Silver Stocks--Comparative Valuations 
Weekly Report # 44
by Jason Hommel
goldismoney.com

FRIDAY, July 30th, 2004

This week's report lists 111 silver stocks.  There are 31 silver stocks that list reserves, resources (and exploration potential) which I calculate by using my "ounce in the ground" forumula.  There are 54 explorers.  There are about 30 additional "silver" stocks with incomplete information. Additions & Changes from last week are in bold. 

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To read about my religious bias, see my other website, bibleprophesy.org There are two essays near the top of the page that explain why I believe the entire world will return to using gold and silver as money again before the end times.  See Ezekiel 38.  Also, see my essay: Biblical Guidelines for Managing your Money

Kitco reports silver at $6.55/oz. as of Friday, 3:00 PM West Coast US, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7511.  I will use .75 for ease.  

How to read the table below:
Stock Symbol that works at Yahoo! Finance (Company name) / Silver oz. "in ground" for 1 oz. silver's worth of stock. / valuation price change since last week (and stock dilution, and resource changes, if any) /  additional comments (EXPT is "exploration potential")

Company names in bold have summaries below with updated information.  Click on the name to see the summary below.

Companies with information about reserves/resources/exploration potential.  The list is ordered/ranked based on the resource picture.  The most expensive (with the fewest silver resources given their market cap) are listed first. 
  1. ABX (BARRICK)                                   1.1 down  --producer, hedger (15? mil oz. gold hedged, 3 yrs production)
  2. IPOAF.PK (INDUSTL PENOLES)            1.7 even --producer, mostly family owned, hedged?
  3. CDE (COEUR D'ALENE)                           2.5 even --producer (also gold) in debt, produces at a loss.
  4. SIL (APEX SILVER)                                  3.5 down  --zinc bonus, low grades, cash rich--$345 million! in debt
  5. GRS GAM.TO (GAMMON LAKE)            4.1 down --producer, owns 26% of Mexgold
  6. FSR.TO FSLVF.PK (FIRST SILVER)        4.7 up  --producer, (not profitable '03 3rd q.) unhedged
  7. MFN MFL.TO (MINEFINDERS)               4.8 even  --significant gold bonus, $35 mil cash on hand.
  8. PAAS (PAN AMERICAN SILVER)               5.1 down  --producer, debt free, may hedge to develop
  9. CFTN.PK (CLIFTON MINING)                   5.3 up -- (126 EXPT) (colloidal silver patent bonus)
  10. KBR.TO KBRRF.PK (KIMBER RSCS)        5.3 even  --one property, high grades, with exploration potential.
  11. WTZ WTC.TO (WESTERN SILVER)            6.9 up  -- (24 EXPT) large mine development cost. copper & zinc bonus
  12. * TM.V TUMIF.OB (TUMI RSCS)              8.2 up -- (16 EXPT) recent bonanza grade silver discovery
  13. SSRI SSO.V (SILVER STD RSC)                  8.9 down --large company, many properties, owns silver bullion
  14. ORM.V OREXF.PK (OREMEX RES)           10.1 down  (41 EXPT)
  15. SHSH.PK (SHOSHONE SILVER)                   10.7 down  --leased properties; need payments; in Cour d'Alene
  16. CZN.TO CZICF.PK (CDN ZINC)                11.1 up  --large zinc bonus, high grades, low start up costs, great EXPT
  17. FAN.TO FRLLF.PK (FARALLON RSCS)      13.3 up  --(23 EXPT) low grades, silver 1/3; also gold & zinc bonus.
  18. SRLM.PK (STERLING MINING)                    14.4 up --(34 EXPT) acquired the Sunshine in Cour d'Alene
  19. CHD.V CHDSF.PK (CHARIOT RSCS)          17.8 up   --explorer, with inferred resources
  20. IMR.V IMXPF.OB (IMA EXPL)                   18.8 down --(75 EXPT) explorer in Argentina
  21. RDV.TO RDFVF.PK (REDCORP VEN)         19 down --60% gold bonus
  22. ADB.V ADBRF.PK (ADMIRAL BAY)           21.7 up --exploring a silver property in Mex. (Huge gas bonus)
  23. GGC.V GGCRF.PK (GENCO RECS)              22.1 down --producer in Mex.  Plans to expand and acquire
  24. * SVL.V STVZF.PK (SILVERCREST)            23.4 up  --(65+ EXPT) --(Silver in Honduras, Latin America)
  25. ABI.V ABMBF.PK  (ABCOURT MINES)        23.5 up --large zinc & small gold bonus
  26. * MGN (MINES MGMT)                                27.9 up  --60% copper bonus (low grades), start up cost ~ $250 mil
  27. EXR.V EXPTF.PK (EXPATRIATE)               28.2 down  --significant zinc bonus 60% zinc, 25% silver (got out Atna)
  28. HDA.V (HUSIF.PK) (HULDRA SILVER)        30.7 down   --very tiny, zinc bonus, low start up costs.
  29. * PLE.V (PLEXMAR RES INC)                       32.8 down  --just acquired 2 new projects
  30. UNCN.OB (UNICO INC)                              35.7 up --lease on largest property, needs $750k by Sept 1 2004.
  31. * ASM.V ASGMF.PK (AVINO SILVER)       41.2 down --will own 49%-100% of the Avino +4 other silver props.
* = I own shares

In the chart above, since last week, 13 stocks were up, 4 were even, and 14 were down.

Next list: Exploration companies or producers with limited information on resources.  This list is in order (roughly) by market cap, the highest market cap companies are listed first.
  1. HL (HECLA MINING CO)             --A PRODUCER (gold bonus) cash rich.
  2. MGR.V MGRSF.PK (MEXGOLD RSCS)       -- bonanza grade discovery on Jan 13th, 2004
  3. CDU.V  CUEAF.PK (CARDERO RSCS)
  4. AOT.V ASOLF.PK (ASCOT RSCS) -- owns percentage of Cardero, CDU.V
  5. SPM.V SMNPF.PK (SCORPIO MINING)
  6. * FCO.TO FCACF.PK (FORMATION CAPTL)  Cobolt (and Sunshine silver refinery)
  7. * OTMN.PK (O.T. MINING)  very large exploration potential
  8. MCAJF.PK (MACMIN LTD)
  9. TVI.TO TVIPF.PK (TVI PACIFIC) --A PRODUCER of a dore silver bar 96% silver, 4% gold
  10. * NPG.V NVPGF.PK (NEVADA PAC GOLD)   Large "exploration potential"  (owns 1 silver property, 10 gold properties)
  11. * MMGG.OB (METALLINE MINE) --zinc/silver (historic high grade silver) (low cost revolutionary oxide zinc process)
  12. * FR.V FMJRF.PK (FIRST MAJESTIC)  -- Bought a former silver producer. Acquiring silver properties.
  13. BZA.V ABZGF.PK (AMER BONANZA)
  14. ECU.V ECUXF.PK (ECU SILVER MINI)      --50% gold bonus
  15. IAU.V ITDXF.PK (INTREPID MINRLS)  "exploration potential"
  16. CAUCF.PK (CALEDON RES)
  17. MAI.V MNEAF.OB (MINERA ANDES)      (gold bonus)
  18. * EDR.V EDRGF.PK (ENDEAVOUR GOLD)  A PRODUCER (I could not yet find a listing of resources or reserves)
  19. MAG.V MSLRF.PK (MAG SILVER)
  20. * CBE.V CBEFF.PK (CABO MINING) --Historic Silver and Cobalt district
  21. QTA.V QURAF.PK (QUATERRA RES)
  22. EPZ.V ESPZF.PK (ESPERANZA SILVR)
  23. PXI.V  PNXPF.PK (Planet Exploration Inc.)
  24. SDR.V SDURF.PK (STROUD RSCS)
  25. APM.V  (Amerix Precious Metals Corp) (NEW BULLET GP)
  26. NJMC.OB (NEW JERSEY MIN)
  27. EXN.V EXLLF.PK (EXCELLON RSCS)
  28. * KG.V KDKGF.PK (KLONDIKE GOLD)
  29. SML.V SMLZF.PK (STEALTH MNRLS)
  30. SRY.V (STINGRAY RSCS)
  31. DNI.V DMNKF.PK (DUMONT NICKEL)            exploring Clifton's property
  32. * KRE.V KREKF.PK (KENRICH ESKAY)
  33. BCM.V BCEKF.PK (BEAR CRK MINING)
  34. * CMA.V CRMXF.OB (CREAM MINERALS) Low grade, large "exploration potential"
  35. MMG.V MMEEF.PK (MCMILLAN GOLD)
  36. CHMN.PK (CHESTER MINING)
  37. GPR.V GPRLF.PK (GREAT PANTHER)
  38. EGD.V EGDMF.PK (ENERGOLD MINING)
  39. GNG.V  GGTHF.PK (GOLDEN GOLIATH)  --Historic silver district in Mexico
  40. LEG.V LEGCF.PK (LATEEGRA RSCS)
  41. TBLC.PK (TIMBERLINE RES)
  42. * AUN.V AUNFF.PK (AURCANA CORP)
  43. TUO.V TEUTF.PK (TEUTON RES)
  44. PDO.V (PORTAL DE ORO RS)
  45. PCM.V PAOCF.PK (PAC COMOX RES)
  46. BGS.V BLDGF.PK (BALLAD GLD SLVR)
  47. GRG.V (GOLDEN ARROW RESC)          IMR.V spin-off. $3.6  mil MC, 35 properties
  48. ASLM.PK (AMER SILVER MINI)
  49. BBR.V BBRRF.PK (BRETT RES)
  50. ROK.V ROCAF.PK (ROCA MINES INC)
  51. MTB.V (Mountain Boy Minerals Ltd)
  52. CLZ.V (Canasil Resources Inc)
  53. LSM.V LASCF.PK (Langis Silver & Cobalt Mining Co Ltd)
  54. CBP.V CPBMF.PK (CONS PAC BAY MIN)
* = I own shares. 
There are expanded profiles on each company, way below.  But before I get to that, let me discuss my methodology, and the problems with it.

