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Eric Sprott Fights PM Manipulation Fire With Fire: Calls Silver Producers To Retain Silver Produced As "Cash"

Tyler Durden's picture


In what is likely the most logical follow up to our post of the day, namely the news of the lawsuit between HSBC and MF Global over double-counted gold, or physical - not paper - that was "commingled" via rehypothecating or otherwise, we present readers with the monthly note by Eric Sprott titled "Silver Producers: A Call to Action" in which the Canadian commodities asset manager has had enough of what he perceives as subtle and/or not so subtle manipulation of the precious metal market, and in not so many words calls the silver miners of the world "to spring to action" and effectively establish supply controls to silver extraction to counteract paper market manipulation in the paper realm by treating their product as a currency and retaining it as "cash". To wit: "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. And it serves to remember that thanks to 0% interest rates, banks don’t pay their customers to take on those risks today." And the math: "If silver miners were therefore to reinvest 25% of their 2011 earnings back into physical silver, they could potentially account for 21% of the approximate 300 million ounces (~$9 billion) available for investment in 2011. If they were to reinvest all their earnings back into silver, it would shrink available 2011 investment supply by 82%. This is a purely hypothetical exercise of course, but can you imagine the impact this practice would have on silver prices?" And there you go: Sprott 'reputable' entity to propose to fight manipulation with what is effectively collusion, which in the grand scheme of things is perfectly normal - after all, all is fair in love and war over a dying monetary model. Who could have thought that the jump from "proletariats" to "silver miners" would be so short.

From Eric Sprott

Silver Producers: A Call to Action

As we approach the end of 2011, the silver
spot price has admittedly endured a tougher road than we would have
expected. And let’s be honest – what investment firm on earth has
pounded the table on silver harder than we have? After the orchestrated
silver sell-off in May 2011 (please see June 2011 MAAG article entitled,
“Caveat Venditor”), silver promptly rose back to US$40/oz where it
consolidated nicely, only to drop back below US$30 within a two week
span in late September. The September sell-off was partly due to the
market’s disappointment over Bernanke’s Operation Twist, which sounded
interesting but didn’t involve any real money printing. Like the May
sell-off before it, however, it was also exacerbated by a seemingly
needless 21% margin rate hike by the CME on September 23rd, followed by a
20% margin hike by the Shanghai Gold Exchange – the CME’s counterpart
in China, three days later.

paper markets still dictate the spot market for physical gold and
silver. When we talk about the “paper market”, we’re referring to any
paper contract that claims to have an underlying link to the price of
gold or silver, and we’re referring to contracts that are almost always
levered. It’s highly questionable today whether the paper market has any
true link to the physical market for gold and silver, and the futures
market is the most obvious and influential “paper market” offender. When
the futures exchanges like the CME hike margin rates unexpectedly, it’s
usually under the pretense of protecting the “integrity of the
exchange” by increasing the collateral (money) required to hold a
position, both for the long (future buyer) and the short (future
seller). When they unexpectedly raise margin requirements two days after
silver has already declined by 22%, however, who do you think that
margin increase hurts the most? The long buyer, or the short seller? By
raising the margin requirement at the very moment the long contracts
have already received an initial margin call (because the price of
silver has dropped), they end up doubling the longs’ pain – essentially
forcing them to sell their contracts. This in turn creates even more
downward price pressure, and ends up exacerbating the very risks the
margin hikes were allegedly designed to address.

When reviewing
the performance of silver this year, it’s important to acknowledge that
nothing fundamentally changed in the physical silver market during the
sell-offs in May or mid-September. In both instances, the sell-offs were
intensified by unexpected margin rate hikes on the heels of an initial
price decline. It should also come as no surprise to readers that the
“shorts” took advantage of the September sell-off by significantly
reducing their silver short positions. Should physical silver be priced
off these futures contracts? Absolutely not. That they have any
relationship at all is somewhat laughable at this point. But futures
contracts continue to heavily influence spot prices all the same, and as
long as the “longs” settle futures contracts in cash, which they almost
always do, the futures market-induced whipsawing will likely continue.
It also serves to note that the class action lawsuits launched against
two major banks for silver manipulation remain unresolved today, as does
the ongoing CFTC investigation into silver manipulation which has yet
to bear any discernible results.

Meanwhile, despite the needless
volatility triggered by the paper market, the physical market for silver
has never been stronger. If the September sell-off proved anything,
it’s the simple fact that PHYSICAL buyers of silver are not frightened
by volatility. They view dips as buying opportunities, and they buy in
size. During the month of September, the US Mint reported the second
highest sales of physical silver coins in its history, with the majority
of sales made in the last two weeks of the month. Reports from India
in early October indicated that physical silver demand had created
short-term supply issues for physical delivery due to problems with
airline capacity. In China, which reportedly imported 264.69 tons (7.7
million oz) of silver in September alone, the volume of silver forward
contracts on the Shanghai Gold Exchange was more than six times higher
than the same period in 2010. It was clear to anyone following the
silver market that the physical demand for the metal actually increased
during the paper price decline. And why shouldn’t it? Have you been
following Europe lately? Do the politicians and bureaucrats there give
you confidence? Gold and silver are the most rational financial assets
to own in this type of environment because they are no one’s liability.
They are perfectly designed to protect us during these periods of
extreme financial turmoil.

And wouldn’t you know it, despite the
volatility, gold and silver have continued to do their job in 2011. As
we write this, in Canadian dollars, gold is up 23.4% on the year and
silver’s up 6.8%. Meanwhile, the S&P/TSX is down -12.3%, the S&P
500 is down -5.1% and the DJIA is up a mere +0.26%.

So here’s
the question: we think we understand the value and great potential in
silver today, and we know that the buyers who bought in late September
most definitely understand it,… but do silver mining companies
appreciate how exciting the prospects for silver are
? Do the companies
that actually mine the metal out of the ground understand the demand
fundamentals driving the price of their underlying product? Perhaps even
more importantly, do the miners understand the significant influence
they could potentially have on that demand equation if they embraced
their product as a currency?

According to the CPM Group, the total
silver supply in 2011, including mine supply and secondary supply
(scrap, recycling, etc.), will total 1.03 billion ounces. Of that, mine
supply is expected to represent approximately 767 million ounces.
Multiplied against the current spot price of US$31/oz, we’re talking
about a total silver supply of roughly US$32 billion in value today. To
put this number in perspective, it’s less than the cost of JP Morgan’s
WaMu mortgage write downs in 2008.

According to the Silver
Institute, 777.4 million ounces of silver were used up in industrial
applications, photography, jewelry and silverware in 2010.12 If we
assume, given a weaker global economy, that this number drops to a flat
700 million ounces in 2011, it implies a surplus of roughly 300 million
ounces of silver available for investment demand this year. At today’s
silver spot price – we’re talking about roughly US$9 billion in value.
This is where the miners can make an impact. If the largest pure play
silver producers simply adopted the practice of holding 25% of their
2011 cash reserves in physical silver, they would account for almost 10%
of that US$9 billion. If this practice we’re applied to the expected
2012 free cash flow of the same companies, the proportion of investable
silver taken out of circulation could potentially be enormous.

another way, consider that the majority of silver miners today can mine
silver for less than US$15 per ounce in operating costs. At US$30
silver, most companies will earn a pre-tax profit of at least US$15 per
ounce this year. If we broadly assume an average tax rate of 33%, we’re
looking at roughly US$10 of after-tax profit per ounce across the
industry. If GFMS’s mining supply forecast proves accurate, it will mean
that silver mine production will account for roughly 74% of the total
silver supply this year. If silver miners were therefore to reinvest 25%
of their 2011 earnings back into physical silver, they could
potentially account for 21% of the approximate 300 million ounces (~$9
billion) available for investment in 2011. If they were to reinvest all
their earnings back into silver, it would shrink available 2011
investment supply by 82%. This is a purely hypothetical exercise of
course, but can you imagine the impact this practice would have on
silver prices? Silver miners need to acknowledge that investors buy
their shares because they believe the price of silver is going higher.
We certainly do, and we are extremely active in the silver equity space.
We would never buy these stocks if we didn’t. Nothing would please us
more than to see these companies begin to hold a portion of their cash
reserves in the very metal they produce. Silver is just another form of
currency today, after all, and a superior one at that.

To take
this idea further, 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. And it serves to remember that
thanks to 0% interest rates, banks don’t pay their customers to take on
those risks today.

None of this should seem far-fetched. One of
the key reasons investors have purchased physical gold and silver is to
store some of their wealth outside of a financial system that looks
increasingly broken. The European banking system is a living model of
that breakdown. Recent reports have revealed that more than €80-billion
was pulled out of Italian banks in August and September alone. In
Greece, depositors have taken almost €50-billion out their banks since
the beginning of 2010. Greek banks are now completely reliant on ECB
funding to stay afloat. The situation has deteriorated to the point
where over two thirds of the roughly 500 billion euros that banks have
borrowed from the ECB are now being deposited back at the central
bank. Why? Because they don’t trust other banks to stay afloat long
enough to get their money back.

Silver miners shouldn’t feel any
safer banking in the United States. Fitch Ratings recently warned that
the US banks may face severe losses from their exposures to European
debt if the contagion escalates. There’s very little at this point to
suggest that it won’t. The roots of the 2008 meltdown live on in today’s
crisis. We are still facing the same problems imposed by over-leverage
in the financial system, and by postponing the proper solutions we’ve
only increased those risks. We don’t expect the silver miners to corner
the physical silver market, and we know the paper games will probably
continue, but the silver miners must make a better effort to understand
the inherent value of their product. Gold and silver are not traditional
commodities, they are money. Their value lies in their ability to
retain wealth in environments marked by negative real interest rates (),
government intervention (3), severe economic uncertainty (3) and
vulnerable banking institutions (33). Silver’s demand profile is
heightened by its use in industrial applications, but it is the metal’s
investment demand that will drive its future performance. The risk of
keeping all of one’s excess cash in a bank is, in our opinion,
considerably more than holding it in the more enduring form of money
that silver represents. It’s time for silver producers to embrace their
product in the same manner their shareholders already have.


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Sat, 12/10/2011 - 03:18 | 1965576 CharlieSDT
CharlieSDT's picture

Long article, but Sprott is a good guy for sure.  Why hold frms with counterparty risk when you can have a hard asset at a huge discount?

