Silver Stocks--Comparative Valuations 
Weekly Report # 53
by Jason Hommel
silverstockreport.com
goldismoney.com

Friday, October 15th, 2004

A day's wage used to be a silver dime, a silver quarter, or maybe a silver dollar.  A silver dime today costs about 45 cents, at $6.20/oz. for silver.  About 900 million oz. of silver are consumed annually, and just under 600 million ounces mined annually.  Oddly, there is is seven times as much refined gold as silver...  Buy real silver, it is scarce, real wealth, and cannot go to zero value.  By the time paper money fails mankind once again, as it always does, any silver dime you can lay your hands on will probably be worth more than what $100 to $200 will buy you today. 

This week's report lists the market capitalizations for 86 silver stocks.  There are 31 silver stocks that list reserves, resources (and exploration potential) which I calculate by using my "ounce in the ground" formula.  There are 54 explorers.  There are about 30 additional "silver" stocks with incomplete information.  This report goes out now to over 11,700 investors each week.  Additions & Changes from last week are in bold. 

Quick links to other areas in this report (Index of this report): 
[Summary list of Silver stocks]
[My Methodology]
[Weekly Commentary]
[Subscribe to the "look at my portfolio". ($34/mo.)]
[Subscribe to my Private Placement notice list (FREE)]
[Subscribe to this Weekly Silver Stock Report (FREE)]
[My Conference Schedule]
[General Commentary on Silver]
[WHERE and HOW to BUY SILVER BULLION]
[The money chart]
[Disclaimers, Warnings, and Advice]
[Company profiles]
[Company profiles with the most resources, and least cost]
[Profiles of Explorers]
[Links]
[19 Silver Stocks I own]
[Archive of about 40 of my past essays]
[Archive of past Silver Stock Reports]
Kitco reports silver at $7.08/oz. as of Friday, 2:00 PM West Coast US, which was used to calculate the following figures. The CAN $ / US $ conversion factor is .7982.  I will use .80 for ease.  

How to read the table below:
Stock Symbol that works at Yahoo! Finance (Company name) / The number that follows the company name, below, represents the company's resources, divided by the market cap as denominated in silver; thus, it is the number of silver oz. "in ground" that you gain title to when you trade away one ounce of silver to buy 1 oz. of silver's worth of stock.  The number is the expression of leverage that silver stocks can give you, the higher the number, the better. / Next, I list the valuation price change since last week (and stock dilution, and resource changes, if any) as up/down or even.  / Finally, there are additional comments (EXPT is "exploration potential")

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

This first list are the 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)           1.6 down --producer, mostly family owned, hedged?
  3. CDE (COEUR D'ALENE)                         2.1 down --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. FSR.TO FSLVF.PK (FIRST SILVER)    4.6 down  --producer, (not profitable '03 3rd q.) unhedged
  6. WTZ WTC.TO (WESTERN SILVER)        5.2 down  -- (18 EXPT) large mine development cost. copper & zinc bonus
  7. MFN MFL.TO (MINEFINDERS)              5.3 down  --significant gold bonus, $35 mil cash on hand.
  8. PAAS (PAN AMERICAN SILVER)             5.2 down  --producer, unhedged
  9. GRS GAM.TO (GAMMON LAKE)           6.1 down --producer, owns 26% of Mexgold
  10. * CFTN.PK (CLIFTON MINING)               6.1 up -- (144 EXPT) (order their colloidal silver now online 10% off)
  11. KBR.TO KBRRF.PK (KIMBER RSCS)     7.0 down  --one property, high grades, with exploration potential.
  12. SSRI SSO.V (SILVER STANDARD)          8.0 down --large company, many properties, owns silver bullion
  13. ORM.V OREXF.PK (OREMEX RES)        8.0 down  (34 EXPT) --20 oz. of silver/T over 292 feet!
  14. * TM.V TUMIF.OB (TUMI RSCS)           8.7 down -- (17 EXPT) recent bonanza grade silver discovery
  15. * PLE.V (PLEXMAR RES INC)                   9.9 down  (up to 25 EXPT?)--just acquired options on 2 new projects
  16. * CZN.TO CZICF.PK (CDN ZINC)          10.3 down  --large zinc bonus, high grades, low start up costs, great EXPT
  17. * IMR.V IMXPF.OB (IMA EXPL)            12.2 up --(49 EXPT) in Argentina 83 oz. of silver/T over 35 meters!
  18. SHSH.PK (SHOSHONE SILVER)                 12.3 up  --leased properties; need payments; in Coeur d'Alene
  19. FAN.TO FRLLF.PK (FARALLON RSCS)   13.8 down  --(24 EXPT) low grades, silver 1/3; also gold & zinc bonus.
  20. SRLM.PK (STERLING MINING)                  15.5 down --(37 EXPT) acquired the Sunshine in Coeur d'Alene
  21. CHD.V CHDSF.PK (CHARIOT RSCS)       17.9 up  --explorer, with inferred resources
  22. * SVL.V STVZF.PK (SILVERCREST)         19.3 down  --(Silver in Mexico, 10.5 oz/ton over 249 ft.
  23. * EXR.V EXPTF.PK (EXPATRIATE)       19.5 down  --large zinc bonus 60% zinc, 25% silver (got out Atna)
  24. GGC.V GGCRF.PK (GENCO RECS)           20.8 down --producer in Mex.  Plans to expand and acquire
  25. HDA.V (HUSIF.PK) (HULDRA SILVER)    25.6 down   --very tiny, zinc bonus, low start up costs.
  26. RDV.TO RDFVF.PK (REDCORP VEN)       23.8 down --60% gold bonus
  27. * MGN (MINES MGMT)                              24.8 down  --60% copper bonus (low grades), start up cost ~ $250 mil
  28. * ABI.V ABMBF.PK  (ABCOURT MINES)   26.4 down --large zinc & small gold bonus, + existing infrastructure
  29. * CSG.TO CSGLF.PK (CAPSTONE GOLD)  31.5 up (120 EXPT) (In Mexico, resources are historical)
  30. * ASM.V ASGMF.PK (AVINO SILVER)      35.2 up --to own 100% of the Avino mine +4 other silver props.
* = I own shares

