Sure, my job is to be even keeled, even when confronted with the daily crime scene manipulated “markets” have become. However, even I have my limits; and watching today’s “trading,” it was hard not to feel nauseous. I mean, today alone, we saw the Greek “negotiations” collapse, with just eight days until “ground zero.” Not to mention, another all-time low for the Baltic Dry Index; implosion of the Ukrainian “cease-fire” before it even started; Walmart reducing sales expectations, partly due to the “strong dollar”; a big “unexpected” drop in the Philly Fed Index – featuring the largest plunge in business expectations since the 2008 crisis; Caterpillar reporting its worst sales month since said crisis; EIA oil inventories exploding to a new 80-year high; Japan reporting its 31st straight trade deficit; and the horrific mining results to be featured in this article. Heck, even Goldman Sachs admitted its proprietary model is signaling a worldwide recession; and oh yeah, per what I discussed in yesterday’s podcast, the Federal Reserve did a 180 degree turn yesterday, when it’s January 27th “minutes” revealed an FOMC with not the slightest inclination to raise rates.
And yet, the PPT executed yet another “dead ringer” algorithm to support the “Dow Jones Propaganda Average“; whilst, for the second straight week, “someone” reversed oil’s plunge following an abysmal inventory report – at the exact same $50/bbl “line in the sand” level. And of course, despite news that Chinese physical gold deliveries are running 17% above last year’s record level; and India’s Central bank unexpectedly repealing the bank ban on gold imports, gold and silver were “Cartel Heralded” at the COMEX open, and viciously suppressed until day’s end. Not that such fraud won’t eventually be overrun – which as sure as night follows day, it will. But in the meantime, it is torturous to endure – particularly when realizing that the longer it goes on, the more damage it will cause the entire world when undone.
And then, of course, there’s that “other” reason to own precious metals – which in my “financial analyst” role, I have spent hundreds of hours researching. Which is, that irrespective of gold and silver’s peerless monetary attributes, they are in fact commodities with ragingly bullish supply/demand imbalances. In this week’s “supply response,” I discussed how PM demand is surging whilst supply is plunging; and following this week’s atrocious mining earnings reports, I am not only 100% confident that gold and silver supply have peaked; but that the industry must consolidate NOW to avoid the danger of mass bankruptcies. Or at the least, to enable the shedding of additional marginal properties and overhead without terminally destroying balance sheets. In other words, the PM mining paralysis I predicted in my year-end forecast.
Actually, one of the most pleasurable parts of my job is the ability to utilize the financial analyst tools I’ve spent 25 years honing. Clearly, the free markets I once worked with – following four years of studying finance, and three getting my CFA – are gone. But nonetheless, the skill set is equally valid; and frankly, there’s little I enjoy more. Thus, I’ve been looking forward to poring through mining press releases and financial statements – in my quest to prove that Precious Metal mining production has nowhere to go but down. And now that the majority of gold miners have reported, I couldn’t be more confident!
Thus far, not a single gold miner has issued a positive report; although relatively speaking, some looked like Apple compared to others. I’ll give you some qualitative commentary in a moment; but for now, here is a tally of 2014 net income of the world’s seven largest gold producers – as well as their 2015 production outlooks. As you can see, only Goldcorp anticipates, without reservation, increased 2015 production. Only Newmont actually achieved a 2014 profit; and conceivably, all but Goldcorp could see lower 2015 production.
Moreover, not a single company reported higher reserves. And given that the lesser “resources” category (measured, indicated, and inferred) typically utilizes significantly higher gold price assumptions (why, I have no idea); it’s painstakingly obvious how much “equity” the gold mining industry has surrendered to the Cartel. Moreover, whether “reserves” or “resources,” the odds of economic production in any scenario are slim at best. Let alone, today’s historically suppressed price environment, where the odds are closer to “none” than “slim.”
I’ll get to silver in a second; but regarding gold, clearly the biggest loser was Kinross – which for the second year in a row, massively reduced reserves without even changing its $1,200/oz gold price assumption. Not to mention, it forecast a 2015 production decline of up to 11%.
I’ll get to silver in a second; but regarding gold, clearly the biggest loser was Kinross – which for the second year in a row, massively reduced reserves without even changing its $1,200/oz gold price assumption. Not to mention, it forecast a 2015 production decline of up to 11%.
Looking at the two largest gold miners, Barrick and Newmont – with #3 AngloGold scheduled to report next week – both are expecting flat production for years to come. To wit, Newmont gave guidance that 2016 and 2017 production will be essentially the same as 2015, whilst Barrick suggested that 2016 and 2017 production levels may well be lower than 2015.
