SRSrocco: How to Spot Good & Bad Precious Metals Analysis

By SD Contributor SRSrocco:

As most of you know, there isn’t a shortage of precious metal analysis on the internet.  Everyone has their opinion.  Yes, even I.  However, there is a way to understand which analysis is the most accurate.

Of all the precious metal analysts I have come across, no one has yet presented any information on actual data of declining silver ore grades So… how in the living hell can any precious metal analyst really make a correct forecast if they don’t have the ROOT FUNDAMENTAL DATA???

To be able to find out which analysis offers the most accuracy, it must get to the root of the problem.  Unfortunately, most analysts do not try to get to the root of the problem, instead they use data taken from other sources and make their predictions and forecasts based on this spoon fed data.

ORE GRADE DECLINES….WHAT’S THAT?

 

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Several years ago, I sent a chart to several well known precious metal analysts on the decline of gold ore grades in 4 countries over the past one hundred years.  I only received a few responses, but two of them asked me where I got that chart and was it true.   This was circa 2008.

At that time, I saw no gold or silver analyst write or talk about falling ore grades.  However, today, a week doesn’t go by without someone in this field bringing up this subject.  Hell, even if you go on King World News, you will hear it from some of the top folks.

This is the very reason why I have taken the time to look at how the ore grades and yields are declining in the top gold and silver producers.  I know of only a few individuals who have provided actual data on the decline in gold ore grades and yields, but no one has done this in silver.  That is why I researched and produced the chart below (from my previous guest post):

I am not mentioning this again to toot my own horn (my wife does that for me), but to show that of all the precious metal analysts I have come across, no one has yet presented any information on actual data of declining silver ore grades So… how in the living hell can any precious metal analyst really make a correct forecast if they don’t have the ROOT FUNDAMENTAL DATA???

I focus more of my attention on the analysts who are cheerleading the miners without knowing the energy situation in the future.  Again, how can they get on King World News or where ever for that matter, and state that the miners are a good place to park ones money when they don’t have a grasp on the aspects of energy and declining ore grades?

Of course these miners can still produce metal for the foreseeable future, but what happens in say 5-10 years when the energy situation grows increasingly worse?  What happens to all those so-called ASSETS (plant, equipment, trucks and etc) when energy shortages appear?  I mean, how does an accountant figure what these assets are worth, if there isn’t enough energy to run them?  This is HUGE PROBLEM no one is looking at.  The same king of thing that no one was looking at 4 years ago in declining ore grades.

MY PROBLEM WITH BIX WEIR

I saw the interview with David Morgan and Bix a few days ago.  Bix is a pretty intelligent chap who does understand the manipulation of the precious metals.  However, his theory that the collapse of U.S. Debt will be the savior for the country because he believes we will tap into all these HIDDEN RESOURCES, makes his good analysis turn quite bad.

Even if a person doesn’t believe in PEAK OIL, the falling EROI- energy returned on invested has been proven by actual data.   I would like to remind the reader that our modern society needs at least an EROI of 8/1 to survive.  Tar sands at 2-4/1 and shale oil at 4-5/1 will not help us in the end… even though it is bringing on more supply.

Bix, doesn’t go to the ROOT OF THE PROBLEM.  That is why his theory is full of holes.

BREAK-EVEN GOLD NOW AT $1,300+

I also saw that article by Paul Van Eeden about the fair price of gold to be $800-$900 an ounce.  As I stated in a previous post… the man is completely FOS. (full of sh*t).  If we look at the table I put together below, we can see that when we factor in ALL COSTS, the break-even price of gold is now above $1,300:

Here we can see that if we take the total net income of the top 5 gold miners Q3 2012, we get $1.9 billion or 39% less than the same quarter in 2011.  If we take that net income and divide it by the total amount of gold produced by the group we get $348.65 net income profit per ounce.

Before I get any hate mail… I realize this is a simple way to get that calculation.. but it is at least a much better metric than the stupid industry’s CASH COSTS.  If we take the average price of gold currently, we can see that break-even is somewhere at $1,350 when we add in everything.

