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Sydney Morning Herald cites silver short-selling, quotes Ted Butler
The real precious metals story really is getting around Oz.
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In-Demand Silver All Set to Soar
By David Potts
Sydney Morning Herald
Sydney, Australia
Sunday, May 1, 2011
http://www.smh.com.au/money/indemand-silver-all-set-to-soar-20110430-1e1...
Bully for bullion but silver is where the real money is. Even if you feel the pinch after next week's budget, whatever you do, hang on to the family silverware.
While gold is going gangbusters, breaking all records except its own personal best, it hasn't done too well in Australian dollars.
Since January 1, gold has climbed barely 1 per cent, a victim of the dollar's surge against the US dollar.
But silver is up some 45 per cent, rising so fast, in fact, that the stronger dollar is barely touching it.
In the past 12 months, silver has surged 169 per cent in US dollars, leaving some 128 per cent in Australian dollars.
... Dispatch continues below ...
Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property
Company Press Release, October 27, 2010
VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:
-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.
-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.
-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.
Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.
"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."
For the company's full press release, please visit:
http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf
For all its headline grabbing, gold rose 33 per cent, leaving only an 11 per cent gain in Australian dollars, which, admittedly, still beats almost everything else.
And what was that about gold's personal best? Well, at more than $US1500 an ounce it's well above its 1980 peak of $US850 an ounce but after inflation it's way off form.
Try $US2200 in today's dollars. Or $2,790 since Australia's inflation has been higher still.
Silver peaked at the same time as gold -- at $US50.35 an ounce when the Hunt brothers cornered the market.
That was $45.48 an ounce at the then exchange rate, and would be $166 in today's dollars.
So neither metal looks all that precious as a hedge against inflation but there's another way of looking at it.
Since both used to be currencies -- silver even more so than gold, history shows -- it's hard to know what is measuring which.
Looked at that way, an ounce of gold, which bought 850 US dollars in 1980, would today buy 1,500 of them.
Either gold is rising in price in its own right or paper money is devaluing.
Anyway, it's the fact it has been falling further behind gold for so long that's turned silver around.
Why it's been such a laggard is a mystery. After all, the uses of gold are pretty limited. Admire it or stick it in a vault as a store of value and there's not much else you can do with it.
But silver is both a store of value and a handy metal around the home in its own right -- with demand almost split down the middle.
Which is used in computers, mobile phones, cars, and medicine? Silver.
Really, the wonder is that it's not worth more than gold except that while there might be more demand for it, there's also a lot more of it around.
Most gold is locked away in Fort Knox and other central bank vaults but silver is footloose and fancy free with about a fifth recycled from scrap. Oh, gold is prettier, too.
Historically, an ounce of gold bought 15 ounces of silver, a ratio of 15:1 -- though when they both peaked in real terms in 1980 it was 17:1. Today it's 33:1. So gold is buying twice as much silver as the norm.
If bullion stays where it is, the silver price would have to jump to $100 to get to the 15:1 ratio.
Alternatively, gold would have to drop to $700 if the silver price stays where it is.
Just as most of the world's gold is locked away in central banks, there are silver-only managed funds.
But these holdings are highly volatile depending on how many buy into or sell out of the fund.
Silver has also been massively short-sold through futures and options contracts, according to the leading silver analyst in the US, Theodore Butler.
That's selling something you don't have, so you must buy later to meet the contract.
This is no crackpot. He was instrumental in bringing two leading banks to trial, still under way in the US, for rigging the silver price by short selling.
When short sellers can't get their hands on the commodity there's strife. It's known as a "squeeze" in the trade and the price consequently rockets temporarily.
Butler estimates that there are about 1 million ounces of silver circulating while what he calls the "monstrous" short position runs into billions of ounces.
"Silver has the largest short position that's ever existed in anything," he says.
As well as short-sold futures contracts, the deficiency arises from forward selling, leasing, and "the cumulative issuance of unbacked silver bank certificates."
The 1 billion ounces of silver above the ground compares with 5 billion for gold.
"Less than one tenth of 1 per cent of the world's investors were aware that silver was rarer than gold," Butler says.
The chance of a squeeze has some analysts suggesting selling gold and reinvesting the proceeds in silver on the grounds one has peaked and the other can only rise. Or, at the very least, silver will rise faster than gold, so that's where you want to be.
A squeeze this time would be a twist on the 1980 sting. Then the Hunt brothers were hoarding silver, at one point holding one-third of the world's non-government supply, which created an artificial scarcity.
This time it's short sellers in options and futures contracts, trying to drive the price down, who are creating the shortage because they're borrowing so much of it.
Eventually this will send the silver price soaring as spectacularly as it collapsed after the Hunt brothers.
