- Read the full article at King World News, here:
Wednesday, November 30, 2011
Eric Sprott - Silver Producers: A Call to Action
“If they were to reinvest all their earnings back into silver, it would shrink available 2011 investment supply by 82%... Silver miners need to acknowledge that investors buy their shares because they believe the price of silver is going higher. We certainly do, and we are extremely active in the silver equity space. We would never buy these stocks if we didn’t. Nothing would please us more than to see these companies begin to hold a portion of their cash reserves in the very metal they produce. Silver is just another form of currency today, after all, and a superior one at that.”
Saturday, November 26, 2011
Billionaire Eric Sprott Asking Silver Producers to Save in Silver
“All you know is that there’s only a couple of things that you have to have your money in to be safe. For example, I’m writing a letter basically suggesting to the silver producers, you know you guys have all of this money in banks, why do you have it in banks?
Put it into silver, it’s a way better asset than having a bank deposit that pays zero interest rate and you take all of the risk of the bank on. You know if enough people accept that thinking, I mean, at the margin, you bring all of those buyers in (to silver), who knows where the price is going to go? But it won’t bear any relationship to where it is today.”
Put it into silver, it’s a way better asset than having a bank deposit that pays zero interest rate and you take all of the risk of the bank on. You know if enough people accept that thinking, I mean, at the margin, you bring all of those buyers in (to silver), who knows where the price is going to go? But it won’t bear any relationship to where it is today.”
- Read the full interview at King World News, here:
Tuesday, November 22, 2011
Sprott to Buy $1.5B of Silver Bullion
As the silver and gold price predictably fade ahead of option expiration, JP Morgan’s bullion manipulation scheme could be headed for unprecedented problems, not from the record purchases of gold and silver from the Chinese, Indians or Russians, but from one Canadian billionaire.
Canadian-based Eric Sprott Management CEO Eric Sprott filed a follow up prospectus for the purchase of an additional $1.5 billion of silver bullion to cover expected demand for the company’s exchange traded fund, PSLV...
Canadian-based Eric Sprott Management CEO Eric Sprott filed a follow up prospectus for the purchase of an additional $1.5 billion of silver bullion to cover expected demand for the company’s exchange traded fund, PSLV...
- Read the full story here:
Saturday, November 19, 2011
This Will Be The Decade Of Silver - Interview With Eric Sprott
Well, I have to beg to differ with the word ‘intelligent plan’, because I don’t think there is an intelligent plan. In fact I think we all now know that most plans have not worked and created a very difficult situation for the average person in the world and has exacerbated the problem in the banking world. So, they’re going to come up with a plan, it won’t be an intelligent plan. I don’t think solving a debt problem is solved by more debt and leveraging, which is what’s being discussed in Europe today. But either way, as I said before, I don’t think the impetus will be for precious metal prices to rise, if I had to predict, I certainly would believe that silver would be above $50 next year and that gold certainly would be above $2000 and it could be substantially higher than that. It’s a question of how irresponsible governments are and maybe we will find out there is a Eurpoean plan, and then 3 or 4 months later, there is an American plan where we get QE3. It’s hard to know where it’s going to go because we don’t know how irresponsible the governments are going to be, but they are tending to be irresponsible, therefore you would think there would be lots of impetus for higher prices...
- Read the full interview here:
Thursday, November 10, 2011
Sprott Inc. likes gold stocks as they trail bullion
Money management firm Sprott Inc. sees the performance gap between gold stocks and bullion as an opportunity.
Sprott is "confident in its physical metals position and believe the current market environment presents unique opportunities to invest in precious metals-related equities, many of which are trading at historically wide spreads to bullion prices," Sprott chief executive officer Peter Grosskopf said as the firm released third-quarter results...
Sprott is "confident in its physical metals position and believe the current market environment presents unique opportunities to invest in precious metals-related equities, many of which are trading at historically wide spreads to bullion prices," Sprott chief executive officer Peter Grosskopf said as the firm released third-quarter results...