So, for Paul Van Eeden to state that the fair price of gold is in excess of $500 less than break-even, the top gold miners proves again that he is not only FOS, but did not go to the ROOT of the problem.  I highly doubt the market would ever value gold at $800-$900 an ounce knowing that break even is now $1,350.

CONCLUSION

The biggest problem I see going forward is declining liquid energy supplies on the global market.  Hardly no one (especially in the mining industry) is looking at this at all.   That is why I believe most of them will get a rude awakening when they fail to realize their mining stock that has mines with 30 year mine lifespan may turn out to be a terrible investment in the future.

However, this makes owning physical metal even better….

 

Comments

  1. Glad you got that out off your system SRSrocco. Lol I know you spend a lot of time on these reports and someday you will be rewarded. I Love your last line the best in this topic. However, this makes owning physical metal even better….

    • I’ve read on SD that silver costs $31-32 to get out of the ground.   That’s why I just started buying the miners again.  They will not sell below cost.   Nowhere to go but up short-medium term.  Famous last words, LOL.

    • I don’t think that mining stocks are a good idea because when the metals’ productions decline a lot due to gasoline shortages, people will be looking forward for physical metals and not pieces of paper.

  2. Well done Steve. Anyone calling out Van Eeden is okay with me. When gold was $1000-1200 a few years ago, he was saying the same thing then, and that gold’s “fair value” was $700 or less. Much like Nadler, Christian and Gartman, he is a buffoon on the POG. Their track records are absolutely terrible over the last several years, as most of you know.

    They have done a lot of damage and are a blight to the gold community and to gold investors in general. They have no integrity at all.   
      

    • @Bay of Pigs:  Thanks so much!  I was trying to think of the names of the 3 Stooges, and there you named them for me!  Thanks again!

    • “They have no integrity at all.”

      No, they don’t but as serious as that is, the fact that they are still given credibility is absolutely amazing.  It galls me when CNBC brings on Gartman, as if he is an expert on gold.  Hell, I am just a lowly stacker these days yet I know WAY more than Gartman about PMs because I listen carefully to guys like The Doc, SRSRocco, and a few others who really do know s**t from Shinola… unlike Gartman, Nadler, and Christian. 
       

    • What most of these precious metals analyzers like Van Eeden think is that precious metals are the same as stocks so their values will go up very high and then it will go back down lower. They don’t especially consider the factor of inflation which is still happening everyday.

  3. Uniform Commercial Code (UCC): The law of the sea! This is the law! It’s in everything! Learn it! It’s what they don’t teach in law school!

  4. An article today by Nigam Arora in Marketwatch is worth reading. His thinking is gold & silver are going to be bad investments since FCX is spending 9 Billion to buy PXP  instead of other mining interests.  Instead I see it as why did Delta airlines buy a refinery and why would FCX buy energy.   To help cut costs in the long run.

  5. This video is just a sample. Start over!



  6. An Overview of the Uniform Commercial Code   —  http://law.duke.edu/lib/researchguides/ucc

  7. I. What is the UCC?
    The Uniform Commercial Code (UCC), a comprehensive code addressing most aspects of commercial law, is generally viewed as one of the most important developments in American law. The UCC text and draft revisions are written by experts in commercial law and submitted as drafts for approval to the National Conference of Commissioners on Uniform State Laws (now referred to as the Uniform Law Commissioners), in collaboration with the American Law Institute

  8. THERE ARE THREE LAWS ON THIS PLANET! LAW OF THE LAND, LAW OF THE SEA AND NATURAL LAW!

  9. I have never had any use for PM analysts. Who needs an ‘expert’ to tell them they should save silver? It isn’t like no one was buying silver until they seen a chart of declining silver ore grades and then thought ‘Gee, I think I will start buying silver (or more silver) now that I know this”. The choir is already convinced and another preacher adds nothing more than an entertainment twist. Wake me up when silver hits $100 an ounce.