Sat, 12/10/2011 - 06:14 | 1965700 Silver Bully
Silver Bully's picture

Sprott better be VERY careful here. The Hunt Brothers were essentially trying to do the same thing back when they attempted to corner the silver market (in essence, turning silver into an independent world currency under their control). They got taken out when the US government changed the rules midstream. The same thing can easily happen here. If Sprott managed to form a coalition of silver miners . . . watch out. Nationalizing mining companies could be the least of their worries. Even threatening to do this would cause action from governments and policy makers.

Do I want that to happen? Heck no! But it is wise to observe that he's playing with fire here, if he starts making things happen. Anyone holding investments in his funds ought to be aware of the possible consequences.

Sat, 12/10/2011 - 06:36 | 1965712 agent default
agent default's picture

The Hunt brothers accumulated a huge number of future contracts (paper silver) on margin.  Trying to beat the market maker with the leverage tools he provides to you is just beyond retarded.  What Sprott is recommending here is to hold the physical metal.  It is an entirely different situation, which the market makers cannot manipulate with the usual methods.

Sat, 12/10/2011 - 07:00 | 1965731 Silver Bully
Silver Bully's picture

Agreed +9000.

My point is, Sprott wants the miners to make the rules. The problem is, they don't. Governments do. As the Hunt Bros found out the hard way. Worse, our governments and the manipulators are one and the same. There are a thousand and one ways to make the miners play ball, whether they like it or not. If they do what Sprott suggests, they're would be playing with fire. I also think this explains why miners in general haven't attempted anything like this recently. Eventually, you just lose your mine, so why even think of going there?

Sat, 12/10/2011 - 09:05 | 1965806 bernorange
bernorange's picture

Sprott gave a follow up interview on this call to action with Mineweb:

Asked whether or not he has received any feedback from the producers on his suggestion that they "reinvest 25% of their 2011 earnings back into physical silver," Sprott said that there had been a groundswell of interest - more than he had ever seen before - but that still more needs to be done.

If the supplies in the physical market really are as tight as various parties would have us believe, the miners would not have to withhold/reinvest an extreme amount of silver to effect "Sprott's pop".

Sat, 12/10/2011 - 09:18 | 1965816 spinone
spinone's picture

right, price is determined at the margin in a free market. but silver is not a free market.  this would make it more difficult to manipulate the silver price, and probably more MF Global situations take place.

Sat, 12/10/2011 - 09:26 | 1965824 Oh regional Indian
Oh regional Indian's picture

It's the old hedging game really, played differently. Very apropos. Clever too. 

The more you study the situation, the more you realize that Silver HAS to be kept moving in trade at any cost, gold, not so much so. Where is industrial inventory carried? At the miners? At the end users? In Banks?

Methinks a big spanner is being wedged into the PM markets in general and the issue will be who owns it on the third lease out.

The parallels to the real Estate market are interesting. More volatility though, that is for sure.



Sat, 12/10/2011 - 10:38 | 1965906 Pladizow
Pladizow's picture

The Government would have a hard time justifying any repecutions, as the miners would simply be engaging in what all fortune 500 companies do - stock buy back and inventory control.

The problem is Gov's dont have to justify anything!


Sat, 12/10/2011 - 11:54 | 1966008 T1000
T1000's picture

It's the hidden tyranny, yo!

 "The Federal Reserve system fitted our plan nicely sinceit is owned by us, but the name implies that it is a government institution. From the very outset, our purpose was to confiscate all the gold and silver, replacing them with worthless non-redeemable paper notes. This we have done!"

Sat, 12/10/2011 - 13:03 | 1966120 JW n FL
JW n FL's picture

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He talks about the concerted efforts by ECB and FED to solve the Euro crisis.

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Enjoy Ya'll!

Sat, 12/10/2011 - 13:13 | 1966145 grid-b-gone
grid-b-gone's picture

It would be difficult for the government to make accounting changes affecting only silver miners. Companies already build up finished goods before large layoffs. In effect, the labor portion is held as a component of finished goods. 

Even if accounting changes were made, miners could just hold silver upstream in the process as work in process (WIP).

I'm not sure how Sprott's proposal would be much different from a distiller that holds whiskey, etc. for years before sending the aged product to market.

Already, there must be some corporations holding PMs as part of their cash and not specifically reporting the strategy to shareholders. Does anyone know of any corporation specifically listing PMs in their balance sheet detail?

Sat, 12/10/2011 - 22:25 | 1967030 rosiescenario
rosiescenario's picture

"Even if accounting changes were made, miners could just hold silver upstream"


One mining company I own did this last year with their zinc concentrate (which is a bi-metal from their primary silver production). Zinc prices were low so they just piled up the concentrate until prices recovered. The miners would not need to stock pile pure silver...the concentrate would be just fine.


It would also put a new dimension into choosing mining stocks....investors could end up buying silver at a substantial market discount. In a sense many miners today offer this discount based on their proven ore reserves. Sprott's idea is to just take that a step further and at the same time, drive up the price of silver and make the CME superfluous.

Sat, 12/10/2011 - 13:18 | 1966158 DeadFred
DeadFred's picture

If the miners take Sprott's advice they will become huge asset-rich companies that the squid and its cohorts will target. Never underestimate the ability of the squid to smell blood and home in on the new victim. I've heard that JPM has derivatrives with the miners that destroy the mining companies if silver supplies go too low. Anyone know about short-silver derivatives? What little I've heard about them has been scary enough to keep me away from the miners but I haven't been able to discover if the threat is real or just a myth. What I've heard is if the silver supply goes too low the value of the derivatives skyrocket and the bank (almost exclusively JPM) that loaned money <with derivative attached> to the mining company now owns the miner. I read it on the internet so it must be true right?

Sat, 12/10/2011 - 14:23 | 1966282 tarsubil
tarsubil's picture

Well, that would negate the need to nationalize them. What a fucking mess.

Sun, 12/11/2011 - 09:56 | 1967397 AE911Truth
AE911Truth's picture

Dear DeadFrED: "I've heard that JPM has derivatrives with the miners that destroy the mining companies if silver supplies go too low. [...] I read it on the internet so it must be true right?" BullS*&T! Truth is the bankers are scared sh*%less over this plan. Not only should the miners implement this plan fully, they should take it three steps further! How? 1. Miners, do not sell your priceless Physical Silver for worthless paper or instantly erasable digital bits. 2. Ask and even encourage your employees and suppliers to consider taking a percentage of their payments in physical silver. I am sure they understand why. If not educate them. 3. Encourage your employees and suppliers to talk to their downstream merchants, employees, and suppliers about accepting physical silver instead of worthless paper. Educate them to educate others downstream. See how this works? The miners can spearhead a shift of the entire economy away from worthless banker paper (soon to implode anyway), and toward real money in the form of physical silver. Only the tiny portion for payment of tax need be in wortless dollars. The shift itself will make the dumped dollars worth less and the tax easier to pay. It is a win win win win! The only losers are the banker/government criminals.

Sat, 12/10/2011 - 11:12 | 1965948 Transformer
Transformer's picture

Silver Bully, I think you are just that, and a troll to boot.  I have studied the whole Hunt Bros. debacle to the point that I could write endless essays.  The whole Hunt Bros. takedown was all about them playing the paper market and the rulemakers (COMEX) changing the rules, plus breaking their own rules extant at the time.  The government had very little to do with it.  If anything, pretty much all the government did was not to back up the Hunt Bros., no different than today when the CFTC won't do anything about Corzine, or the manipulation in general.

If the Hunts had merely bought and taken delivery of what they could afford, and kept doing it, they would have won, and the silver market would be a different animal today.  Instead they got wrapped up in trying to beat the game with paper.  Big mistake.  As long as you play the fractional reserve game in all its guises, you are subject to the whims of the big banks.  You can't beat the rulemakers at their own game.  What Sprott is suggesting is probably much safer for the Miners than having all their reserves in banks.  They are no different than individuals.  A banking shutdown could severely impact their ability to operate.  Silver is money, and it takes money to operate a business.  If the banks shut down for two weeks, the Miners could pay employees and make other needed cash disbursements from their silver reserves.  AND you know that if the bank Holiday comes to pass, silver will quickly become currency.

If the collapse happens, or banking event, whatever you want to call it, and the government wants to Nationalize industries, they will do it, reserves not withstanding.  Miners can hold back silver, simply by increasing their on site inventory, which can be done for a multitude of reasons.  Miners could look at going into DirectSales (retail) of their product, just as First Majestic has done.  You should check out their retail store, online, as it is obvious that they do not follow the spot "paper" price.  From a CFO's standpoint, Sprott's letter makes good sense.  Corporations need to protect themselves every bit as much as we do.

Sat, 12/10/2011 - 09:50 | 1965847 Real Money Wins
Real Money Wins's picture

While Eric Sprott's idea is note worthy and makes perfect sense to those of us who hold physical, the concept for mining companies is a bit more complex. First a companies operating personnel would have to have controlling interest in the company to do this. The problem is that most mining companies are owned by share or stock holders(i.e. Paper investors). If the share holders are the controlling interest then a  board if it has the power would have to decide. If the board does not have that much power then it would have to be put to a vote of the shareholders. Here is where it gets sticky. Shareholders are investors who deal in paper and expect dividends in paper. And now you are going to ask them to vote to turn their profits to bullion and sit on it and not receive their paper profits. this will not be well received for those who value everything against paper assets, remember Wall Street is engaged in in Insanity Investing these days. In a perfect and logical world the concept should be that every company should store 25% of their profits in PM's. In a perfect world

Sat, 12/10/2011 - 10:01 | 1965856 Eally Ucked
Eally Ucked's picture

Example of one of the biggest gold miners Goldcorp:


Listening to Our Shareholders 

Gold is Money – Goldcorp is Gold! 

At the end of the 1


 quarter, 2004 

Goldcorp’s gold inventory had reached 2.25 

tonnes, or 72,716 ounces.  We asked our 

shareholders to tell us how much gold we 

should hold back from sale and you told us loud 

and clear to “hold back  more!” Therefore, we

made the decision to accelerate the 

accumulation of the new gold inventory to reach 

previous levels by holding back 33% (51,925 

ounces) of the 1


 quarter, 2004 production.  It 

is anticipated that a comparable percentage of 

gold production will be held back in future 

quarters until the gold inventory reaches the 

previous level of 266,730 ounces equal to 8.3 

tonnes which was sold during the fourth quarter 

of 2003."

