 Trip notes from Idaho's Silver Valley
Sean Rakhimov
2 August, 2004
I recently had the occasion
to visit Idaho's famed Silver Valley, what could possibly be
the area play of the 21st century. For now it's barely noticed
in the precious metals community and not at all by the general
public. One crosses into Silver Valley (via highway 90) and enters
a bubbling cauldron of silver-related activity. Real estate prices
are on the rise (yes, Virginia, some houses now cost $100,000
there). Locals gather daily for drinks and chatter at various
Wallace cafés, bars and restaurants. I was fortunate to
join a couple of such outings. Here are some bits of information
extracted from the conversations that readers might find interesting:
a) Silver Valley goes through booms and busts inline with corresponding
cycles in metals mined in the area - mainly silver, but also
lead, zinc and gold. Presently, the district happens to be coming
out of its worst slump ever.
b) Pickup in the exploration/mining activity is obvious.
c) Pickup in the non-mining life and activity is unquestionable.
New businesses are being formed or contemplated, old ones are
being revived and a new spring in the walk of the populace is
evident.
d) Prices on commercial real estate in Wallace have roughly doubled
in the last year. This boom has little to do with real estate
booms elsewhere in the country, as it is driven by local development
factors, not by "own a house at any price" craze.
e) Most people in the area own shares of local mining companies
and think the area will thrive with silver price sustained above
$8.
f) More importantly, the population understands and welcomes
mining. There is a craze of entirely different nature taking
hold of the district. Silver in the form of 10 Sterlings coin
is being used in the towns and hamlets of the valley. More and
more businesses are getting on board and adopting silver as means
of payment. You can buy breakfast, lunch and dinner with silver
and wash it down with drinks of the silver revolution paid for
in silver. (Manic revolutionists amongst the sturdy populace
are actually determining the "official drinks" of the
revolution, while tipping the waitress in silver).
Imagine sitting down for dinner, and everyone at the table takes
his silver out and puts it on the table. Craziness? - Perhaps.
But the locals believe this boom will compare to 1968 and 1979/80
like tsunami compares to a mild ripple. Try buying a commercial
building in Wallace, a.k.a. "the capital of the revolution."
Just try. None for sale. They tell me only 15 months ago you
could pick one up for a song!
Claim staking rush is under way in the hills. Bunker Hill's famed
Bob Hopper has his own radio show (see www.silverminers.com).
Some 125 local mining stocks that investors chased up to dizzying
heights in 1980, are now down to less than 20, and these are
steadily rising without anyone really paying attention. Major
silver companies Hecla Mining and Coeur D'Alene Mines went from
being penny stocks to sporting market caps over $1 billion in
three short years. And silver hasn't broken $10 yet. Mineral
exploration is expanding for the first time in many years, and
is now starting to spread district-wide. Another number of 1
billion got my attention. That's where whispers among local mining
industry insiders put silver ounces in the ground. You read that
right. One billion ounces of silver is waiting to be mined in
those hills. They can't say it out loud. I just did.
What is so special about the Silver Valley? Silver runs deep
here, and recorded production compares favorably to any other
district in the world. Most geologists agree - there is a lot
more silver underground. It is a fact that these hills have never
been explored using modern techniques, and the "upper country"
has not been explored for decades. Existing mines kept getting
such rich grades underground that they didn't bother with exploration
of the "upper country" (up the hill). Often up to 3,000
feet. Every commentator agrees that above ground supplies of
silver are declining. When production is less than consumption
this must be true. So what if silver price is taking its sweet
time to take off? Better for the rest of us investors! I have
read Dave Bond's articles, and thought he was exaggerating the
potential of the area. Now being in the valley and having seen
things on and in the ground (I toured the Sunshine and Bunker
Hill mines) I think he was underestimating it.
Silver Valley stocks exploded in 2003/2004. Sterling Mining went
from $0.35 to $14 before settling at $6 in the recent correction,
Merger Mines went from $.03 to $1.35, Chester Mining from under
$.50 to $6, you get the idea - percentage returns can dwarf investments
elsewhere by a long shot. The good news is most of these stocks
are still unknown. You would think after trading these stocks
since 1880's locals know a thing or two about these stocks. I
think they do. Many of these stocks have razor thin floats, good
land positions, and compared to 1980 little competition for investor
dollars. Remember even the precious metals community hasn't fully
participated yet, what do you think will happen when the general
public realizes silver is on the move?
I met with writer Dave Bond who introduced me to the silver fraternity.
Surprisingly friendly when they have the time, most are working
day and night to position themselves before the boom starts in
earnest. Ok, so maybe the famous analysts have the latest Tanzanian
potential gold bonanza to tout, and maybe they do not own shares,
and maybe they have the latest drill results to shout about.
But what about the elephant in the room - the Silver Valley?
They have everything they need to mine every ounce of metal in
those hills. If you're a silver bull, and you ought to be if
you read thus far, do yourself a favor, look it up.
Buy silver? Buy stocks? Buy one? Buy all? They will all go up
in a silver boom (I hesitate to predict when it occurs, read
the experts, hah). If there is one point I brought home, it's
this: why buy exploration companies kicking dirt in the middle
of nowhere that may never find anything, when you can buy companies
with proven properties, great infrastructure, in mining friendly
area with low cost of living, ready labor and what have you,
at comparable prices or cheaper? What is the down side risk?
Whatever the risk, it sure as hell is no greater than in many
high fliers with properties elsewhere around the world. And it
sure as hell is not in finding the metal. The ounces are there!
I give no recommendations. That is your job and the job of your
advisors. But if you hear, as I did, Ray DeMotte of Sterling
Mining say "You are standing on 185 million ounces of silver,"
you might want to call your broker and ask how it measures up
against other silver positions in your portfolio.
And if you want to hear it first hand, they are having an investment
summit in September (see www.thesilversummit.com). Just remember
to stock up on Silver Sterlings before you hit the town. Rumor
has it shops in Wallace will refuse to take greenbacks for a
day. A revolution? You betcha! A silver revolution.
Do I own some of these stocks? No, I own most of them! If you
are like me looking for the American Dream, right now dreams
are coming true in Northern Idaho.
2 August, 2004
Sean Rakhimov
Sean Rakhimov
is an individual investor who lives in NY and writes market commentary
for a Russian internet web site RussianNY.com. Sean was born
in Uzbekistan in the former Soviet Union and immigrated to the
US in 1995. He has worked as computer programmer for various
Wall Street investment banks where he became interested in financial
markets and has been studying them since.
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321gold Inc
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