  10. You can’t hear this song on You Tube but I am Paticularly fond of it. It keeps me focused on who I’m dealing with. BOB DYLAN–Slow Train Coming!

  11. @Charlie: My smallest camera takes to large an image by far! Call Your tax man and ask for UCC #1 and then research it!!!

  12. @Marchas: I will try to explain this as best as I understand it! There is you, Charles Xx Xxxx.. and then there is CHARLES XX XXXX! It is important to understand the difference between the two! There is you Charlie and then there is your strawman. Your strawman was not nessaaraly born on the same day as you were. He was born the day your mother signed your bith certificate. His name is CHARLES not Charels! It all goes back to 1933. Before 1933 all births and deaths were recored in the family bible or church bible. But, in 1933 America went bankrupt. Due to the Fed and WWI. We were so desparate that our corrupt govenment sold every American citizen to European banks!!! NO KIDDING! That is why we have a Birth Certificate! All children born after 1933 have one! On all bith certificates you will find a # . That number is somehow to setup your strawman account.. The American Government signed on to the law of the sea and abandonded land law & natural law! If you look on the back of your Social Security Card you will see a number. That number represents your STRAWMAN EMPLOYEE #! IT was a fraudulant contrtact! A mother can not leave the hospital with her child untill she signs a birth certificate. When she signs, she signs her child into the corporation. That is America incorporated! Do some work and get back to me! We can talk more about this! The UCC#1 takes control of your straw man and returns “CHARLES” to the control of “Charles”. How is your name spelled on every pulblic debt? Every loan/ Every bill you have ever recieved– CHARLES In all capital letters.

  13. @Apple: Please explain what you mean by ‘legal move”?

  14. Your lower case is not responsible for your upper case.  Why would you attempt this legal procedure?  To get money for your property plus damages back?  There are more direct ways to do this.

    • No, to get your debts discharged. To get control of your Strawman. All your public debt is in the name of your strawman. All I know is what I have seen on Youtube about it. And that the UCC 1 form is a real IRS document, I have one that I got from H&R Block. Through this document your debts can be discharged, “they say”.

  15. @Apple: When the government in 1933 sold us, they didn’t sell us for nothing. They sold us for a price! Maybe 1,000,000 dollars + devaluation each! But the deal was made in UCC Law! You are bought and sold everyday on the NYSE so the story goes. The UCC1 form is how you get control! 1,000,000 was just the start! Your life, your Strawman is worth much more in $ today, than it was in 1933! A child born today has a higher value. Upon that childs birth, when a mother signs the birth certificate a deposit is made into the Treasury or the Fed Reserve system! Somewhere there is an account. As an employee you will of course need things. Food, shelter, education…. that is what the account is for as I understand it!

  16. Forget the energy, supply and demand. I look at the macro economics and the selfish nature of man. Is there a short position going on? Of course! Do I care, nope. Is there a massive problem in Europe? Yup, don’t care.  What about Japan, yup they got problems. Who is the saviour, why its Ben Benanke he’s going to sell dollars and export the debt to other countries. Is it going to work? Yes. Is FIAT dead, nope. Do China buy dollars, oh yes and use them to press the neck of America. How long will Silver take to make proper moves, years. Its okay, I’m patient. Its all about the dollar, give a man enough rope and he will hang himself. America still thinks that the dollar is reserve currency. At the moment, yes, in the future, no. The dollars for oil scam is coming to an end. Buy gold, silver and when the time comes, sell sell sell and buy real stuff. If all a country can do to prop itself up is to sell debt, its just a matter of time. What’s that, Basel III rules says gold is money? Tell me something I don’t know. Puny bankers.

    • I’ve heard that China does buy US debts by accepting the US dollar as payments for their products. Then, they dump these dollars in the market by buying more precious metals. Now, IMF considers the Canadian and the Australian dollars as the reserve currencies.

