries. These countries account for 61% of all global silver supply.
Australia was not included in the graph for two reasons. First, even though its production has increased 71% since 1985, its future growth is not forecasted to improve as much as the nations listed above. Secondly, because of Australia’s western form of capitalistic government, it is least likely to deal with issues of political instability, threats of nationalization or protectionist policies such as those in South America, Mexico and China.
Argentina, Bolivia, Chile and Peru— which are located in South America— may suffer from the same type of policies that have plagued the resource industry in Venezuela. Not only are Venezuela’s oil fields nationalized, in August of this year, President Hugo Chavez has also ordered the same for the gold mining industry.
In Mexico, billionaire Hugo Salinas Price has gained significant support in the country to reintroduce the Silver Libertad as legal tender to compete with the Peso for the Mexican people. If this policy were to pass, a large percentage of Mexico’s silver production would be consumed by its own people to protect them from continued inflation. Furthermore, the country suffers from a great deal of upheaval and violence from the drug wars which could lead to political instability possibly threatening the mining industry.
Lastly, over the past several years the world has felt the ramifications of China’s cutback of rare earth mineral exports. China currently produces between 95-97% of the 17 rare earth minerals in the world. Not only have prices of rare earth minerals increased substantially due to this monopolistic policy, it is also forcing foreign companies to move their facilities that manufacture end-user products in China. These companies are also being requested by China to transfer valuable technology to other domestic companies so they can benefit from the knowledge.
This may also occur in exports of Chinese silver. As global tensions increase due the continued disintegration of the world fiat currency system, China may decide to put a total ban on silver exports. Even though Chinese exports have declined substantially (from 3,000 metric tons in 2005 to only 1,575 metric tons in 2009), there is a good possibility that they may turn off the silver spigot completely.
The countries listed above are enjoying the best records of increased silver production, but at the same time are some of the worst candidates for dependable future global supply.
Final Remarks and Conclusion
The world produced a record amount of silver in 2010. Many analysts are forecasting a continued increase in global production for the next decade. There are several factors that show why this will not be possible.
As the world peaks in global oil production and the net energy available for market continues to shrink due to the falling EROI (Energy Returned On Invested), of oil and natural gas, global economic growth will come to a screeching halt. The falling EROI of energy is a one way street to the bottom. Unconventional energy sources such as shale oil, shale gas and tar sands will not be able to stop this decline.
As global economic growth disintegrates so will the demand for base metals – which 70% of silver is a by-product. On top of that, silver ore grades are relentlessly falling in mines throughout the world which takes an increasing amount of energy just to keep production flat. If the mining industry tries to incorporate more human and animal labor to offset declining oil based energy in the future, it will do so only at much lower rates of production than today. This is due to the fact that human or animal labor cannot match the extraction rate of diesel powered excavators or huge dump trucks when it comes to mining silver.
Then there is the negative effect of a global depression on the production of silver. Presently the world has entered into tremendous chaos and economic turmoil. Conditions are ripe for a complete disintegration of the financial markets, thus pushing the world over the edge into a new dark age of hyperinflationary depression. In this sort of atmosphere, countries may resort to the nationalization of mines as well as other protectionist’s policies.
When the nails of the peak silver coffin are added up, the death of increasing future supply is close at hand. The CEO’s and analysts in the mining industry are for the most part oblivious to these factors that will destroy their ability to make viable forecasts of future projects. It amazes me to see professionals plan a huge open-pit mine with a 25-45 year economic plan without any consideration of what the energy environment will be like at that time. For some strange reason, there is this false assumption that “If we build it, the energy will come.”
If the world enters a depression within the next year or two, this will certainly guarantee the global peak of silver production. Why? It won’t matter if the global economy recovers in the next decade, because the peaking of oil and the falling EROI of energy will have destroyed enough net energy to kill any attempt to bring global silver production back to the level it was before.
Lastly, anyone who is good at connecting the dots will realize the ramifications of this article go way beyond just the peaking of silver. The falling EROI of energy will not only be a destroyer of precious net energy, but will also help bring down the largest empire in the world. This will be the subject of a future article.
Author’s Note: The two public mining companies mentioned in this article were provided to give actual information of declining ore grades and not meant to put either a negative or positive view on the company or to offer any investment recommendation. They are just mere symbols of what is taking place throughout the world. Lastly, the information in this article is an interpretation and opinion of what the energy and silver market will look like in the future. Each reader should develop their own opinion, based on several sources, and not solely on this single article.
