Physical Silver Being Drained + A New Silver Miner Research Report

Thru today (Oct 28) the U.S. mint has sold 4,365,000 silver eagles.  This is by far the highest total for October on record, with 3 business days left in the month.   It remains to be seen if 2014’s yearly total will exceed last year’s  42,675,000.  But if November and December continue at the September/October 4 million-plus rate, 2014 will smash last year’s record. Either way, the U.S. mint is selling more ounces of silver than all U.S. mines combined produce annually.

As most of you know the roughly 93% of the physical silver inventory – 1,062 tonnes has been removed this year from the Shanghai Futures Exchange – see this LINK.

Perhaps more interesting has been the drainage of silver from the Comex silver warehouses – since late February –  while the paper silver futures open interest has been soaring (source:  24hgold.com, edits are mine) – click to enlarge:

ComexEligible

An “eligible” vault account holds silver being kept by investors at the Comex but not available to be sold or delivered.  Close to 20 million ounces have been removed from the “customer” accounts since February, held in vaults operated by banks like JP Morgan, Scotia and HSBC.  Yet, at the same time, the paper silver futures open interest has soared to near all-time highs.  At the beginning of January, there were approximately 132k contracts of silver open interest.  As of yesterday, the amount was over 173,000 – close to an all-time high.

To put this in perspective, 173k contracts represents 865 million ounces of silver.  Compare this to the 66.7 million ounces reported by the banks to be in their “registered” vault account (registered = the silver available to be delivered).   In other words,  there’s 7.65x more paper silver that has been sold to investors/speculators than there is physical silver available to be delivered.  This is a Ponzi scheme that only the upper managements at Enron, JP Morgan and Madoff & Co. + the Secretary of the U.S. Treasury could appreciate.   No wonder investors holding their silver at the Comex are taking it OUT of the Comex.

With the above ground physical supply of silver disappearing from sight, at some point investors will come to realize that silver in the ground is a lot more valuable than it is being valued in the stock market currently.   I have written a new research report on a silver explorer/producer that I believe is currently undervalued even with the price of silver at $17.  Furthermore, it is significantly undervalued relative to the amount of silver it will likely uncover on the properties it already owns.  You can access this report HERE or here:

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This is a “de-risked” silver producer which went free cash flow positive during its 3rd quarter, will ramp up its production significantly next year and has one of the lowest cost per ounce cost structures in the world for a silver producer.  It makes money down to $12/oz. silver!

 

13 thoughts on “Physical Silver Being Drained + A New Silver Miner Research Report

  1. Dave, I know that you are very astute in the metals biz. I heard a interesting rumor yesterday that the U.S. Mint was required to only use U.S. mined silver in one ounce eagles. Due to surging demand of silver eagles, silver is now being imported from Mexico to fulfill production of silver eagles. I guess the shortages are beginning to show up.

    1. Actually I believe Congress signed legislation in like 2009 or 2010 which enabled the mint to import silver from Mexico in order to make-up supply shortfalls due to unanticipated demand and limited production in this country. It’s not a rumor, it’s been fact for awhile.

      Look at this way, the mint is using MORE silver than the U.S. produces in a year. I think the number is around 38 million ozs depending on the status of that big silver mine in Utah that was shuttered from the mine wall caving in. Just think what the overall shortfall is in this country if the mint alone requires over 40mm ozs.

  2. I have been reading this record short positions in gold and silver in comex and price manipulation and ponzi scheme in paper gold and silver from last so many months but still the price of gold and silver has been going down so whats the use of printing the same and same thing from every website and analysts which is not going to make any difference to the price or to the price manipulators. Its like reading another brick in the wall/

    1. What’s the point of this comment? Is anyone holding a gun to your head and making you read blogs? Go turn on CNBC or Bravo and enjoy “reality” TV rather than wasting your time reading blogs.

      1. It just so happens that the stock I’m featuring in this blog post has outperformed the sector over the last 2 weeks and is green today when the sector is red.

      2. Dave:

        Years ago I played high school football. After a difficult loss my father came out on the field, he asked me if I felt I had done my best. I said, yeah I think so. He said, ” well then never let the bastards get you down.” Its not profound or new, but I can’t tell you how many times over the last forty years I’ve thought back and found comfort in that simple thought. So I’m saying to you, you did the research and are giving many of us an important service. So “Never let the bastards get you down.” Best Wishes and please keep doing what you are doing.

  3. just remember one thing…………………..

    Lobbyists, Bearing Gifts, Pursue Attorneys General

    The quick reversal, confirmed by Mr. Koster and Ms. Kalani, was part of a pattern of successful lobbying of Mr. Koster by the law firm on behalf of clients like Pfizer and AT&T — and evidence of a largely hidden dynamic at work in state attorneys general offices across the country.