Not to mention that I was beneficiary of that policy and made 400% on the stock of the company.

Sat, 12/10/2011 - 10:41 | 1965911 Pladizow
Pladizow's picture

In some of these miner's Sprott owns more shares then management!

Sat, 12/10/2011 - 11:10 | 1965931 Eally Ucked
Eally Ucked's picture

That's true but they all are very junior cos with very small market cap. And don't forget that many of them wouldn't survive without injection of some fresh capital and that is what Sprott is doing. I don't have Sprott's capital but i'm myself looking for very small miners with promise (like Sprott) and invest my 1 or 2k in them and wait. I lost few k but I made few too and I have fun. Too bad my waiting time (I can afford) is getting shorter and shorter and that is long term business. 

Sat, 12/10/2011 - 12:23 | 1966059 Pladizow
Pladizow's picture

May interest you:


My top 20 list of companies under $0.10 is about to be released to subscribers early next week.
Don’t miss out on this Special Report or any future issues of
Resource Opportunities!

Sat, 12/10/2011 - 12:46 | 1966103 tmosley
tmosley's picture

Oh boy, so we can pay to have penny stocks pumped to us?  Dandy!

Sat, 12/10/2011 - 13:13 | 1966148 Pladizow
Pladizow's picture

Definitely high risk!

Sat, 12/10/2011 - 13:15 | 1966153 Eally Ucked
Eally Ucked's picture

I dont care about special reports, I can find my info from mineweb or geo magazines. I'm not pusher of any stocks so I will not give you any examples but for sure you should forget about special reports.  

Sat, 12/10/2011 - 09:57 | 1965859 HoofHearted
HoofHearted's picture

Coeur d'Alene has suggested they might consider Sprott's ideas within a few years. If everyone bids up CDE because of this, then it would show that these paper investors are in it for the long haul. The problem is the MF Global situation. We're back to asking a third party to hold our silver for us. The only thing I can think that might make this work is all those retirement accounts where we have to hold something in paper or take a penalty for taking the money out. If many people decided to let CDE hold their paper money and CDE holds the phyz, then it shows that there is some trust in this idea. Yet it still seems like unallocated silver being held for me, and that just got troublesome with rehypothecation.

The mot du jour is "counterparty" as in counterparty risk. And this has caused the big intervention in the gold market last week. Likely we'll see more attempts to keep people in the system and away from barbarous relics.

Sun, 12/11/2011 - 10:16 | 1967412 AE911Truth
AE911Truth's picture

Dear HoofHearted, "all those retirement accounts where we have to hold something in paper"

Self directed IRA accounts can hold physical American Gold and Silver Eagle coins. For example, IRA Services, and more.

Sun, 12/11/2011 - 15:05 | 1967907 Thisson
Thisson's picture

No, they can only pay someone else to hold it for them.  With no way to verify if that is true, or avoid possible confiscation when the time comes.

Sat, 12/10/2011 - 15:46 | 1966448 Irene
Irene's picture

"Shareholders are investors who deal in paper and expect dividends in paper."

Actually, a lot of shareholders would love to see their dividends paid in oz. of silver or gold.  Jim Sinclair has talked about the gold paper market being taken down if miners started paying their dividends in gold.  Why wouldn't anybody investing in gold (or silver) miners want their dividends payable in oz. of product?  If you believe in pms enough to purchase miners, this makes total sense.  Count me in.

Sat, 12/10/2011 - 22:34 | 1967044 rosiescenario
rosiescenario's picture

"Shareholders are investors who deal in paper and expect dividends in paper."


Not true...I search for undervalued miners whose reserves of pm are at a huge other words, I am buying silver "in the rock".


I hope Eric keeps hammering on this could have huge potential rewards for the mining companies and their shareholders. AND it would put the CME out of the pm biz.

Sat, 12/10/2011 - 11:53 | 1966006 Missiondweller
Missiondweller's picture

Hell, why not go one step further and only sell their silver on a physical contract only exchange for absolute price transparency?

They could set up the exchange and bar rehypothecation, margin,or leasing. All contracts take physical delivery.

Cut offthe Comex!



Sun, 12/11/2011 - 15:17 | 1967945 MarcusLCrassus
MarcusLCrassus's picture

Doo eeeet!

Sat, 12/10/2011 - 11:43 | 1965995 He_Who Carried ...
He_Who Carried The Sun's picture

This sounds as if Sprott was almost as desperate as the Hunt brothers during their last days. He probably blew up his positions expensive and is now underwater.

Sprott apparently has made some strange investments over the last two years and started year-end windowdressing by selling losers in his portofolio as early as September or so it seems. Some senior managment has left the firm as well if I am not mistaken.

Now this? Fact is, if Europe gets her house in order, problems of the US will come back into focus - so? What's to worry Mr. Sprott?

Sat, 12/10/2011 - 11:54 | 1966009 Bay of Pigs
Bay of Pigs's picture

Dream on. Your comment is laughable.

Sat, 12/10/2011 - 12:25 | 1966066 He_Who Carried ...
He_Who Carried The Sun's picture


Look at you! What a fantastic comment of yours. That's quality, really...

How about addressing the subject?

Sat, 12/10/2011 - 12:59 | 1966121 Bay of Pigs
Bay of Pigs's picture

Anyone who has followed Sprott for the last ten years has made lots of money. How's that?

And Europe "getting it's house in order"? I hope you aren't serious.

Sat, 12/10/2011 - 15:51 | 1966454 akak
akak's picture

Hey Twisted Tits,

Your ludicrous anti-PM, pro-financial establishment trolling in this forum has been quite evident for some time now.  But please note that it is pathetic, and laughably inane, and utterly ineffectual with this crowd --- we have already slaughtered numerous trolls of far greater intelligence and zeal than you.

Sun, 12/11/2011 - 01:51 | 1967230 JOYFUL
JOYFUL's picture

the subject is your premises. They are faulty. Therefore your argument has been dismissed.


Sat, 12/10/2011 - 15:31 | 1966419 Calmyourself
Calmyourself's picture

Did you just say Europe gets her house in order, as in a statement which may in fact happen?  Government spending will equal revenues and all Euro governmentsa wiill allow Brussels to set their budgets.  The Greeks and Italians will pay their taxes which will rise 40%.  Turkey and Greece will be best buds and monkeys will fly out of merkozy's collective asses and snowballs will..  You get the point..

Sat, 12/10/2011 - 12:59 | 1965999 SRSrocco
SRSrocco's picture


Both of these men are telling their readers to make sure to hold the real metal.  Jim Sinclair goes further to say each person should be their own central banker and clearing house.  Bascially Jim is saying holding the actual metal and stock certificates are your best ways to protect your wealth.

On a different tangent...there is this so called notion that in the past several years there has been a SURPLUS OF SILVER.  The GFMS- World Silver Survey is the one that comes up with these figures.  The reason why we have had a so called LARGER SURPLUS is due to taking COIN & MEDAL out of the Fabrication figures. The coin & medal figure is included in the total fabrication number, but they have decided to take it out.

GFMS Calculation for Deficit-Surplus Silver:

Mine Production +Scrap - Fabrication (subtracting Coin & Medals) = Deficit-Surplus

Here is the 2010 figures:

735.9 mil + 215 mil - (878 mil - 101.3 mil ) = +174.2 million surplus


GMFS believes that coin & medal count as new bullion demand.  So the higher the amount of silver that goes into COIN & MEDAL acutally adds to the so called surplus.  Silly isn't it?  Most of this coin production is from Govt mints making Eagles, Maples, Philharmonics, Pandas, Kookaburras and etc.  Most people who own these are not going to sell them for melt.

So, 101.3 million ounces worth of coin and medal in 2010 accounted for 58% of the so called surplus.  This year in the 2011 Interim Silver Market Report, GFMS says that coin & medal demand will increase 25 million.  That would give us a ballpark of about 126 million ounces to coin & medals.  This will be added to increase the surplus in 2011.

Also, the Scrap silver which comes from recycling industrial silver is part of the Supply.  Why does GFMS not take this out as it is also a form of bullion... scrap maybe, but supply that does come back into the market.  Interesting...


I had an email exchange with Oliver Heathman, metals analyst at GFMS and they believe global silver production with increase 30 million ounces in 2011 or 4% above last year.  In my research I thought we would see a decline in 2011 and I have posted a few comments here to that effect.  Australia, Peru, Chile and the United States will come in lower, but Mexico, Russia, and China are higher. 

GFMS's 2010 Interim Silver Market Report showed a higher global silver production in 2010 than its final report.  I believe they will be wrong by at least 15 million.  Anyhow, I wrote that article Peak Silver Revisited: Impacts of a Global Depression, Declining Ore Grades & a Falling EROI, where I believe we are going to see a peak in silver soon.

Anyhow, this so called surplus is really a joke when you figure just how little silver the world owns. 

Lastly, when we had a deficit in silver, we also had LOW SILVER PRICES.  As this so called silver surplus went higher, so did the price of silver.  REASON?  It was investment demand that pushed the price higher, not industrial demand.  This will be the very reason why we see much higher silver prices when the system implodes.



Sat, 12/10/2011 - 13:27 | 1966165 bernorange
bernorange's picture

SRSrocco - I'd love to hear your thoughts on the discrepancy between the two GFMS sourced charts discussed here:

Sat, 12/10/2011 - 13:51 | 1966201 SRSrocco
SRSrocco's picture

bernorange... I checked out those charts and have to say the first one does not make sense.  If we go to the silver institute's supply/demand page we see that industrial applications alone accounted for 487.4 million ounces of silver.  Then they have the following:

Photography = 72.7

Jewelry = 167.0

Silverware = 50.3

Coins & Medals = 101.


then on the bottom of their chart they have what is termed IMPLIED NET INVESTMENT at 178.0 million ounces.  If we were to add this plus Coin & medals we would get 279.3 million ounces.  I don't know how GFMS who was sighted on the bottom of that chart stated that investment demand is higher when their own figures show otherwise.