By: Steve St. Angelo
http://news.silverseek.com/SilverSeek/1318263505.php
JER1
Canadian Stock Exchange Holiday Today...
The silver stocks will open up huge tomorrow!
Your tax money at work...
(LMAO @ Scarface posters in the drug lord's house...)
http://www.latimes.com/news/nationworld/nation/la-na-atf-guns-20111009,0,6431788.story?track=rss
The Dutch Central Bank Answers 10 Questions About Its Gold By Tyler Durden - zerohedge.com
* Friday, October 07, 2011
Three weeks ago, the Dutch asked their central bank where their gold is. The central bank has responded. Courtesy of Vrijspreker, here are both the replies, as well as the key follow up questions. And while the bulk of the answers are expectedly trite, and generic form, "DNB’s physical gold holdings function as the ultimate reserve and anchor of trust in times of financial crisis. Further, gold is being held for diversification reasons." This appears just slightly different from our own Chairman's definition of gold as mere barbarous tradition.
From Vrijspreker.
We repeat the questions of the Dutch Socialistic Party with the answers of the Secretary, and follow up with first comments of the Vrijspreker. We think further questions are justified!
Question —Answer—Comment
1. Did the Dutch Central Bank (DNB) loan part of their gold?
If yes, how much and to whom?
No. DNB has informed me that they have stopped loaning out gold as of 2008.
Comments Vrijspreker: if so, why doesn’t DNB make that clear in the annual report? Why hide such crucial information.
2. Why are gold and gold loans stated as one line item in the annual report 2010 instead of mentioned as 2 separate items?
DNB follows the rules for valuation, determination of result and balance sheet presentation of the European system of Central Banks. The asset ‘Gold and Gold Receivables’ reflects the physical gold inventory.
Comments Vrijspreker: good international accounting standards oblige companies to separate cash from receivables, as they’re clearly different. Why wouldn’t these standards apply to central banks? In times of increasing civil unrest because of opaque financial schemes being set up by governments, central and commercial banks and the demand for more transparency, how would you justify these special rules for central banks? Are they above the law?
3. Can you give an overview of the yearly yields of the gold loans during the past years?
No gold has been loaned out over the past years.
4. Where IS the physical gold of DNB? At which locations and how much is where?
What is the reason that the gold is still at these locations?
DNB has a location policy, which means that the gold has been spread over the following locations: New York, Ottawa, London and Amsterdam.
Comments Vrijspreker: why doesn’t the Secretary answer all the questions? What is the amount per location? And what exactly is the location policy? Why New York instead of any random other city? Also it’s important to know how often and by whom the vaults are audited.
5. What was the most important reason for DNB to sell the gold in the past? Are the storage costs a reason? What are the actual costs to store the gold?
By selling gold in the past, DNB has tried to align its gold holdings with other gold holding countries. The storage costs were not a factor in the decision to sell the gold, because they are relatively low. Currently, DNB’s total annual storage costs paid to other central banks amount to a few hundreds of thousands of euros. The costs vary per location.
Comments Vrijspreker: why would DNB want to align its gold holdings with other central banks’ holdings? Is there a coordinated central policy amongst all central banks? Has this been prescribed by the Bank of International Settlements? Are the recent gold purchases by developing countries’ central banks not conflicting with this international policy. Could you outline the details of this policy?
6. Can you confirm that since 1991 of the 1700 tons of gold about 1100 tons have been sold?
Is the remark of journalist Peter de Waard correct that because of these historic sales there is a loss of about 30 billion euro?
If not correct, what is the right amount?
Since 1991, 1,100 tons of gold have been sold. Back then it was concluded that DNB held relatively much gold compared to other central banks. Decided was to align the amount of gold with other important gold owning countries. Sales proceeds have been added to DNB’s general reserves and have been invested in interest generating investments. Comparing the actual, as a result of the financial crisis, higher gold price with the historical gold price does indeed lead to more or less the amount as mentioned by Mr. De Waard. However, one has to take into account the investment income generated since selling the gold and the fact that the result of said calculations heavily depend of the strongly fluctuating price of gold.
Comments Vrijspreker: again, why align the gold holdings with that of other central banks? What exactly is the purpose of that policy?
7. How much of the National Debt has during the past 20 years been paid off with the proceeds of the gold sales? Are you of opinion that the sustainability of the national debt will be improved by paying off the debt and at the same time selling the gold?