  17. Interesting conversation folks keep at it. Feed Me, Feed Me.

  18. This is how you spot good vs bad—-volatility! Do you see any volatility?

  19. Steve  It is much easier to understand your arguments about silver through the statistical analysis of supply, ore grades and EROI that you’ve provided on SD for the last year or so.  I am more in touch with these types of business P&L analyses than the esoteric COT and who’s long and short and how many contracts are outstanding at any one time.  The manipulation games will certainly end when there is little or no silver available for delivery or stored in the bullion bank vaults.  Constriction at the source is nearly always the most telling indicator of what price the market decides is valid.  Physical vs paper?  I’ll take physical for obvious reasons to hold in my vault but also as a clear indicator of the situation in the mines. It’s plausible, reliable and difficult to conceal from the knowing gaze of people literate in this analysis.  The supply crunch will be our best indicator of silver’s volatily just as the UK banks will be a trip wire that shows clearly that the Euro zone just failed. 

    • I agree 100%, AG.  All the babble about COTs and all that other useless info that is thrown around by some doesn’t tell me a damned thing.  I suspect that it doesn’t really tell anyone much, unless they also happen to know who is buying or selling and why.

      Yes, the quality of PM ores really is declining.  How could they not?  There is only so much of each on this Earth and humanity has been mining them for a very long time now.  It is entirely reasonable that miners would work the best ores first and then the less rich ores after prices rise enough to cover the higher costs of handling and processing an ore that is increasingly useless rock with a decreasing amount of valuable PMs in it.

      One thing to keep in mind with all this is that PMs have not peaked.  The EASY TO GET PMs probably have peaked but there are no doubt many very rich ore fields that are under water, under ice, or are located elsewhere in our solar system.  PMs on the moon are likely to be quite easy to mine because there are no oceans there and there is plenty of high intensity solar energy for processing the ores found there.  Transportation costs will be high initially but we’ll probably figure that out soon enough.  As we “run out” of the easy to get stuff, we will move on to the more difficult to get stuff.  Yes, they will be a lot more expensive to find and mine but we will still have access to them, probably via remotely operated mining equipment.

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  22. Mary B  your comment on the difference between people who receive government assistance and those who work for the government is as different as night and day.  for the most part, those who receive government aid paid into the system for many years prior to that in the form of taxes, social security and medicare payments.  The multiheaded hydra of government employmentship brings just that many more drones to the table who spend 8 hours a day trying to figure out how perpetuate their paycheck, increase their department budgets and thereby must calculate how much more they need to shear from the fleece of the sheeple tax farm.  I’m bald as coot now.
    Another thing about China buying gold and silver.  There was a note today that CNOOC, one of the largest Chinese oil firms just inked a $15 billion deal to buy a large oil sands firm in Canada.  That’s is the law of unintended consequences. BHO refuses to sign the oil pipeline deal and China steps in.  An Indonesian oil firm just agreed to pay over $5 billion to another canadian oil sands producer.  No doubt using our currency to complete the deal.

    • That’s one other thing that I hate about Canada. It gives away all of its hard-earned resources that took a lot of energies to produce them for fiat currencies that can be created out of thin air. Canada do most of his trades with the USA for fiat US dollars by the way.

  23. While the fuel shortages and higher oil prices will limit the supply of gold or silver, all it will take is a commensurate increase in the prices of these metals to get the mines back in to high gear. If the ore grades are declining, no problem, raise the prices and the gold you shall have.  At the current prices, we could very well have acute shortages, that’s why the manipulations cannot last forever. Price fixing always leads to shortages.
    All these energy problems are real, and it’s coming.  Higher prices are the only remedy.
    Thanks for all the work, SRS, reading and studying your data is always time well spent.  (Not to mention it’s bullish as hell!)
     

  24. that’s one factor that is not often talked about.  If silver or gold prices go up by 25, 50 or even 100% will the mines be able to jumpstart production quickly enough to meet demand and supply at these higher prices.
    There are a lot of factors that weigh against a rapid production increase including the political climate, environmental restrictions,  increases in oil costs and wages jumping explosively like they did in South Africa.
    Mines affected by the 50% increase in strike caused  wage boosts are finding they can’t produce gold at a price above break even given the spikes in wages and other costs. Workers are not being rehired,  Mines are shutting down over those new cost factors.
    It may even be that the price of silver will ramp quickly but the silver miners may not be able to keep up with the demand, thus exacerbating the shortages,  always being behind the price curve.  Just because the price of the commodity increases dramatically it does not mean production can get in front of this price curve.  Miners are notoriously slow to increase production from what I have heard.  It takes 4-5 years to get a mine off the ground and producing.

