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Wallace Street Journal

David Bond
February 27, 2004

WALLACE, Idaho - Perhaps only the Sleepless of us here in the Silver Valley caught the hysterically funny nature of a snippet of news out of Russia last week. We saw it mentioned only in the Russian press - it escaped translation into words which might have raised a few eyebrows in the West.

But we miss nothing here in the Silver Valley - home of the world's finest and largest deep-shaft primary silver mines. So for those of you who consider an eight-hour rack some kind of Constitutional right, we dutifully gather these snippets and pass them along to you. (And we find it not mildly disturbing that there is more thoughtful analysis and provocative, investigative reporting on America in Pravda, Rosbalt, the Moscow Times and the London Telegraph than there is in the Wall Street Journal [not to be confused with Wallace Street Journal] or the New York Times).

Herewith: Last week Aeroflot, the old Soviet Union's flagship airline - the 80-year-old carrier still features the hammer and sickle in its logo - announced that come this fall, it will cease to post its fares in U.S. dollars and instead accept only Euro-based payments for travel. This, as the U.S. dollar has slumped 10 percent over the past year even against the lowly ruble.

The world's last coal-powered airline, Aeroflot - were it an American carrier - we would say that it is the perfect combination of Northern charm and Southern efficiency. Anyone who has had the misfortune of flying on Aeroflot and lived to tell about it can regale you with tales of surly service, ratty cabins and terrifyingly fast approach speeds. Most of Aeroflot's transports are rigged to be quickly converted to bomber duty and are so heavy with metal armor they've got a stall speed on the order of 300 knots. If there is a sober pilot in the cockpit of your TU or AN or Ilyushin, it is only because he is under-age and sitting on daddy's lap.

When even Aeroflot won't take U.S. dollars, that should tell you mountains about what's going on in the world vis-à-vis the credibility of U.S. fiat currency. This is tantamount to being kicked out of a hotel on Mediterranean or Baltic while you're still in your tux. (It will be time, soon enough, to ask my friends again at Norilsk Nickel in Russia when they will switch from US dollars to Euros. Last time we spoke on the subject, they said they had "no immediate plans" to go Euro, but that was six months ago, and much has happened since then).

The world should have been put on notice that when Nixon pulled out of the Bretton Woods agreement in 1971, the Fed Note's value as its "reserve currency" would plunge to zilch. Thirty-odd years later, it's in the process of doing just that. With all due respect to analyst Dennis Wheeler (not the Coeur d'Alene Mines CEO), it's not foreign governments that are pulling the dollar down. They're trying frantically to prop it up, because they hold trillions of the little devils in "reserves" and IOUs, and are watching their net worth circle the drain.How does this segue to the Silver Valley's silver stash? Well, hang with me here.
Our dirty little secret is that the shredding Federal Reserve Note is the nicest advance 2004 Christmas present Greenspan and Bush could possibly have given us.

Current and necessary corrections in the gold market notwithstanding, thanks to the circling dollar we're enjoying metal prices across the entire periodic table that promise a long bull run; old Spokane Stock Exchange issues that were a drug on the market a decade ago are seeing unprecedented interest. Long-somnambulant shares are trading in the tens, even hundreds of thousands per day. Folks are back in the market, promising stability and liquidity. Silver Buckle (SBUM) traded more shares Thursday than it averaged in a month two years ago.

Deals and projects up and down the Silver Valley continue to ripple. New Jersey (NJMC) has a new website and the beginnings of a new flotation circuit at its mill near the Sunshine. Atlas Mining (ALMI) is buying gadgets for its Utah clay deposit and there's been some sniffing around its shaft south of Hecla's Lucky Friday. Shoshone Silver (SHSH) is firming up its land position in the Pend Oreille/Lakeview district. Sterling (SRLM) got the Sunshine Mine's chippy-hoist running last week after several months of dogged problem-solving, and former Sunshine hands Mike McLean and Jim Thomas are back on the payroll.
(You didn't' hear it from us, but McLean's and Thomas' reappearance suggests somebody at Sterling is taking a hard look at resuming the Consolidated-Silver Ramp (CSR) project at Sunshine. This would give unfettered rubber-tired access to the huge system of faults and veins around Sunshine's old No. 10 shaft without the hassle of rehabilitating the shaft).

I am asked, repeatedly it seems these days, for specific Silver Valley stock picks. I don't give 'em, ain't my job. What I can say is, look around the fault lines; if a property abuts or straddles a fault, odds are it will perform in a silver bull market. Consider also management: Are they sitting on their butts or are they actively looking to explore and develop their property and improve their reserves? Or are they waiting for somebody else to do it for them.

A recent write-up on a property here (we won't name names) caused quite a stir because the author suggested that gee, in another 15-20 years, it might be another Sterling. Sure. In another 100 years, if you can hold it that long, there's probably a moose pasture on the dark side of the moon that could make you rich. Big deal. Look for land position, both in relation to the faults and in proximity to active operations, and for what management is doing NOW.

Silver's in the cat-bird's seat. Say we're right, that the dollar continues to tank. The Poor Man's Gold is a natural safe haven for a shrinking dollar or during what many anticipate to be a forthcoming spate of inflation. On the other hand, if the economy improves, silver's fates as an industrial commodity with unprecedented versatility and necessity are sealed. Add to this the fact that silver is the least exposed of all industrial minerals to a downturn in the current Asian (Chinese) "miracle) and you've got a recipe for a winner.

Interesting, watching the charts this Thursday. Silver slid down all day long; the minute the Comex closed, it shot up 19 cents and may well have broken free of gold. What does this tell me? It tells me that Ted Butler's silver version of GATA, a conspiracy of short-sellers, may be alive and well on the Comex, but that their reach does not extend to the overseas markets and exchanges. The bastards are outnumbered, and their judgment day is nigh.

David Bond
February 26, 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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