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Wallace Street Journal

Sleepless in Vancouver

David Bond
February 9, 2004

VANCOUVER, B.C. - Leave it to Cambridge House to roll out the best resource investment conference in this tyro's experience in a setting at the Pan Pacific Hotel that was as elegant as Vancouver's winter weather and its plethora of mooching bums outside the hotel was vile.

True, the Cambridge conclave lacked some of the usual bell-ringers. Jim Dines was absent. Media darling and all-around snob Thom Calandra was, um, AWOL, so we heard no hype about Ivanhoe and probably won't in the foreseeable future.

But how could a conference fail with the likes of International Spectator's Doug Casey, GATA's Bill Murphy, the ineffable Paul van Eeden, Peter Grandich (resplendent in his new Continental Air Lines suit), Long Wave analyst Ian Gordon, Adrian Day, Jay Taylor, bottom-fisher Jon Kaiser, eminence grise Bob Bishop, David Skarica, and our personal favourite, David Morgan of Silver-Investor.com, who danced from the back of the room to the podium festooned in silvery filigree passing out one-million-dollar "Federal Reserve Not"s to a thundering rendition of Sammy Hagar's "Paper Money"?

("I just spent more money than the Federal Government," Morgan cracked. And the audience cracked up. And he may be onto something: I was able to swap one of his million-dollar bills for a beer here in Wallace last evening.)

This was not the show for bluebloods. There were more people at the Cambridge conference who'd heard of Sammy Hagar than who had not. This quiet bull-market comprises a different breed of cat.

Four thousand folks - a record for the Vancouver venue - turned out for the two-day shebang. A goodly gob of them were first-timers. But more significantly, the cast of the performing characters has taken on a new hue, too.

Gold was, is, and will always be, the star, the leading lady, of investment conferences for the savvy. Indeed, if one concept is over-preached to the choir, it is that the U.S. dollar is in dangerous territory - that the Federal Reserve Bank's Ponzi scheme is perilously close to running out of suckers. The plutonium-hot potato of fiat "reserve currency" is high in the air, descending at terminal velocity, and no one, and no country or economic union, wants to catch the damned thing. Ergo, gold, which can be confiscated but not counterfeited, manipulated but not manufactured, will come in handy when the Fed spud goes thud.

Used to be, gold was the only thing we talked about at these functions. But behold, other metals from ol' Mendeleyev's periodic table have lately begun to shed their dowdy threads and strip-tease their way into the limelight. And damn! Some of 'em look downright sexy.

Dowagers lead and zinc are 50 percent above last summer's action. Uranium has been resuscitated and may soon walk upon her hind legs again. PGMs sprout over the western plains of Montana and the tundra country of Alaska like fireweed after a nuclear blast. Nickel: A single drill intercept of "ain't work a plug nickel" in Ontario and entire new venture firms are born and posted on the TSX. As well they should.

(Not to mention new Mongolian moose-pastures so fantastic that, viewed from a helicopter's side-door, 'they've got almost as much metal as there is vermouth in an extremely dry martini and could most certainly be economic if one could just get power, rail, roads, water, heat and people willing to work for $40 a month there, and persuade the Tooth Fairy to negotiate a decent toll rate with that new smelter on Mars - and then persuade those $40-a-month miners to dash out and buy new cars with air conditioners.)

I don't think the new kids are buying that tommyrot. No. They were listening for serious opportunity. Serious equity plays. Remember, this generation of Newbies is staring down the business end of the Social Security shotgun and finding it, to their chagrin, unloaded. There may be an entitlement out there, folks, but good luck collecting. Another Ponzi scheme about to bite the dust. This is survival. We're not talking about groceries in the basement; we're talking about being able to get by in the New Millennium.

Emerging from the LME scrap-heap is a new metal: And at the top of the mound of copper, nickel, uranium, iridium, indium and the PGMs is a metal most gold-bugs have never heard of, and its name is...

...SILVER

Dare we utter that nasty word SILVER? Scourge of the gold bugs - until recently, that is. Silver as a biocide. Silver as the conductors in your cell-phone. Silver-coated superconductive wire that will soon rapidly replace the copper running through inner-city conduit and the windings of industrial motors. Silver as a wood preservative. Silver as - swear to God - a dietary supplement. Silver as, dare we say it again? An historic store of monetary value.

Silver's got a set of problems unique to itself, problems that it doesn't share with gold. For starters, its price (as are the prices of all precious metals) is manipulated by a few insiders but, unlike gold, NOT by the United Snakes government. Under Carter, Reagan, Bush and Klinton, the United Snakes government squandered its entire stockpile of the white metal and is now a net PURCHASER of silver just to feed the domestic (and largely unadvertised) coinage program. That's right. While the feds continue to sleaze gold out of Fort Knox through Morgan and Barrick to keep inflation under wraps, it's almost a bragging right of the world's central banks that they ain't got no silver.

Hecla Mining Co., the only NYSE firm represented at the Cambridge function, reported unprecedented curiosity at its booth. Investor relations veep Vicki Veltkamp was overwhelmed with requests for annual reports and company info sheets. Seems a goodly portion of the 4,000 folks at the Cambridge show had never heard of Hecla. If you're Hecla, this is a very good thing. Four thousand people looking for value and looking for silver. If you're a silver bug, this is even better news.

An untold story here in the Silver Valley is the fact that real estate has all but disappeared. This, after real property was nothing more than a drug on the market for two decades. Folks with even a casual interest in silver futures are buying up property here like there's no tomorrow. All of a sudden, silver and silver-mining camps seem to be, in comparison with the dollar, a very low-risk proposition.

