first majestic silver

PDAC, THE Epitome Of Mining Ineptitude

March 5, 2015

Let’s start with the craziest coincidence of my lifetime; which say what you will, I consider a positive omen for things to come. Not for the dying global economy and monetary system, of course, but beleaguered “gold bugs” that have spent the past four years being unjustly “punished” for being correct in their prognostications, and protecting themselves accordingly. Which is, an article by Charles Hughes Smith – which frankly, has little to do with what I typically write about – titled “the three acronyms that best describe this era – TINA, TANSTAFFL, and FUGAZI. Well, I don’t know much about TANTSAFFL, but I do know this much. When I met my wife-to-be back in New York in the year 2000, it was via the introduction of a mutual friend named…drum roll please…Tina Fugazzi. Yes, I know she has two z’s in her name, but it’s close enough. And thus, my friends, the rare article that starts positively!

Which unfortunately, is as far as my optimism goes; as at this point, it’s utterly mind-boggling to watch the lives of billions destroyed by an incredibly small group of political and economic sociopaths in the world’s capitals – particularly New York, Washington, London, Brussels, Berlin, Tokyo, and Beijing. It’s all going to end horribly, of course; but in the meantime, we watch the “oil PPT” support paper oil prices whilst physical supply swamps demand; the “Cartel” suppress paper gold and silver prices whilst physical demand swamps supply; the “President’s Working Group” and other government agencies – overt and covert – support stock prices amidst a collapsing global economy and record valuations; lunatic Central banks monetize every sovereign bond in sight, causing gross “deformations” like negative interest rates and massive equity bubbles that must inevitably burst. And last but not least, government “book cookers” – increasingly, in concert with their private counterparts – literally fabricate economic data to suit their can-kicking agenda; like, for instance, claiming “deflation” amidst rapidly escalating “need versus want” costs; and “happiness” despite unparalleled “misery.” Consequently, as the “one per-centers” benefiting from such FREE MONEY are stocking up on Rolls Royce’s and empty luxury apartments, “99 per-centers” are being forced deeper and deeper into serfdom and debt – particularly in the sub-prime arena, which yet again, is growing like gangbusters.

However, what’s most mind-blowing of all is just how arrogant TPTB have become – in muscling markets wherever they desire amidst some of the most terrifying geopolitical, economic, and financial developments of our lifetimes; like, for instance, the rapidly escalating Ukrainian crisis; the across-the-board, global currency collapse; and the potential near-term collapse of the European Union and/or Euro currency. Seeing the NASDAQ goosed to its internet mania top amidst such violently equity-negative developments is unquestionably the peak of manipulative insanity. But hey, the historic collapse rapidly approaching could only have been possible if an historic bubble preceded it, right?

This morning alone, tensions amidst the U.S., NATO, and Russia reached a fever pitch – not to mention, the U.S., Israel, and Iran. Moreover, the dollar index achieved a new 12-year high; not just due to a plunging Euro, which sits a mere half cent above its Syriza election night lows, but literally dozens of free-falling currencies. And regarding Greece, even I am floored as to how everything isn’t plunging in light of the news that a new €50 billion bailout package is being actively discussed. And if such treason against the Greek citizens isn’t bad enough, it appears Alexis Tsipras is also considering “borrowing” from the Greek pension system to pay off Greece’s “troika” masters. I mean, just how angry will the Greek citizens be? And how long before the Golden Dawn neo-Nazi movement rises to power? To that end, I have NEVER been so sure a catastrophic “Grexit” is in the cards in the coming months; and when it arrives, the “world as we know it” will be forever changed. And not just a “Grexit,” but a “Spexit”; “Itexit”; “Irexit”; “Portugexit“; and likely, a “Frexit” as well.

Aside from across the board, “unexpected” weakness in February automobile sales – as America’s newest subprime market starts to crack; and the aforementioned Greek and Ukrainian crises; no other material “news” is evident this morning. Thus, I have ample leeway to discuss the most pathetic industry conference of all time – ongoing as we speak, in cold and snowy Toronto. Which is, the annual PDAC, or Prospectors and Developers Association of Canada, mining conference. By far, it is the world’s largest mining conference, dwarfing competitors in London, Cape Town, and Beijing; and by far, the most dysfunctional, counterproductive conference I have ever attended.

To be fair, all mining conferences are equally inept; partly due to capital strangulation – which limits miners’ ability to acquire managerial talent and properly market themselves; but mostly, the industry’s inability to address the issue that has all but destroyed it for two decades. Which, of course, is unrelenting Cartel price suppression – via fraudulent, surreptitious Central bank dishoarding; illegal naked shorting; and the spread of vicious anti-gold propaganda. To wit, the very website I wrote of in last month’s “crazy” – which despite being a major bullion dealer, allows its top marketing executives to denigrate customers – has as its top “PDAC coverage” an interview with Cartel lackey Jeff Christian; who not only claims there is no evidence of gold and silver manipulation – other than “sloppy banking and regulation” – but that if you’re a “long-term investor,” “(normal, day to day) manipulations should be meaningless to you, (to be) safely ignored.” Whatever that means.

