Richard (Rick) Mills
Ahead of the Herd
Page 1 of 2
As a general rule, the most successful man in life is the man who has the best information
In 2014 estimated uses for silver were:
- electrical and electronics, 42%
- coins and medals, 35%
- photography, 13%
- jewelry and silverware, 7%
- other, 3%
“Silver is a unique metal that wins whether the economy is going well or is in bad shape. In the latter, the investor buys it as a hedge against the downturn in the economy and the markets. And if the economy improves, then the industrial demand increases.” Chintan Parikh, CPM Group commodity analyst
“The major monetary metal in history is silver, not gold.” Milton Friedman, Nobel Laureate
The crustal ratio of silver to gold is 17.5:1, interestingly in Roman times the price ratio was set at 12 or 12.5 to 1 – one ounce of gold was worth 12 or 12.5 ounces of silver. The U.S., in 1792, fixed the gold/silver price ratio at 15:1. France enacted a ratio of 15.5:1 in 1803.
The average price ratio during the 20th century was 47 silver oz’s to one gold oz.
Today, at the time of writing this article, the silver:gold ratio stands at 74.25:1 (Gold $1,156.20 oz/silver $15.57 oz = 74.25).
To get the gold/silver numbers back in sync with 20th century numbers of 45:1, silver will have to rise to $25.69.
To get back to the historical average ratio of 15:1, silver would have to rise to $77.08 an oz.
Gold could drop more in price, but since silver tracks gold (with much more volatility) silver would drop as well. The end result would still be a silver/gold ratio out of sync with historical and 20th century norms.
Silver is currently undervalued and much cheaper than historic norms.
The number of ounces of gold it takes to buy one share of the Dow is the Dow/Gold Ratio. For example, at the time of writing this article, the Dow is at 17,835 while gold is US$1,156.20. It requires a record high 15.42 ounces of gold to buy one share of the Dow, so the ratio is 15.42:1.
The National Inflation Association (NIA) reports that the median Dow/gold ratio over the past 100 plus years is 5.83.
The NIA expects a return to the median Dow/gold ratio in 2015. At the time of their report the Dow was at its new all-time nominal high of 17,138. Making gold’s fair value, based on their long term median Dow/gold ratio of 5.83, almost $3,000.00 oz.
If the NIA is correct in its gold price prediction silver would have to rise to US$66.66 to get in line with 20th century gold/silver ratio norms (45:1) and US$200.00 an oz to match the historical 15:1 gold/silver ratio.
Kootenay Silver TSX.V – KTN
Sonora, Mexico – It has been a very busy and fruitful work season in NW Mexico for Kootenay Silver Inc. President and CEO James McDonald, P.Geo and crew.
Late last year, Kootenay Silver (TSX: KTN.V) announced a Phase I drill program (25 HQ diameter core holes with 3173.5 meters of drilling) on its emerging La Negra Diatreme silver prospect in Sonora, Mexico. This hugely successful program returned a series of outstanding high-grade silver intercepts (LN 21-14 Containing from surface and bottomed in mineralization 156.47 gpt Ag over 200 meters including 420.34 gpt Ag over 50 meters from 150 to 200 meters including 1337.66 gpt Ag over 6 meters and 492.30 gpt Ag over 17 meters at the bottom of the hole excluding the 6 meters of 1337 gpt Ag interval) and widespread silver mineralization extending from surface to depth, resulting in a new high-grade silver discovery.
On February 23 of this year, the Company announced it has commenced a follow up 30-hole, 3,000 meter Phase II drill program on the new discovery that if successful, has potential to position La Negra as one of the richest, near-surface, pure silver plays witnessed in NW Mexico over the past decade.
Further fueling the excitement, because the silver mineralization extends from surface to depth, the new discovery is amenable to low-cost open-pit mining.
The Promontorio La Negra prospect is situated 6.5 km’s south of Kootenay’s established M&I 92M oz. silver Eqv. Promontorio resource and is contained within a 25 km x 15 km mineralized corridor known as the ‘Promontorio Mineral Belt’.
La Negra’s silver mineralization is believed to be hosted within a Diatreme breccia pipe, a system type known to contain high-grades and large deposits.
Based on its unique characteristics and the multiple high-grade intercepts observed from Phase I drilling, La Negra is already drawing comparisons to other prolific Diatreme discoveries, such as Silver Standard’s rich Pitarrilla mine in Mexico (15M ounces silver in annual production) and AngloGold Ashanti’s, Cripple Creek deposit in Colorado. (200K+ ounces gold in annual production, Diatreme’s can be either gold or silver).
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