Gold is an asset of DNB. The sales proceeds have been invested in other assets and have hence not been used to reduce the national debt. The return on investments will flow back to the Dutch government as a result of DNB’s dividend payments.
8. What is in your opinion the present function of the gold stock?
DNB’s physical gold holdings function as the ultimate reserve and anchor of trust in times of financial crisis. Further, gold is being held for diversification reasons.
Comments Vrijspreker: clearly DNB sees value in gold. For that reason, it needs to be more transparent, and so should all central banks.
9. What is the relation between the size of the market of the gold stock and the size of the market of gold derivates? What are the possible consequences of this?
The size of the physical gold market and derivatives market cannot easily be compared because of diverging measures for the size. For the trade in physical gold the turnover is measured: in the most important market (London) this amounted to USD 136 billion in the second half of 2010 according to the London Bullion Market Association. For the derivatives market the underlying value of outstanding derivatives (swaps, future contracts and options) is of importance. For the second half of 2010 these amounted to USD 396 billion according to the Bank of International Settlements. In general one can say that the availability of derivatives markets promote efficient price discovery.
10. Can you confirm that recently a number of countries have even enlarged their physical gold stock? Do you have an explanation for this development?
Buyers are developing economies that show strongly growing official reserves or where gold traditionally only constituted a small portion of the reserves. There is also a wide group of countries that have sold gold the past decade (including France, Spain, UK and Switzerland)
http://www.zerohedge.com/news/dutch-central-bank-answers-10-questions-about-its-gold
George.
Click on "In reply to", for Authors past commentaries.
I-box update on Huldra Silver, new links...
http://investorshub.advfn.com/boards/board.aspx?board_id=19452
What on earth is going on with that chart.... from .01 to $2.50???
*J* did this link give company and symbol?
wow that coin looks nice...
The world's first gold coin integrated with a diamond to celebrate the Queen's 60th birthday
* Thursday, October 6, 2011
http://www.businessinsider.com/the-worlds-first-gold-coin-integrated-with-a-diamond-to-celebrate-the-queens-60th-birthday-2011-10
George.
Hiding Gold in All the Unusual Places
* Thursday, October 6, 2011
If you’re looking for a safe place to put your investments, Chad Venzke has a suggestion: Dig a hole in the ground four feet deep, pack gold and silver in a piece of plastic PVC pipe, seal it, and bury it.
The 30-year-old central Wisconsin resident trusts no one but himself to store and protect his gold and silver—not banks, not investment funds, and certainly not the government. It’s precisely because of this suspicion of institutions that he invests in those metals to begin with. In case of emergency, "you always want to have your precious metals within arms reach," he says.
Venzke is hardly the only investor who wants his precious metals nearby at all times. A pound of gold worth about $24,000 can easily fit in a pocket; how to protect it is a decision that carries expensive consequences. Do-it-yourself investors who don't trust banks must find creative storage options, whether burying gold in the yard, submerging it in a koi pond, stashing it behind air-conditioning ducts, or placing it under carpets. All these options are debated in online gold and silver investor forums. They're also debated and demonstrated in youtube videos, including one by Venzke that has been viewed more than 7,000 times.
MOUNTING HOARDS
While there’s no way of knowing how many investors take Venzke’s advice, there are growing piles of precious metals in, under, or near American homes. From mid-2010 to mid-2011, U.S. investors bought up more than 100 tonnes of physical gold coins and bars, up from 15.2 tonnes in 2007, according to the World Gold Council. (A tonne, or metric ton, is 1,000 kilograms.) Worldwide bar and coin demand rose 37 percent during the mid-2010 to mid-2011 period, according to the Council, even as demand from exchange-traded funds backed by physical gold, and similar products, fell 84 percent.
The notion of keeping one’s gold in a safety deposit box—inside the banks many gold aficionados find so untrustworthy—is anathema to many gold bugs. Venzke, who predicts "runaway inflation" and a crisis leading to a "new form of currency within this decade," worries that the boxes won't be accessible if banks shut down in a crisis. "How are you supposed to get your stuff out of there?" he asks.
For those storing gold and silver in or around their home, the most immediate danger isn’t a crisis or a dip in metal prices. It’s theft. The FBI, which tallies the theft of precious metals and jewelry in one category, says $1.6 billion was stolen in 2010, up 51 percent from 2005. Just 4.2 percent of the lost loot was recovered last year.