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)  --silver and iron explorer
  4. AOT.V ASOLF.PK (ASCOT RSCS) -- owns percentage of Cardero, CDU.V
  5. * OTMN.PK (O.T. MINING)  very large exploration potential
  6. SPM.V SMNPF.PK (SCORPIO MINING)
  7. * FCO.TO FCACF.PK (FORMATION CAPTL)  Cobolt (and Sunshine silver refinery)
  8. TVI.TO TVIPF.PK (TVI PACIFIC) --A PRODUCER of a dore silver bar 96% silver, 4% gold
  9. * MMGG.OB (METALLINE MINE) --zinc/silver (historic high grade silver) (low cost revolutionary oxide zinc process)
  10. MCAJF.PK (MACMIN LTD)
  11. * FR.V FMJRF.PK (FIRST MAJESTIC)  --A PRODUCER Modernized a former producer. Acquiring properties.
  12. ECU.V ECUXF.PK (ECU SILVER MINI)  --A PRODUCER 50% gold bonus
  13. BZA.V ABZGF.PK (AMER BONANZA)
This next list has silver exploration companies with market caps under about $30 million
(Market cap = total number of shares fully diluted, times the share price.  It's what the company is "worth" in the market place, given the stock price, and is one of the important numbers I calculate each week in these lists.)
  1. IAU.TO ITDXF.PK (INTREPID MINRLS)  "exploration potential"
  2. MAI.V MNEAF.OB (MINERA ANDES)  (gold bonus)
  3. * EDR.V EDRGF.PK (ENDEAVOUR SILVER)  A PRODUCER
  4. CAUCF.PK (CALEDON RES)
  5. * CBE.V CBEFF.PK (CABO MINING) --Historic Silver and Cobalt district
  6. SDR.V SDURF.PK (STROUD RSCS) (partners with Amerix) --in Mexico
  7. * APM.V  (Amerix Precious Metals Corp) (partners with Stroud) --in Mexico
  8. QTA.V QURAF.PK (QUATERRA RES)
  9. PXI.V  PNXPF.PK (Planet Exploration Inc.)
This next list has silver exploration companies with market caps under about $15 million
  1. NJMC.OB (NEW JERSEY MIN)
  2. EPZ.V ESPZF.PK (ESPERANZA SILVR)
  3. MAG.V MSLRF.PK (MAG SILVER)
  4. EXN.V EXLLF.PK (EXCELLON RSCS)
  5. SRY.V (STINGRAY RSCS)
  6. * KG.V KDKGF.PK (KLONDIKE GOLD)
  7. SML.V SMLZF.PK (STEALTH MNRLS)
  8. DNI.V DMNKF.PK (DUMONT NICKEL)   - exploring Clifton Mining's property
  9. * KRE.V KREKF.PK (KENRICH ESKAY)
  10. BCM.V BCEKF.PK (BEAR CRK MINING)
  11. * CMA.V CRMXF.OB (CREAM MINERALS) Low grade, large "exploration potential"
  12. CHMN.PK (CHESTER MINING)
  13. MMG.V MMEEF.PK (MCMILLAN GOLD)
  14. GPR.V GPRLF.PK (GREAT PANTHER)
This next list has silver exploration companies with market caps under about $7 million dollars:
  1. ROK.V ROCAF.PK (ROCA MINES INC)
  2. EGD.V EGDMF.PK (ENERGOLD MINING)
  3. GNG.V  GGTHF.PK (GOLDEN GOLIATH)  --Historic silver district in Mexico
  4. LEG.V LEGCF.PK (LATEEGRA RSCS)
  5. TBLC.PK (TIMBERLINE RES)
  6. TUO.V TEUTF.PK (TEUTON RES)
This next list has silver exploration companies with market caps under about $5 million dollars: (The real "penny stocks" are those with the smallest market caps, not the lowest share price!)
  1. * PDO.V (PORTAL DE ORO RS)
  2. * AUN.V AUNFF.PK (AURCANA CORP)
  3. ASLM.PK (AMER SILVER MINI)
  4. PCM.V PAOCF.PK (PAC COMOX RES)
  5. BGS.V BLDGF.PK (BALLAD GLD SLVR)
  6. * GRG.V (GOLDEN ARROW RESC)          IMR.V spin-off. $3.6  mil MC, 35 properties
  7. MTB.V (Mountain Boy Minerals Ltd)
  8. BBR.V BBRRF.PK (BRETT RES)
  9. CLZ.V (Canasil Resources Inc)
  10. IPT.V IMPJF.PK (Impact Minerals) -  NEW
  11. LSM.V LASCF.PK (Langis Silver & Cobalt Mining Co Ltd)
  12. 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.

My methodology is the natural result of my study of the silver market and my religious views.  To read about my religious views, see my other web site, 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

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

To quickly "tab" down to the company you are interested in, note the symbol. Then hit "control-F" to "FIND" the symbol below.
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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/


WEEKLY COMMENTARY (All new in this section):  

Liquidity (Advanced Trading Concept)

Most beginning traders have only the vaguest notion of the concept of liquidity and its importance.

Before I begin the discussion, let me state my conclusion:  U.S. dollars (or Federal Reserve Notes) are probably the least liquid asset class that exists right now, which is the exact opposite of what the vast majority of market participants actually think!

Let's start with the definition of liquidity: 

At Websters, definition #4 (regarding trading) for "liquidity" is: consisting of or capable of ready conversion into cash.

At investorwords.com: "liquidity" is: The ability of an asset to be converted into cash quickly and without any price discount.

There is another word at investor words (that appropriately describes the way that many junior silver stocks trade) that helps us understand the concept of liquidity: 

"thin market": -- A market with few bid and ask offers. Characterized by low liquidity, high spreads, and high volatility. Small changes in supply and/or demand can have a dramatic impact on market price. also called narrow market. opposite of liquid market.

The perspective of most people is that cash is paper dollars, and thus, paper dollars are the most liquid asset--simply by definition.  There is no need to have to try to convert paper dollars to cash, as they are cash! 

Thus, most people say that either foreign currencies or bonds are probably the next most liquid asset, especially short term bonds, because you can sell them and get cash for a very small discount, perhaps less than 1%.  Essentially, you are trading "cash" for "cash", or "short term" cash for liquid cash.

Now, cash is defined by the dictionary as money.  You knew that, of course.