See the number above, listed after each company in the first list?  That number represents the number of silver ounces in the ground that you get when you buy an ounce of silver's worth of stock.  The number treats all reported ounces in the ground as equal, however, they are NOT EQUAL.  Some ounces in the ground are more certain and others are more speculative.  Some are higher grades, some are lower grades.  Some have been well drilled, others have less drill results.  They range from most certain to least certain such as: "proven & probable reserves," and then, "measured, indicated, or inferred resources."   A reserve has a feasibility study produced for it.  A resource, does not.

Here's the math on how I calculate that one number.  First, I get a market cap by multiplying the fully diluted shares (which bullishly assumes all options and warrants will be exercised and converted into outstanding shares) by the share price in U.S. dollars.  Next, I divide that by the silver price, so the market cap is denominated in terms of silver ounces.  Then, I divide the ounces in the ground by the market cap as denominated in silver.  This produces the single number of how many ounces of silver in the ground you are buying when you give up one ounce of silver in your hand, for shares of stock, instead.  This way, you can not only compare silver stocks to each other, you can compare them to silver directly.  This also helps people in other nations, using other currencies, to value these companies.

This valuation does not include zinc, or copper, or lead, but it does include gold at a 1:10 ratio of gold:silver.  At goldsheetlinks.com, they add 100% of proven & probable reserves, but only 70% of measured & indicated resources, and only 50% of inferred resources.  I don't do that.  I count them as all the same.

I believe that the two most important numbers that a silver mining company can report are the resources in the ground, and the number of their fully diluted shares. Of course, there is much more to a mining company than that, but without those numbers, it is extremely difficult to even start an evaluation.  This report highlights those key numbers, where possible.  If you think those numbers are also important, please email the executives of the mining companies you own, and ask them to make sure their numbers are clearly published at their websites.

Problems with my methodology:  My methodology assumes that the more ounces in the ground, is, in theory, best, given that I expect much higher silver prices.  However, unless the price of silver really moves much higher, my methodology may not be the best one.  If silver does really move up very high in value as compared to today, then I expect my methodology to be one of the best predictors of rising stock values, because more ounces in the ground mean more leverage to rising silver prices.  However, the companies with greater leverage to the upside usually also tend to have greater leverage to the downside, and thus, tend to be more volitile.  

Other factors to consider that the single number produced by my methodology does not:  A resource calculation number does not tell you the entire picture about a company.  The resource calculation number is designed as a starting place for further research.  Other very important considerations are as follows:  How much existing mining infrastructure is in place?  The more the better, so think of it as a "bonus".  How much cash does the comapany have on hand, and what is their burn rate?  What is the management's attitude towards money, silver, hedging, debt, and dilution?  This is why I list "additional comments" in the company profiles, below.

I don't consider grade to be too important (although I list it when I can), because I consider the cost to mine to be the more important consideration.  The "cost to mine" is determined in a feasibility study, which is the last thing produced before trying to raise money for final construction of a mine.  And usually, they cannot even count silver as a resource unless it is at least somewhat feasable to mine at today's prices for silver.  And this is why I count all the ounces as the same.  If a low grade ore can be mined more cheaply, and if a higher grade ore costs more to extract, and if it has to be somewhat economically feasible even at these low silver prices to be counted, it balances out quite nicely.

To quickly "tab" down to the company you are interested in, note the symbol. Then hit "control-F" to "FIND" the symbol below.
___________
If I use a word you don't understand and is not listed in the dictionary at www.m-w.com you can look up the meaning at http://investorwords.com/

See my June 18, 2004 article:
I'm insanely bullish on silver.

WEEKLY COMMENTARY (All new in this section):  

Silver is money.  As such, you cannot analyze silver by looking at current supply and demand factors within the silver industry.  We need to look at the supply of paper and electronic money!

Because silver is money, then demand for silver, as for gold, has strong potential to become a positive feedback loop.  The higher the price, the greater the demand, because a rising price means it's the better money.  Paper money crashes can happen extremely quickly, and thus, rises in the price and value for silver happen equally fast.

People want their money to increase in value.  As paper money loses value, people will want it less.  The only other alternative to paper is gold and silver.  Everything else one may buy is NOT money, and will never become money.

Oil is not money, because if you want to store $4300, you'd need to buy 100 barrels of oil!  Where would you go to get the oil?  Where would you get the barrels?  How would you transport them?  Could you have them delivered?  And where would you put them, on your front lawn, or backyard?  It isreproduciton impractical and difficult to use oil as money.

Zinc is not money, because 46 cents of it weighs a pound!  Are you going to haul a pound or two of zinc to the store to buy a pack of gum?  Never!  Or would you haul 200 pounds of zinc to the store to buy less than $100 worth of groceries?  Never! 

Silver is money, because 46 cents worth of silver (at $6.50/oz.) is a silver dime.  It's very efficient and lightweight, even at these low prices, which means it's actually much heavier than it should be.  A silver dime was also once a day's wage--worth about $100! 

Silver is money because if you want to store $4600, all you need is about 55 pounds of it; a bag of $1000 face value of 90% silver coins dated 1964 and earlier.  And if you want to store $100,000, all you need is about 21 bags.  Of if you need to store $500,000, all you need is about 96 bags.  The problem today is finding a dealer who has that much silver in inventory, which is why, today, silver is the best money there is.  It's real money, and cheap, and scarce. 

To determine the potential demand for silver, you cannot look at existing supply/demand for silver.  You need to look at the existing supply of paper money.  Then, you can gain some perspective of what will happen.

There are trillions of dollars in bonds, perhaps 20 trillion or more!  9 trillion money in the banks!  But less than half a billion dollars worth of silver is available at the NYMEX 52.9 million ounces, the last place to get silver after about 5 bullion dealers are cleaned out of $2.5 million in silver bullion.
------------------

Last week, I wrote an article, "Patents, copyrights, and trademarks are evil."  It should have been titled, "Laws supporting Patents, copyrights, and trademarks are evil".  (minor distinction). 

The most interesting reader response quoted an old essay that should be refuted.  A man wrote to me:

Jason:  Below is an article (advocating) patents & copyrights that should interest you.  It is written by the 20th century's greatest defender of Capitalism. (who wrote "Capitalism: The unknown ideal")

My reply:  "Ayn Rand is also without a solid moral compass.  [Not Christian.]  But thank you for the article."
Refuting Ayn Rand's support of Copyrights, Patents, and Trademarks.
by Jason Hommel

By Ayn Rand: (in italics)

--My comments to refute Ayn Rand's essay are in bold, no italics, and start with a dash like this: --.

Patents and copyrights are the legal implementation of the base of all property rights: a man's right to the product of his mind.

--First, the "base" or source of all property rights is God, not the constitution, not governments, not patents and copyrights, and not the false concept, "a man's right to the product of his mind". 

--Second, "a man's right to the product of his mind" is a justification to do evil.  Men don't have the right to whatever they think they can do; God has defined the limits and rights of men.  But even without God's specific laws, men can self-evidently see what those laws are if you know that your rights end where other people's rights begin, and that you have to treat others with love.  Here are the real issues:

(1) Is making a copy really "stealing"?  Some primitive tribes believe that if you take their picture, then you "steal" their soul.  Some believe if you make an idol or statue of an animal, that you have "stolen" some of the essence of the animal, and put it into the carving or statue.  Let me state a self-evident truth, an axiom that does not need to be proven.  Making copies does not take anything away from the thing that was copied, and thus, nothing is stolen in the process.  

(2) Can you own an idea?  Can an idea become property?  Do men have the God-given right to own the use of truths (applications), and to prevent other men from building upon and copying, using, discovering, and selling such truths?

(3) The issue is whether a man has the right to prevent other men from copying an idea and selling it.  To "prevent other men" requires the use of force to either steal or kill other men.  Done unjustly, it's murder, and a sin.  Thus, the enforcement of "patent rights" requires a violation of all real property rights. 

Every type of productive work involves a combination of mental and physical effort: of thought and of physical action to translate that thought into a material form.  The proportion of these two elements varies in different types of work.  At the lowest end of the scale, the mental effort required to perform unskilled manual labor is minimal.  At the other end, what the patent and copyright laws acknowledge is the paramount role of mental effort in the production of material values; these laws protect the mind's contribution in its purest form: the origination of an idea. The subject of patents and copyrights is intellectual property.

--Ayn moves the discussion from labor to ideas, saying both are work and thus, both are property.  But note the distinction.  Labor is not protected in the same way that ideas are protected through copyrights and patents.  For if labor was protected in the same way, then nobody would be allowed to use their arm the way that a bricklayer uses his arm--which would be ridiculous.  This comparison shows the difference between labor and ideas, and it shows how ridiculous patent and copyright laws are.  You see, men may independently use their arms or minds in the same way, and thus, discover the same thing!  One man cannot have a "right" to prevent another man from being able to use his mind in the same way!

--Patents actually restrict "the mind's contribution in its purest form:" the use of existing ideas!
--Furthermore, patents, copyrights, and trademarks are arbitrary.  Patents require a government employee's judgement in order to secure one.  Some may be approved, and others, not. 

An idea as such cannot be protected until it has been given a material form. An invention has to be embodied in a physical model before it can be patented; a story has to be written or printed. But what the patent or copyright protects is not the physical object as such, but the idea which it embodies. By forbidding an unauthorized reproduction of the object, the law declares, in effect, that the physical labor of copying is not the source of the object's value, that that value is created by the originator of the idea and may not be used without his consent; thus the law establishes the property right of a mind to that which it has brought into existence.

--The heart of the matter is, as Ayn says, that patents and copyrights are all about "forbidding an unauthorized reproduction".  To forbid reproduction requires a restriction of freedom upon all the property of all other men.  It robs men of the use of their real property.  Communism is the control of all property (especially the means of production and reproduction) in the hands of the government.