Metal detectors are a big worry. Basic detectors can find metal on the surface or in the first 12 inches to 14 inches below ground, depending on soil conditions, says Louis Mahnken Jr., a sales representative for Kellyco Metal Detectors in Winter Springs, Fla. That’s why Venzke advises burying it at least four feet deep. There are online debates about the best way to frustrate such thieves, including using scrap metal as decoys or hiding metal by covering it underground with asbestos or mirrors.
DOORSTOPS, BOAT ANCHORS
Metal owners also use the "hiding in plain sight" maneuver. According to dealers, some customers buy 100-oz. silver bars, paint them black, and use them as doorstops. That's foolish, says Steven Ellsworth, a coin dealer in Clifton, Va., who teaches security classes for the American Numismatic Assn.
Ellsworth is a believer in keeping precious metals in bank safety deposit boxes, as well as having high security at home. "My wife sometimes thinks we're over-secured and calls our residence 'the compound,'" says Ellsworth, a retired Army colonel. His security measures include fences, alarms, cameras, and dogs.
Safes can certainly deter thieves. Yet an inexpensive fire safe may be exactly the wrong place to put your valuables. Richard Krasilovsky, president of Empire Safe, calls such safes "handy carrying cases for burglars." A fire safe is designed to protect papers from fire, not from intruders, says Ryan Smith, a senior product manager at SentrySafe. "It wouldn’t be wise to put any more than $20,000 of valuables in our products," he says.
Krasilovsky, whose company makes high-end safes, says safes must be very strong and very heavy—a recent sale was of a $10,000 safe that weighed 4,000 pounds. A proper safe starts at $2,000 and could cost as much as $40,000, he says. If the safe isn't certified to resist burglars with tools for 30 minutes, a so-called "TL-30" rating, "you're buying an expensive boat anchor," says Ellsworth.
Of course, whether gold is buried, put in a safe, or hidden under your bed, there’s nothing to stop a determined person with a gun from making you show them where you put it. That’s why it’s important no one ever know you have gold in the first place. Krasilovsky’s company will deliver safes in the middle of the night, installing them where no one, including a contractor, is likely to stumble across them.
"People have to be extraordinarily secretive," Krasilovsky says. This secrecy keeps away not only thieves but also prying relatives and the tax man. "One of the benefits of owning precious metals is nobody knows you own it," Venzke says. "It’s the most private investment you can make."
Unless, of course, you feel compelled to post youtube videos sharing insights about where to stash your gold.
http://www.bloomberg.com/news/2011-10-06/hiding-gold-in-all-the-unusual-places.html
George.
all will be o.k. , nothing has changed in monitary system. i finally understand 9 9 9 theory. not good.
cain with solid solid taxation against we americans.
Nice post. This may be the last deal on PM equities before, what I believe, a decade long PM rush that will take gold to $5-6,000. I think we are just here far far ahead of the crowd.
Hey Mick, I was in Ihub jail for a few days and then was real busy for a couple more... silver crashed during then too, I had mostly stocks... the profit is gone.... for now.
Junior Gold Stocks Set to Soar
The world’s most profitable stocks just got their biggest “buy” signal in nearly three years.
The last time this happened, they more than tripled in value.
Now everything is coming together for this tiny sliver of the stock market which has produced more two-, three- and ten-baggers than any other.
It’s the perfect setup...
Hitting Eight-Year Lows
Investors have gotten spooked in the last few months. They’re all scared — from the smallest retail investor with a few thousand bucks in mutual funds to the largest institutional investors responsible for billions of dollars.
The future is looking even worse...
The majority of Americans think the economy is already in a recession, or worse. Near double-digit unemployment is now the norm. Today’s unemployment report of 9.1% unemployment was hailed positively. Earnings expectations have been declining.
Europe, China, and other places are even worse off.
The global scare has hit everything: gold, stocks, corporate bonds — almost everything has fallen.
But it has hit one of the riskiest and most profitable stock markets especially hard.
The TSX Venture market, home to the highest-risk/highest-reward gold and natural resource exploration and development stocks, has taken a nosedive:
Wealth Wire
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Junior Gold Stocks Set to Soar
Posted by Andrew Mickey - Friday, October 7th, 2011
The world’s most profitable stocks just got their biggest “buy” signal in nearly three years.
The last time this happened, they more than tripled in value.
Now everything is coming together for this tiny sliver of the stock market which has produced more two-, three- and ten-baggers than any other.
It’s the perfect setup...
Hitting Eight-Year Lows
Investors have gotten spooked in the last few months. They’re all scared — from the smallest retail investor with a few thousand bucks in mutual funds to the largest institutional investors responsible for billions of dollars.
