The Crunch is here
I have an identical twin brother who is a lawyer. Lawyers come up with inventive ways of spending their money. Someone he knew in Wyoming approached him with a deal. Let's say the guy owned 50,000 acres of beautiful land in the wilderness. He was selling pieces of the whole thing so in the end 50 people would each own part of the entire 50,000 acres. They didn't really own 1,000 acres 50 times; every owner had access to the whole place.
My brother realized the flaw right away. When everyone owns something, no one owns it. There may be 50 owners wandering around the 50,000 acres every weekend picking wildflowers but none of them can build an outhouse, much less a cabin. That's how group ownership works.
A Federal judge figured out the same thing last month. On October 31, Federal Judge Christopher Boyko ruled in a case brought by German Bank Deutsche Bank who was trying to foreclose on 14 home loans. The Judge insisted the bank prove the bank was in fact the owner of the note when the foreclosure action was filed. The bank could not and the judge ruled that in effect, when everyone owns something, no one owns anything. So the bank has no right to foreclose. Wait until that little tidbit sinks into the brains of indebted homeowners.
Don't get into a panic. If every borrower stops paying their mortgage next week, it isn't going to affect the financial system. The financial system is collapsing as I write and borrowers going on strike would only accelerate what is going to happen anyway.
For months I've been writing about an expected collapse in the financial system worldwide starting in the fall. Fall has fallen and so has the financial system. One day soon everyone else will realize it. Probably the day they put their little plastic card into the money machine and nothing works.
I've been using a figure of $450 trillion dollars in derivatives. I was wrong, dead wrong. According to figures just released by the Bank For International Settlements, the latest figures show that in a six-month period from December of 2006 until June of 2007, derivatives grew from a stunning $414 trillion to a breathtaking $516.4 trillion dollars. Derivatives grew $102 trillion in only six months. Given that derivatives multiply risk rather than divide risk, the end is near for the world's financial system. "Houston, we have a problem."
I'm not the only one who sees what is happening. Gregory Peters of Morgan Stanley came up with one of the more memorable comments about current affairs on November 13 when he was quoted. "There's a greater than 50% probability that the financial system 'will come to a grinding halt' because of mortgage losses." Actually Gregory was being an optimist. But then 100% is in fact greater than 50%. And I'd give it a 100% chance of coming to a grinding halt; there is no chance we are going to slide through this little rough spot.
We are in a region never before traveled. The Euro is just as much a crap currency as the US peso so going to Euros is no solution. The US political system is in the hands of the Israel lobby and all they can think about is destroying everyone else in the Middle East and turning the entire area into a hellhole as bad as Iraq or Gaza.
We have a president who has failed in everything he's ever tried. If you aren't terrified, try to determine Bush's position on the derivatives issue. He's clueless; he's never even mentioned it. He doesn't even recognize the system is grinding to a halt right under his nose.
You can still buy an insurance policy in the form of resource stocks. While I do feel there will be a temporary slowdown for 18 months or so in base metals, gold and silver are about to regain their crown. When all other forms of money fail, there is always gold and silver. For 5,000 years, when chaos exists, people go to gold. They will again and it will save their bacon. Again.
I've tried to make it clear that the safest place to be is in the junior producers. That doesn't mean sell everything else, it means the safest place to be is in the junior producers. They will get the most value from skyrocketing gold and silver. I have covered a number of gold stocks lately. I really like ATW, Peak Gold, Pediment and Animas. But I've pretty much ignored the silver stocks so today I'm going to introduce you to another brilliant production junior.
Fury Explorations recently purchased the Taylor Silver Mine and mill located just outside of Ely, Nevada. The Taylor mining district was among the earliest silver discoveries in Nevada, being first mined around 1872. Historical records show production of almost 3 million ounces of silver prior to 1979.
In 1979, Silver King Mines built a 1,200 TPD mill that was later upgraded to a 1,320 capacity. Between 1981 and 1984, Silver King produced 3.8 million ounces of silver and 3,000 ounces of gold from an open pit at Taylor. Alta Gold, the successor to Silver King, installed a flotation circuit in 1989 to process copper-lead-zinc ores.
The mill was shut down in 1991 due to poor economics and taken over by the National Bank of Ely in 2000. Fury approached the bank in 2006 and purchased the mine and mill for $2.5 million dollars and 800,000 shares. That includes the 1,320 TPD mill, 34 unpatented claims and 4 patented claims totaling 760 acres. The project has a 16.8 million ounce silver resource using a 1.2-ounce cutoff with no underlying royalties. Average grade of the resource is about 2.3 ounces per tonne.
Do I really need to point out that buying silver at $.15 an ounce is a really good deal? And getting a mill worth maybe $30 million tossed into the deal is even better? Fury has proven that even with silver and gold at the highest prices in 27 years, great deals are still possible.
The project and company are not without issues. You still need the technical staff to put the mine and mill back into production. Fury believes they need to invest about $2.5 million to get the mill back into operation. They have about $6 million in cash so money isn't a problem.
I went to see the project a couple of weeks ago. Part of our visit included a dinner with members of the local County Commission. The community needs the well-paying jobs and tax base. There is 100% support on a local basis.
There is one issue I have to bring up. The US Congress has passed a bill called the Hardrock Mining and Reclamation Act. The bill is in front of the Senate right now. President Bush has threatened to veto the bill if the Senate passes it. The bill calls for an 8% NSR on new mines and a 4% NSR on existing mines.
Management at Fury insisted to me that the bill would not be passed in its current form and/or would be vetoed by Bush. I don't think much more of Congress than I do of the Bush administration. Everyone in political office is raping the public treasury all they can. I fear the bill might be passed. It's the dumbest thing Congress can do so they probably will do it. It will put a giant damper on mining in the US but the bastards in politics in the US today are determined to destroy the country. This is just one more step down the road toward perdition.
With that one, perhaps small, glitch this is the silver project from heaven. The company has picked up a mine and mill for peanuts, they are well cashed up and have 100% support from the local community. Fury is busy doing test work on the ore and it's entirely possible that they run two operations; a bulk tonnage heap leach project for the lower grade ore and a high-grade milling project at the same time.
Fury has run a massive drill program in 2006 and 2007 to bring the resource up to 43-101 standards consisting of 94 holes totaling 21,000 feet using both core and RC drilling.
From the previous records and tests of the tailings area, it appears that Silver King/Alta Gold only got about 75% reovery though the mill. Fury had a team working on the metallurgy to improve recovery and management believes they can get recovery up to about 90%. That would well be worth doing.
I like juniors to have more than one arrow in the quiver and Fury has anticipated me. Fury has a high grade silver-lead-zinc project in Jalisco State, Mexico. They are conducting a 2,000 meter test drill program right now. Fury controls 100% of the project.
I really admire the business sense of the companies such as Pediment, Animas, Peak Gold and Fury who have picked up producing assets for pennies on the dollar. In many cases, all that these projects need is an infusion of dollars and good sense. Fury believes they can be back into production by mid-2009. My suggestion to them was to accelerate that date if at all possible. With the financial chaos I see on the horizon the safest bunker is when you hold shares of producing juniors in your hands.
Fury is an advertiser and we hold shares. To the extent that I have a vested interest, I am biased but right now I am biased towards all producing gold and silver mines. Fury bought the Taylor project and with a $20 million dollar market cap, you can buy silver in a half price off sale and get a mill for free. It doesn't get much better than that.