Yesterday I received an e-mail from the CEO of an excellent junior silver producer which I've owned shares in for many years. He pointed out that despite the big hit his and every other silver producer's stock had taken on Monday, that their company was doing just fine, thank you.
That's no surprise, of course, as it's a terrific company...but he picked the wrong moment to e-mail me, as I was still thinking about the tirade I wrote about the precious metal mining companies in 'The Wrap' section of Tuesday's column. If there ever was a case of being in the wrong place at the wrong time, this was certainly it.
Here is my reply...
Thanks for your kind e-mail this morning.
I know that your company, plus others, are selling for ridiculously low prices.
However, I'm not allowed to comment on any one company, as I'm not an analyst. You'd have to take that up with Jeff Clark or Louis James.
I know you read my column every morning, so you will have noted that the entire sector is being abandoned by the investing public...and has nothing to do with your [or anyone else's] assets in the ground...or your excellent company-specific news.
The issue is that the mining industry will not deal with the real problem out there...which you know about all too well...and that's the outrageous short positions held in all four precious metals by a handful of banks...JPMorgan Chase, Bank of Nova Scotia...and HSBC USA.....plus a couple of minor players. Note the attached "Days of World Production to Cover Short Positions" chart.
If those obscene and grotesque short positions weren't there, the prices of all four precious metals would take your breath away, as they would be many multiples of what they are now...and we wouldn't be having this discussion, as the mining companies would be talk of the town...and the executives of same would be like gods. As a cursory glance at the chart will show you, these outrageous short positions exist in only four commodities...the precious metals...and your metal in particular, silver.
You, or a group of silver mining companies working together, are going to have to bell this cat sooner or later. This is where your real fiduciary duty lies...and I know I can speak for all of your stockholders, the real owners of your company, the sooner you get started the better. And if the idea of confronting the "will of Mordor" is too much for you or the industry, there are other ways that you can make a difference. Withholding production or buying into offerings from Sprott or Central Fund of Canada would be a good place to start.
I'll see you at the Vancouver conference in June.
P.S. I still own your company's stock...but on the next major rally, I will be looking for the exits on virtually my entire portfolio, as I'm appalled by how badly your industry has sold their shareholders down the river. I'll buy the metal itself with the proceeds. The investing public shouldn't have to put up with sort of junk...me included.
Poor guy...I'm sure he wasn't expecting an answer like that. I guess that's why I never heard back from him. But it had to be said...and more stockholders should be saying it to every company executive they can find. Most mining companies have a toll-free number...so you know what you have to do. So give your best Howard Beale impression while trying to remain polite and civil.