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<p>[QUOTE=&quot;NorthKorea, post: 1304699, member: 29643&quot;]Did I make any arguments for the price of silver to go up? I&#039;m fairly certain that my entire post was about how I expect silver prices to NOT go up anytime soon. In fact, I stated that I&#039;m expecting them to go down in the short run, at which time, I&#039;d make acquisition purchases.</p><p><br /></p><p>I clearly stated that I expect the price of silver to be in the $29-$32 range in Dec 2012... that&#039;s 13 months from now. That means I&#039;m calling for a drop in silver (though generally flat overall) over the next 13 months.</p><p><br /></p><p>The argument against monetizing silver is a bit faulty. Counterfeiting of coins, regardless of the base metal, has harsh penalties. If you&#039;re going to counterfeit, it&#039;s still cheaper to counterfeit paper money, since the counterfeiter could care less about failure to last in circulation. Therefore, the argument isn&#039;t really one against monetizing silver, but against the metal, in general.</p><p><br /></p><p>As for mining... as I&#039;ve stated elsewhere, silver is often mined as a bi-product metal. It&#039;s highly unlikely for a gold miner to convert to silver mining... they would merely filter through the waste material a bit better. <img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie7" alt=":p" unselectable="on" unselectable="on" /></p><p><br /></p><p>The reason the costs associated with silver mining are low is because of it&#039;s &quot;biproduction&quot; aspects. Either the alternate metals extracted with the silver are priced into the costing or the miners simply cost out the &quot;mining&quot; cost as the sorting cost.</p><p><br /></p><p>Silver would need to see a ratio closer to 10:1 before it would make sense for gold miners to abandon projects in favor of silver. Let&#039;s use your math:</p><p><br /></p><p>$700/oz gold = $1000 (rounded) profit</p><p>$7/oz silver = $27 (rounded) profit</p><p><br /></p><p>Now, let&#039;s look at a scenario of $50 silver.</p><p><br /></p><p>$700/oz gold = $1300 (rounded) profit</p><p>$11/oz silver = $39 (rounded) profit</p><p><br /></p><p>Now, these assumes your $7 number is correct. I don&#039;t think it is. As I&#039;ve stated before, the costs of mining an ounce of silver (without deducting production off-sets of zinc/copper/gold/etc) worked out to $17 per ounce last year. I&#039;m not sure that number still holds, but that&#039;s where it was at.</p><p><br /></p><p>This would indicate that the following scenario at $100/ounce silver:</p><p><br /></p><p>$700/ounce to mine gold = $2300 profit</p><p>$20/ounce to mine silver = $80 profit</p><p><br /></p><p>That&#039;s at a 30:1 ratio.</p><p><br /></p><p>Now, if we assume silver reaches $300/ounce without gold breaching $3000/ounce:</p><p><br /></p><p>$700/ounce to mine gold = $2300 profit</p><p>$65/ounce to mine silver = $235 profit</p><p><br /></p><p>So, basically, the only time it makes sense for gold miners to completely switch operations to silver mining is at $300/ounce silver. That&#039;s not going to happen.</p><p><br /></p><p>Now, if silver sustains $45/ounce, that will make it profitable for NEW miners to get into silver mining, as they would expect production costs (due to the higher costs associated with start-up and geology) closer to $27/ounce, yielding a 67% profit margin, versus the 80% or so risk premium associated with mining. So, the new miners wouldn&#039;t be profitable at $45/ounce, but they would argue the point (to their shareholders and the market, at least) that silver will expand with inflation, and &quot;triple-digit silver&quot; is the next step.</p><p><br /></p><p>Effectively, current silver producers need $24-$27/ounce silver to maintain profitability (due to risk premium deductions). New miners who enter the market now would need $75/ounce silver as a long-term target to be profitable. They would need $45/ounce silver to show profitability, assuming they have great geologists, which would lower the risk premium associated with exploration.</p><p><br /></p><p>The other problem with PMs (and other geological materials) is the lack of geology students in college for the last 20 years. There will be a shortage of geologists (not just great ones, but even mediocre ones) starting around 2017 (maybe as early as 2015, since many work for large petroleum companies) and ending around 2030/2035. Now, there are geology graduates, but they don&#039;t have experience, and the individuals with experience are old in their careers.</p><p><br /></p><p>The biggest problem with the metals industry lies with WHO owns the resources. As I stated in my post defending the dollar elsewhere on this board, the US gov&#039;t owns a lot of the resource lands where copper/silver/gold/uranium/rare earth/platinum group metals are located.</p><p><br /></p><p>On 26 Oct, the House agreed to allow Rio Tinto (and BHP Billiton) to engage in a land swap with the US gov&#039;t, granting the project mining rights to 2400 acres of the Tonto Forest -- the largest North American copper deposit. I don&#039;t know if the Senate has voted on this yet, but Obama&#039;s administration has already said they are against it for environmental and native American rights issues. I care about the environment, and I can understand burial rights, however, that&#039;s not why I&#039;m against this swap. We&#039;re giving up the rights to the largest copper deposit in North America for 5300 random acres in Arizona. For all we know, the 5300 could be old mines / exhausted deposits owned by Rio Tinto.</p><p><br /></p><p>Given how much backlash China received for trying to purchase companies/land on US soil, I think the idea of giving away land that we KNOW has value to the UK and Australia is simply ridiculous.[/QUOTE]</p><p><br /></p>

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