    • Ah but then 95% of the gold ever produced still exists. At a high enough price, all the gold and (my) silver you want can be yours. High prices encourage supply and suppress demand, either way the shortage is gone.  A balance in a free market that does not currently exist.
       

    • Exactly! That’s why predictions to guess the price of precious metals in the future are wrong. There are a lot of factors that can change the path for the price predictions such as the growing demands, a big supply of silver has been found or something similar to that.

  25. Its called epithermal deposits .  The deeper you go, the less there is.  It ain’t rocket science.

    • There are enough precious metals in the core to cover the entire surface of Earth with a four-meter thick layer.

      The majority of the precious metals have been taken in by the iron at the core. So, in reality, there is more gold deeper under the surface than anywhere else on the planet. The main problem is if you dig a hole to the Earth’s center we will have to worry about the mole people coming to the surface during the night.

    • Crissy, darn it.  I forgot about the Mole People!!  Just look at them trying to get that poor defenseless blond.  That will definitely impact mining output worldwide.
       

  26. SRSrocco:

    I do like your information and data analysis. I think you bring a real eye opener to a lot of things. However, with the declining ore grades, the decreasing EROI, and the increasing energy costs; I think there are some things that could be looked over. 

    First, there is a surging boom of oil reserves increasing in the US from the recent technology capture that I think you are aware of. The US will outproduce Saudi Arabia by 2017. Of course this doesn’t mean we will be energy independent. I agree that a lot of this oil is locked in hard to reach areas; but Horizontal Drilling and Fracking have done absolute wonders. There are many wells in the US that have been left 70% full because they were once thought to be too expensive to extract, but now that new technologies are coming into play, we are once again able to extract those left over resources. Also, not to mention that shale oil and natural gas are literally booming beyond our wildest dreams. Natural gas is slowly but surely replacing oil in many ways.

    This is the reason the US will outproduce Saudi Arabia by 2017. Spindletop in 1901 of East Texas was perhaps one of the most stunning oil finds in the world when it was struck. These new reserves being found rival and are even greater than Spindletop. There are at least 30 like Spindletop now, yet to be drilled.

    This is why states like South Dakota and North Dakota boast the lowest unemployment rates in the land of the so called Free* (TM). You have to balance your Peak Oil view with another case scenario. You have to ask yourself what if Peak Oil doesn’t happen? Just as I have to ask myself what if Peak Oil does happen? 

    You see, Economics is a greater organizer of costs, technological improvement, and advancement than we realize. Let’s take a trip back to the mid 19th century, United States. Whales are being decimated left and right; they are on the brink of extinction. A gallon of Sperm whale oil (from the nose) cost about $2 a gallon; about $200 in today’s money. Now, this higher cost in whale oil was the result of mostly the decreasing stock of whale oil. This is a classic lesson that Economics professors teach. The increase in the price of whale oil led entrepreneurs and investors to the discovery of an innovative and less costly technology. The place was Oil Creek, Pennsylvania. Oil could be purchased at 7 cents a gallon to be used as lighting and heating. The increase in price led by the decreasing stocks of whale was the catalyst of new technology that gave way to lower energy costs over the next 200 years. (The other great thing about this whole story is that many species of whale were saved as a result of the Free Market working like it should without distortions.)

    You see. Even if your theory is right, I will not be vexed because the invisible hand will always provide an alternative. Yes, there could be Peak Oil and no alternative for a number of years which would literally halt most production for the time being (if we go by a worse case scenario). Also, if Peak Oil were to happen, it would be the same replay of 2008 (the last time Oil peaked). Remember what happened to sales of Ipods, computers, cars, and anything else that was a non-core necessity? They literally dropped off the face of the Earth for a few months. People began fixing up their old beaters or investing in more energy efficient cars. Ipod sales literally dropped like a rock. With higher energy costs, there comes a change in the preference curve.

