December 3, 2017
December 3, 2017


Thank you for your thoughts on silver becoming overheated. In the context that you described silver, is Uranium a commodity that has favorable factors? I see the number of new reactors scheduled to come online over the next 10 years as out running the supply from mining. I believe it already is but the industry is relying on weapons decommissioning to make up for the shortfall. Is my thinking straight here?

It’s tough to say. When I was buying uranium shares in 2004, the price of Uranium was $16. I felt I couldn’t go wrong. Now it isn’t that easy. There’s a whole lot of supply out there in weapons programs. It’s hard for me to get real excited about uranium honestly. Too political and too many moving pieces. I like easier plays. Besides, everyone knows the uranium story. Once something gets played out like this, the upside is often priced in by the ‘experts.’ Then again, the cost of producing uranium is near the current price, which makes it at least worth paying attention to. I just don’t know what the catalyst is. I’d put it in the too hard pile.

This great graphic in the NYT blew me away. Even if you bought the market at the depths of the Great Depression, your long term returns are just not there. Lesson 1 – buying “the market” mostly doesn’t work. Lesson 2 – inflation matters.


You need to be an active investor and you need to be in the right companies. This article proves that. You want small companies with a secular tailwind, high returns on capital and management with skin in the game–make sure you don’t overpay. It’s the magic formula for making money.

Great article today on silver. When you say the crazy phase is just around the corner do you have an idea on time-frame? Perhaps more importantly, what price are you considering moving out of your silver position? Many thanks for all your articles!

I’m not really sure on time frame. It sort of feels like we’re already entering the silly phase. Silver is up 50% in just a few months…I don’t believe in target prices. I will sell when the valuation no longer makes sense.

I was thinking along the same lines re silver cost and supply/demand gap but wasn’t smart enough not to sell in December! Having said that, I think gold has supply constraints and isn’t so stretched with respect to the gap between cost to produce and the current selling price. Also as a potential safe haven/currency some of the rules that apply to commodities may not apply as strongly here. Would you agree?

Agree completely. There isn’t much gold supply coming in the next few years either. Nothing like in the silver market. I much prefer gold at these prices, but think that both markets are ahead of themselves here.

What did you think of Faber’s latest report on Uranium stocks?   You said you were going to revisit it.   Also, I know it is a mining stock but marc likes SouthGobi, a Mongolian company.   Have you looked at it?

Uranium could be interesting, I just feel like there are easier ways to make money. I’ve looked at SoughGobi. I prefer Tavan Tolgoi TTL MO (which I own a few of). It’s low single digit PE and double digit dividend yield. It’s also growing like kudzu.

Kuppy, What do you recommend as a better way of financing future growth than a bought deal?

Companies in America raise money all the time. They do marketed deals where the company spends a few weeks travelling around the country telling the story and building up an order book. Then you get good long-term shareholders. Also, you don’t have to give away warrants just to get a deal done. Look at what Andean did on their most recent financing. They didn’t give up warrants because they did not need to. Brokers like you to give away warrants because it makes their job easier. They’re getting millions in fees–they should do their job. It’s not like Energold was a hard deal to sell. It was many times oversubscribed. So why give out warrants if you don’t need to? The broker is supposed to help the company navigate the capital markets–the broker just preyed on the company instead.

Regarding AUY, I seem to remember that you said it is trading for a low multiple of price to cash flow. I just picked up the company’s 9 month interim report, and saw that it had

Cash flow operations: 380 mm
CapX 301 mm

Which doesn’t leave much free cash/ share with 740mm shares out. Okay, I get that free cash was negative in the year earlier 9 month period, so there is a real swing which the continuing gold price rise should accentuate. But… unless I am missing something, AUY is not cheap on a price/ free cash multiple, yet. What am I getting wrong? Kindly let me know.

Welcome to mining…. You aren’t missing much. It’s really an awful business.

To grow the business, they need to spend heavily on cap-ex, drilling, etc. If you strip out the growth cap-ex from the maitenance cap-ex, you will see that AUY is at a low multiple on 2011 cash flow. Especially as production is supposed to ramp up next year.