Silver Provides Blueprint To Sprott’s Call To Action - Eric, Wall Street Cheat Sheet | March 21, 2012
Eric Sprott, legendary gold and silver investor and chairman of Sprott Inc., famously issued an open letter to 17 of the world’s largest silver producers last year. The letter is well-known to the precious metals community because it challenged the mining industry to limit silver sales until prices increased. Unlike an OPEC style cartel, Sprott advocated that miners simply hold a portion of their cash reserves in the form of silver, in order to protect themselves and shareholders from irrational price corrections that take place too often in the silver market. Silver mines not only heeded Sprott’s advice, but has already benefited from it.
Sprott’s “Call to Action” letter suggested, “Instead of selling all their silver for cash and depositing that cash in a levered bank, silver miners should seriously consider storing a portion of their reserves in physical silver outside of the banking system. Why take on all the risks of the bank when you can hold hard cash through the very metal that you mine? Given the current environment, we see much greater risk holding cash in a bank than we do in holding precious metals.” Furthermore, holding silver instead of cash as a form of savings allows silver miners to convert their silver into cash at an opportune time.
When asked about silver specifically, Embry responded, “Nothing has changed. The supply/demand is powerful....
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