If the first chart you linked was included jewelry and silver ware as investment rather than fabrication demand it would turn out to be this:

279.3 + 167 + 50.3 = 496.6 million

Compare that with plain on Industrial Application at 487.4 million ounces and we still can't get to that 55% investment demand figure.  Now, there could be more demand of silver above and beyond what is show in NET IMPLIED INVESTMENT DEMAND.  I have read several articles about this.

In the end...who the hells knows.  I am surprised GFMS is listed as a source on that chart when we can see their information on the silver institute refutes this.

I guess the best we can do is buy and hold physical silver and gold and watch the GRAND FIAT MONEY SYSTEM IMPLODE at a safe distance from us.  We will know it's time when the FIAT PHAT LADY SINGS...

Sat, 12/10/2011 - 13:52 | 1966209 bernorange
bernorange's picture

Thanks.  Appreciate your comments.

Sat, 12/10/2011 - 14:31 | 1966302 max2205
max2205's picture

Ie; withhold production. Or as the hunts would say corner the market. Bubble and pop would not be in their long term interest.

Sat, 12/10/2011 - 22:38 | 1967048 rosiescenario
rosiescenario's picture

..sounds like they employ folks from the BLS.....

Sat, 12/10/2011 - 07:26 | 1965743 Western
Western's picture

@Silver Bully, you make a great point.


However, I don't believe that nationalizing the mining industry is in the best interests of TPTB. They need gold and silver to keep coming, nationalization would collapse the entire industry (don't view it the same as banking where every blood tie to some Zionist is immediately in the gang) and nobody will produce any metals. The best estimate of what would happen if they attempt this is what we see in the blood diamond regions in Africa. Slave labour rather than the professional industry it is now. It's probably not impossible to destroy the current industry and turn into an arm of the cartel... but that would take decades.

TPTB would limit the effects of whatever Sprott's ultimate goals are... rather than outright nationalization. They need the industry.

Sat, 12/10/2011 - 09:23 | 1965821 Silver Bully
Silver Bully's picture

'However, I don't believe that nationalizing the mining industry is in the best interests of TPTB.'

Oh certainly, that would simply be the nuclear option, if you will. They wouldn't even need that, however. The CFTC and other government organizations would regulate them to their knees. It would be very easy to regulate how much excess silver a miner is allowed to keep on hand. Everything else is details.

Again, it is very simple - the miners don't and can't make the rules, despite what Sprott wants. The miners could certainly try, but they would pay the price. If Sprott somehow made them move at all, he would be painting a literal, regulatory, and financial bullseye on his chest. More power to him, just be aware.

Sat, 12/10/2011 - 11:58 | 1966013 scatterbrains
scatterbrains's picture

Homeland security could just declare all ZH members terrorists and have them imprisoned at the nationalized SILVER MINES.. could you imagine ?

All of your personal wealth in pm's seized then sent to jail working in a silver mine for the benefit of tptb ? 

If they can train crackheads, burgles, glue sniffers, shoplifters etc how to milk cows, pasteurize, homogenize, package and ship (as they do now in many state prison systems) I doubt they would have much trouble training silver/gold mining convicts.


Sat, 12/10/2011 - 12:23 | 1966063 Eally Ucked
Eally Ucked's picture

oh well there must be always victims, and finally you will have topic to talk about, not in Russia, China or whereever it is but US, and your superiority syndrome will be destroyed. Just waiting for it, other things we'll follow and you'll be happy! 

Sat, 12/10/2011 - 16:10 | 1966487 prole
prole's picture

Our Gulag is the most secure!

Our chains are the tightest!

We get shot first!

What "superiority syndrome" are you referencing stranger?

We get insulted most on blogs by retards!!

Sat, 12/10/2011 - 11:03 | 1965886 Pegasus Muse
Pegasus Muse's picture

"Sprott better be VERY careful here."

If Western governments were concerned enough about Muammar Gaddafi's effort to transition the African Continent to a Gold-Back Monetary System (Gold Dinar) that they would conspire overthrow an sovereign nation for no just cause, kill thousands of innocent civilians, and steal the countries national resources, there is little doubt they would let the ethics/morality, the Rule of Law or other inconvenience get in their way to crush Sprott's initiative.  As we've seen with MF Global and other dastardly deeds, the SOBs calling the shots will stop at nothing to retain their control of money.  Money Power is the the basis of their strength.  Not to say they cannot be defeated.  It will take tremendous effort and sacrifice by the proletariat to do so.  An American or French Revolution kind of effort and sacrifice.  It will be interesting to see who emerges as today's Andrew Jackson. 

Sat, 12/10/2011 - 11:26 | 1965965 agent default
agent default's picture

First of all, Gaddafi's regime was a dictatorship of the worst kind, lets not pretend that Gaddafi was some sort of popular leader in any way.  The fact that western governments could ferment this kind of rebellion against him is proof to that.  Second, Sprott's initiative puts the entire paper PM system in a very difficult position.  By restricting the supply of physical metals, not that it isn't tight, but this fact is lost on many people playing the paper markets, at some point everybody will start to wonder what all these paper contracts are really represent.  That will be the decoupling of fractional reserve paper and physical/fully allocated PM markets.  If governments try to interfere with the miners, it will only exacerbate the situation by making it clear to everyone that PMs are in fact undervalued.    

Sat, 12/10/2011 - 11:51 | 1965992 sudzee
sudzee's picture

Quite possibly the pullback in the price of silver is a reflection of hightened realisation that paper silver really isn't worth the paper it is written on. A true market price of the metal can only be realised when all of it's derivatives become worthless and physical becomes impossible to attain.

Sprott should start a "silver paper only" fund and issue shares @ 32cents. Maybe that would expose the fraud.

Sat, 12/10/2011 - 13:30 | 1966171 SRSrocco
SRSrocco's picture


Funny, people still buy these products from banks like Scotiabank.  They pay storage and insurance fees.  But when you look at the FAQ on their website, they state that these certificates are backed by the ASSETS of the bank...not the metal itself.  We have seen what happens when MF Global's financial products were not backed by REAL ASSETS.

I need to find out just what sort of assets Scoitabank has on their balance sheet.  They do have some gold and silver bullion, but this is not the larger percentage.  Probably CMBS, MBS, and a great deal of other worthless a paper.

Sat, 12/10/2011 - 14:40 | 1966133 Pegasus Muse
Pegasus Muse's picture

"..., Gaddafi's regime was a dictatorship of the worst kind, ..." 

Hhmm.  Not so sure about that.  There are those who would contend there are others -- of the central-bankster regime enforcing, petro-dollar pushing, oil-thieving variety, who are much worse, 

Sat, 12/10/2011 - 15:32 | 1966425 agent default
agent default's picture

Hey don't get me wrong here, the Libyans  will actually miss Gaddafi in the end, but still you cannot ferment trouble of this magnitude in any country unless there is real discontent and desperation among the people. 

Sun, 12/11/2011 - 02:11 | 1967247 JOYFUL
JOYFUL's picture

Total fail. Agent recall.

You can 'ferment' trouble in any place in the world if your black ops budget has swollen big enough from your illicit earnings via drug money which gets laundered through conniving fininacial institutions which have a quorum of hirelings within the political hierarchy of the State(s) which you seized control of in the first place (by fomenting[non sic] trouble through your neocon agendas.

What you know about GDaff and Libyan would not fit on the head of a pin. However, what you think you know about them would fit nicely in a 30 second PNAC-Brookings Institute-NATO soundbyte.  You are either incredibly gullible or AGENT INDEED!

Sat, 12/10/2011 - 14:08 | 1966234 GoodMorningMr.V...
GoodMorningMr.VanRumpoy...'s picture

As the media tells us, Gaddafi was very naughty man for his democratic deficit so he had to go.


It's odd because there are tin-pot dictators all over the middle East and the world, just as ruthless  that the U.S. and the west willing support with dollars and  foreign aid packages.


George Bush called Gaddafi  "An important ally in the war against terrorism". Tony Blair with same thing.

Obama Shaking hands with Gaddafi

Gaddafi was even working with the CIA by allowing their extraordinary rendition program to “interrogate” terrorist off the books in Libya.

His relationship was great with the west. What happened? his call

African nations to join together and begin trading in a gold-backed African “dinar”.


It''s a bigger concept. There was a time when the Arabs  where most the advanced civilization They were the world's mathematicians  and scientists and scholars at a time when Europe was primitive .  During this golden age they had the Islamic gold dinar.


There downfall was something  the Chinese invented and the Persian traders learned and brought with them to the Arabs : Paper money.


Sat, 12/10/2011 - 15:35 | 1966431 Calmyourself
Calmyourself's picture

"They were the world's mathematicians  and scientists and scholars at a time when Europe was primitive"

Lets be sure to keep in mind that was about ten of them doing that work..  Arab societies as a whole have always been nasty, brutish and very poor.

Sun, 12/11/2011 - 08:35 | 1967341 JOYFUL
JOYFUL's picture

as a whole, you must have travelled some very rutted paths in your life, because clearly a number of important screws have shaken loose.

Would you care to back up your statement - no comic books allowed!?!

Sat, 12/10/2011 - 16:18 | 1966504 prole
prole's picture

KDaff had 40 years (FORTY YEARS) to implement a "Gold backed monetary system."

He didn't do shiite besides hire Beyonce for a bunch of million dollar concerts for his Libertine sons.

(Also loved to parade around with his Praetorean bimbo guard)

It's none of my business and I don't care about that, but the "gold currency" talk is just silly.

"He was just about too......" Give me a break. "Just about to" since 1969?

Sat, 12/10/2011 - 17:14 | 1966596 Solarman
Solarman's picture

What Sprott is doing is very clever.  This action is broad, and across jurisdictions, its decentralization is its protection.  The Indonesian tin producers have decided to make the market itself and bypass the LBMA tin market.


This will be a trend that other producers will follow.

Sat, 12/10/2011 - 12:56 | 1966112 eaglefalcon
eaglefalcon's picture

the three top silver producers are mexio, peru and china.  nationalizing US mines won't help much

Sat, 12/10/2011 - 16:05 | 1966481 au_bayitch
au_bayitch's picture

#eagle +1, metals trade worldwide not only in the US. US companies can move overseas. US companies can split into two companies, a domestic and an international. So I also see that nationalizing would not be clearing helpful to any one party.

