Even More Mexican Silver
For those considering investing in precious metals, silver by far offers the most leverage. It goes up faster than gold and but it drops far faster as well. For all practical purposes, investing in silver should be for the fleet of foot.
Investing in silver shares offers even greater leverage with less risk. In the worst-case situation where you pick a stock at near its peak, you can always hang on. The financial system is going to crash and we are going to go to a gold backed currency. There is no other option. When you have gold money, you need lots of silver for ordinary purchases.
Quinton Hennigh and I were on a trip in January of this year. While we were together for ten days, we 'designed' a new currency based on silver and gold. The coins would look like this.
September is here and it looks as if we are headed for a giant fall. Optimism is at records as is insider short selling. The fools are all talking about "Green Shoots" but whoever came up with that is colorblind. Things are getting worse, far worse and if the Baltic Freight Index calls it right again, we have a crash on the way.
I didn't do a good job of calling it last year. I nailed the top in gold and silver to the day in March and called for a monster crash in the fall but didn't realize the metals shares would get hammered as badly as they did. Since October of last year, gold and silver shares have sold at record lows compared to the price of gold so I don't know how bad they will fall this year but it's probably not a bad idea to keep some cash handy.
I don't know if they will go down at all or how low but the financial world is in the eye of a monster hurricane and things are about to get fugly. Gerald Celente believes we are headed for a revolution or worse and I suspect he's right.
Regular readers know I went to Mexico a month ago and wrote about some of the projects and companies I saw there. I've been saving my favorite for last.
Bob Archer of Great Panther Resources invited me down to Mexico almost four years ago to see his newest project, the silver veins at Guanajuato. When they were in large-scale production during the 18th and 19th centuries the 24 km long vein system produced almost 1/3 of the silver being produced in the world. I wrote about it back then. Feel free to go back and reread what I wrote, it was a good piece.
There are certain rules of thumb that you can use on any mining project. Since Mexico was pretty much shut off from modern mining from 1910 until about 1995, they left a lot of silver.
The mines at Guanajuato that GPR took over were the last cooperative in Mexico. The cooperative took over in 1939 and things went downhill until they ran out of money and time in 2005. Their loss created GPR's gain.
Between 1550 and today, over a billion ounces of silver have been produced from the veins now owned by GPR. You can look at a plan view and realize the vein has still barely been touched. There is easily another billion ounces left to be mined. Those mines are going to be producing silver long after you and I are gone.
I'd like to see GPR speed things up. They are currently operating at a 500 TPD rate with a mill capable of producing 1200 TPD. A lack of access to capital is part of the issue but they really should be more focused on increasing production. In 2008 they produced 1.12 million ounces of silver equivalent and expect to increase that by 20% this year.
The ore grades 258 grams of silver to the tonne and 1.36 g/t Au. They recover 84.9% of the silver and 81.6% of the gold with a cash cost of $5.21. They have extended the mineralization from 430 meters to as deep as 600 meters and outlined a 43-101 silver resource of 5.3 million ounces.
Great Panther also has another producing mine at Topia in the Sierra Madre Mountains with 100% ownership. In 2008 they produced 687,238 silver equivalent ounces with an average grade of 542 g/t Ag and .56 g/t Au. Their cash costs are $9.18 per ounce.
Mining juniors tend to prefer to be exploration companies. You can drill for years and never accomplish anything and get away with it. But production demands visibility. Great Panther is in production and has been for years. They want to emphasize exploration and that's the wrong direction to go. They have to keep raising money and every time they do, the existing shareholders get diluted.
When I wrote them up four years ago, they had 35 million shares and were priced at $.62. Now they have 87 million shares and are 20% cheaper. It's imperative that management understands that the best money is the money that comes from cash flow. It's simply wrong that they have capacity of 1200 TPD and are producing 500 TPD. Everything gets cheaper when you scale up. I'm proud of Bob Archer and the team at Guanajuato but they simply have to get production up and be financing internally.
Great Panther is my favorite Mexican silver producer. I like the mines, I like the management and I like the team. They have the highest leverage to silver and at $14 silver that's probably a very good thing. If you like silver for the future, you need to be thinking GPR. Relative to most of the last four years, it's pretty cheap.
Great Panther is an advertiser and as such we have a very real reason to be biased. We don't share in your losses or your gains so please take some responsibility for your own decisions and do your own due diligence.
Great Panther Resources