--But a human creator is not harmed if another makes a copy of his bright idea.  The man making a copy does not take any physical thing from the creator.  Thus, making copies is entirely unlike theft of real tangible property.

--The novelty or usefulness, of an item generally determines whether a patent is granted.  But if patents are granted on whether they are useful, does it make sense that useful items be restricted from being reproduced and sold by other men?

--I know that people say that patents are needed to encourage and reward creativity.  But are patents needed to get men to think creatively to improve their own lives?  I think not.  I think men will naturally work, and think, and create, to improve their own lives.  I believe the creations that men can create are more than enough incentive.  Furthermore, men who innovate are generally going to appreciate their creations more than others, and will also generally be the first ones to bring their own ideas to market, and thus, innovators have a natural competitive edge in the marketplace.  In fact, competition within the marketplace will encourage the most creativity, since creativity and improvements will be required to remain competitive and to get the competitive edge. 

--But since patents discourage competition within the marketplace, patents discourage creativity.  Many men are forbidden to make use of the patents of other men.  Unless they get a license.  But if a license cannot be negotiated, then existing patents thus halt progress and further innovations.

It is important to note, in this connection, that a discovery cannot be patented, only an invention. 

--Ayn writes as if there is a distinction between a discovery and an invention.  True, discoveries are not inventions.  But an invention is a discovery.  An invention is a specific application of a discovery or truth.

A scientific or philosophical discovery, which identifies a law of nature, a principle or a fact of reality not previously known, cannot be the exclusive property of the discoverer because: (a) he did not create it, and (b) if he cares to make his discovery public, claiming it to be true, he cannot demand that men continue to pursue or practice falsehoods except by his permission.

--I agree that men cannot force other men to "continue to pursue falsehoods."  Thus, if a man learns how to make any invention, then he must be allowed to create the invention.  Why can a patent holder force other men to continue to pursue inefficiencies if there is a better way known?  Patent holders demand that other men not be able to apply their specific applications of discoveries.  And what is a discovery again?  A discovery is "a law of nature, a principle or a fact of reality not previously known," or simply, a truth.  It is evil to forbid other men to apply and make use of truths!  And it is evil compounded to try and prevent other men from spreading such truths to other men through the marketplace.

He can copyright the book in which he presents his discovery and he can demand that his authorship of the discovery be acknowledged, that no other man appropriate or plagiarize the credit for it--but he cannot copyright theoretical knowledge. Patents and copyrights pertain only to the practical application of knowledge, to the creation of a specific object which did not exist in nature--an object which, in the case of patents, may never have existed without its particular originator; and in the case of copyrights, would never have existed.

--Herein lies several assumptions which can be proven to be false. 

--First false assumption: that society would not have developed and invented the thing without the one man.  And this assumption is provably untrue.  Many inventions are created by men nearly simultaneously.  Especially those inventions that are only minor modifications of existing inventions. 

--Second false assumption:  That society would be better off if there is this copyright to protect the written words.  But books have been, and can be, written without copyright protection.  Would all books not be written if there was no copyright protection?  Of course not!  I write and hereby do declare that all are free to copy, sell, modify, and reproduce this, in any way you see fit!

The government does not "grant" a patent or copyright, in the sense of a gift, privilege or favor; the government merely secures it--i.e., the government certifies the origination of an idea and protects its owner's exclusive right of use and disposal. A man is not forced to apply for a patent or copyright; he may give his idea away, if he so chooses; but if he wishes to exercise his property right, the government will protect it, as it protects all other rights.

--Here, Ayn writes an assumption, that you have a "right" to prevent other men from copying your ideas.  Where in the Bible does it say we have the "right" to prevent men from copying our ideas?  And what is required to enforce such a "right"?  It requires the use of active force... to violate the real rights of other men to own and control their own property and privacy, and to restrict their right to access the marketplace!  It requires preventing other men from freely interacting, peaceably, with other men by buying and selling.  If you restrict a man from selling, you remove his right to re-make his property into a reproduction.  If you restrict a man from buying, you remove his right to trade away his property (gold) to make a purchase from another man, or to hire another man to make something "for his own use". 

--This "intellectual property right" is in direct contrast with, and incompatible with, all other rights, which are basically the right to be left alone, as long as you do not interfere with others.  To secure an "intellectual property right" a man, or government, is required to interfere with the rights of others.   In fact, the right to be left alone must be violated by the man who attempts to secure his patent rights.  It is impossible to have real rights not be violated by the enforcement of the false right of a patent or copyright.  Just and righteous laws cannot contradict themselves.  Only evil laws create contradictions and hypocrisy.

A patent or copyright represents the formal equivalent of registering a property deed or title.

--No, the two are not equivalent at all.  A property deed or title means someone owns a certain tract of land, and that's all.  If one man owns one section of land, he does not simultaneously gain a bit of control over all other lands held by all other men, which would be the formal equivalent of a patent or copyright.  See, a patent or copyright says that no other men can use their own property in a certain way, to print something specific, or make a certain invention.

The patent or copyright notice on a physical object represents a public statement of the conditions on which the inventor or author is willing to sell his product: for the purchaser's use, but not for commercial reproduction.

--And herein lies the evil... patents and copyrights restrict commerce and competition.  But competition in the marketplace are at the very heart and essence of capitalism, and stimulates the most innovation, and progress.  I know Ayn is supposedly the great defender of Capitalism, but I don't think Ayn really understood this unknown ideal very well. 

The right to intellectual property cannot be exercised in perpetuity. Intellectual property represents a claim, not on material objects,

--But, intellectual property does represent a claim on material objects!  Intellectual property represents a claim on all material objects that have been made into a copy!

but on the idea they embody, which means: not merely on existing wealth, but on wealth yet to be produced--a claim to payment for the inventor's or author's work. No debt can be extended into infinity.

--Why does Ayn bring up the concept of debt?  As if we are indebted to a man, an inventor, and that this debt takes the form of an agreement to "not compete" in the marketplace with him--as if society is indebted to the inventor, but not "into infinity" for an infinite length of time.  Excuse me, but I owe no debt to society's forefathers.  Fathers should leave an inheritance to their children, not debts.  One way men leave a good inheritance to their children is through making the world a better place, through inventions!  Inventions are for our benefit, not for our debt and enslavement and restriction.

--I would owe a debt if I borrowed real property, such as money.  I don't owe a debt if I copy an idea.  Again, Ayn is assuming that which must be proven... that an idea is property.  Ideas are not property.  And there is no debt when we copy an idea. 

--In the next section, Ayn recognizes that over a long time, many horrible problems would result from granting intellectual property rights, and thus, tries to justify an expiration date for intellectual property, as if that solves the problems created.  But a time limit does not solve the problem of "intellectual property rights".

Material property represents a static amount of wealth already produced.

It can be left to heirs, but it cannot remain in their effortless possession in perpetuity: the heirs can consume it or must earn its continued possession by their own productive work. The greater the value of the property, the greater the effort demanded of the heir.

In a free, competitive society, no one could long retain the ownership of a factory or of a tract of land without exercising a commensurate effort.

--But why is Ayn bothering to make the bad argument that real property requires "effort" to retain?  Ayn is trying to argue that if real property will dissipate or expire over time, then, likewise, thus patents should also expire.  But real property does not expire over time!  Gold does not expire, it remains as untarnished after 6000 years as if it were minted yesterday!   And under a gold standard, a static amount of property (gold) turns into more wealth over time. 

--And as society advances, centrally located property, such as in New York City, becomes more valuable over time.  Land in a city is only difficult to retain because there are property taxes to pay.  Now, given that whatever the government can tax, it will destroy, then perhaps government should levy a tax upon all "intellectual property" rights that it has granted!
But intellectual property cannot be consumed.  If it were held in perpetuity, it would lead to the opposite of the very principle on which it is based: it would lead, not to the earned reward of achievement, but to the unearned support of parasitism.  It would become a cumulative lien on the production of unborn generations, which would ultimately paralyze them.

--Yes, I do believe that patent holders are "parasites," who put a "lien on the production" and progress of society, which  "ultimately paralyzes" us.  Thus, we should either tax them into non-existence, or simply stop protecting all "patent rights" altogether.

Consider what would happen if, in producing an automobile, we had to pay royalties to the descendants of all the inventors involved, starting with the inventor of the wheel and on up.  Apart from the impossibility of keeping such records, consider the accidental status of such descendants and the unreality of their unearned claims.

--Ayn argues very well against patents here.  Patents are impractical, and with the proliferation of patents, it will eventually be impossible to require industry or government to keep up-to-date with what has already been patented.  We are probably well past that point already.  Why should a business be required to search a patent database before engaging in a new commercial activity?  Why should China, for example, have to track down all patent holders in another country, or every country, to pay royalties to them?  Ridiculous!  The truths embodied in free trade, computers, and the internet, are exposing the fraudulent nature of patents and copyright.

--And this is exactly why intellectual property laws in such areas as computer programming is so terrible!  Given the rapid pace of the development of computers, it is as cumbersome today in computing and software, as if it would be if, in producing an automobile, we had to pay royalties to the inventor of the wheel! 

--Above, in Ayn's attempt to say an "inherited patent" is bad, Ayn tries to imply that any inheritance is bad.  Ayn apparently dislikes the concept of men inheriting wealth.  But men who have a right to property also have the right to spend or give their property to whomever they choose, and they have a right to leave an inheritance to their children.  So it is not the "inheritance" that makes an "inherited patent" bad.  An "inherited patent" is bad, because all patents are bad!

The inheritance of material property represents a dynamic claim on a static amount of wealth; the inheritance of intellectual property represents a static claim on a dynamic process of production.

Intellectual achievement, in fact, cannot be transferred, just as intelligence, ability or any other personal virtue cannot be transferred. 

--It is so sad to see Ayn argue that intelligence or virtues cannot be transferred.  If that is so Ayn, please stop writing.  For why bother if you do not hope to transfer part of your intelligence and virtue to your readers?  And if your readers can get these merely by reading your work, how much more should children be able to get the intelligence and virtue of their fathers! 