But my perspective is that only gold and silver are real money, and that paper dollars are fraud!  Paper dollars were exposed as fraud in 1933 when it took $35 of them to buy an ounce of gold instead of $20!  Paper dollars were exposed as fraud again in 1971 when foreigners could no longer redeem them for money (gold) at $35/oz.  At that point, paper dollars could only be redeemed for money (gold) at a large price discount, as the gold price (as measured by those fraudulent dollars) rose to $850/oz. by 1980.

Thus, perhaps the true and best definition of liquidity should be "consisting of or capable of ready conversion into real money (gold or silver), with little or no discount!"

As I said, most traders believe that the currency markets are the most liquid markets in the world, due to both the small spreads, and the large volumes.  However, if silver and gold are money too, and especially if gold and silver are the only true money, then these paper money markets are not nearly as liquid as people think! 

The currency markets move perhaps a trillion dollars back and forth, being traded from paper to paper, every day!

However, how can you move billions or trillions of dollars into silver if there is less than 1/2 of a billion dollars worth of silver, or even less of silver available to buy?  (As estimates range from 60 million ounces of silver to 600 million ounces of silver left in the world.)

Frankly, you can't buy more than a billion dollars worth of silver at today's prices, and that's my point!  People think the paper money markets are liquid, but they are NOT!  If you have to move the price of the silver market to buy a billion dollars worth, then you are "moving into real silver" at a substantial cost, or "price discount in terms of dollars"... that hurts all dollar holders! 

My point is that you cannot easily liquidate dollars for real silver bullion!  Thus, paper dollars are not liquid!

But the big currency traders think that they can get silver at any time, because of the existence of the silver futures markets.

Currency traders are deluded into thinking that the open interest in silver represents the potential size of the silver market.  It is NOT!  The open interest in silver may be up to 100,000 contracts, but there is not 500 million ounces of silver available to purchase!  As I have written previously, the COMEX may limit a single position in one delivery month to as little as 7.5 million ounces, and they may limit deliveries to as little as 1.5 million ounces of silver!  And there is only 104 million ounces of silver available at the COMEX, and only 43 million registered for delivery!  See the wearhouse stocks for yourself at http://www.nymex.com/jsp/markets/sil_fut_wareho.jsp

The normal perspective is that silver is an illiquid market, because the silver market is small, and the spreads are much larger than in the "normal currency" market, the narrowest spread for real silver being about 4.5% between the bid and ask at tulving.com.  The spread is narrower in the paper futures market at the COMEX, down to 1%, if you ignore shipping costs.

However, when considering fundamental principles, silver is the most liquid of all, because it is real money.  Silver and gold, by definition, must be the ultimate liquid assets.

People ask me, "What is the price of an ounce of silver?" Well, a silver "round" that is privately minted, is a common bullion one-ounce silver bullion piece.  And, there are really 3 prices.  There is the price if you buy one of them, which can be up to $1 above the spot price or more, then there is the price if you buy in bulk, which can be as low as $.40 above the spot price, and then there is the price if you wish to sell, which is usually about right at the spot price. 

And even the long-winded explanation of price is not sufficient, because then I have to define what is meant by the "spot" price.  And this is the price as determined by the paper futures markets.

The paper futures markets create an illusion of greater liquidity (or false sense of availability of silver) in the silver market than there really is.  They make it seem as if there is plenty of trading of real silver, (100,000 contracts) but in truth, perhaps only 1-2% of paper futures contracts result in real physical silver trading (perhaps 1-3 million ounces a month).   

The real silver trading volume, monthly, is perhaps 1/12th of the 900 million ounces of silver consumed each year, (divided by 12) or about 75 million ounces per month.  Most of that is traded "over the counter" and not on the COMEX exchange.  Investment demand for coin silver is a miniscule proportion of the total annual silver demand, or about 25 million ounces per year, or about the 1-3 million ounces a month.   

In reality, the full amount of paper futures contract longs could demand delivery.  This could be 500 million ounces, but the COMEX only has 50 million ounces, or less in the registered category, available for delivery!

In a sense, the futures market is like the last silver bank in the world that is propping up the false value of all the paper currencies of the entire world, and it is operating on that same old shaky "fractional reserve" system--a system that led to the bankruptcy of all banks in history.

But this time, there are trillions and trillions of paper dollars in the world, and the smallest supply of real silver, per person, in history.  This is why I believe silver bullion and silver stocks are probably the greatest investment opportunity of all of human history.

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So, what about Silver Stocks?  They are also thinly traded, with large spreads between the bid and ask (buy and sell prices).  This means they are difficult to acquire at good prices.  A good way to buy is to place a low bid to buy, and hope others will sell to you, in their time and in the amounts that they want to sell.  A good way to sell is to place an order to sell at a high asking price, and let the market come to you to buy your stock.  In this way, you are acting more like a market maker with your buys and sells.

Some people are scared to invest in silver stocks due to the lack of liquidity.  I'm not.  The reason is that I strongly believe in the fundamentals of silver, and I know that these fundamentals of silver are not well known.  I understand that the world is largely deceived as to these fundamentals about silver, and thus, I'm confident that the world will catch up and perceive reality as it is, soon enough.

My experience has shown me that highly illiquid silver stocks are becoming more liquid all the time, as the market is pouring investment dollars into silver stocks in anticipation of much, much higher silver prices.

I invested in SSRI at about $3/share about 2 years ago or more, when the trading volume was about $100,000 per day, or about 33,000 shares per day.  I thought that was brave because orders for $10,000 were 1/10th of the overall volume!  Today, the average trading volume for SSRI is almost 600,000 shares at about $15/share, or $9 million, which is 90 times the previous volume!

I invested in CZN.TO last summer in 2003 at about $.11/share, when the trading volume was... basically, just me!  I was often the ONLY ONE BUYING!  And it was difficult to execute trades for a few thousand dollars.  It took months to buy a $30,000 position.  Today, the average volume is 191,000 shares at $.77 Cdn, or about $100,000 per day. 

Ironically, Canadian Zinc, like silver, and like SSRI and like all silver stocks, will likely attract more buyers at higher prices when there is greater volume, and greater perceived liquidity of silver.  And they will buy when they begin to perceive what I see right now, that the dollar is not nearly as liquid as people think!

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I'm sorry I missed producing this report last week.  Several people wrote to say they would pay for the free report. 

