The details of important silver market reform will be decided in the next two months. The new Frank-Dodd Financial Reform law includes updated speculative position limits for silver. New position limits were supposed to be imposed by the middle of January. Instead, the CFTC has settled on simply determining position limits by the middle of January and implementing the new limits gradually. In short, regulators will decide upon the silver market position limit in the next two months. The issue of whether these limits are right or wrong is beyond us. These limits will be imposed and investment strategies must be adjusted accordingly. The new position limit can affect the price of silver. [more]
The best measure of the money stock in the economy can’t be found on some federal reserve or other government agencies website, for they publish various money stock figures that either include items that aren’t money, leave items out that are or have nothing to do with the money altogether. This money stock measure is known as the TMS or True Money Supply. This measure is superior because it represents the amount of money in the economy that is available for immediate use in exchange. It only counts immediately available money for exchange without prescribing to the errors of the Federal Reserve’s money supply measures such as double counting. It also excludes Money Market Mutual Funds (MMMF) because these investments must be sold in exchange for money first. Time deposits are also excluded from this measure as they are also not immediately available for use in exchange.So what does the TMS consist of? [more]
First you want to start off with three basic but very informative metrics of the company. [more]
Since I first wrote an article regarding the streamers/royalties among the precious metal companies, a lot has changed, notably with Royal Gold (RGLD) and Sandstorm Resources. I will go over all the royalty companies once again, but this time a bit more in depth and not all for the best (Franco-Nevada).
How do royalty companies work? The royalty company pays an upfront fee (to help finance the development of various mines) in exchange for the right to purchase silver at approx $4/oz and gold at $450/oz (although they vary). I recommend doing due diligence to get an idea of what the difference is between streams and royalties as royalties have multiple types. This includes GSR (Gross Smelter Revenue), NPI (Net Profit Interest), GPR (GROSS PROCEEDS ROYALTY), CGR (CONTAINED GOLD RETURNED), (NET SMELTER ROYALTY) and SSR (SLIDING SCALE ROYALTY). They also do not need sustained capital expenditures going forward except the one time upfront payment when an acquisition is made.
First I will talk about the streamers - Silver Wheaton (SLW), Gold Wheaton (GLWGF.PK) and Sandstorm Resources. What's unique about them relative to pure royalties? They receive the physical metal instead of cash payments for a fixed price (as mentioned above) in addition to having a much more favorable tax situation courtesy of the Canadian Government. As long as they reinvest their proceeds or pay it out as dividends, they are stuck with a tax rate in the neighborhood of 0-8%. That's a huge advantage when it comes to net profit margin. I will start with Sandstorm as the company made the most recent acquisition, which is a game changer in my opinion.
Sandstorm Resources (SNDXF.PK) - A gold royalty company focusing on advanced stage or producing mines. Though Sandstorm has only been operating for a year and a half or so, it has already completed four royalty acquisitions. This is an amazing accomplishment given that Sandstorm is a micro/small cap company ( <200m market capitalization ). The company has an amazing management team headed by CEO Nolan Watson (former CFO of Silver Wheaton). Sandstorm is very well capitalized, following an acquisition in early March, with nearly $90 million of cash on hand. This gives the company ample room to deploy at least $60M of its cash balance off in the near term (as it has a bit over $100M in long term debt). [more]