- Read the full story at the Globe and Mail, here:
Tuesday, November 8, 2011
Eric Sprott talks to James Turk in Munich
Eric Sprott, Chairman of Sprott Asset Management, and James Turk, Director of the GoldMoney Foundation, meet in Munich and talk about the Munich Precious metals conference (Edelmetallmesse). They comment on Eric Sprott's speech at the conference and how increasing interventions by central banks, from zero interest rates to money printing and bond buying have completely distorted the financial markets.
They speak about the very hard choices between austerity and increasing stimulus and how both will bring on a meltdown, whether bankruptcy or hyperinflation brought on by money printing. They talk about the huge leverage in the banking system and the risk inherent in the system. People are only now starting to understand counterparty risk. They explain that 20-to-1 and even higher leverage is common in the banking system.
They talk about the disparities between the physical market and the paper silver markets. Eric talks about supply and demand and how the upward pressures on silver price from demand growing much faster than supply are not being accurately reflected. A 900 million ounce silver supply simply cannot cope with a 380 million ounce increase in demand and maintain current prices. Eric also explains that investment sales of silver are 50 to 1 in volume compared to gold and that this means a decreasing gold/silver ratio.
They talk about Eric's book and how his analysis shows that the US government, with a GDP of 15 trillion, has liabilities of almost 80 trillion and that these promises will be broken just as the Greek government is breaking its commitments.
They talk about the short-term focus of political decisions and the bad omens for the dollar as a world reserve currency. Kicking the can down the road is increasingly not an option for bankrupt governments, as even the bond markets are increasingly uncooperative with new stimulus efforts. As an example the recent failed attempt by the EFSF to raise 3 billion. They talk about the IMF creating $280 Billion SDRs out of thin air and ask whether that will keep the party going a bit longer.
This interview was recorded on November 4th 2011 in Munich.
Thursday, November 3, 2011
EXCLUSIVE INTERVIEW WITH ERIC SPROTT CONCERNING SILVER PRICE OUTLOOK
Patrick MontesDeOca chats with Eric Sprott in this exclusive interview that took place at the Silver Summit in Spokane, Washington the week of October 17, 2011. Mr. Sprott speaks in riveting detail about the Silver Market and it's outlook through this year and next, in this not-to-be-missed interview.
Friday, October 21, 2011
Monday, October 17, 2011
Sprott Launches Corporate Class, New Fund
"Sprott Asset Management has launched Sprott Corporate Class Inc., a mutual fund corporation which will allow investors to switch between investment mandates without triggering a taxable disposition.
As part of the launch, the company is also offering a new mandate, the Sprott Resource Class, which will be managed by Eric Sprott, Rick Rule, Paul Wong, Charles Oliver, Jamie Horvat and Eric Nuttall. The fund will also serve as the rollover vehicle for Sprott’s Flow-Through limited partnerships."
As part of the launch, the company is also offering a new mandate, the Sprott Resource Class, which will be managed by Eric Sprott, Rick Rule, Paul Wong, Charles Oliver, Jamie Horvat and Eric Nuttall. The fund will also serve as the rollover vehicle for Sprott’s Flow-Through limited partnerships."
- Read the full article here:
Thursday, October 13, 2011
Why have the Gold Equities Lagged?
Why have the gold equities lagged? Eric Sprott provided a few reasons and what he is doing about it:
First and foremost: the sell-side’s abysmal gold price estimates. While the futures market is comfortably forecasting a continuation of today’s levels, the majority of sell-side analysts refuse to update their gold price estimates to reflect its recent strength. A rising gold price is normally a bad sign for the broader equity markets, and generally indicates a bearish trend. As bears ourselves, we’re completely fine with this, and invest accordingly. But the sell-side has difficulty pairing bearishness with new underwriting opportunities. It doesn’t mean you have to believe their price forecasts however.