    The debt-to-GDP ratio, the sovereign purchases of Gold, the reclassing of Gold into a Tier 1 Asset, and the fall of world-wide currencies in my opinion will have an unseen effect, the likes of which the world has never seen. There will be both deflation among higher-premium goods such as electronics, computers, houses, cars, etc and inflation of energies, certain commodities like food and precious metals. The metals that the miners hold in the ground will still act as a future value flow. But you say it will be too expensive to mine. Not with the proportional increase the precious metals will receive. 

    I do agree with you that we could very likely see Peak Oil prices. However, I do temper this theory with possibilities that it won’t be as earth-shattering as many in the Global Warming and Malthusian sector tend to do when it comes to Peak Oil (which I am not calling you a Malthusian; but this is where the idea of Peak Oil first came from). There is a great possibility that new technologies and alternative energies will improve at a proportionate rate to the decrease in stocks that traditional energies will experience. Also, there is a possibility that Gold and Silver will rise faster than or just as fast as the increase in energy; which will justify the value of what miners currently have (even though they are experiencing decreasing ore grades). 

    This area does warrant more analysis and I fully appreciate your concerns on this topic Rocco. It has made me look deeper into it as well. Sorry for the long post. 

  27. ich1baN…  regrettably with the recent surge of questions & comments through emails, it gets increasingly difficult to respond to everyone.  I gather once I get my website up and running it will be nearly impossible.  However, I want to reply to yours brielfy because you bring up several good points.

    Many have stated that TECHNOLOGY will solve our problems.  I happen to believe technology has actually made matters worse.  Technology doesn’t create energy, it just produces techniques to remove it more rapdily.  Thus, it also increases the depletion rate of a well or field.

    That being said, the biggest BONER being propagated by the MSM and the Oil & Gas Industry is the miracle of SHALE ENERGY.  I gather from your response you did not read my last article   THE FORCES THAT WILL PUSH SILVER OVER $100.  If you did, then maybe you would have come across these two graphs:


       
    The chart reveals the ugly truth that the shale oil operations have accumulated an estimated $14 billion in negative cash flow since January of 2009. Here we can see that shale oil players in the Bakken have seen an accelerated need for additional sources of capital not provided by their operations alone. How long can they continue this losing battle? 

    And I imagine you might have not come across this data on SHALE GAS:

    Some Pearls Coming From the Shale Gas Industry

    1) The USGS recently announced massive downgrades of U.S. shale gas reserves
    2) Break-even price for typical shale gas player (over the life of the well) is at least $6-7 mmbtu. With the current price of natural gas at $3.50 mmbtu… we can only imagine the hemorrhaging taking place on their balance sheets.
    3) Geologists at Labyrinth Consulting have examined 9,100 of the 15,000 wells in the Barnett shale play using production data filed by the operators with the Texas Railroad Commission and found that less than 6% actually met minimum economic thresholds.
    4) Forecasted revenues to land owners were a mere fraction of what was promised:
    a) The wells at DFW airport have come in with dismal returns. (8) They never performed up to original projections. Chesapeake Energy needed 2.0/Bcf to break even. The wells have produced .9/Bcf .
    b) The University of Texas at Arlington saw revenues peak at approximately $7M with a mere 6 wells on campus to plummet drastically in a matter of months. Revenues in 2010 were down to $800K even though there were now 22 wells on campus.
    5) To acquire additional capital to continue the shale gas treadmill, companies drilled a few wells to prove up new large reserves. They took these supposed reserves and pawned them off on larger companies such as BHP Billiton, Encana and BG Group.
    6) In 2012, the shale gas party ended when in the first half of the year, over $8 billion dollars of impairment charges of shale gas investments were written of the balance sheets of major oil and gas companies. BHP Billiton won the grand prize by suffering a $2.5 billion impairment write down from its initial $4.75 billion shale gas investment it purchased from Chesapeake the prior year.
    7) Wall Street firms have made a killing putting together these sort of lousy energy deals. Without Wall Street, the Shale Gas Treadmill would not have the means to continue.
      