--Ayn's reasonings become hard to follow when one bad idea is based on another bad idea.  But why is Ayn bothering to make the bad argument that "intelligence or virtues cannot be transferred"?  Ayn is attempting to say that if intelligence or virtues "cannot be transferred" (which is false), then neither should "intellectual property" be transferred for an "excessive length of time," from generation to generation forever.  Because if "intellectual property" can be inherited in perpetuity, it creates obvious problems that expose the absurdity and problem of the entire concept of "intellectual property": such as paying royalties to the inventor of the wheel.

All that can be transferred is the material results of an achievement, in the form of actually produced wealth.  By the very nature of the right on which intellectual property is based--a man's right to the product of his mind--that right ends with him.

He cannot dispose of that which he cannot know or judge: the yet-unproduced, indirect, potential results of his achievement four generations-or four centuries-later.

It is in this issue that our somewhat collectivistic terminology might be misleading: on the expiration of a patent or copyright, the intellectual property involved does not become "public property" (though it is labeled as "in the public domain"); it ceases to exist qua property.

--That there must be an expiration date is one key reason why we could say intellectual property is not property at all. Consider the contrast to real property.  The ultimate forms of property do not have an expiration date!  Land does not vanish or expire, and neither does gold or silver!  They remain in perpetuity, and can be inherited. 

--True, other property does spoil, rot, rust, evaporate, disintegrate, or vanish.  But all other property expires of it's own natural process.  The concept of a government-granted time period that must be attached to "intellectual property" is completely man-made, and arbitrary.  But rights are not arbitrary, and do not come from man, rights come from God.  If rights were arbitrary, they could not be self-evident!

And if the invention or the book continues to be manufactured, the benefit of that former property does not go to the "public," it goes to the only rightful heirs: to the producers, to those who exercise the effort of embodying that idea in new material forms and thus keeping it alive.

Since intellectual property rights cannot be exercised in perpetuity, the question of their time limit is an enormously complex issue.

--Exactly!  The time limit as something that must be 'arbitrary'.  Where is the standard?  What would the length of time be?  Why did God not give us laws to uphold "intellectual property"?  The reason is that "intellectual property" is not the kind of property that men can own, nor is it a right given to men by God!

--Consider why God did not say that excessive interest is wrong.  Because how would you define excessive?  What would the rate be?  In fact, God said that any interest is wrong.  (Unless when an Israelite loans to a non-Israelite.)  Furthermore, low interest rates can be more harmful than high interest rates.  Low rates, where there is no gold standard, are highly inflationary!

If they were restricted to the originator's lifespan, it would destroy their value by making long-term contractual agreements impossible: if an inventor died a month after his invention were placed on the market, it could ruin the manufacturer who may have invested a fortune in its production.

--Ayn makes more assumptions that can be proven to be false.  Is it true that "long-term contractual agreements [would be] impossible"?  No.  Yes, it "could ruin the manufacturer".  Or, it might not!  Why assume that competition would ruin a business?  Competition may ruin a business, or, it may force that business to become more innovative and efficient!  Society benefits from competition because the most efficient business survives to serve society's needs. 

--The other false assumption is that the manufacturer "may have invested a fortune".  They may have, or may not have invested a fortune.  Whether investing a fortune was wise or not, depends on many factors, not just the untimely death of a creative inventor. , who may be able to keep the company current and competitive with ongoing inventions.  But it is not the job of the government to protect a bad investment, nor to protect against unforeseen risk.  Government's job is to protect real property rights, not to protect fraudulent claims and bad investments.

Under such conditions, investors would be unable to take a long-range risk;

--Again, Ayn makes one false assumption after another!  Investors MAY have increased difficulty with taking a long-range risk... but would not be UNABLE!

the more revolutionary or important an invention, the less would be its chance of finding financial backers.

--Again, not necessarily.  It is not the revolutionary nature or importance of an invention that might restrict financial backers.  It is the potential profitability, which depends on many things.  A few of which are: the cost of initial production, the potential return in the marketplace, and many other factors! 

--In fact, if patented, important inventions are less likely to be brought to the marketplace, because when a patent is granted, it means that only one man or entity has the right to produce it!  But what if the inventor is a bad businessman, a bad advertiser, is poor, cannot find financial backers, or is slow to bring the invention to society?  Why should society suffer or tolerate such poverty or incompetence of the inventor?  An invention is more likely to be brought to the marketplace, and more likely to benefit the most possible people, if all possible producers are allowed to produce it, without interference by government.  An invention is more likely to find financial backing if all of finance were allowed to produce it, and if patents did not exist!

Therefore, the law has to define a period of time which would protect the rights and interests of all those involved.

"Therefore, the law has to..."?  Based on all those provably false assumptions?  Ridiculous!  A just idea is justified by truths, not by lies and false assumptions!

In the case of copyrights, the most rational solution is Great Britain's Copyright Act of 1911, which established the copyright of books, paintings, movies, etc. for the lifetime of the author and fifty years thereafter.

In the case of patents, the issue is much more complex. A patented invention often tends to hamper or restrict further research and development in a given area of science.

Ayn, thank you for acknowledging the inefficiency of patented inventions!

Many patents cover overlapping areas.  The difficulty lies in defining the inventor's specific rights without including more than he can properly claim, in the form of indirect consequences or yet-undiscovered implications. A lifetime patent could become an unjustifiable barrier to the development of knowledge beyond the inventor's potential power or actual achievement.

Yes, yes, yes!  It's why society would be better off if there were no patents!

The legal problem is to set a time limit which would secure for the inventor the fullest possible benefit of his invention without infringing the right of others to pursue independent research.

Yes, yes, yes!  The granting of a patent right must infringe the rights of others! 

As in many other legal issues, that time limit has to be determined by the principle of defining and protecting all the individual rights involved.

--Rights are inviolable, and do not, and cannot, contradict each other.  If inviolable rights must be violated to secure a patent, then a patent is NOT a right!  And this is not a problem that can be solved with a "time limit".  This problem proves that laws that grant patents are evil. 

--Ayn, as if somehow realizing that the entire foundation for patent rights is unjustifiable and irrational, seems to instinctively move next to try and defend the entire concept of patents by addressing (attempting to refute, but not refuting) one key objection.

As an objection to the patent laws, some people cite the fact that two inventors may work independently for years on the same invention, but one will beat the other to the patent office by an hour or a day and will acquire an exclusive monopoly, while the loser's work will then be totally wasted. This type of objection is based on the error of equating the potential with the actual. The fact that a man might have been first, does not alter the fact that he wasn't.

--I agree that the principle of "first come first served" must apply in a world of limited real property.  In capitalism, property is allocated in either of two ways.  The first is "first come, first served." Second, property ownership is given to the highest bidder, which is the market creating a price.  And the one who gets to sell the property is the one who acquired it first!   But ideas are not real property because ideas are unlimited, and can be replicated without cost!  Unlimited ideas do not need to be allocated, "first come, first served", and ideas do not need to be sold to the highest bidder!  Anyone can grasp and possess a truth freely if they have open eyes, a ready mind, and an honest spirit!

--Thus, Ayn completely fails to refute the objection that two men may invent the same thing at nearly the same time!

Since the issue is one of commercial rights, the loser in a case of that kind has to accept the fact that in seeking to trade with others he must face the possibility of a competitor winning the race, which is true of all types of competition.

--But once a patent is granted, there is no more competition!  That's the entire point of patents, to remove the competition!  The entire point of the free marketplace is to create competition.  Ayn tries to appeal to competition as a high ideal to justify patents.  But if competition is a high ideal, and since patents prevent competition, then patents are not justified by the truth that competition in the marketplace is good.

Today, patents are the special target of the collectivists' attacks-directly and indirectly, through such issues as the proposed abolition of trademarks, brand names, etc.

It is not "collectivist" to attack bad laws that protect copyrights, trademarks, patents and brand names.

In communism, people cannot own property, nor "intellectual property".  But without real property, there is no real profit incentive, no competition, and no free market place.  In communist countries, they lack innovation (not because they don't allow patents) but because their marketplaces are less free than in the US, but this is an argument that validates the fact that more competition in the marketplace stimulates the greatest innovation. 

Profit incentives are created by a free marketplace, even without protection of patents, copyright or trademark law. 

I have pointed out that patents and copyrights require collectivism, and state ownership of all tangible objects, because you cannot use your paper and ink and make copies of others work, and you can't use your wood and your springs to make a patented mousetrap.  Ayn tries to defend patent laws by saying something that is exactly the opposite of the truth, by saying that those who attack patents are collectivists.  Although Ayn makes an unsupported assertion, I have shown quite clearly that patent protection requires action that are based on collectivism--the state restricting real property rights, and restricting free market competition.

While the so-called "conservatives" look at those attacks indifferently or, at times, approvingly, the collectivists seem to realize that patents are the heart and core of property rights, and that once they are destroyed, the destruction of all other rights will follow automatically, as a brief postscript.

Wow!  See, Ayn's rhetoric is what happens when a false concept is accepted as true.  Patent rights are not the ultimate right!  They are a false right, and the other rights would not be destroyed if patent rights were destroyed.  In fact, if patent rights were destroyed, other rights would be strengthened, because patent rights infringe on other, real rights!

The present state of our patent system is a nightmare. The inventors' rights are being infringed, eroded, chipped, gnawed and violated in so many ways, under cover of so many nonobjective statutes, that industrialists are beginning to rely on secrecy to protect valuable inventions which they are afraid to patent. (Consider the treatment accorded to patents under the antitrust laws, as just one example out of many.)

That industrialists are afraid to patent goes to show even more precisely why patents are evil.  One can get a competitive edge in the marketplace, through secrecy, as Ayn acknowledges.  But registering a patent is incompatible with secrecy! 

An inventor is free to keep his ideas private.  But if he brings his ideas to the marketplace, they are no longer private, and thus, no longer protected by secrecy.

