1. The historic silver/gold price ratio was 15 or 16:1, but in recent years, silver is relatively cheaper ranging from about 40:1 to 80:1. On Jan 24th, 2003, with silver at$4.89/oz. and gold at $368/oz., the ratio is 75:1. This means that silver is currently undervalued, and cheaper than historic norms, and thus it is a better investment than even gold if you want to “buy low and sell high”.
2. The supply and demand fundamentals for silver are extraordinary. There has been an ongoing supply/demand deficit in silver for 12 years. More silver is consumed by industry than is produced by mining and recycling combined. Some say this deficit reaches back 60 years, and has consumed virtually all the known silver ever mined since the beginning of the world. The annual deficit has recently ranged from 100 million to 200 million ounces per year. Annual supply is about 650 million ounces, and annual demand is about 800 million ounces.
3. Considering refined and mined known silver reserves, there is far less silver in the world than gold. About 150 million ounces of silver vs. 4000 million ounces of gold.
4. Most silver, 70-80% brought to market, is mined as a by-product of copper mining, gold mining, or zinc and lead mining. There are very few silver mines in the world, since most are really copper or gold mines. Therefore, mild increases in the price of silver will not bring substantially more silver out of the ground. Much silver is consumed in photography; by Hollywood and medical photo imaging. There is so little silver used in each photograph, that price increases in silver will probably not reduce demand. With a relatively inelastic supply, and relatively inelastic demand, it will require a dramatic explosion in price to bring the supply and demand deficit back into balance.
5. Famous Billionaires have bought silver in recent years. In 1997, Warren Buffet bought 130 million ounces of real silver, due to the favorable “supply and demand fundamentals”, and although he bought as much as they would let him legally buy, his purchase was with about 2% of the value of his portfolio. Another Billionaire who tried to follow in his lead would be unable to do so since there is less silver now available in the world to buy at the COMEX than what Buffet has, and less than that in known, reported silver reserves in the world. George Soros owns a large percentage of Apex Silver (SIL). Bill Gates owns over 10% of Pan American Silver (PAAS).
6. In the gold market, there has been a large increase in paper futures contracts which are used to suppress the price. See my essay, Controlling Gold with Paper. In silver, the relative amount of paper contracts is much larger. In other words, there are more paper shorts who will be caught in an impossible situation when the price of silver really begins to rise due to the fundamental supply demand gap. They will be forced to buy silver or go bankrupt. Either action will cause a dramatic rise in the silver price. If they default on the silver contracts, that will signal to the world the severe shortage of silver, and signal a great investment opportunity.
7. One of the cheapest ways to buy silver: You can buy U.S. coins dated 1964 or earlier, $1000 face value (4000 quarters, or 2000 half dollars, or 10,000 dimes), in a “bag” of “junk silver”, which contain 715-720 ounces of silver, depending on how worn the coins are. In the early 1980’s, when silver was $30-$50/oz., a bag of silver could be used to buy a house! Imagine buying the money for your next house for $3500 today by investing in silver!
8. You get so much silver for your money. A bag of junk silver weighs about 55 pounds, and is the size of a bowling ball. If you invested $100,000 into junk silver coins, at $3500/bag, that would give you 28.5 bags each weighing 55 pounds, or 57 bags weighing 27 pounds each, or about 1571 pounds total. Could you imagine moving that much around your house if you had to move? Silver is so cheap it creates physical problems for investors today!
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About First Majestic Silver Corp.
Management of First Majestic is committed to building a senior silver producing mining company based on the Company’s current portfolio of projects focused on silver in Mexico.
First Majestic owns five producing silver mines including the La Encantada Silver Mine, the La Parrilla Silver Mine, the San Martin Silver Mine, the La Guitarra Silver Mine and the Del Toro Silver Mine.
First Majestic’s largest operation is the La Encantada Silver Mine. This property has been expanded several times since 2006 to reach the current capacity of 4,000 tpd. Running at full capacity, production at La Encantada is approximately 4.1 to 4.3 million ounces of silver, in the form of silver doré bars, annually.
The Company’s second mine, the La Parrilla Silver Mine, is located conveniently outside the city of Durango. The property underwent a fifth major development project in 2012 that further expanded the mill to 2,000 tpd (from the previous 850 tpd). The expansion was deemed commercially effective on March 1, 2012 and the parallel 1,000 tpd flotation and 1,000 tpd cyanidation circuits became fully operational. At the current run rate of 2,000 tpd it is anticipated that La Parrilla will produce in the range of 3.3 to 3.5 million ounces of silver equivalent annually.
First Majestic’s third operating mine, the San Martin Silver Mine was expanded to 900 tpd in late 2008. The mill is currently undergoing another expansion from 900 tpd to 1,300 tpd, with production scheduled to ramp up in September 2013.
In 2012, the Company completed the acquisition of Silvermex Resources which resulted in the La Guitarra Silver Mine becoming the Company’s fourth producing silver mine. Since acquiring the mine, First Majestic has increased the mill capacity from 350 tpd to 500 tpd.
The Company’s newest producing mine, the Del Toro Silver Mine, began Phase 1 of operations in the first quarter of 2013 at 1,000 tpd through flotation. The next stage at Del Toro, Phase 2, includes a ramp-up in production to 1,000 tpd flotation and 1,000 tpd cyanidation and will allow for the production of silver doré bars.The final stage of production, Phase 3, will see Del Toro’s throughput increase to 2,000 tpd flotation and 2,000 tpd cyanidation, and is on schedule to commence in the second half of 2014. At this point, Del Toro is expected to become the Company’s largest operation.
Management feels strongly that investors will continue to witness a dramatic bull market in precious metals over the coming years. For this reason, a focus to continue to develop and increase production at its core assets will continue. In addition, management is determined to expand First Majestic’s asset base and thus continues to investigate other interesting advanced stage silver projects in Mexico. With a Management team comprised of proven company and mine builders; shareholders are poised to capitalize on First Majestic’s rapid evolution into a world class silver producer.