The second reason is gold’s volatility. The amount of paper gold and silver contracts that trade on the futures and equities exchanges still dwarf the amount of actual physical trading that takes place. Paper markets continue to set price discovery – thereby allowing for dramatic volatility with little or no influence from actual physical fundamentals. In the LBMA market, for example, market participants traded an average 19.6 million ounces of gold PER DAY in July 2011.1,2 Keep in mind that the total gold mine production in 2010, globally, was approximately 86.5 million ounces. Global gold mine production is not expected to increase significantly year-over-year, so the LBMA is essentially trading a year’s worth of production in less than a week. And this is just ONE market. When you add the COMEX futures and gold ETFs, the paper trading volume becomes absurdly high. When price discovery is dictated by levered paper contracts with no physical backing, it’s extremely easy and relatively inexpensive to jostle the spot price around. The result for gold has been many days of extreme downside volatility, despite a strong and consistent overall upward trend. Investors don’t like volatility – and the constant whipsawing has probably kept many of them away from the gold equity sector as a result.
Thirdly – investors still remember how badly gold equities got crushed in 2008. There was a reason they sold off so aggressively however – they were the most profitable positions investors owned going into the ‘08 crisis. Gold equities had enjoyed a strong bull trend going back to 2001, with the HUI Index appreciating by 980% from its November 2000 low through to August 2008. Investor behaviour is fairly consistent – when panic hits, you sell your winning positions first.
In many of the funds we manage at Sprott, we’ve transitioned out of gold bullion and into gold equities to better participate in the continuation of the trend indicated above. As long-time investors in this space, we can assure you that the production growth rates will be significantly higher in the junior stocks. They continue to trade at discounted valuations, and we believe they offer the best opportunity to build exposure. Margin expansion is the key metric for this industry, and the market is now acknowledging the miners’ improvement in margin capture – which has occurred despite the increase in capital and operating costs. We meet with a large number of gold mining management teams on a weekly basis, and based on those meetings, it appears that the average cost of producing an ounce of gold today, all in, is now around $800. At $1,200 gold, these companies can capture roughly $400 in EBITDA. At $1800 gold, however, they’re now capturing $1,000 per ounce in EBITDA - representing an increase of 150% in profit margin. That is significantly far above what any other equity sector has been able to generate over the past year.
Amazingly – despite this new reality for gold producers, we are still finding opportunities in select gold and silver mining companies that can be purchased today at 2-3 times their 2-year-out forecasted cash flow. These multiples are based on the current gold and silver spot price, and if these companies hit their production targets, and gold and silver continue their appreciation – we may discover that these stocks were trading at less than 1 times 2-year-out cash flow today. Having been in the business for many years, we can tell you that investing in a stock at 1 times 2-year-out cash flow tends to be a winning proposition – let alone in an industry that literally mines the world’s reserve currency out of the ground.
In our view, gold stocks represent a bona fide growth sector in an otherwise dreadful equity market. All other equity sectors are weakening due to sovereign uncertainty and the reemergence of soundly weak economic data. The recent disconnect between gold equities and bullion isn’t new either. We’ve seen it before over the past decade, and the returns generated after previous divergences have averaged around 26% (see Table 2). Given the recent performance correlations, the HUI’s breakout above 600 and spot gold now firmly above $1600, we expect this rebound in gold equities to be prolonged and much more significant in percentage terms.
Equity investors shouldn’t let $1800 gold dissuade them from participating in precious metals equities. The world is still dramatically underexposed to gold, and we firmly believe it should represent a higher percentage of investors’ total portfolios today. The fact remains that both gold and silver continue to trade well below their inflation-adjusted highs in nominal terms, and the market is now beginning to acknowledge the profit potential that precious metals equities offer at today’s bullion prices. We believe the equities will offer more upside than the bullion over time. Many of the smaller names are well priced and have momentum behind them. The prospects for gold stocks look extremely bright.
First and foremost: the sell-side’s abysmal gold price estimates. While the futures market is comfortably forecasting a continuation of today’s levels, the majority of sell-side analysts refuse to update their gold price estimates to reflect its recent strength. A rising gold price is normally a bad sign for the broader equity markets, and generally indicates a bearish trend. As bears ourselves, we’re completely fine with this, and invest accordingly. But the sell-side has difficulty pairing bearishness with new underwriting opportunities. It doesn’t mean you have to believe their price forecasts however.