Those who observe the spectacle of the progressive collapse of patents--the spectacle of mediocrity scrambling to cash-in on the achievements of genius--and who understand its implications, will understand why in the closing paragraphs of Chapter VII, Part II, of Atlas Shrugged, one of the guiltiest men is the passenger who said: "Why should Rearden be the
only one permitted to manufacture Rearden Metal?"

-AYN RAND

I find it most interesting that there is a "progressive collapse of patents".  Especially today, perhaps 30 years after Ayn wrote the piece above.  Today, computers are eroding copyrights in music, dvd's and even in software.  Free trade with nations like China is destroying patent protection monopolies on production.  Bill Gates has put numerous software companies out of business by badly copying their products, and incorporating them into the operating system.  I think we would all have better computers if Bill Gates was allowed to at least make a good copy of his competitors' products, and if other men were allowed to compete with Bill Gate's operating system. 

As it is, the undeniable reality of truth tends to march onward, and destroy false ideas, such as patents, copyrights, and trademarks.   The beauty of truth is that it spreads relentlessly, precisely because the spread of truth cannot be restricted, no matter how much government opposition.

--Jason Hommel

(It would please me enormously if other men were to take any of my remarks or written works, and refine or modify them in any way so as to make them better, more truthful, or more clear, or to give them greater market exposure.  And if they attempt to do the opposite, and slander my instead, it will likely not work.  Such is the beauty of truth.)

Note my business model.  I produce this free weekly report.  I don't worry about other men copying my report.  Who would do the continual work to update it weekly?  And if they tried, would they even have the market reach to get reader feedback as good as I get? 

It's possible that another man will one day re-produce my weekly report, and be able to reach a wider audience--especially if they attempt to spend perhaps $50,000 to $100,000 on marketing.  And if such a man succeeds, I strongly suspect that I will make even more money in the process, as even more investors will be exposed to the opportunities in silver and silver stocks.  In fact, I encourage my readers, weekly, to copy me, and to spread the word.  I will only be helped.  And such is the beauty of the business model that is founded on truth. 

There is another thing I have learned about truth, and why it is so beautiful and wonderful.  It is really easy to intellectually defend!  And when you find someone who argues in favor of something false, it is quite easy to refute their arguments and expose them as untrue.

Now, how do we put these truths to productive use?  Do we need to re-write the laws of the U.S.?  I don't think so.  I believe jury nullification will work.  See, men on trial (for making copies) have a right to a jury.   The jury has the right to judge both the merits of the case, and the validity of the laws, by simply refusing to convict.  If juries across the land are educated to the point where they will not convict men who copy patents and copyrights, then those laws become "nullified". 

Another way to end unjust laws would be to counter sue.  You could attempt to prosecute people who would infringe real property rights when they attempting to enforce the evil of patent and copyright and trademark law.  After all, people who infringe the real rights of men are nothing more than liars, thieves, and murderers, who have no justification for their evil actions.  Such evil actions end up actually creating victims (those who make the copies) who can testify against them in a court of law.

Furthermore, according to the U.S. constitution, the true victims, those who make copies, have the right to question their accusers, and in the process, they can expose the frauds behind the unjust patent, copyright, and trademark laws.

________________
I sell "intellectual information."   But I don't need to sell anything.  I have more than enough money.  I write to help others.  I make money in three ways.  The most is through capital appreciation of my own portfolio.  (IE, I don't have to work for others, but I do need to "work" to pay attention to my own investments.)  The second way I make money, is through helping other people find good investments, as I make money on finder's fees on private placements.  Third, and least of all, I make money through selling a "look at my portfolio" at goldismoney.com.  I offer this because many people ask me for stock tips, and so, I sell it in response to that market demand.   The money I make from the sales of the "look at my portfolio" goes to pay the webmaster team that keeps goldismoney.com running, and advertising.

Anyone who bought my information product could re-copy it, and sell it for less.  Or try to give it away to as many people as they could, by posting it on the internet.  Whether doing so would be beneficial to them, or hurtful to them, is up to them.  I don't care, I certainly wouldn't sue them, I win either way.  If more people see the "look at my portfolio" for free, and buy the stocks as a result, I make more money.  If less people see it, it helps those who paid for it to continue to acquire those stocks with less competition.  Either way, if people buy the stocks I own, the price of those stocks tend to go up, and I make money.

Because I have a market reach, I also receive a lot of tips about silver stocks.  And thus, I believe I may have invested in some of the best ones that came my way.  If you believe I may have an edge based on my work and unique position... then the best way for me to share this with you is to is tell you more precisely where I put my money.  It's not investment advice.  I offer a monthly "look at my portfolio".   I do not issue recommendations, and I don't list number of shares or the size of my portfolio, but I will show the top investments in my portfolio, by rank, updated monthly.  It includes which stocks are 9% and more of my portfolio, those between 9% and 6%, under 6%, under 3%, and under 1%.

To order: http://www.goldismoney.com/articles.php

If you have any questions about billing or order fulfillment, you need to contact my support staff at support@goldismoney.com and not me.  I manage a large portfolio, and I don't have time to process billing requests.  I don't bill any cards, my support staff handles all of that.  The toll free telephone customer support line is:  877-895-6824.

-------------------

When I attended the Vancouver gold show, mid June, I was interviewed on the radio by the Korelin Economics Report. See http://www.kereport.com/recent.htm

I will be speaking in Idaho at the Silver Summit in September 23-24
http://www.silverminers.org/summit/index.html

I will be speaking in Toronto at the Cambridge Gold Show on October 3-4.
http://www.goldshow.ca/

-------------------

SAFES: Need a safe to store your silver?  Steve Miele in Grass Valley at the Sports & Swap shop can deliver a safe anywhere in the U.S., and can have a safe custom built to your specifications, such as to hold silver bullion.  Call Steve at (530) 272-4179.  If you get a very large, refridgerator-sized, heavy safe, in excess of 1000 pounds, you have to have it delivered to a local loading dock or Freight dock, and then arrange delivery from there, which is a bit complex, because you may need to hire several people at such a freight dock to operate a fork lift.  (Sorry, I had the phone number wrong last week.)

General Commentary on Silver (slightly modified from last week):

Now, I think it's time that the silver community started a letter writing campaign to the editors of newspapers around the world, to tell them about silver. 

Here is a sample letter:

May 21, 2004

Dear Editor,

I'm a silver investor.  I believe paper money is fraudulent.  There is over 30 trillion dollars, U.S., worth of bonds in the world, but less than 2 trillion dollars worth of gold, according to gold.org. 

As of April, 2004, the size of M3, the money in U.S. banks, has reached 9.1 trillion dollars, yet due to fractional reserve banking, the total of U.S. currency and coin in circulation is only 724 billion dollars as reported by treas.gov.

At silverinstitute.org and cpmgroup.com, they each report that silver has been in a deficit for about 15 years, where world mine supply has been about 500 million ounces, scrap supply about 200 million ounces, and industrial and jewelry demand about 800 million ounces.  The difference, about 100 million ounces, has come from investor and government selling, drawing down reserves of silver.  Known supplies of refined silver are down to about 250 to 600 million ounces.   At the COMEX, they are down to 48 million ounces of silver left that is registered for delivery, which you can see at nymex.com. 

The governments of the world are printing up too much paper money, and the world is running out of real money, silver.  I believe this will lead to the price of silver rising dramatically in value, around the world.

I urge your readers to verify the statistics I have provided, and to make their own decisions.

Sincerely,

Jason Hommel

------------------
I wrote an article:
Miners to Use Silver as Cash - 27 November 2003
Apparantly, I was about 6 months too early in my predictions, but that's ok, I'm a very long term thinker and investor.  I did not miss the mark by too much time, and if you think in terms of decades, I was right on the mark.

 There are several companies that are increasingly deciding to hold their cash in the form of silver bullion.  These companies are:

SSRI SSO.V (SILVER STANDARD RSC)
SRLM.PK (STERLING MINING)
NPG.V NVPGF.PK (NEVADA PACIFIC GOLD)
EDR.V EDRGF.PK (ENDEAVOUR GOLD)

 ------------------
The Silver Valley in Idaho is bringing back the use of silver as money.  A silver one-ounce coin, a "Sterling" to be used as a $10 piece.
http://shoshonenewspress.com/index.asp?Sec=News&str=2869
------------------

For news on the New Hampshire Sound Money Bill, that proposes to use U.S. Treasury minted Silver Eagles and Gold Eagles as money see:  http://www.goldmoneybill.org/

25 Reasons why the Sound Money Bill Must Be Supported
by Jason Hommel

Send any donations you can, to:
[These are not political campaign donations.]

SOUND MONEY FOR AMERICA,
c/o Henry W. McElroy,
15 Iroquois Rd, Nashua, NH  03063
ANY AMOUNT, ANY LEGAL TENDER CURRENCY - U.S. OR FOREIGN !

For more info, contact
Rep. Henry W. McElroy, NH State Representative
Sponsor of the bill
603-233-5892

Harvey Wharfield
978-635-9586

We also need assistance with the following. 

1.  Please contact your local representative to your state government.  Find out whether they might support a similar "sound money bill" in your own state. 

To contact your state rep to the federal goverment, see http://www.house.gov/writerep/
To contact your state rep to your local state government, you will have to find that on your own.  Try searching for "contact state representative california" and replace the name of your state in the search.

2.  If you know of any local representaives to your state government, who may be GOOD, LIKE MINDED REPRESENTATIVES, SENATORS, and GOVERNORS, who may like to support, or sponsor, a sound money bill in your state, please tell them about the NH initative.  Copy the above, and send it along to them.  And call Henry W. McElroy or Harvey Wharfield, and let them know of the other reps who may assist the cause.

3.  If you have an email list to people who may be interested in gold and silver as money, or who may be good conservatives, please send out this notice to the list, so the project can move forward! 

--------------------------
There are two excellent annual silver surveys that are sponsored by industry.

