Small Caps in the Coeur d'Alenes
David Bond
August 25, 2003Mr. Moriarty has graciously offered me space in this most useful of websites for afficiados of God's only currency, 321 Gold. Having learnt much from 321 Gold, I can only hope to pay a bit back.
The smell of the bull is overpowering, so much so that once one becomes accustomed to it he or she begins to ignore it. Folks living next to a mid-summer Wenatchee feedlot know whence I speak. Don't get used to it. Such is the making of peril.
Pay attention. "I've been around, ya know. I am blind now but these eyes have seen," admonishes Al Pacino's character, Col. Slade, in the seminal movie, Scent of A Woman.
Fast reverse to December, 1979, Spokane, Washington, the last respectable annual meeting of the Northwest Mining Association's membership, a confab where deals were done in the elevators and by the water fountain in the main lobby festooned with chirping canaries.
The late Paul Sarnoff (author of The Silver Bull and 30 other investment books) and his lovely wife, Lucy, are holding court with Phil Lindstrom of Hecla Mining Co. and a tyro newspaper reporter.We are discussing child support. Paul avers that he and Lucy stayed together these many years because neither wanted the kids.
"Ya see, Davey," intones Sarnoff. "The Great Wall of China was a magnificent piece of engineering. The Mongols never scaled it, never got in to China that way."
"Ya know how the Mongols breached the wall?
"No, I confessed, I did not." Lindstrom ordered another merlot and a serving of oysters.
"Simple, Davey," Sarnoff said. "The Mongols bribed the gate-keepers with silver. And the gate-keepers let them right through. What the Mongols could not climb, they bought with pieces of silver."
Those were heady times. In the cusp of the next decade, we witnessed Consolidated-Silver go from 10 cents to 10 bucks. Royal Apex climbed out of the pennies into the $5 range.
Deals were being done.
Blue-chip Hecla crawled from near-bankruptcy to the sudden need to sink $30 million into a new shaft at its Lucky Friday silver mine before the taxman took their newfound lucre away. Coeur d'Alene Mines, then-CEO Justin Rice managed to swipe the lucrative Rochester property in Lovelock, Nevada, away from ASARCO based on a single geologist's report. That of E.N. "Penny" Pennebaker, and Rochester hasn't quit giving silver and gold to Coeur ever since.
I took Paul and Lucy underground at the Sunshine Mine later in 1980 as director of PR for Sunshine Mining Co. We all had a blast.
But Nelson Bunker Hunt committed a faux pas. He intimated to a National Geographic reporter that perhaps a silver-backed currency, issued by the Hunts and backed by their physical silver holdings, might be a more stable means of exchange than the fiat currency of the Federal Reserve Bank.
Jimmy Carter's Fed and Treasury Department freaked out, the Commodities and Futures Trading Commission ordered the COMEX to go into liquidation-trading only mode for silver trades, and the bubble burst.
The Hunts were right on fundamentals but wrong on timing. With the prime well into double digits, the last thing Carter needed was a non-fiat currency competing with the Federal Reserve Note. After all, his mentor, Lyndon Johnson, already had dishonored the Silver Certificate.
(As a teenager I used to collect Silver Certificates. Nowhere on one of those bills did I ever detect an expiration date. When in my senior year in high school I attempted to exchange them for silver, I was turned away. About the "full faith and credit of the United States, further affiant saith not." Damned mean thing to do to a high school kid).
This mining camp up here in North Idaho, birthplace of my two daughters, felt the callused back of Carter's hand. Century-old companies folded their tents not for lack of reserves but in reaction to Carter's and successor Ronald Reagan's decision to contain and deflate inflation by breaking the back of the U.S. commodities markets. Silver and gold fell hard. And the Coeur d'Alene Mining District, a staple of this nation's strategic minerals for two world wars and in peacetime, fell hardest.
Our wealth in the ground turned to ash in our mouths as Treasury auctioned off the remainder of America's strategic mineral and precious metal stockpiles, pounding down the price in weekly garage-sales to the kings of Europe until all America's wealth was gone and Fort Knox laid barren.
The Bunker Hill smelter collapsed. So did the Sunshine Mine. The Star Mine. The Con-Sil. The Crescent. The Lucky Friday. The Coeur. The Galena. Silver Valley suicide rates, bankruptcy rates, drug-addiction rates, felony rates, skyrocketed. A cynically small sacrifice to be paid to preserve the fiscal integrity of eight successive American administrations, one supposed. The happy coda to this grim yarn is that not all of America's wealth is gone.
LBJ with his sandwich, base-metal quarters; Nixon with his floated currency and creation of the EPA and wage and price controls to hamstring commodities and new mine development; Ford, Carter, Reagan, Bush, Clinton and Bush XLIII in their acquiescence to the Nixon vision, could only manipulate and thus kill above-ground markets for silver.
They were powerless against our host, Planet Earth.
