Silver—Long Term

[webmaster]

Subject:Silver—Long Term
By: David Morgan, Silver Investor

Overview: My purpose this week is to point out what many others have addressed and it might be referred to as peak silver. Now before we get too far into this subject, please note this topic previously has been addressed by me and several other writers in this space.

Link: http://news.silverseek.com/SilverInv...1243604997.php

[Paul]

Cheap oil soon to be a thing of the past, cheap silver too. These are very useful commodities that most everyone takes for granted. There could be a rude awakening very soon.

Also I must say that David Morgan is a top bloke. I trust him implicitly on all things silver.

[of one mine]

Hi anyone knmow if silver will be headed down to 13. soon? or will it go up or down this weekend? Yeah I know the way it looks now......

[akak]

Originally Posted by of one mine

Hi anyone knmow if silver will be headed down to 13. soon? or will it go up or down this weekend? Yeah I know the way it looks now......

Well, the markets are always closed on the weekends, so we will have to wait until Monday to see where it goes from here.

My best guess? It may rise as much as another $1 before taking a temporary breather and correcting down $1.50 to $2.50, from which point it should quickly rise back to around $16, then bouncing around between $15 and $17 for the rest of the summer (barring any unforeseen "black swans").

[thowze]

Does anyone have a link to that United States Geological Survey report on how long silver will last? Couldn't find it in Ted Butler's archive articles.

[RJW]

Thanks Mr. Morgan, I enjoy your posts almost as much as Uncle Ted's bedtime stories.

It would seem that the USGS data does indeed support your analogy with peak oil. U.S. mine production has fallen by 50% in the last thirteen years or so, while consumption has risen steadily, leading to an explosion of imported ore. This situation is clearly not sustainable, at least for the US. However, world production continues to grow, albeit at a slower rate. This can only lead to higher prices, and one must consider how much longer producers will accept fiat currency in exchange for real money. I guess as long as barrels of oil are priced in dollars.

http://minerals.usgs.gov/ds/2005/140/silver.pdf

[akak]

Originally Posted by RJW

Thanks Mr. Morgan, I enjoy your posts almost as much as Uncle Ted's bedtime stories.

It would seem that the USGS data does indeed support your analogy with peak oil. U.S. mine production has fallen by 50% in the last thirteen years or so, while consumption has risen steadily, leading to an explosion of imported ore. This situation is clearly not sustainable, at least for the US. However, world production continues to grow, albeit at a slower rate. This can only lead to higher prices, and one must consider how much longer producers will accept fiat currency in exchange for real money. I guess as long as barrels of oil are priced in dollars.

http://minerals.usgs.gov/ds/2005/140/silver.pdf

One factor that needs to be kept in mind, and that is often overlooked or not properly understood, is just how mine and mineable reserves are calculated. They are as much an economic determination as they are a physical one.

When proven reserves of silver, say, are estimated by the USGS as 15 years or whatever it may be, that does NOT mean that production will necessarily taper off or decline after those reserves are all mined. The reason is because those reserves are defined at a particular price. If the price of silver (or any other mineable mineral) were to rise, then the reserves of that mineral will rise as well. For example, with silver at $14 an ounce, reserves might be estimated at 15 years with today's annual rate of production. Were silver to climb to $25 an ounce, however, reserves might suddenly increase to 25 or 30 years worth of production --- with no additional discoveries. This is because ore bodies that would have been uneconomical to mine at the lower price now become profitable to mine at the higher price, and can now be included as "reserves", whereas they could not have been before.

In the jargon of the mining industry, "ore" is ONLY defined as "that which can be mined at a profit". If a particular deposit cannot be mined at a profit, at a particular price, it is automatically not considered as "ore" or a reserve, no matter how large it may be, or how much mineral of interest it may contain.

This fact is usually not acknowledged in a number of recent discussions I have seen on "peak silver" or peak metals in general. It does not invalidate the "peak" concept, but quite possibly, even probably, pushes the peak further into the future than a overly-simplified analysis of the mine reserves data would suggest at first glance.

[WestAfricanTexan]

Akak, I just wanted to drop in and show some love for the last post here. I am in the oil business, and where I work we are drilling 30,000ft holes in the ground under 7,000' of ocean. 15 years ago, you wouldn't have dare attempted to dig a post hole where my butt is now sitting. There really are plenty of minerals, but they are expensive to get to, this particular vessel costs in the neighborhood of ten million dollars a day, when you figure everything into it. And we're going to be working on this project for the next 5-10 years! That's part of the FUNDAMENTAL reasons that oil and gas are going up...we aren't running out, we are just running out of the stuff that's east to get!

[Prospector]

Originally Posted by of one mine

Hi anyone knmow if silver will be headed down to 13. soon? or will it go up or down this weekend? Yeah I know the way it looks now......

If you check historical charts you will see that silver has a prominent two year cycle: peak in winter of an even numbered year, drop in spring, and up/down/sideways the rest of the time. We always warn that "past performance does not guarantee future results", but history is a somewhat more reliable indicator than anything else we have. We are currently in the u/d/s part of the cycle, so there is a good chance of getting at least one more chance to buy low this year before the market goes to a new peak next winter. It is reasonable to expect that peak to be about $35 to $50.

[Boot]

Certainly silver fell out of favor previously, but so did kodak film. That was then, this is now. A great deal of the silver is being both hoarded AND consumed. Investors are collecting coins, bullion. Jewelry is created, purchased and kept. Medical and industrial applications continue to grow. Importantly, clothiers are using silver in Polyester sportswear. (Reportedly it decreases the odor of the clothing by suppressing bacterial accumulation.) * Polyester alone consumes 1,200 TONS of silver per year, which (at 32,000 ounces per ton) works out to over 38 million ounces. consumed, not hoarded. With increasing usage, and peak silver theories floating about, this correction in spot price shouldn't last long. In fact it represents a good entry point IMO. Boot
*http://www.bullionbullscanada.com/in...red&Itemid=102