The future is looking even worse...
The majority of Americans think the economy is already in a recession, or worse. Near double-digit unemployment is now the norm. Today’s unemployment report of 9.1% unemployment was hailed positively. Earnings expectations have been declining.
Europe, China, and other places are even worse off.
The global scare has hit everything: gold, stocks, corporate bonds — almost everything has fallen.
But it has hit one of the riskiest and most profitable stock markets especially hard.
The TSX Venture market, home to the highest-risk/highest-reward gold and natural resource exploration and development stocks, has taken a nosedive:
TSX Venture Index 10 Year - Sep 11
In March your editor warned, “We’re long past the ‘easy money’ period; you have to take less risk and keep more cash on hand for when corrections do come.”
In the six months since, the TSX Venture Index is down 45%. It’s almost as bad as 2008, when it shed more than 60% of its value in three months' time.
The fall has been so fast and hard, the Index has fallen to 2003 levels.
Meanwhile, the fundamentals have improved exponentially. Natural resource prices, which drive the TSX Venture stocks, are up many times over since then.
Gold prices have quadrupled. Copper prices have tripled. The price of a barrel of oil has increased more than three times despite its recent sell-off.
But just because something is down, doesn’t mean it's cheap or a buy...
Take real estate and the big tech stocks; they’re all still below their bubble highs.
~~wd_junior_gold~~
When They’re Crying, We’re Buying
There also has to be a significant lack of interest to truly hit a bottom.
There is a significant lack of buyers in the TSX Venture market right now, to say the least. And this small sector allows us to gauge interest in a unique and accurate way.
You see, the TSX Venture Index is composed primarily of junior resource companies. The vast majority of these companies produce no sales or revenue of any kind. They can’t borrow money, either. Yet their primary function is spending money exploring for natural resources...
So the only way they can get cash is to issue more shares in exchange for cash.
During the extreme bullishness earlier this year — when gold was going up $100 a month and junior resource stocks as a whole were going up 10% a month — investors were handing these tiny companies as much money as they could spend.
A lot has changed since then.
The image below shows how high demand was for newly-issued shares of junior resource companies over the past two years:
As you can see, the interest in pumping money into junior resource companies has fallen even faster than share prices have.
The total financing activity in September was a mere $343 million. That may sound like a lot, given many of these stocks carry market caps between $10 million and $50 million...
But it’s actually 39% below last September’s levels, 66% below the past year’s monthly average, and 76% below the high in March when the TSX Venture Index was at its highest point in three years.
They’re cheap. They’re out of favor. And there’s one more reason to like them...
Keep It Simple
Although gold and natural resources across the board have corrected heavily, their fundamentals have never been better.
Recent news has been extremely bullish for short- and long-term gold prices.
The Federal Reserve has proven its commitment to keep the printing presses going with Operation Twist. The British central bank has just committed to printing an additional £75 million ($116 million).
Globally, interest rates are going to be held at record lows for far longer than most people expect.
When it comes to energy, oil prices are going up from here. Demand is still rising despite the sluggish economy. Supply has continued to lag.
Any economic lift will send oil and energy prices rising fast.
My colleague Keith Kohl recently wrote an excellent article on why oil prices are going to quadruple again from current levels.
In the end, this one is really simple.
We’re seeing the same extremely profitable situation in junior resource stocks that has presented itself many times before: No one wants junior resource stocks. They’re at multi-year lows. Expectations are low. And the fundamentals are stronger than ever.
The time to buy junior resource stocks is now.
http://www.wealthwire.com/news/metals/2009
JER1
Lottery odds style events hitting PM's...
( I don't completely agree with this math but I still would say we had a number of simultaneous coincidences affecting prices... the gold correction, margin hikes, and the market crash.)
http://www.24hgold.com/english/news-gold-silver-lottery-odds-events-keeping-gold-and-silver-prices-contained.aspx?article=3642785278G10020&redirect=false&contributor=Rob+Kirby
The Battle Lines are Drawn as the Gold SPDR Consolidates By Arthur Hill
* Friday, October 07, 2011
After a sharp decline in September, the Gold SPDR (GLD) moved into a consolidation the last two weeks. Support resides at 155 and resistance 162.50. Traders should watch these levels for the next direction clue. Also watch the Dollar. Gold bounced this week as the Dollar declined, but a bounce in the Dollar would be negative for bullion.
http://blogs.stockcharts.com/
George.