Below-ground, the stuff's still there and, despite the best efforts of Nixon's et. seq's Environmental Protection Agency and its corrupt governor/administrators, American gold and silver can still be mined.
Take the maligned Coeur d'Alene Mining District of North Idaho. Every geologist worth his salt will tell you that at least one billion ounces of silver exist in known resources and reserves. Less than 10 percent of that district has even been explored! Yet the veins are, though fractious, also continuous. Exploration and mining technologies available to these deposits today, from trackless, rubber-tired mucking to satellite-driven geochemistry render 1960s reserves predictions as irrelevant as those dire 1950s predictions that we'd run out of oil and potable water by 1970.
Astute investors, diligent readers of 321 Gold all, have recently noticed that small-cap companies sitting on what Wright Brothers, vintage exploration technologies might deem "moose pastures" contain an abundance of mineral wealth.
Thus rose Sterling Silver (OTC:SLRM), which has leased the Sunshine Mine 3 miles east of Kellogg, from 40 cents to $4 over the course of four months.
And you heard it first here at 321 Gold.
Think about it. Look at your blue chips. Generally, when a company purchases a property, their stock price falls as the market senses risk and exposure. Precisely the opposite happened with Sterling. And Kimberly Gold. And Shoshone Silver.
"Sonofabitch, I blew it." whined a friend on the phone today, a usually astute gent who bailed on Sterling at $1.75.
"What are you griping about?" I asked. "You got on at 40 cents and sold at $1.75. You made money. Don't bitch at me."
"Well," he grumbled, "It went to four bucks. Find me another Sterling." (A caveat here: I don't own any Sterling although I wished I had, nor do I have any investments in the stocks I am about to discuss. Takes the fun out of speculating.)
Sterling has set sail and made landfall far beyond the horizon of most of us pikers. It's worth $5 and probably worth $20, if you believe the Europeans. It's out of my reach.
Let's make a red-headed stepchild move instead:
Kimberly Gold (OTC: KMGM). Many of the same bunch of astute managers as Sterling, but far more speculative and volatile. Kimberly just got permission from the state and feds to expose veins of gold at the Kimberly gold mine near Riggins, Idaho, and preliminary results look good. Can't remember the last time I was able to write about assays where there's a prime number to the left side of the decimal point, but that's what Kimberly's reporting.
Shoshone Silver (OTC: SHSH). Shhhhh, indeed. Got a press release from them the other day that looked like boiled-over parsley, but Shoshone Silver is anything except a sleeper. Irv Schiller, God rest his soul, fired this company up in the 1960s and snagged a bunch of Wallace and Revett properties south of the Osburn Fault. Shoshone is now widely invested south of the border but is aggressively pursuing properties in the Coeur d'Alene District. Watch these guys. Irv and I used to go picking up rocks (geologic soil-sampling was the dignified term) and I learned a few new ones from him: Leverite and Sexite. Never was made as good a mill-man. Hugely speculative, sell anytime you're above where you've bought, but if SHSH gets serious about a land position in the Coeur d'Alenes, pay attention.
Bunker Hill: Arguably the richest mine in the Coeur d'Alene District and probably the western Hemisphere. A smorgasbord here: Twenty parts Pb to 10 part Zn to one or two parts silver. CEO Robert Hopper is one of the most brilliant mining guys ever ready to swing a pick. He's such a righteous crank that even the EPA is afraid of him. Privately held, if Bunker Hill ever goes public I'm bringing my first-born to the party.
New Jersey Mining Co. (OTC: NJMC) has introduced high-tech exploration into the Coeur d'Alene District. Geophysics, NASA over flights that miss both the forests and the trees to give you a straight picture of the rocks, and a genuine faith in the district. New Jersey also has the only permitted gold mill in the district. Fred and Grant Brackebush are old mining stock and if anybody can find a fat quartz vein, these guys can. Back to the 1970s, Mt. St. Helens, etc. Stuff blows up, once in awhile.
Check your metal price at least twice a day, and if you sense a move, pull up CBSMarketwatch or PinkSheets and then place an order. As Jerome Bunde of Pennaluna said, not long ago, "You've already lost everything, so what else have you got to lose?" Bottom-line: words were never better spoken.
High-rollers and low-rollers, saviors and charlatans, all have traipsed through this mining camp. They've decided it's more fun to diddle with the dollar. And now it's time for you and me to go for the silver and gold.David Bond
Aug 25, 2003Editor's Note: Mr. Bond covers gold and silver mining equities for a number of national and international publishers, including Platts Metals Week, a division of McGraw-Hill. He lives in Wallace, Idaho, heart of the planet's richest silver fields, the Coeur d'Alene Mining District. He is former editor of the Wallace Miner, and holds regional and national firsts in investigative journalism from the Atlantic City Press Club (National Headliner) and from the Society of Professional Journalists (SDX/SPJ) and has edited or written for newspapers on both coasts, Canada and Alaska.