Defiance Silver, a call on Silver
Silver topped at the end of April 2011 before tumbling some 70% to below $15 an ounce into late 2014. That makes the silver correction one of the longest in history. Regardless of what we think it should be, silver is a commodity whose price responds to both supply and demand. Unlike gold, silver is consumed so the world continues to need additional supplies of the metal each year.
I was candid about a top for silver in 2011 along with half a dozen other pundits. And I think this correction has been overdone. I don’t subscribe to the silver at $500 an ounce in a vacuum theory so popular with other writers. Until we go back to a gold standard, the price of silver will be linked to that of gold. Over the past 100 years silver has averaged a ratio of 53-1 to gold and I’d expect it to roam 20 points either side of that. At a current 75-1 it seems to me that silver is pretty cheap.
A few months ago I went to see one of the best silver projects I have ever viewed. If you believe the price of silver is going up, the shares of Defiance Silver (DEF-V) are the lowest cost call on silver in the world. It’s a perpetual call on silver.
I believe the long drought in the resource market is ending soon. We had a lot of indication of a major bottom last November. The next month would be good timing for a retest and once that is complete I think we are driving higher.
Defiance Silver has an option/purchase agreement to buy the San Acacio silver mine in Zacatecas Mexico. The company has until 2018 to complete the $5.5 million dollar purchase.
In a 1-kilometer wide zone at the San Acacio mine to a maximum depth of 210 meters to the water table, between 1548 and 1910, the miners produced over 100 million ounces of silver. The entire strike length of the mineralized zone is 5.6 km and has been largely untested.
When I went to visit the project in January, the company showed a resource of 12.45 million ounce inferred resource. As promised, the company released an updated 43-101 increasing the silver equivalent ounces to 17.9 million ounces and increased the grade to 192.50 g/t Ag.
The 5,000-meter Phase 1 drill program was designed to drill beneath the existing known resource. The company drilled 140 meters below the existing 210-meter known depth with a 2000 meter three hole program. Results were released in late January showing grades as high as 419 g/t Ag. An additional 5-hole program has been completed and results will be released shortly.
The company knows that the vein system is open both up and down strike. There are companies mining the same vein to their Northwest and to their Southeast. And there are companies mining silver ore down dip. It’s a wide vein system with a lot of potential. Money is obviously an issue. When I visited the project in January silver was cheaper and the share price was higher. They released an excellent 43-101 and the share price went down. Go figure.
One day soon, some tiny thread is going to come unraveled in the financial system and the whole cheap sweater is going to come unraveled. When it does and people start looking for real assets to invest in, one will be silver. Of all the silver companies I know of, Defiance has the lowest cost of silver and the highest potential. They can add as many ounces as they can afford to drill. San Acacio will one day again be a mine.
Until then Defiance is the cheapest and best call on silver I know of.
Defiance Silver is an advertiser. I have participated in a recent private placement. I am biased, please do your own due diligence. It’s not going to stay this cheap for long.
Defiance Silver Corp