Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Eric Sprott and Endeavour Silver: A Match Made in Heaven?

Commodities / Gold and Silver 2012 Jan 12, 2012 - 04:43 AM GMT

By: Eric_McWhinnie

Commodities

Last year, Eric Sprott, legendary gold and silver investor and chairman of Sprott Inc., issued an open letter to 17 of the world’s largest silver producers. The letter was a call to action for silver producers to limit silver sales until prices increased. Sprott explained, “I have always liked silver because I look at the physical supply and demand metrics and they scream that silver should be higher. But the price is being kept down by paper silver traders who are abusing the market.”


Sprott’s letter goes on to say, “Instead of selling all their silver for cash and depositing that cash in a levered bank, silver miners should seriously consider storing a portion of their reserves in physical silver outside of the banking system. Why take on all the risks of the bank when you can hold hard cash through the very metal that you mine? Given the current environment, we see much greater risk holding cash in a bank than we do in holding precious metals.” After the letter, Sprott said he received a groundswell of interest-more than he had ever seen before-but more still needs to be done. The issue of silver producers protecting themselves and shareholders through physical silver reserves seemed to fade, until Endeavour Silver issued a press release yesterday.

Endeavour Silver Corp. is a mid-cap silver mining company with a focus on production, reserves and resources in Mexico. On Tuesday, the company released a press release providing an update for the fourth quarter. In the fourth quarter, gold production increased 45 percent, while silver production increased 25 percent, compared to 2010’s fourth quarter. However, the most interesting section of the press release comes from the company’s inventory update. Endeavour says, “Due to the correction in metal prices in the fourth quarter 2011, Endeavour management elected to hold a significant portion of the fourth quarter silver and gold production in inventory rather than sell at the lower prices. Management plans to monitor the metal prices closely and sell some or all of the silver and gold in inventory at appropriately higher metal prices, or if the need arises for more cash.”

This is a fine example of what Sprott discussed in his call to action letter. Endeavour is electing to hold its precious metal inventory until prices correct to its liking. With silver falling to as low as $26 in the fourth quarter, Endeavour sold only 400,000 ounces of silver and 4,000 ounces of gold in the quarter. As a result, Endeavour’s inventory increased to 812,000 silver ounces and 3,000 gold ounces in bullion. The company also holds another 168,000 ounces of silver and 2,400 ounces of gold that are recoverable from concentrate. For comparison, Endeavour’s inventory at the end of the third quarter included only 270,536 ounces of silver, and 2,420 ounces of gold.

Although Sprott’s open letter brought attention to the matter, Endeavour has been parking excess cash in silver and gold on a short-term basis since 2008. More recently, in the third quarter, Endeavour announced, “Management elected to not to sell all the silver and gold produced during the third quarter due to the falling precious metal prices.” The company made this decision as its realized gold and silver price came in at $1,679 and $40.72, respectively. Based on this, it appears that Endeavour expects precious metals to climb higher than these levels in the near future.

Judging by the market, it also appears that investors believe Endeavour is making the correct move. Shares of the company have gained more than 8 percent this year. Due to Endeavour’s decision to hold a significant portion of its fourth quarter precious metal production, revenues decreased 39 percent when compared to the fourth quarter of 2010. However, shares still managed to close 2.12 percent higher on Tuesday. If more miners follow Endeavour’s example, precious metal investors could see a silver market dictated by actual physical supply and demand issues, rather than paper traders who abuse the market.

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

By Eric_McWhinnie

http://wallstcheatsheet.com

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2012 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in