Read the Monday Afternoon Wrap-Up for 7/8/2013 and the Tuesday Morning Commentary for 7/9/2013
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…
Care of unfettered MONEY PRINTING in the ensuing five years…
…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…
…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…
…let alone, thisinterview 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!