    Attorneys general are now the object of aggressive pursuit by lobbyists and lawyers who use campaign contributions, personal appeals at lavish corporate-sponsored conferences and other means to push them to drop investigations, change policies, negotiate favorable settlements or pressure federal regulators, an investigation by The New York Times has found.

    A robust industry of lobbyists and lawyers has blossomed as attorneys general have joined to conduct multistate investigations and pushed into areas as diverse as securities fraud and Internet crimes.

    But unlike the lobbying rules covering other elected officials, there are few revolving-door restrictions or disclosure requirements governing state attorneys general, who serve as “the people’s lawyers” by protecting consumers and individual citizens.

    A result is that the routine lobbying and deal-making occur largely out of view. But the extent of the cause and effect is laid bare in The Times’s review of more than 6,000 emails obtained through open records laws in more than two dozen states, interviews with dozens of participants in cases and attendance at several conferences where corporate representatives had easy access to attorneys general.

    http://www.nytimes.com/2014/10/29/us/lobbyists-bearing-gifts-pursue-attorneys-general.html?

    ……….everyone is on the take.

  4. Back in 2008 when Bear Stearns slipped under the surface and JP Morgan took the control of the paper silver , glee amongst brokers was once again the sign of the times .
    A sinking feeling was realized by holders of physical silver. The lunatic paper world had just discovered that the play on paper silver was ramped up by a new rush of paper derivative phony ounces. To this day the choke hold is in place to keep the physical gold and silver from realizing their true price levels. The charade will go on for as long as the Wall Street scum keeps overall controls in place concerning the whirling algorithmic smoke and mirrors . Brokers are drunk with power in these markets. A scene which harkens back to a certain time and place known as the 1st century in Rome. Don’t think for a moment that history doesn’t repeat itself.

    1. how much of this is going on?…for how long?

      SEC to Open Inquiry Into American Realty Capital Properties’ Accounting
      Real-Estate Investment Trust Says Two Top Executives Resigned, Financial Statements Can’t Be Relied On

      One of the largest U.S. real-estate empires was battered Wednesday by its disclosure of an accounting mistake and subsequent coverup that forced the resignations of two top executives, slashed its flagship company’s stock-market value by 19% and sparked a regulatory probe.

      American Realty Capital Properties Inc., the primary holding of property mogul Nicholas Schorsch, said in a securities filing that it asked its chief financial officer and chief accounting officer to resign after determining the company had overstated a measure of income in the first quarter, and that the executives chose not to correct the error in the second quarter. Shares of three other companies overseen by Mr. Schorsch also fell.

      The Securities and Exchange Commission intends to launch an inquiry into the accounting irregularities, according to a person familiar with the matter.
      The revelation is a black eye for Mr. Schorsch, chairman of American Realty Capital and one of the biggest real-estate investors in the U.S.

      American Realty Capital also stated that fees associated with the Red Lobster deal were $108 million, but in a later filing said that the fees were actually $10.8 million.

      “We believe the existence of these errors is symptomatic of the larger problem: The Company is engaging in too many transformative transactions too quickly,” Marcato wrote at the time.

      Analysts suggested it was too soon to assess the damage to the company or Mr. Schorsch’s broader empire. Some investors “may throw in the towel on today’s news, as accounting missteps take a while to sort out,” Paul Adornato, a REIT analyst with BMO Capital Markets, said in a client note. “Confidence takes longer to return, if ever.”

      Others said the errors could directly undermine American Realty Capital’s growth strategy, which has relied on tapping the debt and equity markets for capital to pay for acquisitions.

      http://online.wsj.com/articles/american-realty-says-it-overstated-funds-from-operations-in-2013-1414588112

  5. The only thing scary thing this Halloween about the gold and silver plunges in prices is what those drops really mean.
    If there really was so much available physical gold and silver laying around then why the evidence that the mines are showing huge cavernous craters in which mammoth dump trucks carry piles of earth out to refine small amounts of the ore at a time?
    Why has an executive from one of the worlds leading silver mines just made the announcement that he will be stopping production on a percentage of his ore process and hopes others will follow in suit until prices rise to levels that are necessary to carry on such important tasks.
    Or why Greenspan himself has just announced that physical gold had better be an important part of ones portfolio for future financial security?
    No , the dropping prices oughten be what scares the Dickens out of you….the fact that there are those who want to take your physical away like that of candy from a baby….That’s what is REALLY SCARY !!!!! Happy Halloween !!!!!!!!!

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