Ari,
This looks very intriguing and have put it on the radar screen. I also have forwarded the info you put up to some of my strategic partners.
I am the most bullish one I know on silver. Here are some of the reasons why in recent Midas du Metropole commentary. I suspect that silver is in "play" and will be a big surprise to the investment community in 1999. Excellon might be a very good way to play that.
Bill
PS - This was written as silver was crashing and traded $4.86 this day and closed at $4.94.
Speaking of silver, the Midas camp thinks the price of silver will double in 1999 and reach $9.78 by the end of the year. Our thinking:
To a great degree, silver is a psychology kind of market. Known official U. S. inventories ( Comex warehouse stocks ) have dwindled for years and now stand at a very low 76,596,00 million ounces. If one had been told years ago that the stock number would be this low, we all would have expected the price of silver to be substantially higher because of the tight supply.
The price has not responded to the upside however, as one would have expected due to future price expectations and inventory accumulation factors. With gold continually failing to stay afloat above the $300 level and commodity prices in general dropping sharply during 1998, producers and hedge funds have been encouraged to sell silver rallies- always expecting the spec rallies to fail. Purchasing managers have relied on " just in time inventory buying" for their silver purchases. With the dismal outlook for precious metals prices, there has been no reason to forward purchase in size and accumulate large silver inventories. Eventual supply has never been in doubt so far and purchasing managers have cut down their capital costs by reducing their silver on hand.
It is also a psychological market for speculative investors. Many remember what happened to the price of silver in the inflationary 70's when the price went to $50 per ounce. Nothing could be farther from the late 70's scenario than the late 90's one. Commodity prices have been trending down, not shooting up. We have seen dishoarding, not hoarding. This negative psychology has severely dampened speculative commodity fervor and hard asset investing.
As a result of this present day thinking, it is our opinion that silver inventories are critically low all over the world and that pent up speculative demand for silver could be unleashed at any time. It is not atypical to see Reuters news releases such as this morning's-" Indian silver firm on low supply". The Indian silver premiums have been strong for many months which also indicates that silver inventories are low. In a sense, silver is a "sold out" market in a big picture way and that is why the price has rebounded from sell offs. A "sold out" market is a recipe for a price explosion - "sold out" meaning those that want to be short, are so. Therefore, we have run out of forceful sellers.
This opinion, by the way, contradicts the Martin Armstrong camp ( Princeton guru group ) that thinks the price of silver is headed for $2.80. They say the silver inventories in the U.S. have been moved to London to hide them from regulatory authorities. Others say that the Arabs have huge silver inventories in London, accumulated from the oil hay days, and will dump them on the market. Well, Brent crude has been trading below $10. Why have they not dumped this mysterious silver? If there ever was a time for Arab silver dumping, it is now. They know that most commodity prices have swooned. Why hold on? Why not at least start shipping the silver to India. The silver premiums in that country have been running 10 to 12%.
The other tidbit of information that is out there that indicates that this market is "sold out" is the contango ( forward prices ) continues to trade at less than full carry ( the interest costs plus storage and insurance ). This unnatural, pricing condition of silver suggests that the silver market is actually very tight. The spot price of silver is almost the same as the March futures contract. A change in psychology could unleash a super bull market in a blink.
It is mind boggling to me that only $370,00,000 could wipe out the Comex silver stocks. Remember, Long Term Capital Management, one hedge fund, was probably short 300 tonnes of gold which amounted to $2.9 billion dollars worth of gold.
There are many fundamental forces at work that can fuel a mega bull market in silver or precipitate an assault on the remaining silver stocks. Fearing a deflationary meltdown, governments around the world are turning on the monetary spiggots through their central banks. Slowly, but surely, paper is losing relative ground to hard assets. Y2K demand for silver bags has begun ( the silver bag premiums are also very firm ) and Y2K fears are bound to grow. This is a certainty as no one knows how this potentially serious economic problem will be resolved. It will be at least a year before we will have any real idea of the Y2K impact. That is one year of fear building - rational, or not. And finally, the powers to be have no central bank silver to bomb the market. Yes, they can play games for a bit as they have done recently, but at some point they will be very short of ammo and there will be no further point in keeping the price of silver down. They will have other battles to fight. Besides, it is just as likely as not, that officialdom will want to see a commodity go up as evidence that we are not going into a deflationary depression.
The price of silver will not wait for a psychological change to move higher - that will only flame the silver bullish fire. You have heard us say in Midas commentary many times, that a real silver move will begin with no fanfare - not because of a weak dollar or a world crises, etc. The smart money will move in first. Warren Buffet bought quietly in the summer of 1997, the news leaked, and then the price ran up $2 upon that revelation 6 months later.
That move was not sustained and failed because silver scrap came out of the woodwork and because of the previously mentioned factors. 1998 was a very bearish one for the prices of commodities. However, like gold, silver has a natural supply- demand deficit and has had one for years. Since the bull market in silver has been delayed, supply is being rationed off too cheaply. That supply is being run down. Available scrap was supplied to the market on the run up to $7.80 last year, so much of that my be gone and will not be there on the next price run up. That is why we think the price of silver will run up to $9.78 on the bull move this year.
One other bullet point. The price of silver can run up as fast or faster than any other commodity. In 1987, I participated in a silver price move up of $3. It occurred in a week. It can happen that fast and does. If we are correct about the silver commercial inventories being depleted, it could happen again some time in 1999 and probably will.
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