I also will not be able to produce this report next week, as I will be headed to the Chicago Resources show on October 21-25--which I was invited to earlier this month.  Sorry again, for not indicating my travel schedule more in advance, but I was busy, and I was already attending two other shows.


I will be attending the
The Chicago Natural Resource & Technology Conference
October 22-23, 2004
Chicago, Illinois
Email: eradez@danoyes.com
Keynote speaker this year is James Turk.  See http://goldmoney.com/en/speak.html
I'm sorry, but I could not find a web link for the event.
I was invited to speak on a few panel discussions by Steve Carr at http://honestmoneygroup.com/

I will be attending the San Francisco Gold Show (not speaking)
http://www.iiconf.com/sf04/default.aspx

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To read about my religious views, see my other web site, 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
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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%.

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2 Silver Stock Funds

1.  Richard Greene, thundercapital.com $100,000 minimum, 2 year hold, sophisticated/accredited investors only.  Will use margin, and/or short sell.

2.  Philip Judge or Simon Heapes, anglofareast.com  Less than $5000 minimum?  No margin or shortselling.

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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:

FSR.TO
SSRI SSO.V (SILVER STANDARD RSC)
SRLM.PK (STERLING MINING)
EDR.V EDRGF.PK (ENDEAVOUR SILVER)
And PAAS (Pan American) is now thinking about it.
 ------------------
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

--------------------------
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. 
--------------------------

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
$200,000,000,000,000: Estimated total derivative exposure of all banks in the entire world. (20 x U.S. GDP)
$75,000,000,000,000: U.S. Govt. unfunded liabilities; social security, etc.
$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)
  $9,274,000,000,000: M3 (money in U.S. banks) July, '04  http://tinyurl.com/vra0
  $7,337,786,947,237: US debt, Aug. 20-04   http://www.publicdebt.treas.gov/opd/opdpenny.htm
  $2,360,000,000,000: U.S. annual budget 2005 http://tinyurl.com/3xbd2
  $1,860,000,000,000: World "official" gold mined in all of history, 145,000 T (4.6 bil oz.) @ $400/oz. http://tinyurl.com/vrcc
     $400,000,000,000: Estimated silver mined in all of history: 40 billion oz?  @ $10/oz.  http://snipurl.com/93j1
     $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
     $166,200,000,000: U.S. current account deficit (trade deficit) for 2Q 2004.
     $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.
            $358,000,000: 51.1 mil oz. of "registered" COMEX silver bullion @ $7/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 60 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 60 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 60 x 10,  You will see that bonds and currency are overvalued relative to select silver stocks by a factor of 154,800 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 154,800 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.  Canadian Zinc, Sterling Mining, IMA Resources, and perhaps Mines Management and Cardero are probably the best five candidates.  These all have market caps ranging close to $50-$100 million dollars or more, and are more liquid than many others.  (I used to recommend PAAS and SSRI for this kind of "liquid alternative", but they are no longer relatively cheap, and the others have now increased in liquidity, and are now much more suitable for this kind of trading.)

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

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: "60 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 60 times better.  Currently, the ratio is 60 ounces of silver can buy one ounce of gold or 60:1.

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 web site 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.

Beware of scammers.  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/
web.queries@computershare.co.uk IR
--'produces 40 mil oz. silver annually from one mine'
Additional comments:  unfortunately, BHP has a 57 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. 


Silver Wheaton
http://www.wheatonriver.com/index.php/str=9,mod=cnt,act=cnt,id=120
"Silver Wheaton will have approximately 724 million common shares outstanding"
$70 million Cdn financing at $.40 Cdn, with 1/2 warrants at .80 Cdn.
175 million units and 87.5 million warrants.
724 million shares outstanding + 87.5 mil warrants = 811.5 mil shares fully diluted.
@ $.40/share Cdn x .77 US/Cdn = $.308 US
$250 million MC.

Wheaton River has a market cap of 1.47 billion at $2.58/share.  I have no idea of the quality of the silver properties, but somewhere in the back of my head, I remember removing WHT from my report when I discovered that about 10% of their money came from the production of silver.   As a gold company, I have not listed them.  For the market cap to be $250 million, with a $70 million Cdn private placement already done, there is serious, serious, big-money demand for silver focused investments out there in the world right now. 

Wheaton River plans to wait until October 15th to spin off some silver properties.  See http://www.wheatonriver.com/

KGHM Polska Miedz
http://www.kghm.pl/en/index.php
ir@kghm.pl
--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/
http://www.gmexico.com/Html/contactUs.htm
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/
dhuguet@buenaventura.com.pe (IR)
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 silver alone: 2.7 Billion market cap.
 -------------- -------------- --------------

ABX (Barrick)
http://www.barrick.com/
investor@barrick.com (IR)
535 million shares outstanding (1 Q 2004)
@ $20.57/share
$11,004 million Market Cap
5.5 million oz. / year gold production.
--production hedged out for 3 years worth of total production, 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 "unhedge".
--reportedly, they plan to deliver 1/3 of production to hedges, which means they "might" 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.")
$11,004 million Market Cap / 1710 mil oz. = $6.44/oz. silver
You may get "approx" 1.10 ounces in the ground for 1 oz. silver's worth of stock, if the silver and gold was not hedged--but 30 mil oz of silver may be 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. 

Around the spring of 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, but that they just bought options or futures that expired.

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)
@ $4.75/share
$1888 mil MC
419 proven and probable reserves of silver (from 2002 annual report on web site)
$1888 mil MC / 419 oz. silver = $4.51/oz.
You get "approx" 1.57 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 CEO Michel Roy."

From 2003 annual statement, by Dec 31, 2003, Penoles hedged 1.5 million ounces of silver at $5.31/oz.  That looks to be a bad bet, but easily coverable for Penoles.  They bought an option to sell (put) 17 million ounces of silver at 4.94.  Another bad bet.  Totally wasted money, it appears to me.  They also have an option to buy 8.5 million ounces (call) at $5.53.  Not bad.  Such hedging practices, win or lose, make it more difficult for investors to know and guess the current operational state of the company.  Who knows whether Penoles will lock in more silver, and take away the upside potential profitability for shareholders, or even waste money on put options that will never be exercised.

