Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Junior Precious Metals Mining Companies Risk

Commodities / Gold & Silver Stocks May 02, 2008 - 07:49 PM GMT

By: David_Morgan

Commodities

Dear David,

Thank you very much for your hard work and excellent research. Your level approach to the metals has long been a beacon to follow. 

Thank you. 


I am writing to inquire about your opinion of the coming need for companies to follow the FASB-157 accounting rules. There has been some speculation on Web forums (such as PrudentBear Chat) that there could be some fall out in the coming months as companies which have been calling derivatives and other "mark to model" assets cash and short-term cash on their balance sheets. 

What level of risk is there that the junior mining companies might be bitten by this bug-bear? I would imagine that any producing mines could simply point to their ounces in production as an offset to any suddenly weakened assets that come to light via FASB-157, but wonder what impact this might have on the junior sector as a whole. Kind regards, 

Chris 

Comment: Thank you for the kind words. A lot of what makes my work so enjoyable is hearing from subscribers such as you. Soon after the initial fallout of the derivatives mess last fall, which several prominent resource sector writers such as Jim Sinclair and Greg McCoach (and I) have been railing against for some time, a number of the mining companies we follow were quick to assure shareholders that they did not have exposure to these financial time bombs.

You are correct to wonder if, as the new accounting rules take effect, this might be a cause for concern. My studied response is as follows: First, I don't believe that our sector has seen the level of participation in these investment vehicles that has been taking place in, say, financial houses, pension plans, and banks. Second, there is a simple way to find out . . . go to their Web site and see if they mention their involvement, or lack thereof, in these derivatives. If they don't have a statement, call the IR of the company in question and ask them point-blank. I think you will find them to be upfront about it. (And if they aren't, that tells you something too, doesn't it?)

Actually I am much less worried that the sector will be tarred with this brush than I am about the ability of many of these “blue sky” explorers to raise the cash they need to keep drilling. Money is going to be harder to come by, it will cost more to get it, and shareholders will expect to see tangible results for the expenditures. If a company is not looking to either start production by themselves, JV with a major on a project, or at least have some very good-looking property to prove up over the next 12-18 months, they could be in real trouble. 

My longer term view is as expressed in the past columns, we will see higher precious metals prices by year end, but may see the summer doldrums again this year. Four known metals personalities were recently on a “Metals Roundtable” sponsored by Financial Sense News Hour. Each of us were asked to forecast the gold and silver price by the end of the year, and without exception all of us saw gold over the recent high of $1000 per ounce, and silver over $21 per ounce. 

By David Morgan,
Silver-Investor.com

Mr. Morgan has been published in The Herald Tribune , Futures magazine, The Gold Newsletter , Resource Consultants , Resource World , Investment Rarities , The Idaho Observer , Barron's , and The Wall Street Journal . Mr. Morgan does weekly Money, Metals and Mining Review for Kitco. He is hosted monthly on Financial Sense with Jim Puplava. Mr. Morgan was published in the Global Investor regarding Ten Rules of Silver Investing , which you can receive for free. His book Get the Skinny on Silver Investing is available on Amazon or the link provided. His private Internet-only newsletter, The Morgan Report , is $129.99 annually.

Contact information: silverguru22@hotmail.com , http://silver-investor.com

Disclaimer: The opinions expressed above are not intended to be taken as investment advice. It is to be taken as opinion only and I encourage you to complete your own due diligence when making an investment decision.

David Morgan Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in