Sat, 12/10/2011 - 13:14 | 1966150 grovernors
grovernors's picture

Could not the same thing be accomplished to a greater effect simply by giving merchants a smartphone app that takes x  precious metals (pm) price and gives y fiat change?  Call it cashregi$ter(pm) if you wish...?  Any common worker whom handles cash could participate, just like buying coins from the till.  Diversification spreads risk thus this model would be more viral and sustainable.

The dollar is not the reserve currency, security based on fiction is.

The absolution of precious metals from currency also removed the natural security inherit in pms.

There is no wealth other than that of the intellect and labor your body and soul if you wish, everything else is potential.








Sun, 12/11/2011 - 01:01 | 1967198 geekgrrl
geekgrrl's picture

I'm not sure that involving merchants like mastercard and visa do is the way to go. But I do like the smartphone app idea. Apparently kitco has one for android phones called kitco spot that gives gold, silver, platinum and palladium spot prices. I'm thinking this would be very handy for those folks who might be interested in bartering metals for food at places like Farmer's markets at some point down-the-line. At the very least, I think it's safe to say that folks paying in PMs will be getting the full spot value, as opposed to selling PMs to a coin/bullion dealer where the price paid is almost always below spot by at least a few percent.

On the other hand, for the moment it's difficult to see how the real value of physical gold or silver can be reflected in spot prices now that the rehypothecation scam has been exposed (Thanks TD!). All I can say is that I will be watching GLD and SLV to see what happens. I want to see how many people get out as a result of digesting this recent news. If an exodus pushes down spot prices, great! I'll buy some more. It seems to me that from a fundamental analysis point of view, if there are multiple claims to real gold and silver bars in vaults, many folks are going to end up without a chair when the music stops. The smart players will get out now while they can, and I'm curious how big this number is. I have a gut feeling the number is actually quite small, and that the vast majority of shares in the GLD and SLV ETFs are actually owned by the Fed and other CBs (through intermediaries, of course) to artificially suppress PM prices. 

Sun, 12/11/2011 - 11:32 | 1967471 AE911Truth
AE911Truth's picture

Barter via GoldMoney account on SmartPhones is a good idea. Can be done at FleaMarkets. Can be done at any Merchant that has a GoldMoney account willing to accept it as payment. Does GoldMoney have an Android or IOS app? This could be a bid deal.

Sat, 12/10/2011 - 14:15 | 1966255 Citxmech
Citxmech's picture

The thing is, this kind of action could/would be unorganizied, and decentralized - which would make it very hard to fight.  They just need to start doing it and the results will flow.  It would also make mining stocks worth a shitload more.  What's the govt. going to do, nationalize all the miners right now?  That would'nt go over well (and would probably restrict supply even more).

Sat, 12/10/2011 - 10:44 | 1965919 jekyll island
jekyll island's picture

Counter party risk is not just with other firms:  

 Earlier this month, Ghana’s government announced that it plans to increase mining taxes in 2012. The proposal includes a ten-percent windfall tax and a general increase of the corporate tax from 25% to 35%. That will be on the high end, but not the highest in the world. The good news is that it’s a tax on profits, not a straight grab at the top line. It’s still an additional cost, but it applies only if companies are making money.

And this:  

 just two days after our modern-day Evita got re-elected president of Argentina – Christina Fernandez Kirchner's government announced a change in rules for mineral exporters; they will be required to repatriate all sales revenue to Argentina. Apparently certain unpatriotic exporters didn't want to bring cash from abroad back home and convert them to rapidly inflating Argentinean pesos – how strange.


There may be opportunity for mining companies to avoid the inevitable nationalization of their products by holding more silver as "inventory" as opposed to selling at a profit and paying increased taxes.  I suspect this move, if implemented, will be countered by these same countries (and others) as the grab for PMs intensifies in the near future.  



Sat, 12/10/2011 - 15:26 | 1966412 TradingTroll
TradingTroll's picture

Whoa! Sprott just showed his hand, and it isn't a good one. Sprott is weak, he just revealed his vulnerabilities and frustration. The silver market is big and he is only a billionaire.

You see, Sprott has moaned for years as to his limited abilities. He can only affect stock (ie buy up silver inventories) and not flow (new production) As silver industrial use drops with the economic slowdowns worldwide, flow increases. Sprott wants flow to be mopped up by investment demand as it was last year, but one look at the GSR shows how weak silver is. Without more QE, or CB printing in excess of deflationary money destruction, silver will see $20 before $50. Sprott knows this and is panicking.

He has tried every trick in the book, including getting a 25% Premium on PSLV so he can buy more silver at a 25% discount. It isn't enough. His overnight offering news and an attempt at a buy the rumor sell the news trade didn't work. Now he needs silver producers to stop selling to make his master plan work.

But why would a producer do so. Silver Standard is just one company selling juicy silver assets (Kingsgate bought the SSRI project and only paid a few dollars an ounce, making the ZHers who say it only costs $5 to dig it up lower their numbers)

A silver producer who wants to buy an asset needs cash/shares not more silver.

Also metrics like PE and PCF fall apart if they hoard silver without hedging. Imagine what $20 silver does to the share price of a producer like this. Share prices are quoted in fiat not grams of silver.

And hgow does all this end. Imagine we get to $100 silver and all the producer-hoarders sell and we never get to $150

As any public company CEO will tell you, you want to get the cheap shares and weak hands out of the way so share price can rise. At $100 silver how easily will it be for the producer-hoarder to hold and not sell when shareholders start asking for a dividend.

Sadly, this is just a pump and dump by Sprott and being a Canadian in the Vancouver mining industry I can assure you we all know Sprotts true colors. If any of my holdings do this I will liquidate. I will hoard my own silver thanks very much, because as MF Global proved, it is all about distance to physical, and when a silver producer pays a dividend I buy silver and can touch it. A producers hoard is not something I have any interest in.

It all begs the question: Eric Sprott-silver bug friend or foe?

Sun, 12/11/2011 - 00:15 | 1967156 AUD
AUD's picture

Eric Sprott-silver bug friend or foe?

Just talking his own book TT, as I said yesterday. That's what Sprott is best at.

Sat, 12/10/2011 - 15:42 | 1966444 thunderchief
thunderchief's picture

The miners should use their cash to either buy back stock, pay dividends to shareholders (the folks that own the companies) or purchase other miners stock through aquisition.

ES idea, seems just that. A nice idea.  It's like cramers booya crap.  It's a booya for the silverbugs.  I do not see it happening.  Here is why.  Miners need liquidity to expand and do mergers.  They would have to dump large amounts of metal on the market if they all the sudden did a takeover.  That will send silver on some wild rides.  And I truely do not see them moving metal around to settle business deals.  So some Silver miners are giving ES a booya, and that's it.

Here is an idea.  Why don't the miners provide a physical silver dividend.  Sprott could buy silver directly and store it as a share dividend for investors.  Oh, I forgot, no one, even ES really cares about those guys. 

Sat, 12/10/2011 - 03:19 | 1965578 yabyum
yabyum's picture

It would be a great day when Hecla payed the dividend in "product" Just dreaming i guess.

Sat, 12/10/2011 - 03:26 | 1965589 Motorhead
Motorhead's picture

Indeed.  But just remember, "silver, bitchez"!

Sat, 12/10/2011 - 06:12 | 1965699 Al Gorerhythm
Al Gorerhythm's picture

That'd be the day that the miners were nationalized. That bitchez not.

Sat, 12/10/2011 - 12:53 | 1966109 tmosley
tmosley's picture

Hell, that would be enough for me to put a bit back into the paper game.

Too bad it will never happen.

Sat, 12/10/2011 - 13:33 | 1966175 Amish Hacker
Amish Hacker's picture

Sending shareholders a few rounds or bars every quarter would be a logistical nightmare, but if Hecla retained a portion of their production, as Sprott suggests, it would have nearly the same effect. Shareholders would see their equity include real, un-rehypothecated metal that belonged to them as owners of the company.

Sat, 12/10/2011 - 13:38 | 1966180 grid-b-gone
grid-b-gone's picture

Miners should sell directly to retail. Cut out all the middlemen and weaken paper manipulation. I'd like my dividend in metal, too, thank you.

Sat, 12/10/2011 - 14:57 | 1966364 Big Corked Boots
Big Corked Boots's picture

proud owner of a round or two...

Sat, 12/10/2011 - 20:21 | 1966878 mt paul
mt paul's picture

south side of the brooks range

above the arctic circle.. alaska

some very pure nuggets to be had ..93-96 %

catch the boys at the mine

at the right time..when the fuel bill is due

might get em for spot less 10 %..

strictly Benjamin's fiat money..

Tue, 12/13/2011 - 02:46 | 1972979 geekgrrl
geekgrrl's picture

This is a great point! Why are the ETFs necessary at all?

Sat, 12/10/2011 - 03:21 | 1965582 wandstrasse
wandstrasse's picture

but please do not stop to supply the coin shops.. I still want to buy..

Sat, 12/10/2011 - 03:23 | 1965584 Rhone_Ranger
Rhone_Ranger's picture

Have Sprott and Corzine ever worked together?

Sat, 12/10/2011 - 08:42 | 1965783 nickt1y
nickt1y's picture

WTF kind of question is that? Would you care to elaborate? If not STFU.

Sat, 12/10/2011 - 08:57 | 1965795 scatterbrains
scatterbrains's picture

Which raises the question, at what level does the negative "feedback?" indicate government shill alert ?  Is it 5 or 10 or what ?  Some of us can spot these shills instantly but there should be a fight club rule that if enough members downgrade your ass you carry a ZH big red X across your handle/name/icon or something.


Sat, 12/10/2011 - 11:31 | 1965973 XitSam
XitSam's picture

I understand the sentiment.  But, for example, if you write a contrary opinion to a "George Washington" conspiracy post, his minions will downmod you into the basement.

Sat, 12/10/2011 - 03:25 | 1965587 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Silver bitchez!

Sat, 12/10/2011 - 03:28 | 1965593 Ecoman11
Ecoman11's picture

Sprott has applied for a chartered bank license to create the first bullion-commence bank in Canada. Google 'Sprott Continental Bank'

Sat, 12/10/2011 - 03:58 | 1965622 AUD
AUD's picture

So maybe Sprott wants miners to deposit their silver with Sprott Inc so he can charge them storage fees for allocated or hypothecate their unallocated deposit?