Whether Penoles hedged an entire 2 years worth of production by Feb, 2004, I don't know, and remains to be seen.  Penoles also engages in hedging dollars in the foreign exchane markets, further complicating matters.

77 million oz. silver refined by the metals division in 2003, and 1 mil oz. gold.
They probably refine almost all the silver that comes out of Mexico.
They produce about 48 mil oz. of silver from their mines 2003, and they have expansion plans. 

I've heard this stock is tightly held, most is family owned. 

Their oz. numbers are "proven & probable reserves", which is much more certain than most of the others which are mostly "inferred and indicated resources."  They undoubtedly have "inferred and indicated resources" in addition to the "proven & probable reserves," I just could not find any info on that at the web site or in the annual report.  There is no need for a Mexican company to comply with Canadian law, 43-101.  When CDE recently complied with 43-101, they raised their total numbers by about 30-50%?

Given the report in March, 2004, that Penoles has hedged silver for two years, I expect silver bullion to continue to outperform IPOAF.PK stock at these prices.

CDE (COEUR D'ALENE)
http://www.coeur.com
coeurir@coeur.com (208) 769-8155 or (800) 624-2824
214 mil shares outstanding (June 2004) not fully diluted
@ $4.44/share
$950 mil MC
"Current cash, cash equivalents and short-term investments stand at approximately $252.7 million at January 31, 2004, giving effect to recent $180 million offering of 1.25% Senior Convertible Notes due 2024, net of offering costs."
July 15th, 2004:  Cour Presents Resources in Cdn 43-101 form:
http://biz.yahoo.com/cnw/040715/id_coeur_d_alene_mine_1.html
Total of proven & probable reserves: 175 mil oz. silver, 1.4 mil oz. gold.  Total silver equiv: 189 mil oz.
Total of measured, indicated, and inferred resources:  76 mil oz. silver, 1.4 mil oz. gold.  Total silver equiv: 90 mil oz.
(43-101 reporting increased the number from 189 mil to 279 mil oz. silver).  Before, Cour only reported reserves.)
(Produced 14.2 mil oz. silver in latest fiscal year (early 2004)
$950 mil MC / 279 mil oz = $3.41/oz.
You get "approx" 2.08 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments: CDE's page on silver, "The Value of Silver" says nothing about silver as money.  Unbelievable!

Wheaton recommends rejecting the CDE buy out offer:
Wheaton Does not Intend to Pursue the Coeur D'alene Mines Proposal: Recommends Shareholders Vote IAMGold Combination
Monday May 31
http://biz.yahoo.com/bw/040531/315071_1.html
Interestingly, as one reason, Wheaton says: CDE has a history of losses and negative operating cash flow.

Quarterly Loss Reduced From $31.2 Million a Year Ago to Just $3.0 Million in 2004's First Quarter
As of May 5th, CDE announced: No silver or gold hedge positions in place.

For the full year 2003, the Company reported a net loss of $67.0 million, or $0.40 per share, compared to a net loss of $81.2 million, or $1.04 per share in 2002.

Why does CDE continue to mine and sell silver at a loss?  Why has CDE borrowed $180 million to continue expanding this business plan?  Why couldn't CDE have raised the money from issuing more shares?  Why has CDE stock increased over seven times from about 30 million shares outstanding at the end of 1999 to 214 million shares outstanding by the first quarter 2004?  How was CDE able to secure such favorable terms for a loan? "giving effect to recent $180 million offering of 1.25% Senior Convertible Notes due 2024, net of offering costs."" Who did CDE borrow money from?  Who stants to gain if CDE continues to produce silver at a loss? 

If CDE produced silver at a loss during the first quarter 2004, how much money will they make if silver hits $10/oz?  Perhaps the break-even price for production is a constant $8.00/oz.?  Regardless of their "cash cost" numbers.  If so, and if CDE produces 15 million oz. of silver per year, then at $10/oz., CDE may make up to $30 million dollars, at the most, from their silver production, if none of their other costs like energy costs rise in price due to inflation.  Mining uses a lot of energy, just so that you know, so I don't think it is likely that CDE will have profits even with higher silver prices in the $8-10 range due to inflation.   Given that CDE has a market cap of up to $1000 million dollars, CDE just is not worth it at all, in my opinion.  And neither would CDE stock be worth the price if they had a market cap of $300 million, in my opinion.  I would rather own silver, as it moved in price from $6 to $10.  And in the meantime, CDE may well move in price from $6.49/share down to $2.16/share (assuming no further dilution, and a reduction to a more reasonable $333 million market cap), and by then, with silver at $10, CDE may have a P/E ratio of 10, and a huge heavy debt load of $180 million dollars that may take up to 6 years of possible profits to pay off. 

At $2.16/share, $10 silver, and a P/E of 10: $333 mil MC / 189 mil oz. = $1.76/oz.  = You'd get about 5.68 oz. of silver for each silver oz. worth of stock.

There is one very important factor that CDE investors need to consider, especially if they are hoping that the stock will return to a historic price.  CDE stock prices, in my opinion, are highly unlikely to return to historic prices.  And why?  Because of the recent massive dilution.  At the end of 1999, there were 30 million shares out.  Today, there are 214 million.  You MUST take that information into account when looking at a long-term historical price chart.  For example, the price in 1996 was $20/share, but there were less than 30 million shares?  If so, then the market cap was $600 million ($20/share x 30 million shares).  Today, the market cap typically exceeds the previous historic price of $20/share and $600 mil MC!  $3.63/share x 214 mil shares = $777 mil MC, which shows that CDE is more expensive today at $3.63/share ($777 mil MC) than it was at $20/share ($600 mil MC).

I expect silver bullion to continue to outperform CDE stock at these prices.

SIL (APEX SILVER)
http://www.apexsilver.com/
information@apexsilver.com (303) 839-5060
47.4 million shares outstanding (late May, 2004) (not fully diluted?)
(derived from share price & market cap, late May, 2004)
@ $19.14/share
$907 mil MC
cash on hand: ~ $490 million October 2004
San Cristobal (Bolivia) (proven & probably reserves) 454 mil silver
(The revised capital cost estimate amounted to $560 million)
(Produced zero silver in 2002)
7.8 billion pounds of zinc, and 2.9 billion pounds of lead
$907 mil MC / 454 mil oz = $1.99/oz.
You get "approx" 3.54 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments:  Apex Silver Completes the Sale of $100 Million 4.0% Convertible Senior Subordinated Notes Due 2024
Friday October 15

Apex's webpage on silver, "Commodity Fundamentals" says nothing about silver as money.  Unbelievable and shameful!  Unless you count this phrase, "As a precious metal, it has been a source of human adornment since the beginning of time."  At least they recognize that silver is a precious metal, and at least they recognize it has been precious since the beginning of time.  That's a start! 