The second reason is gold’s volatility. The amount of paper gold and silver contracts that trade on the futures and equities exchanges still dwarf the amount of actual physical trading that takes place. Paper markets continue to set price discovery – thereby allowing for dramatic volatility with little or no influence from actual physical fundamentals. In the LBMA market, for example, market participants traded an average 19.6 million ounces of gold PER DAY in July 2011.1,2 Keep in mind that the total gold mine production in 2010, globally, was approximately 86.5 million ounces. Global gold mine production is not expected to increase significantly year-over-year, so the LBMA is essentially trading a year’s worth of production in less than a week. And this is just ONE market. When you add the COMEX futures and gold ETFs, the paper trading volume becomes absurdly high. When price discovery is dictated by levered paper contracts with no physical backing, it’s extremely easy and relatively inexpensive to jostle the spot price around. The result for gold has been many days of extreme downside volatility, despite a strong and consistent overall upward trend. Investors don’t like volatility – and the constant whipsawing has probably kept many of them away from the gold equity sector as a result.
Thirdly – investors still remember how badly gold equities got crushed in 2008. There was a reason they sold off so aggressively however – they were the most profitable positions investors owned going into the ‘08 crisis. Gold equities had enjoyed a strong bull trend going back to 2001, with the HUI Index appreciating by 980% from its November 2000 low through to August 2008. Investor behaviour is fairly consistent – when panic hits, you sell your winning positions first.
In many of the funds we manage at Sprott, we’ve transitioned out of gold bullion and into gold equities to better participate in the continuation of the trend indicated above. As long-time investors in this space, we can assure you that the production growth rates will be significantly higher in the junior stocks. They continue to trade at discounted valuations, and we believe they offer the best opportunity to build exposure. Margin expansion is the key metric for this industry, and the market is now acknowledging the miners’ improvement in margin capture – which has occurred despite the increase in capital and operating costs. We meet with a large number of gold mining management teams on a weekly basis, and based on those meetings, it appears that the average cost of producing an ounce of gold today, all in, is now around $800. At $1,200 gold, these companies can capture roughly $400 in EBITDA. At $1800 gold, however, they’re now capturing $1,000 per ounce in EBITDA - representing an increase of 150% in profit margin. That is significantly far above what any other equity sector has been able to generate over the past year.
Amazingly – despite this new reality for gold producers, we are still finding opportunities in select gold and silver mining companies that can be purchased today at 2-3 times their 2-year-out forecasted cash flow. These multiples are based on the current gold and silver spot price, and if these companies hit their production targets, and gold and silver continue their appreciation – we may discover that these stocks were trading at less than 1 times 2-year-out cash flow today. Having been in the business for many years, we can tell you that investing in a stock at 1 times 2-year-out cash flow tends to be a winning proposition – let alone in an industry that literally mines the world’s reserve currency out of the ground.
In our view, gold stocks represent a bona fide growth sector in an otherwise dreadful equity market. All other equity sectors are weakening due to sovereign uncertainty and the reemergence of soundly weak economic data. The recent disconnect between gold equities and bullion isn’t new either. We’ve seen it before over the past decade, and the returns generated after previous divergences have averaged around 26% (see Table 2). Given the recent performance correlations, the HUI’s breakout above 600 and spot gold now firmly above $1600, we expect this rebound in gold equities to be prolonged and much more significant in percentage terms.
Equity investors shouldn’t let $1800 gold dissuade them from participating in precious metals equities. The world is still dramatically underexposed to gold, and we firmly believe it should represent a higher percentage of investors’ total portfolios today. The fact remains that both gold and silver continue to trade well below their inflation-adjusted highs in nominal terms, and the market is now beginning to acknowledge the profit potential that precious metals equities offer at today’s bullion prices. We believe the equities will offer more upside than the bullion over time. Many of the smaller names are well priced and have momentum behind them. The prospects for gold stocks look extremely bright.