Since you asked, the Hunts came unstuck with a margin call after the Comex commodities exchange suddenly changed the rule book for buying commodities on margin loans.
Certainly there isn't enough new silver being produced to come anywhere near the demand on paper for it, a legacy of the long period when its price was so low that it wasn't profitable to mine it.
Even as we speak, there are few pure-silver mines; most silver is mined as a byproduct of lead, zinc, or copper.
Production of silver from mines is increasing only about 2.5 per cent a year, according to the Silver Institute.
Yet demand for "fabrication" -- silver used in industry or jewellery -- rose 13 per cent last year, while investment demand shot up 47 per cent.
Only the fact that scrap silver climbed 14 per cent, and stocks were run down, prevented the price going even higher.
There's no reason to suppose that the amount of silver produced will be stepped up at its much higher price. You don't hear of explorers setting off to find silver.
Still, having hit a high of almost $US50 an ounce on Tuesday, silver has eased a bit, proving how volatile it is at the best -- or perhaps that should be worst -- of times.
So could there be a cloud to the silver lining?
Yes, but you wouldn't credit this, only if gold actually drops.
That would be because the US has lifted interest rates, the sovereign debt crisis suddenly disappears, or China, which has switched from being a silver exporter to a heavy importer, falls in a heap.
Neither metal would then look so precious because there would be a rush back into US dollars.
But don't hold your breath.
As silver becomes the new gold, the challenge is finding ways of investing in it.
"The silver market is not at all analysed by mainstream investors and remains very much overlooked as an investment opportunity," says the editor of Sound Money, Sound Investments, Greg Canavan.
Although Australia has the largest reserves of silver, there's really only one mine and then the rest.
That's BHP Billiton's Cannington in northwest Queensland, one of the world's biggest silver/lead mines, which produces 42 million ounces a year.
There are five other listed stocks mining silver.
Alcoyne Resources (ASX:AYN), formerly Macmin Silver, expects to produce its first silver from its Queensland mine this month and says it costs just $14.02 an ounce to mine silver.
Cobar Consolidated Resources (CCU) has just raised $28 million to develop its Wonawinta mine and expects to produce 2.5 million ounces of silver a year.
Coeur d'Alene Mines (CXC) is a US-listed miner but also trades on the ASX through depository receipts, having bought Endeavour Mine.
Intrepid Mines (IAU) has a gold/silver/copper project in Indonesia, which is "definitely an exciting one and, like all early-stage projects, it comes with plenty of risk. Being years away from generating cash flow, we see no need to rush in," Canavan says.
Perilya (PEM) has silver mines at Broken Hill and in the Dominican Republic, which between them produce a combined 2 million ounces a year, but it also mines other base metals.
An easier, more direct way of investing in silver is through an exchange traded fund, a managed fund that trades on a stock exchange.
Rather inconveniently, the first and biggest silver fund, iShares's SLV, trades on the New York exchange.
Back home, there's Physical Silver Securities (ETPMAG) run by ETF Securities.
"It's getting more money than our gold fund," the head of Asia-Pacific sales for ETF Securities, Nigel Phelan, says.
The fund invests purely in silver and so slavishly follows its price, less the 0.49 per cent annual fee.
Another way to trade silver is through "minis" offered by RBS. These are glorified contracts for difference (CFDs), only less risky because there's a built-in stop-loss.
Unlike a CFD, you can't lose more than you've invested. But it's heavily geared and there can be margin calls since silver is the most volatile commodity traded.
You can go short (if you think the price will drop) with ZSIKZA or ZSIKZB, or long with ZSIKZQ or ZSIKZS.
Then there are silver bars and coins.
Note there's a difference between sterling (which is 92.5 per cent pure) and fine silver (99.9 per cent).
You can buy fine silver bars at bullionvault.com or goldmoney.com. Both will store them on your behalf for a small fee but you can't bring them home.
If you prefer to touch your investment, there are pure silver coins issued by various mints. But ounce for ounce you're paying more for a coin than a bar because of the retail margin, where you're likely to be paying 5 per cent more buying and getting 5 per cent less selling.
The other catch is mints are issuing so many of them that they will never be considered rare.
The most popular are the US $1 Silver Eagle (165 million sold and rising), Canada's $5 Maple Leaf (13 million so far but they are one decimal place purer than any other silver coin), and the Perth Mint's $5 Kookaburra (more than 8 million).
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Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon
Company Press Release, January 18, 2011
VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.
PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.
Following the transaction:
-- Prophecy will own approximately 90 percent of PCNC.
-- PCNC will consolidate its share capital on a 10 old for one new basis.
-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.
-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.
Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.
For the complete announcement, please visit:
http://prophecyresource.com/news_2011_jan18.php