You'd be relying on Sprott to make sure his banks' 'assets' are as good as gold.

Sat, 12/10/2011 - 10:29 | 1965897 Vlad Tepid
Vlad Tepid's picture

I think it's pretty clear that, aside from being a good move from the miner's point of view, Sprott's interest in this is to hasten the seizing up of the silver supply.  If the miners don't sell at whatever price they can get to get cash, and holdon tothe silver, supply will shrink, prices will rise and maybe we can take down a JPM or two before all of us die of old age.

Sun, 12/11/2011 - 00:25 | 1967166 AUD
AUD's picture

I think it's pretty clear that you have no idea what you are talking about & like the other 'to the moon bitchez' morons who frequent this site, would likely buy PSLV at a significant premium to NAV.


Sat, 12/10/2011 - 03:44 | 1965606 AUD
AUD's picture

 Eric 'I'll sell all my shares in PSLV at a premium to NAV because all my clients are stupid' Sprott can go jump. Here is a a quote from someone who knows something about the refining business

Miners don't produce 99.9% bars, so to do what Sprott suggests they either just hold/stockpile their dore bars and only send them to refineries when they need actual cash or refine the metal and hold 99.9% bars.

In either case the problem is that miners can't hold physical, they don't run vaults, so they would have to store it with someone else. Refiners aren't set up for this, they just turn stuff over, so it would have to be shipped to bullion banks to be held as allocated (with storage costs) pending sale.

As to the value add of refining, it is not much because refining is a dog of a business - worldwide there is over capacity so very competitive.

Sat, 12/10/2011 - 03:59 | 1965623 Ecoman11
Ecoman11's picture

They can leave some in the ground and focus on lower operation costs. Why sell silver at $30 when it will be 2-3x the price in a few years? Do you have any idea the amount of physical buying that's going on in Asia?

India alone has more gold then US & Europe combined.

Macquarie Research: Indians Carry Gold Worth Over $950B

Sat, 12/10/2011 - 04:07 | 1965633 AUD
AUD's picture

Silver in the ground is not money. Why do you think they dig it out of the ground in the first place?

Sat, 12/10/2011 - 04:12 | 1965636 Ecoman11
Ecoman11's picture

LOL. So it's refined into bars to sit in a vault for many years, yeh not money.

If gold and silver are currency, and miners have the reserves, then miners are the real banks.

Sat, 12/10/2011 - 04:44 | 1965653 AUD
AUD's picture

What, do you think they dig it out of the ground as at least 99.5% pure good delivery bars? You have no idea what you are talking about, no wonder you think Sprott is the business.

Sorry ZH, Sprott is talking his own book here, I'm surprised you can't see through it.

Sat, 12/10/2011 - 05:00 | 1965659 hmmmstrange
hmmmstrange's picture

Sorry Srott, it's in the miners' best interest to not even let the excess silver hit the market, of which you participate fully in.

Sat, 12/10/2011 - 05:03 | 1965660 Don Smith
Don Smith's picture

I'm fairly confident that the Tylers saw what you see - fighting manipulation with collusion.  They're just calling attention to the article, not judging it either way.  If anything, they cast mild aspersions on Mr. Sprott, but they are they color commentators to what daily grows in entertainment value as the the fight of the century - one for our very financial system.

Sat, 12/10/2011 - 05:18 | 1965665 AUD
AUD's picture

Sprott can kiss my arse but this on the other hand is really quite interesting, if true

Sat, 12/10/2011 - 13:27 | 1966167 Ricky Bobby
Ricky Bobby's picture

Yes and oil reserves are not money either. I will gladly trade you zimbabwe dollars or bennie bucks for proven reserves.

Sat, 12/10/2011 - 04:02 | 1965629 AUD
AUD's picture

and another

miners don't produce saleable (internationally recognised) metal as the economics of 99.5% plus purity refining don't add up at the volumes individual mines put out.

Sat, 12/10/2011 - 06:26 | 1965708 Global Hunter
Global Hunter's picture

OK if silver miners don't produce this 99.5% purity silver who does? Pharma cos?  big oil?  aliens?  Honestly curious because I always thought miners pulled a resource out of the ground but from your posts I'm beginning to doubt that these miners actually exist or they're doing something different from what they say they are.  

Sat, 12/10/2011 - 06:50 | 1965723 AUD
AUD's picture

from your posts I'm beginning to doubt that these miners actually exist

No, you like many others here are just ignorant. Refiners produce the pure metal, miners generally produce dore bars. Miners don't have vaults, where would they store their 'reinvested' silver?

A bullion bank maybe? Maybe Sprott's new venture? Yeah I trust Sprott... he'd never operate a hypothecated unallocated precious metal depository. He gets interviewed by King World News & has articles on ZeroHedge, I'd trust my silver with him for sure.

Sat, 12/10/2011 - 06:58 | 1965729 Global Hunter
Global Hunter's picture

How much does building a room and vault compare to the capital costs of building a mine? Answer a lot less

For those mines that don't have their own refining capacity could they not take back 25% of the refined ore? answer yes

Case rested.


Sat, 12/10/2011 - 09:30 | 1965829 SilverIsKing
SilverIsKing's picture

Who do you trust?

Sat, 12/10/2011 - 11:00 | 1965934 TheSilverJournal
TheSilverJournal's picture


Sat, 12/10/2011 - 11:33 | 1965976 Transformer
Transformer's picture

Refiners will either buy your product once it is refined, or return it to you, keeping a small percentage of the product.  So, it is possible for a Miner to retain control of their product through the refining process.


Sat, 12/10/2011 - 17:25 | 1966583 prole
prole's picture

This is silly talk. Nonsense.

"No, you like many others here are just ignorant. Refiners produce the pure metal, miners generally produce dore bars. Miners don't have vaults, where would they store their 'reinvested' silver?"

Gold and Silver mines are on their face experts in precious metals. It would take them about 2 seconds to add the final refining stage and produce 9999 bars instead of "dore" what percent is dore 80? IDK.

It just happens to be convenient for them to ship dore bars nowadays, to the refiners. If large buyers had a clue they would be just as keen on dore bars anyway.

PLUS~Look at your parsed wording: "Miners GENERALLY produce dore bars." Don't some mines like the big mines in SA produce the 9999 bars themselves? If you are knowledgeable in this area or an expert, please educate me don't insult and dismiss me.

PLUS+~ Excavating and security being two other areas in which mining companies are already world class experts at, they having the need to secure the metals at every stage, the capacity to 'store' and provide security for the metals is already built into what they do.

Sat, 12/10/2011 - 04:55 | 1965657 Rakshas
Rakshas's picture

ES has maintained for some years now that PM miners don't seem to understand thier own product, they know how to find gold and silver, they are very good at getting it out of the ground and are generally competent enough to get it to market - after that it's kind of like watching a bipolar dog chasing cars.....

Look how long it took some of the bigger gold miners to unhedge thier production; this would seem to demonstrate a lack of confidence in thier shiny rocks going forward, particularly when it was becoming more and more clear that the fiat bubble was forming and Greentard, well that guy alone should have been enough of a harbinger to get them off thier asses and start planing past the next two quarters. The mining buisness over the past century has required signing deals with the devil banks to move projects forward but these past 15 or so years the miners should have been taking care of themselves via thier own bank of PM's - Silver Wheaton is a good example of one concept that works, they've essentially become a bank of sorts for budding miners in need of capital.

Sprott's suggestion for the miners makes sense to me, whether they hold silver concentrate or pay to have Ag refined to purity and hold it in a vault, storage costs are a small percentage of the overall value especially for a comodity that has been held down like silver has over the past three decades. Alls you really gots to do it think about how much silver the central bank is printing vs how much bum wad benjamins they be makin'.

 I mean really, how many readers of ZH would take cash over silver to hold for the next 5 years?  You don't have to be a bug; equally you don't have to be an idiot, it's your call....



Sat, 12/10/2011 - 06:28 | 1965709 Global Hunter
Global Hunter's picture

most of the mining ceo's I've met were former investment bankers.

Sat, 12/10/2011 - 16:02 | 1966470 Sicilian Muse
Sicilian Muse's picture

This reminds me of a moment in Reggie Middleton's recent interview with the guy from Gold Bullion International. I think it was the third segment where he was asking the guy to make a secular bull case for gold. One of the things the guy started talking about was central banks. He started to mention that up until the last couple years central banks had always been net sellers of gold (implying that they were now buying) and mentioned how the British central bank had sold half their gold at 2 or 300 bucks--at which point Reggie smartly interrupted with--"that doesn't concern you?" and went on to say that if you traded inversely to central bank buying, you would be quite the wealthy person. 

I guess my point is that if you think the mining companies generally get it wrong when it comes to hedging and valuing their metal assets, then why would they get it right now? The contrarian bet is that rest assured, as soon as mining companies do what sprott is advocating, silver will plummet shortly thereafter.


Sat, 12/10/2011 - 06:32 | 1965710 Global Hunter
Global Hunter's picture

oh I see what you did've created a strawman arguement.  Building a room to store silver that you mine is 100% impossible because you said so.  You are a fucking idiot AUD.  A complete fucking idiot now fuck off and go suck a banker's dick.

Sat, 12/10/2011 - 09:10 | 1965811 scatterbrains
scatterbrains's picture

If I'm the CEO of a gold/silver mining company I should have been doing this already, at least to some degree back somewhere around QE-1 without needing someone like Sprott having to tell me.  I'm sure there must be plenty of miners around who've witness many years of manipulation all the way back to the Hunt days and more recently the margin games played by the CB's... or if not then just how stupid are these guys.

How much change can pissed off common share holders force upon these idiots that blindly continue to be raped by the banksters ? Honest question here.


Sat, 12/10/2011 - 17:40 | 1966491 akak
akak's picture

If I'm the CEO of a gold/silver mining company I should have been doing this already, at least to some degree back somewhere around QE-1 without needing someone like Sprott having to tell me.  I'm sure there must be plenty of miners around who've witness many years of manipulation all the way back to the Hunt days and more recently the margin games played by the CB's... or if not then just how stupid are these guys.