As for the South African miners, clearly this high cost region is the gold equivalent of U.S. shale oil; as without having a full understanding of exactly which metrics investors were focused on, it’s quite clear that Goldfields, despite forecasting only a 1% production decline, is in dire straits. Like fellow South African miner Harmony, Goldfield’s stock was utterly annihilated following results. As was Goldcorp’s, by the way, despite its strong production growth forecast. Perhaps, because GG valued its silver reserves with a $22/oz price assumption – suggesting they might have been significantly lower if synchronized with today’s reality.
As for silver, such analysis is far more difficult; as roughly two-thirds of the world’s silver production is by-product of gold and base metal mines. For example, Goldcorp is actually the world’s fifth largest silver producer; but because its silver output is byproduct of “primary gold mines,” it doesn’t disclose silver production levels. Moreover, large producers like BHP Billiton are not only primary base metal producers, but tare so large that silver amounts to just a tiny amount of their total output. Furthermore, several of the world’s largest silver producers are not public companies; and of those that are, such as Fresnillo, not all have yet reported earnings.
However, of those that have reported, none are forecasting higher 2015 production; such as the world’s seventh largest producer, Pan American, which expects roughly the same silver production in 2015 as 2014. That said, no major Precious Metal miner – including Kinross – holds a candle to the atrocity that was Coeur D’Alene’s report last night. Frankly, I can’t say I’m too sympathetic; as nearly a decade ago, I met its then CEO, who mocked me for claiming silver prices were manipulated. Anyhow, like Kinross, Coeur D’Alene appears just one write-off from major financial distress – which is probably why its stock plunged 13% today alone.
Not surprisingly, CDE did its best to put lipstick on a giant, oinking pig – in claiming silver reserves rose 10% from a year ago. Which, by the way, was entirely due to massively overpaying for Orko Silver two years ago – when silver prices were dramatically higher. That said, the 15% plunge in their gold reserves completely offset the silver reserve gain. However, when one realizes CDE utilized price assumptions of $19.50/oz and $1,350/oz, respectively, in its reserve calculations, it’s not difficult to foresee another massive write-down (and subsequent balance sheet stress) if PM prices don’t recover soon. Worse yet, Coeur wrote off a whopping 45% of its gold and silver resources, and expects 2015 silver production to decline by 7% to 14%. But heck, at least they were “honest” enough to admit “all-in” costs of $17.50-$18.50/oz. In other words, shouting to the world that they will incur massive 2015 losses at current prices. And this, the world’s tenth largest silver producer!
Well, that’s enough for now. Clearly, it’s irrefutable that for the time being, “peak gold” has arrived – and likely, “peak silver” as well. And care of the utterly dire financial condition of the mining industry – and extended lead times involved in turning deposits into mines, gold production for years to come will be unaffected by gold prices, even if they soar to the stratosphere. And as for silver, the primary miners’ situation is not materially different; with the additional risk that – as occurred in 2008 – if base metal prices continue to decline due to global economic weakness, it’s very possible that byproduct silver production will plunge precipitously – just as it did during the Great Depression. And thus, whilst “peak gold” and “peak silver” are as ambiguous as “peak oil” – in that, if the price is high enough, production inevitably rises; for the foreseeable future, oil has essentially ZERO chance of materially rising, and a significant chance of significantly declining; whilst for gold and silver, the polar opposite situation is true.
And by the way, no one does a better job dissecting the complexities of silver mining than Steve St. Angelo at srsrocco.com. Assuredly, he will give as detailed an analysis of the top silver miners – probably more so – than I have with the top gold miners.
Andy: we obviously passed peak silver decades ago as evidenced by ever declining ore grades mined. At some point (perhaps in the next decade according to USGS), we are going to be bereft of accessible silver ore. Given that silver is such a strategically important element for any tech needs (and 1000s of other critical applications), the GSR may even go to 1:1. After all, we can do without gold in our daily lives, but not without silver unless, of course, we revert back a century
Certainly in the U.S. and Canada we did, but not overseas. That is where all the growth has come from; but likely, won’t be around much longer.
So would it be better to buy silver for preservation of wealth, as opposed to gold?
Silver does have the industrial-use aspect, and I can buy seven 1 oz silver coins for around the same price of a 1/10 oz gold coin (which is depressingly small, and…just depressingly tiny….)…..
Any ideas?
Hey Andy – I got mocked AND my job threatened simultaneously once because I didn’t agree with a consulting partner on the merits of offshore development. The partners show the cost benefit analysis over say five years, which makes the ROI look great, but the most expensive part of an IT system is maintenance and IT systems last approximately 20 – 30 years, so when you plug-n-chug, it’s actually always better to NOT offshore IT jobs.
