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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