The survey by silverinstitute.org costs $195, 87 pages.
http://www.silverinstitute.org/wssum03.pdf -- 8 page free summary of last year's reeport.

The survey by cpmgroup.com costs $150, 162 pages.
http://www.cpmgroup.com/SSpress2004.pdf --3 page press release.

 The two reports present the case that about 500 million oz. of silver are mined each year, about 200 million oz. of silver comes from scrap, and about 100 million oz. of silver comes from investor dis-hoarding, either by individuals or government sources, in order to meet the annual demand of about 800 million oz. of silver by industry & jewelry.  This is wildly bullish, because investors are net selling more than buying, and I think the potential of investor demand is huge, and can be measured by seeing how much paper money there is in the world.
--------------------------

Here are two U.S. Government produced reports on silver, containing data on years from 1900 to present, on U.S. & world  production, and U.S. consumption, and U.S. industry & government stockpiles.

Report #1
http://www.goldismoney.com/ssr/USsilver.xls
Report #2
http://www.goldismoney.com/ssr/USsilver2.xls

I evaluated these government produced reports in my silver stock report #36.

In sum, we are running out of silver.  The U.S. government had over 3 billion ounces of silver in 1940, and today, has very little left, or none.

--------------------------

The Commodities Futures Trading Commission

The CFTC report on the allegations of manipulation in the silver market -- 9 page report
The CFTC report confirmes much of the research above, and almost outlines the bullish case for silver!
--My comments on the CFTC report are in silver stock report #34 & #35

--------------------------
Silver consumption, per capita, in the U.S. is the same today, in 2004, as it was in 1945.

And what is the per capita consumption of silver in the U.S. today?  5500 tonnes x 32152 = 177 million ounces of silver used per 285 million people.  177 / 285 = .62 oz. silver consumed per year, per person, in the U.S., whether in 1945, or in 2004.  Each person in the U.S. today, on average, uses 6 tenths of an ounce of silver. 
--------------------------

See my article: Biblical Guidelines for Managing your Money

As the New York Times, January 11, 1859, page 2 said---
"It is well known that the most colossal fortunes the world ever saw have been based on silver mines..."
--quote found by Charles Savoie

----------------------------

WHERE and HOW to BUY SILVER BULLION
http://www.goldismoney.com/buy-gold.php

----------------------------
My 2004-2009 price predictions for gold and silver:
2004: $595/oz. gold,  50:1 ratio = $12/oz. silver
2005: $1011/oz. gold,  30:1 ratio = $34/oz. silver
2006: $1719/oz. gold,   10:1 ratio = $172/oz. silver
2007: $2923/oz. gold,  5:1 ratio = $ 585/oz. silver
2008: $4,969/oz. gold,  1:1 ratio = $4969/oz. silver
2009: $8448/oz. gold, 5:1 ratio = $1698/oz. silver
2010+: infinity dollars/oz. gold, infinity dollars/oz. silver.

I calculate the gold price rise by guessing that by 2009, M3 will have a "gold-value" like it did in 1980, which is to say, M3 was worth 2 Billion oz. of gold or less.  It also assumes M3 will about triple in that time.  These figures are conservative, because I see no reason that M3 should be valued more than the gold the U.S. actually holds, which is a mere 261 million oz., not billion.  Today, the M3 value is $8870 billion / $425/oz. = 19 billion oz. of gold M3 could buy in theory.  The silver:gold ratio is also a very, very vague guess, reflective of monetary demand chasing silver, which is more scarce than gold in above ground, refined form. I have no idea when the ratio of 15:1 will be exceeded, I'm just totally guessing.  I suppose it could happen this year or next month for all I know.  Of course my real price targets are infinity dollars per oz. for both gold and silver when all is said and done, I just don't know how long that will take, nor what year it will be.  But my point in producing the price predictions is to show my bullishness for silver and gold.

----------------------------
A great overview on silver: Douglas Kanarowski's 78 Approaching Forces For Higher Silver Prices

See also Douglas Kanarowski's article:  What Impact Will Digital Photography Have on Silver?

Doug's third article is also excellent: Silver -- the next big thing in the global markets? Answering A Few Silver Questions

 ----------------------------

 See the 600 year silver chart to see how undervalued silver really is:
http://goldinfo.net/silver600.html

----------------------------
Look at the summary of the world silver survey by GFMS Limited on behalf of The Silver Institute :
http://www.gfms.co.uk/Publications%20Samples/WSS03-summary.pdf

Note, there is virtually no monetary nor investment demand. Note, the 2002 mine production (585 mil oz.) is greatly exceeded by industrial, photo, and jewelry demand. (838 mil oz.).  Note the chart on page five, "Supply from above-ground stocks".

The difference between mine supply and industrial demand was met by a combination of three factors: 1.  Government selling, 2.  Private selling, 3.  Recycling

U.S. government selling is ending, as their stocks have run out, or will run out.  This factor will reverse, because the U.S. government will need silver to continue their coin program, and/or need silver when they wake up and decide they need to replenish their strategic stockpile for domestic security.  Silver is a war material.  China's selling of silver will also likely turn into buying, as China will need silver for continued industrial development, or when they also lose faith in the U.S. dollar.

Private selling has been rapidly shrinking and is now almost ended, and should turn into buying, and become monetary demand.  Monetary demand is everything in the silver supply / demand situation.  It's not now.  Now, it's nothing.  But it will become something incredible, because the dollar is dying.

----------------------------
The following is a "must read":  Ted Butler's best ever explanation of how silver is manipulated lower than it should be.
http://www.investmentrarities.com/11-04-03.html

Over 3400 people have signed the silver petition to stop the manipulation at the COMEX:
http://www.PetitionOnline.com/comex/

Ted correctly points out that a lower price creates excessive demand from consumers.  However, Ted Butler does not point out, and neglects to mention, that a perpetually low price also creates lack of demand from investors who are "trend investors". 

I think most silver experts over-analyze all the supply and demand factors of the silver market.  No factor is more important than monetary demand.  The force of photographic demand is like a light breeze compared to the hurricane or tornado of monetary demand.  Monetary demand is everything.
----------------------------

Consider the gold market for a moment:  Even short selling at the COMEX is nothing compared to monetary demand.  The short position most certainly helps to depress the price of gold as the short position is growing larger.  However, it adds fuel to the fire if there is short covering, and thus, it can boost the gold price later.  But the commercial short position on the COMEX is next to nothing compared to the non-reported "over the counter" trading that is done that does not appear on the COMEX.

(Numbers in metric tonnes, 32,152 oz. per tonne.)

870 tonnes -- the paper position at the COMEX, 280,000 contracts for 100 oz. each.
5,000 tonnes -- the official number admitted that the central banks have sold.
15,000 tonnes -- the number GATA research shows that central banks have sold / or leased.
30,000 tonnes -- the number of official central bank gold, minus either the 5000 or 15,000 tonnes.
145,000 tonnes -- all the gold mined in the history of the world.
2,600 tonnes -- annual mine supply
4,000 tonnes -- annual demand

And all of that is nothing compared to the amount of dollars out there that exist that could buy gold. $20 trillion bonds, $9 trillion M3 = $29 Trillion.  A mere 1% is $290 Billion, which, at $500 /oz. is a massive demand of 18,039 tonnes.  Do you understand what that means?  That means that far, far less than 1% of dollars, in either bonds or M3 can buy gold, because there simply is not that much gold available. 

Long before 1% of U.S. paper dollars tries to buy gold, gold will be going up well over $1000/oz., and silver will be headed up over $50/oz.

----------------------------
To scare away investors--that is the entire reason gold and silver are manipulated in the first place.  Only the trend investors can be deceived.  The problem is that nearly everyone is a trend investor.  Very few investors understand value.  If people knew the facts and used their brains, the available above-ground refined silver would be gone by tomorrow, and the price would be well over $20-50/oz.  But don't trust me, check the numbers and follow the links:

"The money chart"

   1,000,000,000,000: 1 Trillion dollars
         1,000,000,000: 1 Billion dollars
                1,000,000: 1 Million dollars
$45,153,000,000,000: U.S. Household wealth, as of first quarter, 2004. (Includes Real Estate, and investments)
$33,000,000,000,000: World bond market, yr end, '01:  http://tinyurl.com/vr7u
$26,400,000,000,000: World stock market, June 2002: http://www.nyse.com/press/1044027443845.html
$20,200,000,000,000: U.S. bond market, yr end, '02:  http://tinyurl.com/vr7g 
$11,447,800,000,000: U.S. GDP, 2004 q1 http://www.bea.doc.gov/bea/dn/home/gdp.htm
$11,300,000,000,000: NYSE U.S. stock market, April, '04 (363 bill/s x $31.14/s ave.) http://nyse.com (See: Market info: quick facts)
  $9,101,000,000,000: M3 (money in U.S. banks) April, '04  http://tinyurl.com/vra0
  $7,183,392,668,476: US debt, 5-18-04   http://www.publicdebt.treas.gov/opd/opdpenny.htm
  $2,360,000,000,000: U.S. annual budget 2005 http://tinyurl.com/3xbd2
  $2,572,160,000,000: Marcos/Phillipine "black/unofficial" gold: 200,000 (to 500,000) Tonnes @ $400/oz. (Book: "Gold Warriors")
  $1,860,000,000,000: World "official" gold mined in all of history, 145,000 T @ $400/oz. http://tinyurl.com/vrcc
     $300,000,000,000: Estimated silver mined in all of history: 30-40 million oz?  @ $10/oz.
     $724,174,342,365: Total U.S. paper currency & coin in circulation, Dec. 31, '03  http://www.fms.treas.gov/bulletin/index.html
     $700,000,000,000: U.S. annual budget deficit (current). 
     $272,000,000,000: Market Cap of Microsoft (03-2004) http://tinyurl.com/vrcn
     $222,000,000,000: M3 increase (money in U.S. banks) from Jan 2004 to April 2004 (in three months).
     $180,000,000,000: Debt of Ford Motor Co. (03-2004) http://tinyurl.com/vrd1
     $104,400,000,000: US gold, 261 mil oz., @ $400/oz. http://tinyurl.com/vsr9
     $100,000,000,000: all the world's gold stocks/equities (estimated?)
       $75,000,000,000: Money flowed into Equity funds in the first quarter, 2004
         $8,226,000,000: all the world's "primary" silver stocks (80 of them on this list, as of June 25, 2004)
         $6,710,000,000: 671 mil oz. of "identifiable" silver bullion left in the entire world, according to GFMS @ $10/oz.
            $529,000,000: 52.9 mil oz. of "registered" COMEX silver bullion @ $10/oz.  http://tinyurl.com/vrcw

So, what do all those stastistics mean?