Getting mocked for having a different opinion by someone that has a huge power differential just sucks…..and I just graduated from college, so I was wondering if my badge would work the next day 🙂
I am personally 50/50, and that should be the starting point of any discussion. At that point, you need to decided what personally makes you more comfortable.
And as for being a Cassandra, no prob you’ll get used to it. I sure have, after 13 years of writing of PMs. I just don’t do so to “family, friends, and colleagues”(http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCAQFjAA&url=http%3A%2F%2Fblog.milesfranklin.com%2Ffamily-friends-and-colleagues&ei=eojoVI_2Gte3yASikIJQ&usg=AFQjCNFz9QJdDLSDx9b_QnaLfOowCaeyoQ&sig2=cs2JI5In0yAXKfmPqnVKEg&bvm=bv.86475890,d.aWw) anymore.
a
my miners are in the toilet. 🙁
Andy, if I may be so bold, as to provide a perspective on Ukraine, where I personally have been late 90s, Kharkov, Kiev, Chernotsi.
The prolog is that borders mean something.
The US had a civil war, where a portion of country up and left. That succession was not overwhelming approved by the US population as a whole. Scotland was allowed by the UK gov to conduct a vote, thus sanctioned by the whole. The crimea vote, was not a vote of the whole Ukraine, by an overwhelming majority, say 66%. I find fault with the W.Ukrainians for not following law, by over throwing an elected president. They should have had impeachment proceeding, and do it civily, and not by gun point. The US should not have been in there, eggin em on. Crimea should not have had a vote for leaving Ukraine, unsanctioned by the whole. Putin should not have accepted crimea into Russia (where I have been 20+ times), to effectively steal the crimea from Ukraine. What Putin did was not “international norms”, and sowed the seeds of rebellion and war, and he should have known that touching a US old sore spot of Soviet Expansion, will set in motion a counter move by the US.
There is plenty of blame here, to go around, US, Russia, Kiev, Crimea, Donest. They all screwed up bad, and now, people die in the Ukraine. I shake my head, at how incompetent THEY ALL ARE, to resolve matters civilly.
Ukrainian nationalist, US foreign policy, unilateral succession, Russian intermeddling, THEY ALL SCREWED UP, and people die, and it just makes me sick.
I wish I was king of the world. 🙁
Greece has now been “fixed”.
Everything is great now. Go back to playing your video games.
What exactly has been “fixed” in Greece? All they did was propose a 4 month can kick. The proposal has not even been accepted yet. How did this do anything other then push the day of reckoning 4 months into the future? You have a good point though, at least video games can offer some degree of control and honesty. 🙂
Even the Fed would blush at the garbage this “statement” says. Basically, a proposal to do nothing in return for four months; or more likely, to pretend to do something that everyone knows they won’t do in return for four months. Both parties are terrified of a Grexit, but that’s what Greece MUST do – and by the way, that was what Tsipras was elected to do, LAST MONTH. This game has just started; and BTW, watch the Euro go nowhere on this “good news.”
Mark, please adjust the settings on your sarcasm detector.
Michael Pento predicts rioting to break out in the streets of Athens very soon.
Yes, I saw. Quite a bold short-term prediction, given it may (or may not) be proven wrong in two days!
There is no deal..at least no deal that will last.
Bankrupt is Bankrupt.
Default or write off 70% of the debt. Those are the choices in my view.
1 month..4 months what does it matter.
The numbers tell the tale.
Greek can only rebuild if they re-construct the foundation they sit on.
Less debt. Full income tax participation.
Decrease in entitlement mindset.
A sick patient does not get healthy by simply changing the sheets on his bed.
Health comes from aggressively attacking the cause of illnesses and maintaining new healthier actions.
Nothing is fixed until the cause of disease gets acknowledged and treated.
Rick rule says silver and gold will plummet very soon as societies dissinagrate further as in 2008. What percentage of silver and gold collapse do you expect in the very near term? Thanks for your work again. Frank
Frank,
Without having read his comments, I would guess you have misread them. Rick has been one of the world’s biggest PM bulls, in large part due to his expectation of the very type of events that are occurring today. It would almost be like ME making similar comments.
Thx.
a
Hey Andy, he may have been referring to a statement from Rule that there hasn’t been a capitulation in the precious metals yet and thus prices had further to drop. FWIW, Joe
First off, what does “capitulation” mean in a rigged market? Or in the case of a Grexit, etc.? And frankly, I’d say that comment is more focused on mining stocks (which are trading with no volume, as few investors remain) than the metal itself.
a
There was another comment, that for “the boys” to exit huge naked shorts, they would pound, 1000Au 12Ag, cover going down to targeted bottom, and go long, and off to races. Difficult to understand that play, though. Who’s knows. This was a recurrent theme, when JPM had a net long gold position last year, I think, but never went net long silver, unconfirming that time, as lift off time, that did not happen. Nice work andy, as always.
