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In late 2008, the Cartel unleashed its most furious PAPER PM assault to date; dwarfed, by the way, by what we have seen in 2013.  In the process, they slammed gold prices from $1,000/oz. to $670/oz., and silver from $21/oz. to $8/oz., in months.  The resulting PHYSICAL demand surge was historic, with gold and silver premiums surging to 30% and 100%, respectively, before PAPER prices rebounded sharply in early 2009.

Given these historic declines – to WELL BELOW the metals marginal costs of production – countless mines were shuttered; yielding a nearly 10% decline in worldwide gold production, that took four years to be recouped…

World Gold Production Graph

Care of unfettered MONEY PRINTING in the ensuing five years…

4 Chart Graph

…and increasingly challenging projects…

THE ONLY MAJOR GOLD DISCOVERY IN A DECADE – GONE, GOOD-BYE!

…mining costs have since exploded

Difficult times for miners as costs rise

Gold Breakdown – Why mining costs keep rising 2013

…and thus, breakeven costs are dramatically higher…

SILVER COSTS: Much Higher Than Most Realize

In my view, the world’s pre-eminent mining cost analyst is Steve St. Angelo of SRSRoccoreport.com; whose work I have cited countless times.  As I spent nearly a decade as an (award-winning) Wall Street sell-side analyst, it’s nice to know there are still sound, uncompromised fundamental analysts at work.  Anyhow, nearly a year ago, he warned us that silver prices had fallen below their cost of production…

SRSrocco: In the Face of Irrational Paper Markets, THE COMPLETE COST FOR MINING SILVER

BREAK EVEN COST FOR SILVER RISES TOWARDS $30 AS COEUR, HECLA & SILVER STANDARD SHOW NET INCOME LOSSES

…a point that was validated by another long-time expert, handle “Rhody” from numerous GATA postings…

Silver Plunges below Marginal Cost: Commentary from a Retired Geologist

Steve also noted that gold prices were approaching their own cost of production; but who listens to “shadow world” analysts like us?

BREAK-EVEN GOLD NOW AT $1,300+

Thus, it was nice to see him vindicated last month, when Canadian bank BMO published the below table; depicting a silver cost of production in the $25-$30/oz. range for most of the WORLD’S LARGEST MINES; with even the low-cost Fresnillo mine (in Mexico) losing money at $19/oz. silver…

Fig 3 BMO Research

…and today, this article from the most “MAINSTREAM” of all Wall Street banks – Citibank; validating his analysis regarding gold production costs…

Citi: “No Gold Company… Will Generate Free Cash Flow at Current Gold Prices”

…depicting EVERY miner in their coverage universe hemorrhaging cash flow at $1,300/oz. gold; in some cases, at mind-boggling rates…

Underwater Essentially Gold

…let alone, this interview with Gold Fields CEO Nick Holland; published just hours after I wrote this RANT!

Miners can’t operate with gold below $1,500 – Gold Fields

Once again, TPTB have “bit their noses off to spite their faces”; as this time around, a FAR LESS healthy mining industry will consolidate dramatically to survive; in the process, likely cutting production by significantly more than what they were forced to endure in 2008.  Thus, the resulting “PRECIOUS METALS SUPPLY CRUNCH” could be “one for the ages”; and likely, will crop up at the WORST POSSIBLE TIME for a Cartel already operating in desperation mode.  And when it does, man will you have wished you hadn’t waited to buy!