More importantly, PDAC fails on all levels to achieve its end of promoting the industry to the world. And trust me, I know; as I attended as a private investor in 2006 and 2007; a mining investor relations officer in 2008, 2009, and 2010; and a mining investor relations consultant in 2011. To start, for some ungodly reason, this gathering of 10,000+ industry denizens is held in one of the world’s coldest winter cities, in the heart of winter. This week’s weather forecast, for example, is snow every day – making transportation miserable for the 10,000 people scrambling between the airport, the dungeon of a conference center; the handful of jam-packed bars and restaurants catering to attendees; and of course, the incredibly overpriced hotels. In between the mostly ineffective boondoggles, where company after company bores attendees with the particulars of their (typically risky, underfunded) projects, the conference hall is invaded by literally hundreds of blood-sucking vendors, trying to sell you everything from metallurgical processing to catering services. Moreover, since the junior mining stocks peaked in 2007, the amount of actual investors has dwindled dramatically, to the point that all that remains are a handful of parasitic Canadian investment bankers, seeking new victims to naked short so they can underwrite “keep the doors open for six months” financing with onerous, company-killing warrant issuance.

The list of keynote speakers is diverse, but for the most part dominated by mainstream views that decidedly agree more with those who would harm the industry than help it; and by the time it’s over, hundreds of millions of dollarshave been wasted by companies and attendees alike, with nary a discussion of the key factors that must be addressed if the industry is to stand a ghost of a chance of survival. Just over a year and a half ago, I predicted that three-quarters of the junior mining industry – i.e., the industry’s “lifeblood” would be “extinct” as a result; and in hindsight, I couldn’t have been more correct. To that end, John Kaiser anticipates $3 billion of junior mining working capital will be vaporized this year alone; at which point, there literally won’t be a junior mining industry left. This is why no discoveries have been made for decades, and why the “PM Armageddon” we forecast is all but set in stone. Let alone, the difficulty of actually producing a major discovery; given relentlessly increasing operational, logistical, taxation, and environmental risks.

Yesterday, PDAC kicked off in typical fashion; with a Cartel raid, despite a slew of gold bullish news – such as the rapidly spreading realization that the Fed is decidedly NOT raising rates. To boot, two HUI mining index components – Eldorado Gold and Gold Fields – plunged more than 7% to fresh multi-year lows; followed up by today’s 6% plunge in Silver Wheaton, following the Cartel’s maniacal defense of its latest “lines in the sand” at $1,210/oz and $16.50/oz, respectively; as SLW was so desperate to shore up its capital, it executed a well-below market equity financing.

Fortunately, I haven’t owned a mining stock in four years; as back then, after five years of working in the industry, I realized the risk/reward relationship was as negatively skewed as any I’d seen in 25 years in the investment business. Which is why I went all-in to the actual, underlying metal; which no matter how much the price is suppressed, or the mining industry destroyed, isn’t going ANYWHERE. That said, what’s bad for mining – which these days, is pretty much everything – is good for metal prices; and no PDAC interview will tell this ugly story better than this one with the CEO of Pan American Silver, one of the world’s largest silver producers.

Ignoring his ramblings about non-sequitur topics – of which there are many – CEO Geoff Burns claims Pan American’s “all-in” cost of silver production is $16.50 per ounce, putting PAAS in the “lower quartile of the industry.” In other words, PAAS is one of the industry’s low-cost producers, but still requires $16.50/oz to achieve a profit. Which, by the way, PAAS decidedly did NOT do in 2014 (it lost $544 million), despite silver averaging more than $19/oz. The reason, you ask? None other than the massive write-downs of “reserves” and “resources” that are forever overestimated – per last week’s MUST HEAR Audioblog, “what’s more fraudulent, mining resources or the Greek debt deal?

Thus, all we have written about the upcoming PM mining Armageddon has been validated; not to mention, the conclusions of October’s “Miles Franklin All-Star Silver Panel Webinar.” Which, by the way, will be significantly strengthened if the expanding global recession causes base metal prices to weaken further, given that roughly two-thirds of silver production is by-product of other mine types. In other words, that “other” reason to own Precious Metals – i.e, a dramatically tightening supply/demand balance – has never been more operative.


And if you deem such action to be prudent, we hope you’ll give Miles Franklin a call at 800-822-8080 – and give us a chance to earn your business.


Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

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