Read the full article here:
Sunday, October 9, 2011
Tuesday, September 27, 2011
Eric Sprott backs Carney in Dimon spat
"In the fight to put risk-limiting regulations on banks, Mark Carney has a big name in his corner: Eric Sprott.
After Mr. Carney ended up in a well-publicized argument with JP Morgan Chase chief executive officer Jamie Dimon about whether regulators are on the right track, Mr. Sprott wrote an open letter to The Globe and Mail backing Mr. Carney."
After Mr. Carney ended up in a well-publicized argument with JP Morgan Chase chief executive officer Jamie Dimon about whether regulators are on the right track, Mr. Sprott wrote an open letter to The Globe and Mail backing Mr. Carney."
Letter:
Dear Sir,
I wish to express my firm support for Mark Carney’s recent financial regulation speech in Washington. Despite Mr. Dimon’s alleged criticism of Mr. Carney’s remarks, the fact remains that we would not be in the present situation today were it not for the excessive overleverage and flagrant misappropriation of capital undertaken by the world’s largest banking corporations.
It has been our view for many years that the world’s largest banks are operating with leverage ratios of over 20-to-1. We are now in an environment where all financial assets, including currencies, can change 5-10% in a single week (many change by that percentage in a single day – see the Swiss Franc’s 9.5% depreciation against the US dollar on September 6th, 2011). With volatility of that magnitude, the practice of maintaining such leverage is not only imprudent, it is irresponsible.
We have long maintained that all banks should make stronger efforts to bolster their capital reserves. It should not be the responsibility of government to rescue these corporations if they continue to make the same mistakes, and engage in the same risks, year after year. In that vein, we must also question why banks were allowed to reinstate their dividends so quickly after the 2008 crisis. In France, for example, where French banks are currently experiencing deposit withdrawals, one wonders how much stronger they would be today had they initiated a more prudent recapitalization policy.
In our opinion, the current economic crisis is still, at its heart, a banking crisis. Mr. Dimon’s alleged criticism reflects his inability to acknowledge this. Banking regulation is a wholly crucial issue and we stand behind Mr. Carney’s attempts to address it.
Yours sincerely,
Eric Sprott, FCA
Sprott Asset Management LP
200 Bay Street, Suite 2700
Dear Sir,
I wish to express my firm support for Mark Carney’s recent financial regulation speech in Washington. Despite Mr. Dimon’s alleged criticism of Mr. Carney’s remarks, the fact remains that we would not be in the present situation today were it not for the excessive overleverage and flagrant misappropriation of capital undertaken by the world’s largest banking corporations.
It has been our view for many years that the world’s largest banks are operating with leverage ratios of over 20-to-1. We are now in an environment where all financial assets, including currencies, can change 5-10% in a single week (many change by that percentage in a single day – see the Swiss Franc’s 9.5% depreciation against the US dollar on September 6th, 2011). With volatility of that magnitude, the practice of maintaining such leverage is not only imprudent, it is irresponsible.
We have long maintained that all banks should make stronger efforts to bolster their capital reserves. It should not be the responsibility of government to rescue these corporations if they continue to make the same mistakes, and engage in the same risks, year after year. In that vein, we must also question why banks were allowed to reinstate their dividends so quickly after the 2008 crisis. In France, for example, where French banks are currently experiencing deposit withdrawals, one wonders how much stronger they would be today had they initiated a more prudent recapitalization policy.
In our opinion, the current economic crisis is still, at its heart, a banking crisis. Mr. Dimon’s alleged criticism reflects his inability to acknowledge this. Banking regulation is a wholly crucial issue and we stand behind Mr. Carney’s attempts to address it.
Yours sincerely,
Eric Sprott, FCA
Sprott Asset Management LP
200 Bay Street, Suite 2700
Read the full article at the Globe and Mail here:
Like this article? Digg it!
Subscribe to:
Posts (Atom)