Yesterday silver opened at 18.01 and this morning it's at 19.09 as I type this. One day I'm thinking about the Battle of Trafalgar and maybe Waterloo, and the next day the American Civil War goes by in a flash, along with the rest of the 19th century. Maybe some of the big shorts on the Comex got overrun and had to cover. Given the lack of transparency we may never know.
But here's what $19 silver DOES mean: Pirquitas will be extremely profitable. I have looked at the numbers again, and this project was updated a few months ago with silver projected at $9.35, tin at 3.65/lb and zinc at 1.02/lb for the life of the project. At the time, silver was actually at 14.55 and tin at 7.28 (now $8+) Because of the base metal credits, the cost of silver is negative. Not just the cash cost of producing silver, but all costs. Pirquitas would be profitable even if they never found an ounce of silver there. As it stands, Pirquitas is expected to produce 10 million ounces of silver a year for ten years, all of it for free, since the base metal credits cover the costs of production, and then some.
So given today's silver price, whoops it's 19.15 now, Pirquitas could throw off nearly $2 billion in cash flow. So the increase in capex from $140 to $220 isn't really that big a deal, nor is the company losing up the $57 million on that ABCP exposure. A couple of years ago at a shareholder meeting, we asked RQ to keep some more of the company's liquid assets in silver bullion, but he wouldn't listen. I guess no one's perfect.
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