Bullishly, they note:  "As a result of the silver inventory drawdown, by the end of 2002, the worldwide stockpile of refined silver has been reduced to levels sufficient to satisfy less than approximately six months of the existing demand."

A positive article was written about Apex in Business Week Online:
A Bright Gleam On Apex -- Friday June 4

"Apex has rights in some 100 mineral-exploration holdings at 34 properties in countries such as Bolivia, El Salvador, Mexico, and Peru."

The article's analyst notes that in 2-3 years, when/if production comes online, "At silver's current price of $6 an ounce, Apex could earn $2 to $3 a share, he figures. If silver runs up to $10, earnings could hit $6, he says." 

I note that this means that at a P/E of 10, if production comes online, Apex may more than tripple in 3 years to $60/share, while silver nearly doubles.   That's not much leverage, given the increased risks of mining and owning a public company, and given that management of Apex seems to not recognize that silver is money, and debt is aweful.
March 16th, Apex raises $144 million in a convertable debenture deal to help finance the development of San Cristobal.  They now have 350/435, or 80.4% of the capital costs needed for construction.  Raising the last bit should now be very easy to do.  If, while raising money, they held their cash in the form of silver bullion, they would probably not need to raise any more cash at this point, since silver has moved up over 50%.

See my silver stock report #40 for reasons why Apex will not likely use their cash to buy silver bullion while they wait for higher silver prices.

Apex silver primarily has institutional investors.

Apex has a lot of zinc. That's an added bonus that is not factored in to my method of valuation. Zinc prices have been heading up soon, so that's another bonus. Plenty of zinc is especially good if zinc is moving up in price.  Zinc hit a recent high of $.51/lb., from a low of about $.35/lb. For zinc prices, see http://www.metalprices.com

Apex is not mining now, but are waiting for higher silver prices.  George Soros, Billionaire, owns a bit of this one, his group of funds owns over 14% I read recently.  There are several other zinc / silver plays on this list that investors might also consider: Canadian Zinc, Expatriate, or Metalline (I own Metalline, but not SIL.)

I do not have an idea on whether or not SIL will out perform silver bullion or not.  It's hard to say, because of that huge zinc bonus. 

FSR.TO FSLVF.PK (FIRST SILVER)
http://www.firstsilver.com/
info@firstsilver.com (604) 602-9973 or (888) 377-6676
38.6 mil shares fully diluted (March 2004)
 @ $1.86/share Cdn x .80 US/Cdn = $1.49 US
$57 mil MC
From the Company's main page:
"As at December 31, 2001, First Silver's mineable reserves were 12 million ounces of silver and inferred resources totaled 30 million ounces of silver. The mine is developing a 1000 plus meter exploration drift to upgrade currently identified inferred resources to mineable ore reserves and to discover new reserves." (12 + 30 = 42 mil oz.)
(The company appears to mine about 2 million ounces of silver per year, so perhaps by mid 2004, that would be 5 million ounces mined out from reserves and resources?) 42 - 5 = 37 mil oz.
12 + 30 = 42 mil oz.
$57 mil MC / 37 mil oz. = $1.55/oz.
You get "approx" 4.56 ounces in the ground for 1 oz. silver's worth of stock.

Additional comments: First Silver Reserve Inc. Purchases Silver
Thursday October 7

"First Silver has purchased 100,000 ounces of silver (equivalent to approximately 5% of annual mine production)."

This is a high grade, producing miner.  The high grades, about 300g/ton, are a plus.   They are also actively exploring, another plus.

1st Q, 2004, FSR.TO earned $1.45 million Cdn?, or 4 cents/share, ending a string of losses for the 6 quarters prior.
The Company recorded a profit of $1.93 million or $0.05 per share for first half of 2004, as compared with a loss of $0.28 million or $0.01 per share for same period in 2003.

"Total costs, net of gold credits, were $4.92 per ounce of silver in the three months ending June 30, 2004, as compared to $5.90 per ounce of silver in the year earlier period. Costs in 2003 were increased due to mill equipment breakdowns."

Produced 565,332 oz. silver for the quarter, and 1288 oz. gold.

First Silver is unhedged, and remain committed to remaining unhedged.

WTZ WTC.TO (WESTERN SILVER)  (formerly Western Copper)
http://www.westernsilvercorp.com  
info@westernsilvercorp.com Jay Oness Toll Free: 1-888-456-1112
43.3 mil shares fully diluted (July 2004)
@ $9.02/share
$391 mil MC
(not actively mining)
$14 million Cdn cash in the till (2 mil + 12 mil financing) no debt
From the "SNC Lavalin Resource Calculation" March, 2003.
Indicated 158.8 mil oz. silver
Inferred   54.6 mil oz. silver
Total 213.4 oz. silver.
Total 1.94 oz. gold x 10 (at 10:1) = 19.4 silver equiv.
The capital cost to get the mine going is estimated to be US $148 million
Western Silver Completes Pre-Feasibility Study on Chile Colorado Zone at Penasquito
New info: 267 mil oz. silver at a grade of just over 1 oz. per tonne. (an increase of 54 mil oz. over previous est.)
Brechia zone will likely double the numbers: probably in Jan will have 500 mil oz. silver, 5 mil oz gold.
Plus, they have two other zones that could each duplicate the success of each of the other two. So up to a Billion... oz. of silver as "exploration potential"!
Feasibility: 2006-7 production timeline.
$391 mil MC / 287 oz. = $1.36/oz.
$391 mil MC / 1000 oz. = $.39/oz. --exploration potential
You get "approx" 5.21 ounces in the ground for 1 oz. silver's worth of stock.
Exploration Potential = 18

Additional comments:  Western Silver Discovers More High-Grade Gold Mineralization and Expands the Size of the Gold Zone at Penasquito Monday August 30

WTZ's silver page: "Why Silver?"  While acknowleding the silver fundamentals as produced by the Silver Institue, and shrinking supplies, it says nothing about silver as money.  WTZ acknowledges their role is to make sure their shareholders are "well positioned to take advantage of any shortage of supply or rise in the price of silver."

