Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Natural Resource Stocks -- Ignore unavailable to you. Want to Upgrade?

To: jimsioi who wrote (11558)	5/20/2004 10:47:40 AM
From: Activatecard	Respond to of 108717

Fleckenstein may personally believe that silver is money, but PAAS does not. “A change in psychology regarding the superiority of paper assets, precipitated by the ramifications in the financial markets of "the next time down."” is great prose, but that is all it really is, just words. Ted Butler has wondered why the silver miners don’t withhold a portion of their production. One doesn’t have to be a conspiracy bug to see merit in this idea. Ross Beaty wrote a goofy little letter, which I’ve pasted below. Ted Butler’s reply is here: investmentrarities.com While Fleckenstien pillars CDE, it’s not as if PAAS is proactive, and for being such a “well run” company, Ross Beaty seems particularly clueless. So while CDE and PAAS battle it out to see whose CEO is the biggest knucklehead, the CEO of SSRI, Robert Quartermain, buys 2 millions ounces of silver. Seems to me, both CDE and PAAS are business as usual, while SSRI has the vision. To: Ed Steer, GATA From: Ross Beaty, CEO, Pan American Dear Ed: I have been pilloried by some people (and strongly supported by others) for criticizing Ted Butler and his conspiracy theories on the silver market. Many people have misunderstood my position or have simply refused to look at the facts on the other side of the coin. My position is simple. I do not NEED to rely on conspiracies to know there is a profoundly bullish outlook for silver. And I can explain the market long/short reality that Butler uses to promote his theories, but without needing to invent manipulations by anyone. For example, there exist now well over 300 million ounces of silver sold forward to bullion banks by base metal mining companies in long-term hedge contracts (going out as much as five years). These ounces are the ones the bullion banks use to go short in futures positions against speculative long positions. Banks do this simply to offset their risk on the hedge contracts. But none of those ounces shows up in any market statistics -- for example, COT reports on COMEX -- because they exist in private contracts and will be delivered by the mining companies only when they are mined over the next few years. But the silver certainly exists; it is in the ground until it is mined. In addition to those ounces, there are more than 500 million ounces of identifiable silver bullion inventories that you can touch and feel today, as detailed by GFMS in its annual silver survey. Silver inventories in COMEX, Tokyo, Zurich, other European exchanges and vaults, and in Chinese and Indian government hands. Butler conveniently disregards that because it runs contrary to his theory of conspiracy. He makes extremely selective use of facts. Please also note that my silver views do NOT extend into the gold arena, where the opportunity for government manipulation is much much greater due to the large holdings of gold by governments and the obvious bias of central bankers to hold gold prices down. In fact, I think a very good case can be made for at least some market manipulation by central bankers in the gold market. For the record, I must also defend Pan American's position not to use our cash resources to buy physical silver. We have no surplus cash, and if we did we would give it back to our owners to decide what to do with it (like buy silver!). Our cash is dedicated to build new mines and expand our silver production. Had we bought silver at $8 an ounce we would be looking at a current loss of 25 percent of the cash deployed to buy silver. Not too clever. We are in business to be a mining company delivering the best possible leverage to silver to our investors, not a seller of dreams. (There are plenty of exploration companies that do that.) Leverage comes in two ways: asset leverage and income leverage. Mining companies give both to their shareholders. Mining companies build mines and take world prices as they are. Pan American has grown from zero to nearly $1 billion in market value in 10 years, and our production has grown from zero to more than 12 million ounces (our forecast for 2004) from five mines, while silver prices have hardly risen. That is good wealth creation by any measure and I resent Butler's gratuitous comments to the contrary. Unless you produce, you have zero income exposure to rising silver prices in the medium term, due to the normal three-to-five-year delay of getting projects into production. Exploration and "resource holders" MAY someday take their properties to production, but there are many risks in doing so, and if the properties don't reach production during the bull phase of the market cycle, they may never get the exposure to higher silver prices that producers now have. I sadly note the tendency of some people to have blind faith in the kind of loose and dubious (but strongly presented) words of people like Butler and the tendency to rely on specious conspiracy theories to explain facts that can quite easily be explained without resorting to such theories. Silver has been my life for 10 years. I have developed good knowledge about silver markets and don't need to invent things to explain what is going on. Here are the facts. There are seriously depleted above-ground silver inventories in the world, great demand fundamentals, and constrained supply. Whenever you get those fundamentals -- in any commodity -- you usually see dramatic price rises. I believe that will continue for silver in the near future, as we have enjoyed in the last year. Any buying of physical silver by investors will simply hasten this. In that I am absolutely on the same page as Butler. Pan American is in very good shape now. We are very close to achieving our mission of becoming the world's pre-eminent silver mining company, from a standing start just 10 years ago. We now have more than 34,000 shareholders owning Pan American and who have benefited as we continue our misson of delivering the best possible leverage to silver prices in every way. In 2003 we had a "beta" of 6.6 to 1 between our share price and the silver price. In other words, for every dollar the silver price rose, our share price rose $6.60. Those who suggest an investment in physical silver is a better way than buying PAAS to play a rising silver price ignore this. I am extremely proud of what we have done in this company, and we are going to continue to do it as aggressively as possible. -- Ross Beaty