It’s Shocking How Undervalued Junior Miners Are

Hedge fund manager Eric Sprott’s speech at last week’s Silver Summit turned a room full of nervous precious metals owners into pumped-up silver buyers. Highlights are posted below.

• Ten times more silver than gold is produced each year, and the ratio in the earth’s crust is 15:1, so how can the price be 50:1? Expect a return to the historical norm of 15:1, which implies that silver will outperform gold.

• The demand/supply picture has seen a 380 million ounce per year positive swing — in a 900 million ounce market. Where is the silver coming from?

• The paper silver markets trade a billion ounces a day and the world only produces 900 million in a year. The amount available for settlement of these futures contracts is something like 1.5 million ounces, ludicrously little compared to the amount of paper.

• “On the physical side I’m seeing only buyers.”

• “There are a lot more people who can afford a one-ounce silver coin than an ounce of gold.”

• Gold will be a reserve currency and silver will also play a role.

• “We tried to buy 15 million ounces of silver and had to wait three months — and some of the silver we got was manufactured after we ordered. So there’s not a lot of silver sitting on shelves waiting for people to buy it.”

• “Somewhere along the line some manufacturer will say ‘I can’t get the silver I want’ and the jig’s up.”

• People will prefer gold and silver to having money in a bank where there’s tremendous counterparty risk. Three months ago Dexia was considered to be the best capitalized European bank and now they’ve been nationalized.

• “You go to some of the biggest names who own gold and ask them about silver and a lot of them haven’t even looked at it.”

• Central banks are selling gold surreptitiously.