For a while I was using M3 and dividing that by the US gold (261 million ounces), which implies the us dollar is 84 times more valuable than it should be, and that gold should hit $34,000/oz. after the fraud is destroyed.  Today, I realize I need to add in the Bond market, because bonds are an asset class designed to siphon away and replace real money, which is to say, gold.  This gives a price of about $111,111/oz. for gold.  At $ 430/oz, this implies that US bonds and paper currency are 258 times more overvalued than gold.

Gold is overvalued relative to silver, because at current prices, it takes 68 ounces of silver to buy 1 ounce of gold.  Historically, this ratio was 15 or 16.  Given the silver shortage, this ratio will hit 10:1 or 5:1, or even 1:1.  Thus, gold is perhaps 68 times more overvalued than silver.

Silver is overvalued relative to certain select silver stocks, perhaps by a factor of 3 or 10 or 20 to one.

Thus, if you multiply all those numbers, 258 x 68 x 10,  You will see that bonds and currency are overvalued relative to select silver stocks by a factor of 139,000 to one. In other words, if silver stocks reach their true value, and paper currency disappears as it always does, then you might expect certain silver stocks to go up in relative value by a factor of 139,000 times more than they are worth today.  By that time, you should definitely sell the silver stocks, and buy gold.

Can silver stocks really appreciate so much? Is there historical evidence for such a crazy thing?  Yes.

See http://www.sterlingmining.com/old.html
Excerpt:
"CDE rose from penny stock status (.02 in 1967) to an NYSE-listed, $60 per share stock in 1980. In fact, the average share on the Spokane Stock Exchange rose in value nearly 16000% (yes, sixteen THOUSAND percent), as America could not get enough of silver and silver stocks."

CDE rose by a factor of 3000, or 300,000%, and by 1980, the metals boom was stopped short, and paper money's death was postponed.  If paper money dies a death that lasts a generation world-wide, then even greater gains should have been expected.

For this reason, a wise silver stock investor should NEVER sell silver stocks for paper cash.  A wise silver stock investor who looks for value would never sell a fairly valued silver stock for an overvalued silver stock that traded for hundreds of thousands of times more value than it should be.  Likewise, there is no excuse for a silver stock investor to have any cash or money market or bonds in his portfolio for any reasonable length of time, except for when selling one silver stock to raise the cash for another silver stock, or for when you need to raise the cash to buy silver, or a private placement in another silver stock. 

So, if you want some fairly liquid alternatives to cash, in case you don't know what other silver stocks to buy at the time, here they are:
1.  Buy silver.  You can hold silver in an IRA.
2.  Buy CEF.  Central Fund of Canada, ticker symbol CEF.  It's gold/silver bullion fund.  It has 50 oz. of silver for every 1 oz. of gold.  The fund is fairly liquid, you can buy it as easily as any other stock, and is a good cash substitute.  Unfortunately, given the current ratio, about 55% or more of the value is in gold.
3.  Buy a fairly large cap silver stock, with fairly large volume, that is stilll fairly cheap on the list.  SSRI is probably the best candidate.

----------------------------

The sheer stupidity of big money not recognizing the value of the world's remaining silver is utterly shocking to the rational mind.  Clearly, bond holders are utterly deceived, and totally unaware of the situation.  All my readers should understand and know that bonds were originally invented to suck the capital and money (gold and silver) away from the people.  Bonds today are a paper promise to repay paper.  What a con game!  Are bond holders conservative and safe?  No, they are fools!  There is nothing safe about holding a paper promise to receive more paper when we have been experiencing hyperinflation for the past two and a half years! 

See my prior essay, " Inflation & Deflation During Hyperinflation "

----------------------------
And the fund investors who buy paper silver futures contracts instead of real silver are a very odd bunch of fools, for they should realize that nobody can deliver 800+ million ounces of silver promised in the paper contracts and options that does not exist.  It's like the paper longs are betting on the bank run happening, but they all are making sure they get at the end of the long line.  Instead, they could go front and center, where there is an open window available where you can go and get physical silver, and nobody is there.  Idiots!  If you know a bank run is going to happen, and you are actually willing to bet on it, then go and withdraw your money before it is too late!  Don't bet on it happening, which, if it does happen, your contracts will be defaulted on!  Amazingly blind idiots.  Wake up!

See also my prior essay, "The Moral Failures of the Paper Longs"

----------------------------

How bullish am I on silver?  Here's an interesting way to put it: "68 times infinity" dollars per ounce.

I believe the dollar will eventually be destroyed, likely within my lifetime, hence the "infinity" part.  I believe the ratio of silver to gold may be equal during a spike, when the market realizes that above-ground refined silver is more rare than gold.  Thus, silver may outperform gold by a factor of 68 times better.  Currently, the ratio is 68 ounces of silver can buy one ounce of gold or 68:1.

I may end up selling silver for gold, some at the 10:1 silver to gold ratio, some more at 5:1, and I would sell any silver remaining at a 1:1 ratio, that we may hit during a supply/demand crunch during a paper money collapse.

How we can tell if silver is leading gold, or if gold is leading silver?  IE, which is going up more, faster than the other?  The way you can tell is by looking at the ratio.  If the silver:gold ratio is going up (say, from 60:1 to 80:1), then gold is moving up faster (because it takes 5 more silver oz. to buy an oz. of gold.  If the ratio is going down (from 60:1 to 40:1), then silver is moving up faster.  So, keep an eye on the ratio.
 
----------------------------
For a list of bullion dealers:
http://www.goldismoney.com/buy-gold.php

For a list of Brokers that handle Canadian issues and/or pink sheets:
http://www.bibleprophesy.org/SilverStockExtra.html

To track the 163 ticker symbols of the 100+ stocks on this list at yahoo:  (Updated on April 2)
http://www.bibleprophesy.org/SilverStockExtra.html

To learn All about Canadian law, 43-101, about reserves and resources:
http://www.bcsc.bc.ca/Publications/mineral_projects_sept03.pdf

A good website that hosts posting boards for many of the smaller canadian stocks (that Yahoo! finance does not have boards for) is stockhouse.com
Click on "Bullboards".
----------------------------

This is a list of primary silver stocks. 

I count a company's ounces of gold as 10 oz of silver. Why? Because I have a very strong positive bias in favor of silver over gold.

Given my bias in favor of much, much higher silver prices, then, to me, the grades of silver are far less important than buying more oz. in the ground.  More oz. in the ground at a lower cost is the most important consideration for me. 

My method is simple. Cost per ounce in the ground. How much do you get (silver reserve totals), and how much does it cost (market cap)? The cost is the market cap divided by the silver reserve totals. Cheaper is better. Buy low, sell high.

Disclaimers, Warnings, and Advice: I have gathered the information below over the course of several months. I believe it is accurate to the best of my ability. I have made mistakes in the data from time to time. I'm human. I have collected the information from public sources such as company web sites and public information found at yahoo.com to get the stock prices. This report in no way guarantees the accuracy of the information below, since the information may change at any time. The number of outstanding shares can change as a company engages in new share issues to raise more capital through private placements, or if outstanding warrants (and options) are exercised and converted into shares, or if shares are bought back. Shares can be consolidated, or split. The number of ounces of silver in the ground can also change, as these are often only estimates. The number can also change up or down, depending on drilling results.

This report is not investment advice.  This report contains information that may or may not be up to date, and may be inaccurate.  I urge you to contact the company and do your own research to verify the information contained in this report.

This report is not an offer to buy or sell any securities.  I am not a broker.  Only your broker can buy or sell securities for you.

I urge you to consult with your investment advisor to determine whether these kinds of investments are right for you. 

I also caution you to be aware of your investment advisor's advice, they are sometimes paid to push things like mutual funds, bonds and other securities that may not be in your best interest to buy.  Some investment houses are short physical metal, and thus, they may attempt to strongly discourage you from buying precious metal or precious metals investments.  I believe that the propaganda machine in support of frauds such as bonds and the dollar is so strong, that they may even believe what they say when they give bad advice to avoid the safety and protection of precious metals.  It is most likely that they simply do not understand the precious metals market as well as you do.

All total estimates of "ounces in the ground" can vary widely. There are "proven and probable reserves" which are the highest category of certainty which is obtained through many drill holes, and then at the least accurate, there are "inferred resources" which are hardest to estimate. Additionally, every miner always has "more silver properties that need to be explored, which probably contain more silver". For the purposes of this report, I have added all those numbers together. It is believed that all these "ounce in the ground" estimates can be profitably mined at $5-6 per ounce silver, or lower. Thus, I believe that when silver trades for $15/oz. or above, that all of these ounces can be mined at a substantial profit.

I may be wrong. (I probably make mistakes in every article, and there have been updates and corrections made each week, especially as prices change.)

Mining is a risky business. You need to be willing to sustain a total loss of your investment for various unforeseen accidents. Silver stock companies can do stupid things to shareholders such as take on debt, or issue more stock at too low prices which reduces the percentage of the company you may own (dilution). Yet, they need to issue shares to raise capital for drilling, and then an even bigger dilution to build a working mine. They may sell YOUR silver too cheaply, or worse, hedge the price of YOUR silver just as it begins to go up if they lock in a price which then proves to be too low if the dollar is destroyed. Mining is a risky business as estimates of assets in the ground can change. There is political risk and environmental risk. They can't franchise the business, are stuck in one location, are subject to government confiscation, or taxes, or union wage negotiations, and corporate looting.