Western Silver was formerly Western Copper... Copper now at $1.35/lb!

Note the capital cost to get the mining started: $148 million dollars.  
WTZ also has the following other metal resources:
3.73 billion pounds of zinc x .50/lb = $1865 million
673 million pounds of copper x $1.30/lb = $874 million
1.3 billion pounds of lead x .40/lb = $520 million

MFN MFL.TO (MINEFINDERS)
http://www.minefinders.com/
info@minefinders.com
39.1 mil shares fully diluted 1 Q 2004
@ $6.70/share
$262 mil MC
Cash on hand, Fully Diluted: C$34 million
"over 3.5 mil ounces of gold resource and 160 mil ounces of silver" --Dec. '03
silver conversion = 3.5 x 10 = 35 mil + 160 mil oz. silver = 195 mil oz. silver
At 70:1 ratio, 3.5 x 70 = 245 "silver equiv" of gold, and 160 mil of silver = 405.
245/405 = 61% of the mineral value is in the gold, 39% silver.
At 10:1 ratio, 35/195 = 18% of the mineral value is in the gold, 82% silver.
"In addition to the resources already drilled, Minefinders controls a strong portfolio of properties in Nevada, Arizona, and Mexico which have the potential to host new multi-million ounce discoveries over the next few years."
$262 mil MC / 195 mil oz. = $1.34/oz.
You get "approx" 5.27 ounces in the ground for 1 oz. silver.

Additional Comments:  Minefinders Corporation Ltd.: New Drilling Adds to Dolores Underground Resource
Wednesday October 6 "The new drilling expands in-pit measured and indicated resource by 5-8%"

  Minefinders Drills 21.4 g/t Gold Over 1.5 Meters at Clear Project, Nevada
Thursday September 9

At 70:1 silver to gold ratio, over half of MFN is in gold, so consider this a significant gold bonus.

Minefinders reports increased Measured and Indicated Resource at Dolores
August 9, 2004 (The increase was by 10%, and I don't see how the numbers relate to my previous numbers, which were higher, and may have included a total that was based on more properties?)

PAAS (PAN AMERICAN SILVER)
http://panamericansilver.com/
info@panamericansilver.com (604) 684 -1175
70 mil shares fully diluted (April, 2004)
http://panamericansilver.com/s/CorporateInformation.asp?ReportID=26039
@ $16.43/share
$1150 mil MC
10 silver properties (3 in production)
produced 7 mil oz. silver in 2001: estimated to produce 15 million ounces in 2005
Reserves & Resources through Dec. 11th, 2003 from
http://panamericansilver.com/s/ReservesAndResources.asp?ReportID=25303
743.2 million total
850 million ounces, says Ross Beaty, CEO, on Sept 17th, 2004
$1150 mil MC / 850 mil oz. = $1.35/oz.
You get "approx" 5.23 ounces in the ground for 1 oz. silver's worth of stock.

Additional Comments:  See my silver stock reports #51 & 52 for more on whether PAAS will buy silver bullion.  I don't think they will any time soon, unless more shareholders demand it.

Pan American of Canada buys Morococha silver mine in Peru for US$35 million  This $35 million acquisition is a great deal for PAAS, and a minor help for PAAS shareholders.  According to the press release above, the silver mine produced 3.5 million ounces of silver a year, at a cash cost of $3/oz., which is great!  At $6.50/oz, that's $3.5 x 3.5 mil oz. = $12.25 million per year profit after cash costs!  That gives the acquisition a P/E ratio for the mine's acquisiton cost of under 3!  What a deal! 

Unfortunately, PAAS shareholders are paying way above that when they buy the stock today.  After this acquisition, PAAS should have a "2004 silver production forecast to 13 million ounces from 10.1 million ounces and will reduce forecast cash costs to below $ 3.50/oz, bringing anticipated total costs to less than $4/oz for the year."  Now, at $6.50/oz, that's $2.5 x 13 mil oz. = $32.5 million per year profit, after cash costs, excluding management expenses?  That gives a P/E ratio for PAAS of about $1000 / $32 = 31.  Therefore, considering the two P/E ratios, 31 compared to under 3, PAAS stock is over ten times overvalued compared to other silver mining opportunities that exist in the market, such as the property they just purchased.

PAAS had a very meager profit of $1.3 million, second quarter, 2004.  I certainly would not get excited about paying nearly a billion dollars in market cap to get an annual earnings of $5 million.  That's a P/E ratio of 200! 

The reason silver investors are investing in companies such as PAAS is for the upside potential of rising silver prices, and the leverage that silver stocks offer. 

PAAS plans to produce 15 million ounces of silver in 2005.  Therefore, for every dollar the silver price rises, (while other costs remain flat), PAAS expects to earn an extra $15 million.  

Doing the math on that, PAAS would need about an extra $100 million in annual profits to get to a "reasonable" P/E ratio of 10.  This would require an additional rise in the price of silver by 100/15 or an extra $6.66 per ounce to rise to about $13.33.  And by then, I would expect the price of PAAS to be fairly valued at a market cap of about $1000 million, with a P/E of ten.  In the meantime, however, you could invest in silver bullion, and double your money.   Therefore, I think silver bullion may outperform PAAS shares.  On the other hand, if stock buyers bid PAAS up so that it has a P/E of about 20 by the time silver is $13.33/oz., (if that happens by next year, and is actually a reasonable expectation for a major) then PAAS and silver bullion may perform about the same.

Given that I expect silver and PAAS to perform about the same from these prices, and given that stocks are more risky, I would not buy PAAS even if they were to buy silver bullion with spare cash.  Yet, I advocate that PAAS buy silver bullion.  Why?  Because it would help their shareholders.  To be abundantly clear, I support buying silver properties as being a better investment than silver bullion at this point.  However, either silver bullion, or silver properties, are better than paper money, which PAAS has been holding for over a year now.