Sadly, like the general population, pretty fucking stupid.
Either that, or completely held hostage --- I can't yet figure out which.

I have had connections to the mining industry for years, and regularly read a number of the leading mining journals, and I can tell you that most if not almost all mining executives, managers and shareholders are, to all appearances, dumb as a fucking box of rocks (pun intended) when it comes to politics, political and economic trends, and most particularly PM manipulation.  The degree to which they are in denial over all of these matters (aside from environmental regulation, which does make them immediately howl) is shocking, but little different from the degree to which the general public is in denial as well. 

I almost invariably find myself gritting my teeth, if not wanting to throw some journal against the wall, upon reading some wishy-washy mining publication article or editorial touching on price manipulation of PMs, for example, and either pooh-poohing it, or downplaying it to a gigantic degree.  If anyone should be able to see and understand what is going on in the PM markets clearly, it is the PM miners themselves, who are also those MOST impacted by these official but surreptitious crimes and PM manipulations --- but yet virtually to a man they refuse to even acknowledge what we all here know and recognize, much less ever speak out against it.  Sometimes, I have to wonder if they all collectively have a gun held to their heads, for as much as they play the cowed and beaten dog in respect to the many crimes committed against them through the PM markets.

Sat, 12/10/2011 - 03:50 | 1965614 SHEEPFUKKER

Your move, paper whores.  

Sat, 12/10/2011 - 03:58 | 1965621 Joy on Maui
Joy on Maui's picture

Welcome to the world of OPEC, I mean OSEC?   This is absolutely brilliant.  I do hope  this idea gains a hold in the minds of the CEOs of silver producers around the globe, or at least in the minds of those who have been watching the MF Global debacle unfold.   I do pray they are aware of the (potential) power they hold.  Poetic justice, anyone?

Sat, 12/10/2011 - 03:58 | 1965624 hmmmstrange
hmmmstrange's picture

I dont get Sprott's reasoning. Why go through the process of turning silver produced, in to cash then back to silver? Seems there a redundent step in the process. Just don't process some of the ore. Just stockpile it. Release records on stockpiled reserves already mined in quarterly reports and you've achieved the same thing without going through the expense of refining and paying taxes on that silver sold. Just imagine the silver price if silver mines stopped refining ore.

Sat, 12/10/2011 - 04:07 | 1965631 Ecoman11
Ecoman11's picture

His reasoning is due to the fact that silver miners know there is paper representing physical silver that is suppressing the price. He often refers to the World Silver Survey every year that counts ETFs in supply. Now look at the chart below and ask yourself how the hell does supply and demand match pefectly, right to the ton, year after year.

Does that look normal? Does copper, zinc and lead supplies have figures like that too? 60% of silver is made from those three metals.

Sat, 12/10/2011 - 04:15 | 1965641 hmmmstrange
hmmmstrange's picture

I understand a forced squeeze by increasing demand, but there are better ways of doing it. Most silver mines are not "silver" mines but lead mines. Silver is by far a byproduct of lead mines. By stockpiling ore which has been independently assayed, you achieve the same thing, but you defer the 30% corporate tax on the silver/lead that would have been sold, and have the benefit of increasing the value of the shares and pumping up the commodity. The company then becomes a real silver ETF.

Sat, 12/10/2011 - 11:39 | 1965984 Transformer
Transformer's picture

They do not have to sell, and then buy back silver.  The refining process is simple.  When you have product refined, you don't pay the refiner.  Either he buys your product from you, or retains a small percentage of the product and returns it to you.  It is extremely easy for miners to hold a percentage of what they produce, and no additional bookeepiing entries to do it.

Sat, 12/10/2011 - 05:13 | 1965663 onebir
onebir's picture

"Now look at the chart below and ask yourself how the hell does supply and demand match pefectly, right to the ton, year after year."

Supply and demand for use don't match: the implied net (dis)investment line is clearly the balancing item... In 2009 and 2010, silver supply was quite a bit higher than industrial/jewelry demand and (estimated) investment in silver made up the difference.

Sat, 12/10/2011 - 04:11 | 1965634 mccoyspace
mccoyspace's picture

This is a strange argument as I understand it.

On the one hand he is calling for the silver producers to join the "alternative currency/barter networks" scene. The producer's product is itself a currency, it is 'cash,' he says. They could hold it directly and be their own bank. It is easy to imagine the next step being that the costs of doing busuness (capital investments, fuel, etc, etc, etc) could be paid for with the product produced. A bilateral exchange between say the fuel companies and the silver producers.

But he also seems to be playing the paper game. He shows how the removal of 20% of the silver production would jack up the price of silver denominated in paper money. The silver producers would still be in that game too, so they would see the paper value of their silver go way up, for thier own personal profit. This would also work to destabilize or reign in the banks/middle men who are presumably profiting off of the manipulation of the market through rehypothacation schemes. The silver producers make paper money and reassert leverage over the market. 

This 'profit through embargo' idea seems like it comes from a pretty different place than the 'alternative currency' idea and represents a kind of bi-market approach. It seems like a way for silver producers to consolidate their economic power, which may be a good thing, but it leaves me feeling a little ambivalent.....

Sat, 12/10/2011 - 04:18 | 1965644 Ecoman11
Ecoman11's picture

Sprott isn't saying to keep all their silver in the ground. His main message is the fact that keeping all their cash (with no interest) in the bank is not worth the risk considering everything that's going on. Keeping some in the ground is better investment for the mid-long term. Makes perfect sense.

Sat, 12/10/2011 - 04:29 | 1965650 hmmmstrange
hmmmstrange's picture

Problem with keeping some of it in the ground is you dont know what you have until you take it out. Core samples will give an estimate but not the real amount. You dont need to process it but you do need to remove it. I'd much rather invest in a company that have 100% proven reserves already mined, sitting in a pile ready to be refined. Dig as much as you can and only process enough ore to cover expenses.

Sat, 12/10/2011 - 06:44 | 1965715 Global Hunter
Global Hunter's picture

Its a simple concept, the miner either keeps 25% of the silver they mine and then refine or take back 25% if its refined someplace else rather than sell it all to banks.  Thats it.  

See some people talking about lead mines or this and that, he's directing this towards silver miners, ones that mine silver.  Here's an example of a Canadian silver miner that sells its own bullion and coins.

I don't know if there's a lot of drunkeness tonight but this is a really simple concept 

Sat, 12/10/2011 - 19:18 | 1966760 DosZap
DosZap's picture

I think it's a hell of an idea.

Only sell enough to make payroll, and operating costs,pay dividends,  have it smelted, assayed,(hell build your own vaults) and stored,and do not sell it .

True VALUATION then comes about.Or, better yet, the miners SET the prices for the entire market. After all that famous line, it only costs $5.00 to dig it out of the ground applies(LOL)............................. JPM Suck on that one.

Oh, my gosh, what we gonna do, someone is really setting the price,and they own it all.

Sat, 12/10/2011 - 10:26 | 1965890 El Gordo
El Gordo's picture

If they want it to act like a currency, then treat it like a currency.  Pay their bills, pay their employees, pay their shareholders in kind rather than in cash.  I'd go for that in a minute.  That way, the value is truly determined by the market - how much fuel or labor will one ounce of silver buy? etc.  I don't like the idea of hoarding, but I do like the idea of using it as barter.

Sat, 12/10/2011 - 13:01 | 1966128 tmosley
tmosley's picture

The point is to starve the system of resources, for the MF Global debacle to move to completion, wiping out all of the supression rackets, and return to a system of true price discovery, where mines could again rely on the markets to get a real price for their silver.

This is a first step towards renewing the system.

Sat, 12/10/2011 - 04:32 | 1965651 Ecoman11
Ecoman11's picture

Tyler you're on a PM rampage today. What gives?

Sat, 12/10/2011 - 05:35 | 1965671 JOYFUL
JOYFUL's picture

What gives?

The dike. 

The little Dutch boy(the one what come over to the Isles after Charles was seperated from his head and usury was once again institutionalized) has finally had enough.  Though he's raped n pillaged Ireland one more time, taken Greece to the cleaners, occupied Portugal and Italy, he's finally met his match on the plains of  a virtual La Mancha.

To the cynical and underinformed, Eric Sprott looks like another Don Quijote, tilting at windmills, and forever doomed to fooldom. Much to the chagrin of same, Sprott will turn out to have been the embodiment of what those two forgotten giants of the past, Richard Cantillon and J.B. Say took the trouble of defining as the entrepeneur.

To Cantillon's prescient description of the entrepeneur as he who is responsible for bringing about competition and the decentralisation of markets through the application of decision-making and risk-taking add Says'  one who brings other people together in order to build a single productive organism and you have the project Eric proposes in a nutshell.

Nothing great has ever been accomplished without vision: those who snipe herein at his are mere rodents of the kind we are accustomed to seeing drop over the sides of sinking ships. It's called the Anglo-American Establishment, but it's really just the continuum of Sephardic money changers who changed their religion and countries more often than some change their socks.  Their windmills are a falling, much like those in the Scottish Highlands which tumbled in the breeze yesterday, wind generators of a new greenmail scam which incarnated all of the phony rhetoric these scammers have used for centuries to defraud the crofter of his hard won coin. 

VIVA El Sprott!



Sat, 12/10/2011 - 07:19 | 1965739 falak pema
falak pema's picture

you sound like a resurrected Jacobite re-fighting the Battle of the Boyne.

Sprott on...and damned be he who cries 'hold enough'.

Sun, 12/11/2011 - 10:01 | 1967399 JOYFUL
JOYFUL's picture

Funny that you should say that.  Born n raised a Protestant, bred in the bone disgust with the papist persuasion, never been to the Emerald Isles(in this lifetime) nor north of Hadrians' Wall


after 50 some years I finally figured something out, what my mam was accustomed to saying, whenever the weather was unusually cold.....

Colder than Billyo she would say.  Colder than Billy O.  Billy O.  William of Orange....King Willy. Let's see, allowing 25 years a generation, what's that, 12 generations...?  By the time of mine, nobody had a clue what it meant, but the truth stuck, like flies on a gluestrip.

Yup, must have been some kind of bastard, that one, to live so long in folk memory. 