It’s all BS. Any talk about what JPM – i.e., the government – is “doing” is pure speculation. When physical demand swaps the diminishing supply, it will be end game.
Well we are there.
In the next few days the new Greek Government either stands high and sticks to its plan to tell the truth or it bows down in submission to the trump card holding banking cartel.
What will it be…..
Truth or more lies.
Mr. Jekyll and Hyde Alan Greenspan, the chief architect of fiat bubblonomics says that something major is going to snap “very soon” and all hell is going to break loose then.
https://www.youtube.com/watch?v=uExEdyQWftw
How soon is “very soon”? My unscientific heuristics like Groundhog Day is telling me sometime around September to October timeframe of this year. I’ve given myself 6 months to prepare like crazy for the family, now focusing on dehydrated foods.
Hi Andy
I can’t pretend not to be getting extremely pissed off with this bloody nonsense.
We have discussed before that the gold market is very tight, but some how, somewhere China, India, and Russia are getting supplied, And they (the cartel) are still supplying.
Where the hell is this supply coming from? China is taking pretty well whole world production of Gold all on its own. When I look at official sovereign gold holdings even if the FED and BOE sold ALL of their sovereign gold holdings the supply would have been gone ages ago.
Something doesn’t add up here!
Then we have the Greek situation, I don’t believe for a moment that Syriza have done a 180° about turn. There is something about this deal we aren’t being told. Could it be that The BRICS require more time to get their alternative banking system fully functioning before telling Germany and France they have a safety net to fall into when the Euro goes down?
It’s not out of the question, let’s face it the Germans know the Euros finished, they desperately need a plan B, and if the Greeks go imploding the Euro before Plan B is completed this could finish the German economy not to mention all the other EU economies.
Just a thought!
Yes, even today’s Yahoo! Finance top story is “why Greece will never repay it’s debt”; and why, per what I said in yesterday’s Audioblog (to be posted today) that the Euro would fall on this fraudulent “deal.” As if Germany, the U.S., and anyone else will.
Just as an extra note Andy…
We know the COMEX has been rigging the price and smashing it down for months and months now, and we know that GLD and SLV aren’t delivering physical and haven’t been for sometime.
So how is it these games continue all the time and no one is able to say enough is enough.
Why can’t we have the names of these Traders at HSBC and JPM? Someone must know who they are right? I think it should be in everyone’s interest to stop bloody whining about the situation and get active in finding out who these people are and naming names so we can all know.
Forget Jamie Dimone and Lloyd Blankfiene we already know about them, and when the day of reckoning comes their faces are already known. And it can’t all just be mindless Algo’s doing the dirty work, someone did the programming. Who? Let’s have names and addresses!
The fraud will end when it ends. But rest assured, it WILL.
Well all this analysis is very likely correct…as far as it goes.
Peak mining gold, maybe, for the time being, but you cannot draw any conclusions about supply to the market because gold has very large stocks to flow ratios.
That is, all the gold that has ever been mined is still in existence, and therefore can be sold at any time.
And this is exactly what has been happening…gold is getting sold on the bid for $USD and that could be for any number of reasons.
As I type the $USD can buy you more gold than 2 years ago at $1193.!!!
Who would have thought?
If I didn’t know better, I’d think you worked for the United States office of Propaganda. Absolutely ridiculous.
If I didn’t know better, I’d think you were working for the United States office of Propaganda.
If I didn’t know better I would have been following hawkers’ advice and would have been buying gold at $1900 and more gold on the way down to where it is today.
But what is to stop the “manipulators” from running the cost down to $700.
Very little I would suggest.
But I know this, those that have been buying at the top and averaging down on ” gold is a good buy” advice, will be those very same people selling all they own right at the bottom.
I certainly don’t know where that is, you have to wait till it is in, and then some, till it is confirmed that it is in fact going up.
Perhaps you should read what I wrote – for free – nearly daily on GATA from 2003-11, saying the same things when gold was as low as $300/oz. I am not a “hawker,” and if you think gold is down for any other reason than heavy-handed government manipulation, you are simply not getting it.
In the end there can only be one outcome. Debts get paid or they are defaulted.
Everything else is just delay tactics and noise.
My normal response to the naysayers now is simply…WE WILL SEE.
Today, tomorrow or next month or next year. Donèt know do not care.
As long as I am on the side of sound money principles I know I will be better off than most.
I just cannot see Greece selling anything to the populous other than a plan that allows them to recover control of their own destiny.
Everything of value usually has a high price.