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Steal MeBob Moriarty Famed yippie Abbie Hoffman wrote a book titled, "Steal this Book," published in 1971. It was so popular that booksellers simply couldn't keep the book in stock. But it didn't sell many copies. No one wanted to reorder the book, no matter how many jumped off the shelf. Readers took the title to heart and, well, they kept stealing the book. The Federal government has committed to an incredible $11.6 trillion dollars so far in cash and government guarantees for a "bailout" program. They are working their butts off keeping the details from the public because if the public understood the looting going on, there would be a revolution in a week. There will be a revolution; it just will be a few months down the road. If we had truth in advertising rules regarding the bailout funds, we would title the money, "Steal Me" because that's what the banks and crooks running the banks think the money is for. Bank of America took over Merrill Lynch on January 1 of this year. They had to accept billions in under the table guarantees before they would do the deal. Merrill Lynch was a 95-year old company before management went off the rails and destroyed America's biggest brokerage company by turning it into a casino dealing in over-the-counter derivatives that no one knew how to price. Merrill managed to lose $15.3 billion in the last quarter of independence before being taken over by BofA in January. But as a gesture of goodwill to the generous taxpayers of the United States, the board of Merrill Lynch voted the awarding of an incredible $3.62 billion in bonuses in early December. Why not? It wasn't company money or shareholder money, it was taxpayer money. In a move of incredible brilliance, Merrill employees only formally booked the $15 billion in markdowns after their bonus was determined. I don't know of many businessmen who believe you should get a bonus for destroying your own company. That's a lot like giving departed President George Bush the Nobel Peace prize and hanging a Medal of Freedom around his neck. I think maybe those container loads of $100 bills came marked, "Steal Me" because that's what the financial looters seem to be reading. This is the greatest period of looting a treasury in history. It's going to be interesting to see how it plays out. What Obama and his group of thugs haven't yet figured out is that the money has to come from somewhere. The taxpayers are tapped out, having suffered a 45% loss in wealth in the last year. The Chinese are starting to act uppity about financing all our stupid wars and you can't possible grow trees fast enough to print all the money Obama has committed. There is a silver lining to this cloud. It's silver. Or gold. Producing companies of silver and gold are about to go through the roof as investors and those few people who still have any savings realize they are being stolen from by their own government. It's not really the government's fault; our government has been hijacked by the financial industry. We live in interesting times, the like of which have never been navigated through before in history. This is the greatest financial disaster ever. It's nowhere near finished; we have some $683 trillion in derivatives that have to be marked to market. When that happens, you can kiss the entire banking system goodbye. It's history, far too big to bail. Obama and the fools surrounding him can throw $100 bills around until the cows come home; all they are doing is feeding the pigs. AIG is back at the trough for the 4th time. By the 10th or 20th time, even the densest taxpayer will get it. They can't be saved. There isn't enough money. But you can protect what you have. I said a couple of days ago that I just came back from a week in Mexico visiting three wonderful companies. My second trip was to the San Jose property of Fortuna Silver. Fortuna Silver
Readers who have been around for a while may well remember my first write-up of Fortuna in September of 2005. You owe it to yourself to go back and reread the piece. I did, I had to, to figure out what I had said. It was interesting reading, I did a good job. The stock ran from about $1.04 a share to almost $4 over the next couple of years. Fortuna got hammered last year but it has nothing to do with the caliber of the projects or the caliber of management or the price of silver. It got hammered because people had to sell anything and everything to raise money and they threw out the baby with the bath water. It got to a point in October that even with a producing mine making money, they were selling for less than the cash they had in the bank. They are still absurdly cheap. So let me reflect on what has happened in the last 3.5 years. Caylloma went into production of lead, zinc and silver. The company did very well and has used the positive cash flow for their new project in Mexico that I just went to see. Jorge Ganoza Durant took over as president and CEO a few years ago. He got the mine back into production and as promised, installed the zinc circuit and increased capacity. Investors don't get the story at Caylloma or the stock would have never traded below a couple of bucks a share. Part of the reason is because the company was focused on Mexico and simply ignored the Peru story believing the numbers told the tale. That is never true. Investors get bored and they want constant reassurance, even when things are going well. Ignore the resource numbers from Peru, they are meaningless. Fortuna shows a total of about 19 million ounces of silver eq. but it's a district with 30 veins to mine and 400 years of history. Anytime they get bored or need a different mixture of silver, lead and zinc, all they have to do is pick another vein. You can track them all on surface. Caylloma will never have big numbers for a resource; it would be a waste of time drilling. They have 8 years production in a resource. That's more than enough. But the interesting thing is that Fortuna knows the various mixes of lead, zinc and silver ore. They can cherry pick a vein to favor whatever one of the three metals gets the highest return. It's a great position to be in. As long as something is economic, it's all economic. But I told the Caylloma story in 2005, I told it well and you should pay attention to what I wrote. Jorge did everything he said he would do. Jorge is estimating production of 1.6 million ounces of silver from Caylloma in 2009 and about 10,000 tones each of lead and zinc. Silver is expected to provide about 50% of the revenue. The San Jose silver-gold project is an advanced exploration play on the verge of being turned into a mine. It has been a past producer under Continuum Resources. Continuum was direct shipping ore to a nearby mill for processing. Fortuna has just completed a takeover of Continuum at year's end 2008. Fortuna now owns 100% of the project. San Jose is a low sulfidation epithermal system. It's very unusual because of its density. The existing mine workings are about 500 meters in strike length and 200 meters deep. The veins are wide, often in excess of 15-20 meters. Grade increases with depth. Fortuna is reporting an average grade of over 260 g/t Ag and over 2.0 g/t Au with about 67 million ounces of silver in 43-101 resources. With those kinds of grades, if you have the cash, you have to make a firm decision to get into production and build a mill. Fortuna has already spent $15 million in ramp development. They estimate the mill will only cost another $30 million. If you believe in the future of gold and silver, the decision has been made for you, you have to produce. I'm really proud of Jorge. Lawrence Roulston and I were the first writers to visit Peru to see Caylloma. Jorge wasn't even the president then. He's young, only 38 now but has generations of experience behind him. I'm thrilled because someone actually followed through with his promises. He did everything he said he would do in Peru and I have little doubt he will do the same in Mexico. They did fall down in communication. Once they had gotten half a dozen people down to write about it, they ignored telling their story and that hurt the stock. If you don't tell your story, you don't have a story. And even though I really like San Jose and I have little doubt it will be a profitable and successful mine, I love Caylloma. It's a cash cow and if they don't screw it up, it will be producing silver lead and zinc 400 years from now. You don't get opportunities like Fortuna at these prices very often. The company has a market cap of about $81 million with $40 million in the bank. They have one operating mine throwing off positive cash flow. That means they don't have to print more shares every time they want another drill hole and that's very good. I have no doubt they will make the production decision soon. Jorge was talking about production in 2011, I'd like to see them try to advance that, it's too good a story to not get into production. With today's prices, the rock is worth about $160 a ton. It's time to produce. We need the gold and silver for the gold standard that is coming. Management is excellent. Jorge has built a great team in both Peru and Mexico. He's young and is going to be running the mining business in 15 years because all the old farts now running mining will have kicked the bucket or gone to Thailand to live at the beach. We are biased. We have participated in several private placements. Fortuna is an advertiser. Take some responsibility for your own financial decisions and do your own diligence. You will like the story. Fortuna Silver Mines, Inc Bob Moriarty 321gold Ltd |