Once again, proof that history is written by the "winners"


Sat, 12/10/2011 - 04:50 | 1965654 Gringo Viejo
Gringo Viejo's picture

Are opinions like assholes? Jim Willie put forth the argument ( 12/09/11) that the MF takedown was contrived to prevent a COMEX default. You make the call..............

Sat, 12/10/2011 - 09:31 | 1965831 scatterbrains
scatterbrains's picture

I was watching MF stock during the silver take down and I recall at the time the stock price action was behaving strangely as though insiders were jumping ship. My first thought was that some big player got caught in the down draft and couldn't meet the margin call.  Then I thought Corzine probably hated GS after the way he was ousted. If he still had insiders whispering in his ear that maybe GS/JPM was about to blow up their pm manipulation games then perhaps motivate by both hate and greed he would be on the otherside of the trade. Have we seen which trades actually blew the company up yet? I wouldn't put it past the fed to assit GS/JPM in crushing the bankster rat over at MF if they knew he was up to something. I have no clue but it was a thought for a minute.


Sat, 12/10/2011 - 04:57 | 1965658 Conax
Conax's picture

The way I (a layman) read it, he just wants them to convert some of their reserves (not operating funds) into their own silver stack and sit on it instead of trusting banks with the money. Just 25%, leaving 75% in cash reserves. Pay the refining cost on some tonnage and store the bars somewhere in a private vault. They will profit on the increase in the price they caused by taking some off the table, and vex the bankers at the same time.  Pretty sweet.

I would think having a big stack of silver would strengthen a miner's value and reputation, and stock price. It sounds like a fine idea to me.

Sat, 12/10/2011 - 05:39 | 1965681 thunderchief
thunderchief's picture

The PM miners today are stacking cash every quarter, and a lot are doing nothing with it.  You are not even seeing mergers of any scale lately.  This could change over night, and I am sure miners will want cash for aquisitions.

The reason silver is so low is lack of buying.  At these levels you would think every dealer would be out of stock.   The general public, and even small investors are not stepping up to the plate.  

So if everyone wants 29 dollar silver and won't buy at 32 it is simple greed.  The price will stay range bound with lots of buyers around thirty and then it dries up a few dollars up.  We cannot even get back to the mid thirties!

The big banks also play this game, as they know they have broken the silver market with these massive takedowns.   No one is saying that.  I will say it.  JPM broke the silver market with these takedowns, and now you have what you have for a while.

Sprott is crying like Jamie Dymon about the price of silver.  If he is going to make this big purchase why doesn't he just do it at these bargain levels.  He also wants sub thirty silver as well.  He also knows it is a broken market.

It will stay broken for quite a while IMO.  Your best bet is to accumulate on a monthly basis and stop listening to this cry baby billionaire talk. 

Sat, 12/10/2011 - 06:26 | 1965707 Rakshas
Rakshas's picture

Cry baby?? WTF - I'll have you know that Sprott recently sued an upstart junior silver miner because they wouldn't sign off on a $25MM financing that would have seen them (the miner, sorry can't tell you the name, and no it's not crumpled foreskin) pay SAM (Sprott) back $50MM; the suit alleged the miner benefited from the Sprott name in a private equity financing deal, Cry Baby millionaire INDEED, do these sound like the actions of a crybaby??.  You should really get your facts before tossing unjust characterizations around mister...... edit: /sarc

On a somewhat related note ES got his ass kicked to the curb by a British Columbia Supreme Court Justice and had to pay the miner's court costs for the frivolous legal action.   


Sat, 12/10/2011 - 14:01 | 1966224 oddjob
oddjob's picture

The company was Aurcana. High cost fully diluted whore of a Silver producer that is selling even more shares.

Sat, 12/10/2011 - 15:05 | 1966372 Sicilian Muse
Sicilian Muse's picture


My question to all the people who think silver is a bargain at $32, is did you think the same in March '11 at $32-- when only a year before it hovered at $18. Or do you just think that because you think the futures market pushed spot near $50 in May?

And I'm not sure I'm totally getting Sprott's beef with the futures market? To what extent is he saying that there is manipulation going on? Is he saying that BIG players used the futures market to cause a parabolic rise in silver, then conspired events and margin hikes to kill late levered longs and create an apparent paper peak that will supress the $ price of silver for a long time to come?


Sat, 12/10/2011 - 06:22 | 1965704 falak pema
falak pema's picture

When thieves fall out and war is declared amongst the US Oligarchs...civil financial war now looming, as the margins calls go sour, as the liquidity pump dries and the insolvency wall looms higher and higher; Oh to be a Goth looking on at ROme burn from inside. Nowhere to run, nowhere to hide ill gotten wealth, as the Midas touch goes sour, burns all that glitters and shines.

Sat, 12/10/2011 - 15:32 | 1966423 Sunshine n Lollipops
Sunshine n Lollipops's picture

Your literate observations are always a treat, falak.                                                                                                   

Sat, 12/10/2011 - 06:24 | 1965706 JPMorgan
JPMorgan's picture

The way I read it.


Mr Sprott wants the silver miners to hoard their own product hence controlling the available supply to the market.

Reduced silver supply = higher silver price = silver miners higher net worth = PSLV higher net worth.


Could work accept the silver miners require the liquidity of cash to be able to operate day to day.

But that works as well because if the banks stop loaning them cash because of what they are doing they would be forced to shut down operations, once again effecting supply.


Not a bad plan but I doubt the miners would be up for it though.

Sat, 12/10/2011 - 06:39 | 1965714 thunderchief
thunderchief's picture

If the big banks knock the paper price down enough (and they just did again a few days ago, almost $2 in a matter of minutes) they have traumatized enough people from paying more than where it is now. 

You are seeing buying dry up quick as silver goes past 33.  I say bravo JPM, they have done their work and won.  That is broken, given silvers fundamentals.  I say broken, as higher prices will drive buyers out, fearing another JPM takedown.  So everyone becomes a JPM in the silver market, actually working for a low range bound price.  And buying a handful of silver eagles isn't doing the trick.

I think ES wants to slowly make his purchase at the lower end of this range bound price.  Fundamentals will eventually catch up, but there is too much propaganda in this marktet, on both sides, even from ES. 

Where are the physical buyers at these bargain levels?  Why hasn't the Comex been cleaned out?  Isn't this a delivery month?  All this stuff in the EU and around the world should back the PM's and shoot the price  up. 

Broken.  That is the reason. Sorry to say this but it's the end of the year and silver is about where it was a year ago on the best fundamentals I have ever seen. 

Sat, 12/10/2011 - 06:46 | 1965719 Global Hunter
Global Hunter's picture

this is what MF was about: collapsing it and taking MFs assets to cover JPM's shorts including silver. If the bigger banks continue to take down smaller ones to cover their paper PM shorts they can continue this game for some time...until they can't.

Sat, 12/10/2011 - 06:51 | 1965725 Silver Bully
Silver Bully's picture

'The reason silver is so low is lack of buying.'

Honestly, I'm impressed there is still a silver market at all after what has transpired in the past 7-8 months. Margin hikes, relentless short raids, MFing Global, utter lack of trust in the systems determining price. We're lucky price is still hanging on to $31-32 right now. I mean, the MF Global mess alone is keeping people away. Would you buy or sell with a system that abuses your money like that? Even if price went up, can you be sure you will get your money, let alone your metal?

This won't stay this way for too long, tho. Its got a month or three to go, but we'll see silver get rumbling again (QE3 or no). Higher margin requirements are also still making themselves felt.

'The general public, and even small investors are not stepping up to the plate. '

Honestly, I haven't. There's too much crap hitting the fan lately. However, I see only positive from here on out, short term pain aside. We're either going to see silver correct down to $22-24, or it will bust back up near somewhere near $40. Either way, buying will commence once price breaks. I just want the market to make up its freakin' mind and get it over already. 

Sat, 12/10/2011 - 13:06 | 1966137 tmosley
tmosley's picture

There isn't a silver market.  Just a random number generator creating up and downticks.

Sat, 12/10/2011 - 06:58 | 1965728 terryfuckwit
terryfuckwit's picture

i just assume you guys know their is no hypothecacy nin in sprotts contracts and no secret london offices and if so go go Sprott

Sat, 12/10/2011 - 16:03 | 1965742 thunderchief
thunderchief's picture

I'm all behind ES.  But I find this grind down a weapon to stop buying.  A lower range bound trade 29-33, can even lead a lower range trade as buyers grind themselves up hoping for lower.  I'm sure everyone knows someone who wants to buy at 29.  Then there will be those that sell at 30 and want to buy again at 25.  

It also works in the other direction, where people jump in as the train is leaving the station.  All the big up moves are paper moves too, and yet all the pro silver sights talk them up as buyers showing up.  Strong hands.  But no deliveries ever occur, setting things up for a bank smashdown. 

This grind down continues until most small investors are broke.  That is why you should never sell in this market, never go on margin, and do not play the time expire game.  Monthly accumulation is the only way IMO.  The be all to end all in this game will be the Asians.  Just watch.

Sat, 12/10/2011 - 07:52 | 1965756 Hedge Fund of One
Hedge Fund of One's picture

The manipulation of PM supply/price/double-counting makes me wonder how they could be used as currency. Seems that we would have just as much fraud as we have with fiat currency now. Would not change the hearts of the money-changers who would just have a different gig.

Sat, 12/10/2011 - 09:42 | 1965841 jeffgroove102
jeffgroove102's picture

I think the biggest problem the metals market faces today is authority by mob rule as expressed by Marc Faber. In other words, democracies are happy to plunder minorities to their benefit. This is why I believe in only keeping 25% of your worth in the pms. I do not disagree with those whom believe in hard assets, but the elephant in the room is governments that are willing to take from those that have, especially if it benefits them.

Case in point, Marc Faber has asked people countless times if they own precious metals, and unfortunately very few do.

Sat, 12/10/2011 - 09:42 | 1965842 jeffgroove102
jeffgroove102's picture

I think the biggest problem the metals market faces today is authority by mob rule as expressed by Marc Faber. In other words, democracies are happy to plunder minorities to their benefit. This is why I believe in only keeping 25% of your worth in the pms. I do not disagree with those whom believe in hard assets, but the elephant in the room is governments that are willing to take from those that have, especially if it benefits them.

Case in point, Marc Faber has asked people countless times if they own precious metals, and unfortunately very few do.

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