GRS GAM.TO (GAMMON LAKE)
http://www.gammonlake.com/
gammonl@sprint.ca (902) 468-0614
62 mil shares fully diluted (Feb 27th, 2004)
@ $5.65/share
$347 mil MC
Total Ocampo NEW "1.85-million gold ounces and 76.7-million silver ounces in the measured and indicated categories and a further 2.55-million gold ounces and 127.8-million silver ounces in the inferred category."
Inferred: 2.55 mil oz. gold, 127.8 mil oz. silver
Silver equiv = 25.5 mil oz. + 128 mil oz. = 153.5 mil oz.
Measured & Indicated: 1.85 mil oz. gold, 77 mil oz. silver
silver equiv = 18.5 mil oz. + 77 mil oz. = 95.5 mil oz.
Total silver equiv: 249 mil oz.
OLD DATA: Total Ocampo Inferred: 1,124,000 oz. gold,   50,438,000 oz. silver
Silver equiv = 11.24 mil oz. + 50.44 mil oz. = 62 mil oz.
Total Ocampo Measured & Indicated   2,207,800 oz. gold,  108,438,000 oz. silver
Silver equiv = 22 mil oz. + 108 mil  oz. =  130 mil oz.
Total Ocampo Measured & Indicated plus Inferred = 182 mil oz.
Gammon owns 26.3% of Mexgold, MGR
Since Mexgold owns 185 mil oz. of "target exploration potential", 26.3% of that is 48.6 mil oz.
249 + 49 = 298 mil oz. (231 oz. in report #49, last week)
$347 mil MC / 298 mil oz.= $1.16/oz.
You get "approx" 6.08 ounces in the ground for 1 oz. silver's worth of stock.
**Note** most of Mexgold's oz. that are added in are an "exploration target" not yet "inferred resources".

Additional comments:  Gammon Lake Resources Defines Expanded 7.5-million Ounce Gold-equivalent Resource at Ocampo Gold-silver Project  Tuesday September 7

"Overall, a total of 130,000-metres have been drilled in more than 800 holes since the inception of the Gammon Lake Ocampo Project"

 At prices of a 64:1 silver:gold ratio at $425/oz gold and $6.60/oz silver, the resources are worth $1048 million of silver, and $1411 million worth of gold.  Cash cost is $85/oz.  Life of mine is 7 years. 

GAMMON LAKE INTERSECTS 1-METRE OF 390 GRAMS PER TONNE GOLD AND 1,402 GRAMS PER TONNE SILVER  (13.2 OUNCES PER TONNE GOLD-EQUIVALENT) June 10

* CFTN.PK (CLIFTON MINING)  (I own shares)
http://www.cliftonmining.com/
clifton@cliftonmining.com 801-756-1414   (303) 642-0659 Ken Friedman
47 mil shares fully diluted  (May 2004)
@ $1.05/share US
$47 mil MC
http://www.cliftonmining.com/wsreview.htm   --source of 100 mil oz. resources est.
http://www.cliftonmining.com/resource.htm
From: http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=13531
"A previous geologist has talked about a possible resource of 1 billion oz. of silver, and 5 million oz. of gold."
100 mil oz. silver
+500,000 oz. gold x 10 = 5 mil oz. silver equiv.
= 105 mil oz. silver.
up to 1000 mil oz. silver "exploration potential".
Clifton has a complex JV agreement with Dumont Nickel.  In sum, here is what Keith Moeller VP, Clifton Mining Company wrote to me:  "If Dumont produces a positive feasibility study on an individual property piece, then they gain a 50% interest in that piece alone, not in the rest of the property.  If they spend more than 5 million dollars (US) on any one piece and they produce a positive feasibility study on that piece, then they will gain a 60% interest in that one piece of property, not in the rest. If they stop at any time or fail to produce a positive feasibility, then they will gain no interest in any of our property.  Right now we have around 7 different pieces of the property that have "Stand Alone" mine potential.  If Dumont stakes or purchases any property within five miles of the joint venture property, then we automatically receive a 50% interest in that property."
My problem is how to quantify that.  First, there is the range of potential silver resources.  Second, there is the range of potential ownership, which is highly variable, and not subject to the entire property, nor necessarily subject to spending by Dumont, but subject mostly to Dumont doing a positive feasibility study on each of many properties .  At the extreme ranges, the values are:
40% to 100% of 105 = 42 - 105 million oz.
40% to 100% of 1000 = 400 - 1000 mil oz. "exploration potential"
$49 mil MC / 42 mil oz. = $1.17/oz.
$49 mil MC / 1000 mil oz. = $.049/oz.
You get "approx" 6.05 ounces in the ground for 1 oz. silver.
Exploration Potential: 144

Additional comments: Goldseek.com is hosting a "Meet the CEO" session with Dr. Friedman of Clifton. If readers would like to send him some questions (open until Aug. 23), see:http://www.goldreview.com/MeetCEO/ask.php

Note the "exploration potential" is very large, but it also assumes that their JV partner, Dumont, does not acquire any interest in the property at all.

Perhaps an interesting and novel way to determine percentage ownership of the projects would be to look at the relative market caps for both Clifton, and Dumont, and then assume that the market has it "about right", and then use thier relative values to determine a possible percentage ownership of each.  And then, simply decide to own both, keeping your percentage ownership of each company, about the same.  For example, if the MC of Clifton is $43 mil, and Dumont is about $10 mil, so own about 4.3 times as much Clifton as Dumont.

JV agreements were primarily entered into during a time when it was difficult to raise money through share offerings, as a way to advance the projects.  Unfortunately, JV agreements also make it difficult for investors to value a company!  Several companies at the NY Gold show in June were just completing buyout agreements (or working on doing so) with their JV partners. 

For more info on what's going on with Clifton, see http://www.dumontnickel.com , JV partner.  One man suggested buying both Clifton and Dumont to ease the difficulty in trying to figure out their JV agreement.

Clifton has 28% ownership of a biotech firm that makes a colloidal silver.  The biotech firm has a patent on a "super" colloidal silver solution made with 10,000 volts that adds oxygen that gives it more powerful antibacterial properties, and is safer since it uses less silver, which would prevent "blue skin" argyria.  Normal colloidal silver that you can make at home with 30 volts works to kill bacteria by disrupting the oxygen metabolism of the cell wall, killing bacteria with oxygen.  The market for safe antibiotics is in the multi Billions of dollars.

You can now order the colloidal silver solution online at http://www.asapsolution.com
To receive 10% off, use 50105 as the coupon number.