Vanadium Redox Battery Upgrade...
http://www.eurekalert.org/pub_releases/2011-03/dnnl-utv031711.php
A list of silver stocks to browse through...
http://www.pennyminingstocks.com/silver_a.html
HUSIF Huldra Silver (.95) British Columbia based early stage silver producer with by product credits in lead and zinc.
Website: http://www.huldrasilver.com/
TSX Quote HDA http://tmx.quotemedia.com/quote.php?qm_symbol=HDA
Pinksheets: http://www.otcmarkets.com/stock/HUSIF/quote
IHUB: http://investorshub.advfn.com/boards/board.aspx?board_id=19452
I remember when .999 silver shot was only .39 cents over spot price for a 100 oz bag.
Now a 800 oz bag is $1.39 over spot price.
There is no longer silver bars for sell on their "industrial silver" page either.
Physical silver running out because its spot price does not reflect true investment demand
Several readers of ArabianMoney have written to us over the past two weeks to express their astonishment at the current price of silver because demand where they live is so high that stocks have run out.
Consider this comment: ‘I used to buy silver from a shop in Kobar in Saudi. From the last four weeks they said they ran out of silver. I cannot find anyone who sells silver in Saudi now. I asked them from where do they get their silver. They said the UAE. The problem is they only have 1kg bars…and I still cannot find any supplier.’
No stock
Well don’t bother coming to the UAE. Our information is that the 1kg bars mentioned here and featured in a video on the website last month (click here) are all sold out too. We’ve also had feedback about low or no stock in Texas and Australia from big private bullion dealers there.
Now what would normally happen when a commodity is in short supply is that the price would go up to encourage sellers to put some more into the market. That is presently not happening because the silver price is being artificially suppressed in the Comex futures market by the bullion banks acting on instructions from the Fed presumably, so why would you sell that silver cheaply if you happened to own some?
But something has to give and it is the price of physical silver rather than the Comex price of the shiniest of metals. If you can find any silver these days you will pay quite a substantial premium over the spot price. But pay it because that is probably still a bargain compared to where silver prices are going.
The truth is that silver is a rare metal, more rare than gold. Silver reserves have been estimatated at one-hundredth of gold reserves. Silver is after all consumed by industrial processes and reserves have dwindled over the years because the price has been kept so low for so long by market manipulation. Why is that?
Silver price fixing
This market manipulation dates back to the last silver boom of the late 70s and the spectacular $50 spike in the price in 1980. The central banks then saw suppression of the silver and gold price as a part of their war on inflation. They clearly lost that war but kept gold and silver prices down until this decade.
Thirty-one years later and we are still not back to those silver prices despite a seven-fold increase in the global money supply. On that reckoning silver ought to be $350 an ounce, not $30 today.
However, the snap back for silver prices now has the capacity to be sensational, and far beyond the mini-spike in the first few months of this year from $30 to almost $50 again. So those who go seeking out physical silver to buy at current prices are going to be very well rewarded and soon, not in 31 years!
ArabianMoney continues to stick with silver as our top tip for 2011 and that means a big rebound in the price before the end of the year.
JER1
http://www.arabianmoney.net/gold-silver/2011/10/06/physical-silver-running-out-because-its-spot-price-does-not-reflect-true-investment-demand/
JER1
~$1650~$32~HDA.v/HUSIF up 10%
Only 104,000 shares available to $1.95
No major sell blocks!
Speaking of dilution... I have found that keeping track of warrant exercise dates with most of these Canadian silver companies allows you to get out at the tops and get back in on the dips, especially if you pay attention to the currencies... it's making our favorite stocks are very cheap right now!
CMC/CMCXF is looking good. My kind of silver project.
Similar situation to Huldra Silver~HDA.v/HUSIF
LOL... agreed.
There is a good chance they don't even have the bars for him... if they don't.... "hold on to your butts"- Sam Jackson
CMCXF CMC Metals (.2415) High grade Silver and gold deposits. Yukon operations sold 200 ton bulk sample in 2010 at 130 OUNCES (3,600 grams) Silver per ton. In production now to sell 1700 ton bulk sample in 2011. By Product credits in copper, zinc, and lead. Exploration tested 1,749 ounces per ton (54,660 grams per ton) Silver in the B vein. High grade Gold deposits in California up to 28 grams per ton gold, Bishop Mill comes on line Q4 2011.
Website: http://www.cmcmetals.ca/s/home.asp
IHUB: http://investorshub.advfn.com/boards/board.aspx?board_id=19559
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