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XMFSinchiruna (27.47)

You Can Buy Silver for $1 per Ounce!!

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November 25, 2008 – Comments (12)

Please enjoy this valuation analysis of Silver Wheaton, which will remain my second largest holding in real life right on through this multi-year bull market for precious metals. When silver is back above $20 per ounce early next year, these share values will be remembered for the incredible discount to future earnings.

http://www.fool.com/investing/value/2008/11/25/silver-selling-for-1-per-ounce.aspx

 

 

12 Comments – Post Your Own

#1) On November 25, 2008 at 4:07 PM, FreundInvesting (29.42) wrote:

Thanks for the analysis, Sinch. Why do you own Pan American if its all-in cost is so much higher than SLWs?

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#2) On November 25, 2008 at 5:05 PM, XMFSinchiruna (27.47) wrote:

FreundInvesting

Because I own them all. :) 

Seriously, though, please keep in mind the important distinction between production cost and all-in cost of production. Production cost determines revenue from sales, so is much more relevant to a company's ability to survive the ridiculous price environment now prevailing. At $6.61 per ounce cash cost of production, PAAS is still making money in the present on every ounce sold, even if in the larger picture including acquisition and development costs, etc.. they may be just breaking even. $6.61 is a bit higher than many competitors, but those costs should come down sharply as input pressures like fuel have fallen quickly, and especially as production ramps up in 2009 at the crucial Manantial-Espejo mine in Argentina.

http://www.fool.com/investing/general/2008/11/14/wake-me-when-silver-mining-is-profitable-again.aspx

It's as much about future production costs as it is about present costs. When silver is back above $20, and the low-cost Manantial-Espejo is kicking out countless tonnes of silver per year, PAAS will be looking just fine.

Disclaimer:

I own shares of PAAS, SLW, HL,CDE,SSRI, and at least 20 other silver miners. :) I went with the basket approach, which hurt me dearly during the present correction, but for which I shall still one day be thankful.

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#3) On November 25, 2008 at 8:50 PM, abitare (35.58) wrote:

I like Gold much more then silver. Gold is money, money is in short supply. Silver is more of a commodity, which is in over supply in a slowdown.

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#4) On November 25, 2008 at 8:58 PM, XMFSinchiruna (27.47) wrote:

Study the history abit... every time gold has moved substantially on safe haven buying, silver has moved right behind it in greater peaks. The systematic way in which has been manipulated through masive short positions throughout this bull market cycle makes it very clear the importance attributed to silver during an economic crisis. When gold gets priced beyond the ability of the average joe to afford it, then silver steps in enjoys the same ride. That's exactly when the Hunt brothers stepped in in the late 70s and cornered the market. It's a tiny market for a scarce metal, and its prices will explode once gold finds momentum once more.

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#5) On November 25, 2008 at 9:04 PM, kaskoosek (53.16) wrote:

abitare

Gold is a bit tricky. It can overshoot due to it being perceived as money, but I still do not like it. It is very volatile and the reasons people hold it are phycological and not fundamenal.

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#6) On November 25, 2008 at 9:12 PM, XMFSinchiruna (27.47) wrote:

kaskoosek

That is simply not true, kask. There are entirely fundamental reasons why gold increases in value when a fiat currency like the USD is in real crisis mode. It's not perceived as money, gold is money! The real misperception is that those meaningless dollar bills in your wallet represent some kind of money.... In psychological terms, I think you were projecting.  :)

Happy Thanksgiving!!

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#7) On November 25, 2008 at 9:32 PM, BlueInsight (< 20) wrote:

Sinch,

 Thank you for your valuable insight.  I have been following your blog for some time now and agree with everything you've been saying regarding the coming bull market in silver and gold.  If SLW is your second largest holding, which is your largest?  Thanks again.

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#8) On November 25, 2008 at 11:14 PM, XMFSinchiruna (27.47) wrote:

BlueInsight

CEF CEF CEF CEF CEF CEF

:) :) :) :) :) :) :) :)

Get the hint? I like that one. :)

Pure play on gold and silver unencumbered bullion.

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#9) On November 26, 2008 at 8:24 AM, binv271828 (< 20) wrote:

Excellent writeup! Thanks as always for the insight and analysis! SLW is awesome!

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#10) On November 26, 2008 at 2:49 PM, HooDaHeckNose (95.31) wrote:

Thanks for the write up. I've been looking at SLW (and CDE) for quite a while, just couldn't pull the trigger.

After reading this I decided to jump in and bought 1000 shares @ 2.62. Well, so far so good.

Thanks

John

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#11) On November 26, 2008 at 3:31 PM, XMFSinchiruna (27.47) wrote:

HooDaHeckNose

Nice entry price!

Seeing as my cost basis is over $10, I obviously believe you'll do just fine.  :)

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#12) On December 06, 2008 at 12:53 AM, kstarich (30.56) wrote:

Went to buy silver and found out it is very hard to find bars for sale right now.  Lots of demand in the real market for sure.  In fact I also learned the price is about $5 more than the spot price.  I checked alot of dealers and heard the same story everytime.  So it's not going to be long before the paper price comes in line with the demand price.

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