    ————————-

    So, right this very minute, with the price of WTI Crude now at $85.98 ($5-$10 below break even) the shale oil players are continuing to accumulate additional negative cash flow.  The ENEMA of the SHALES CONTINUES as the MSM produces worthless hype. 

    Another silly fallacy is the notion that this technoloy is new.  The technology to frack and use horizontal drilling has been around for decades… the only thing different in the equation was “HIGHER OIL PRICES”.  The only reason why the Bakken and the Eagle Ford is now being drilled and extracted of its oil is due to higher oil prices.  However, as we can plainly see from the charts above, the depletion rates are off the charts and the break-even price is higher than what the market is paying.

    This will end badly… right along with that comical notion that the US is the next Saudi Arabia.     

      

  28. There is another factor that must be accounted for in the quest for hydrocarbons.  This is the political/environmental factor.  BHO promised that our utility bills would necessarily skyrocket.  Gasoline that former cost less than $2 a gallon now costs $4
    Utility bills are moving up.  WHI is just under $90 a bbl.   If Obama signs any more Executive Orders or UN treaties, the price of energy will move upwards like a rocket.  CNOON just signed papers to buy Canadian Oil sand produce NEXEN for $15 billion.  An Indonesian? oil firm inked a deal for over $5 billion to buy another Canadian oil sands producer  We will not receive those resources and the XL Pipeline is a dream from the past. 
    Obama’s EPA is working overtime to regulate coal mines AND coal fired power plants to extinction.  It will not be a matter of passing on the costs to the consumer. They will be out of business, closed and destroyed under the regulatory burden.  Solar and wind power will not help extracting silver and gold  The environmental policies weighing against mining will boost costs to the point of no return. 
    Never let a good crisis go without a solution that creates harm to an industry.  The political and environmental policies against energy producers, even to the point of putting a stop to fracking , could be the most important tipping point, thus creating an uneconomical EROI for any mining whether the mine seeks coal, iron, precious metals or other vital materials.
    This is only speculation on my part but I did live through the last 2 major energy crunches when the Saudis and Iranians embargoed oil and the price of oil and gasoline shot up 100% and then another 150% in a few short years.  These prices never dropped back to their former levels.

    • But you can still buy a gallon of gas for a 25 cents. Before 1964, you could buy a gallon of gas for 0.25$ or with a pre-1964 American quarter. Now, You can still buy a gallon of gas for 0.25$ with the same pre-1964 quarter. That’s preservation of your purchasing power! Silver’s production rises at the same rate as the price of gas since gasoline is used to mine silver. An energy crisis will also hit gold and silver by the way.

  29. In the last pm bull market in the 70′s there were energy shortages.  What happened to the miners then?  That’s right, they went absolutely ballistic…  If history is anything to go by I suspect the same thing will happen in this bull market, but probably to an even greater extent owing to the huge increase in the amount of paper money since the last bull market.   
     

    • The energy shortage of the 1970s was a contrived affair and not the result of any lack of energy resources or supply / demand issues.  OPEC came into being and flexed its muscles to push oil prices higher.  Yes, the miners “went ballistic” in that they shot up like rockets and then came down the same way as silver went from $5 an oz. to $50 an oz. and then back to $5 an oz… where it stayed for the next 20 years.  

      Source:  http://silverprice.org/silver-price-history.html

    • If there are energy shortage, then there would also be a precious metals shortages because gasoline is used to mine gold and silver. I think gold and silver are easier to store as your wealth compare to gasoline which is liquid and dangerous.

  30. The declining liquid energy supplies won’t just affect the metals, it will also affect the food productions and the industries which means that there would be less production since most of the commodities and products today are produced with gasoline. When that happens, I think the human population will decline a lot. 

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