Do your own research.  Be responsible for your own investment decisions.  Again, please, before investing in a mining company, call up the company, and speak either with the CEO or the Investor Relations contact person.

Contact the company.  Check the company web site, read the annual reports, check my numbers, check my math, and email the company. That's what they are there for, to answer your questions, and to speak about the opportunity of the company. Don't trust everything you read over the internet. I am a biased source. I own silver mining stocks. And I'm not a broker, nor an investment advisor. I'm just a private investor trying to make sense of this crazy world, and sharing my information and thoughts on silver companies.

Surely, there are scammers in the mining industry in the past, and there will be scammers in the future.  Remember the fraud of Bre-X.  The new 43-101 compliance laws put in place after Bre-X will not prevent a "certified" geologist from lying if he feels lying will create a better payoff.  The Bible warns, "trust no man", yet at the same time advises us to "cast our bread upon the waters", and to not issue "false allegations" against others.  Physical gold and silver provide the "payment in full" as long as the coins or bars themselves are genuine and not fake.

This report may be copied, and transmitted by other people, and may become outdated by the time it reaches you.

I can't tell you how you should invest your money, of course. The reason is that I don't know how convinced you are of the silver bull market, nor do I know how soon you will be needing the money back, so I don't know how long you can wait to see results, nor do I know how much liquidity you need. Nor do I know the size of the money you have to invest. It is very hard to invest large quantities of money in a small market cap stock.

That being said, my investment strategy seems to be working for me, so far. And so, here is how I have started an initial valuation process of the following silver companies to guide my own investment decisions.

----------------------------
(Market cap is always converted to US dollars and denominated in US dollars because I divide by ounces of silver, which are also denominated in dollars)

The Market Cap is the usual tool to value a company.  It is what the company "costs to buy" if you could buy the entire company, all the shares, at the latest share price.  It is calculated by multiplying the share price, by the total number of shares that the company has issued.  In reality, you could almost never buy an entire company at the price of the Market Cap, but only a small portion.  Usually, even small buying pressure, such as trying to buy 1% of a company, can push up the price of a stock by up to 10-50% higher.  In my reports, I list Market Cap in terms of millions of dollars as "$75 mil MC".

To calculate the Market Cap, I try to get and use the number of "fully diluted shares".  A company creates shares when they sell them to investors in what are called "private placements", or "initial public offerings" (IPO).  These usually consist of shares and warrants, sold for cash that the company will need to grow and expand.

The "outstanding shares" is the number of shares that exist out there if you count them all, and it does not count the warrants, which are like options. The investor can "exercise the warrants" which is a right, but not an obligation, to buy more shares from the company at the set price of the warrant.

If the company does well, and the stock price moves up, all the warrants will be, or should be, exercised and converted into shares, especially if they become "in the money", and the warrants are significantly cheaper than the stock price.

Now, "fully diluted shares" is the total number of shares, plus the warrants, counting warrants as if they were all exercised and became fully trading shares.  I think "fully diluted shares" is a better number to use to calculate market cap than by using "outstanding shares" as most do.

Finally, I go beyond valuing a company based on Market Cap alone; instead, I value a company by dividing the Market Cap by the assets of the company, which are usually the silver reserves in the ground.  Thus, I can get a sense of what you are getting for what you are paying.   And then, I denominate the whole thing in terms of silver, and not dollars, to get a more constant measure.

----------------------------
(These first four companies, BHP, GMBXF.PK, KGHM and BVN  produce a lot of silver, but look to be way too expensive to buy for the silver exposure for your portfolio.)

BHP Billiton Ltd (BHP)
http://www.bhpbilliton.com/
--'produces 40 mil oz. silver annually from one mine'
Additional comments:  unfortunately, BHP has a 53 Billion market cap, so we can't buy BHP for the silver exposure.  IE, $53 Billion / oh, say, 1000 million?????= $53/oz.

Dear BHP:  By all means, keep mining the silver if you want the silver exposure, and want to be in the silver business.  But don't sell the silver.  Keep it.  Let the profits of your entire company accrue as an increasing physical supply of physical silver.  In fact, do as Buffett did, and buy more silver if you can.  It would be infinitely easier for you to buy silver from yourself than it would be to buy 40 million ounces of silver from the COMEX, which, today, might be impossible. 

KGHM Polska Miedz
http://www.kghm.pl/en/index.php
--KGHM is the world`s sixth-largest coppper producer and second or third in silver.
1163 tonnes of silver produced in 2001.
1163 x 32152oz.tonne = 37.4 million ounces of silver produced in 2001
--Copper/Silver mine in Poland.
--Market capitalisation is about  $$1.52 billion.

Grupo Mexico SA de CV (GMBXF.PK)
http://www.gmexico.com/indexi.html
651,646,640 shares (2002 annual report)
@ $4.00/share
$2606 mil MC
"Grupo Mexico ranks as the world's third largest copper producer (copper at $1.24), fourth largest producer of silver and fifth largest producer of zinc."
They produced 28.2 million oz. of silver, worth $129 million, in 2002.  (P. 5, annual report.)
Total value of produced metals: $2527 milllion. (but the company lost money in 2002).  They mainly produce copper, 900,000 tons worth $1.5 billion in 2002.  Thus, silver, at 2002 prices, is only 5% of their production value.  Silver is a by-product for them, not a main product.
I don't have silver reserve figures, nor do I see any need to find them or add them, since they are not a primary silver producer, and I don't think anybody would be buying them for the "silver exposure".
If we assume 280 mil oz. of silver (ten years reserve for production), then we stilll don't have anything exciting for the silver alone.
$2085 mil MC / 280 = $7.45/oz. cost.

Compania de Minas Buenaventura SA (BVN)
http://www.buenaventura.com/
NYSE:BVN
- Peru´s largest publicly traded pprecious metals company
--produces over 10 mil oz of silver per year
--looks way too expensive for the silverr alone: 3.6 Billion market cap.
 -------------- -------------- --------------

ABX (Barrick)
http://www.barrick.com/
535 million shares outstanding (1 Q 2004)
@ $19.12/share
$10,229 million Market Cap
5.5 million oz. / year gold production.
--production hedged out for 3 years, or about 15 million oz.  (most notorious hedger of the industry, the "leader")
--price of hedges locked in near the market lows, perhaps $340/oz. on average, nobody knows for sure, because Barrick will not say
--reportedly, Barrick is trying to "unheedge".
--reportedly, they plan to deliver 1/3 oof production to hedges, which means they will be hedge free in about 10 years.
--the size of the hedge, 1 Q, 2004: 14.7 mil oz. gold, at $400/oz., would be valued at $5.9 billion dollars. 
--but they claim to be "debt free", if you ignore the gold they owe for delivery, at locked in, low prices.  (only true if gold is not money)
--cash: $850 million
Silver Reserves reported to be 850 million ounces! 
Gold Reserves reported to be 86 million oz.  (x 10 = 860 mil oz. + 850 silver = 1710 mil oz. "silver equiv."
$10,229 million Market Cap / 1710 mil oz. = $5.98/oz. silver
You may get "approx" 1.09 ounces in the ground for 1 oz. silver's worth of stock, if the silver isn't hedged.

Additional comments:  Barrick earns $26 million in first quarter.  x4 = $104 million, which gives a P/E ratio of 103.  Ouch, that's high.  The hedge book loss was $10 million. 

Over the years, Barrick has hedged their production, which many claim has helped to depress the price of gold and silver, by artificially adding to supply.  (Barrick's promises becoming the extra supply.)  The declining price of the precious metals has put other miners out of business, which Barrick has acquired at low prices.  If Barrick goes bankrupt due to their hedges, and rising gold and silver prices, then perhaps Barrick's many properties will, once again, be sold at distressed prices. 

About a year ago, perhaps spring 2003, ABX made an announcement about covering 30 million ounces of silver they sold short.  Then, a large buyer showed up in the futures contracts for about that amount. 

1 Q 2004 note on hedging silver, p. 33:  "At March 31, 2004, we had fixed-price commitments to deliver 22.3 million ounces of silver over periods primarily of up to 10 years.  We also had written silver call options on a notional 7 million ounces of silver with an average exercise price of $5.76 per ounce.  These options expire at various dates in 2004 and 2005.  The options are classified as non-hedge derivatives for accounting purposes.

Looks like they never closed out the silver hedge, like they said, but that they just bought options or futures that expired, or maybe were rolled over.  I don't know whether they stilll have paper contracts that offset their hedges.  In fact, perhaps the dip in the silver price can be explained by the options that Barrick wrote on some silver? 

I expect silver bullion to continue to outperform ABX stock at these prices.   I don't really count Barrick as a silver company... Let me be abundantly clear.  I primarily list Barrick to show how poorly it compares to all the rest, and to help show how much better the rest compare.  This is a "comparative valuations" report, after all.

IPOAF.PK (INDUSTL PENOLES)
http://www.penoles.com.mx
397.5 mil shares outstanding (2003 annual, unchanged since 2001)
@ $3.95/share
$1570 mil MC
419 proven and probable reserves of silver (from 2002 annual report on website)
$1570 mil MC / 419 oz. silver = $3.75/oz.
You get "approx" 1.75 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments:  Industrias Penoles is the world's top producer of refined silver.  They actually derrive more revenue from silver than any other source.  But they lost money in 2002.  Produced 21.5 mil oz. silver 1 Q 2004 (Net earnings of $342.5 million 1 Q 2004)

The word late Feb. 2004 from ECU Mini, who reported to lemetropolecafe.com, is that Penoles hedged silver at low prices.  As reported at lemetropolecafe.com, "We know the market is so tight even the world’s largest silver producer, Mexico’s Penolas, wasn’t thrilled about supplying 1 million ounces for a special project with ECU Silver, led by their extremely able