I watch the Euro and I watch zinc, lead and copper. They tell me what gold and silver are going to do. Which in turn tells me that this is a fundamentals market, not a speculative market.

And I see what's going on down the street, that this old mining camp has market value again. Watch the majors. Watch Hecla, watch Sterling, watch Coeur, watch privately-held (damn!) Bunker Hill. These are the players in this market. Their adjacent properties, independently held by any of a several dozen of survivors of this 25-year washout, can make you rich.

I took a friend down the Bunker Hill Mine yesterday and I asked Bunker's owner, Robert Hopper, what would it take to build a mine like this (we're talking 200 miles of workings and 3,000 horsepower of double-drum hoisting juice, at 13,000 volts, thank-you, production-ready stopes everywhere you look) what it would cost to build a mine like this from scratch.

You mean, not the cost of filing and discovery? Not blocking out the ore? Not proving up reserves. Not fighting the environmentalists and the government for 15 years? he asked.

Yeah, just the physical building of this thing, I said. No greenies, no bureaucrats, you're driving right in to guaranteed orebodies.

Funny you should ask, he said. Seems he had a mine appraiser on the property just a couple of years ago.

OK, he said. No permits, no environmentalists, no bureaucrats, just build the shafts and the drifts, all on guaranteed ore. No mistakes by the geologists. No lawyers.

Oh, about 400 million dollars.

Let's look at similar properties, here in the sleepless Silver Valley.

Sunshine's about the same size as Bunker. Build that baby from scratch, another $400 million. Let's go down the Osburn Fault. The Caladay Shaft alone was nearly $30 million, just a straight hole down into the ground; no drifts or rails or raises. Between the Coeur and the Caladay, at least another $400 million in drifts, shafts, hoists, raises, inclines, declines and concentrators Let's not forget the Crescent and the Star, each with an excess of 100 miles of workings. Slumbering, rumbling giants.

Look around here. To drive a mile of underground workings would cost, today, $2.6 million per mile. $500 per foot if you did it on the cheap. Speculative development mine workings, after you un-peel all the lawyers and the EPA and the holding costs, would run you twelve times that today. NOBODY has figured this out. It's how Ray DeMotte and the boys at Sterling managed to buy the Sunshine and Con-Silver Mine for a dirty-cheap five mil. It's how Bob Hopper got into the Bunker Hill for $10 and COVC. It's why all these bright guys are buying office buildings for $100k, $200k and grinning all the way to the bank while the locals look on in wonder.

Party's on. Surf is up. Come play. Silver has grabbed hold of six bucks. Watch the rest of the world follow. "Toxic Bob" Friedland's Ivanhoe Mining and Ivahoe Energy has basically leased the entire country of Mongolia. Copper and gold values ain't too bad, there's a brick-load of it, and China's putting him up in business with rail lines and infrastructure if he can figger out how to mine the whole mess.

I've got a friend who is back in Thailand after a two-year hiatus here in Wallace and he says the place has been miserably discovered; tourists, Wal-Marts, McDonalds, everything. Sucks.

Stuff that used to cost pennies now cost a double-sawbuck. The Asians not only have acquired our vices, they also hold a frighteningly-sized chunk of our national debt.

This is why Bush and Greenspan are pushing the dollar to zippo. Not a bad thing, from my point of view, because at the rate the US dollar is tanking, I'll be able to pay off my $58k mortgage for $5,800 in a couple of years. Watch the Euro, watch copper, watch silver, gold, zinc, lead. They are, inflation-adjusted, at 20-year highs in terms of USDs.

But this dribbling US dollar tends to piss off the Chinese, Japanese, et. al, who think in terms of generations, not quarterly reports. The big Asian central banks went on a US dollar buying spree a couple of weeks ago to prop up their debt holdings here; Greenspan said thanks by pharting to the effect that maybe he'd raise the prime rate next quarter. That threw gold back down to $400 and silver to $6, strengthened the dollar against the Euro, for about 48 flipping hours. Then the Japanese, Chinese and the Indians, all newly empowered to trade silver and gold, jumped back in, anxious to rid themselves of worthless USDollars. We're talking civilians here, not central banks. If you're a chart junkie study the open interest, backwardisation and contango in the resouce futures. It will scare the beJesus out of you, or make you very rich.

The Russians won't be taking US dollars as settlement for oil, or nickel, or just about anything else on the periodic table, for very much longer. They've said as much. The Asians and Islamics have re-instituted the Dinar, which is gold-backed and electronically traded (Saddam was the first to try it, we snuffed him but Malaysia and Indonesia are going for it anyway), and intend that it will be used as well for oil settlements, effectively retiring the US dollar.

Even the United Snakes does not have a military sufficient to defeat a worldwide flight from the US$D into some real physical commodity, be it gold, silver, owl shit or whatever. So what's the short-term solution? Silver stocks. What's the long-term solution? I think I'll have another beer, Lewis.

David Bond
February 9, 2004

David Bond covers gold and silver mining equities for a number of national and international publishers, including Platts Metals Week, a division of McGraw-Hill. He lives in Wallace, Idaho, heart of the planet's richest silver fields, the Coeur d'Alene Mining District. He is former editor of the Wallace Miner, and holds regional and national firsts in investigative journalism from the Atlantic City Press Club (National Headliner) and from the Society of Professional Journalists (SDX/SPJ) and has edited or written for newspapers on both coasts, Canada and Alaska.
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