First let me make one thing clear, I am long this stock, and it hurts to see it underperforming SLV and Silver in general. Although, supposedly every $1 increase in silver is a $1 increase for SLW in a lot of its contracts with "small inflationary adjustments".
However, the way I see it, with the prices of silver soaring like this, I am anticipating mines will come and renegotiate their contracts with SLW or even cancel them completely, paying their penalties for doing so because right now, suddenly, it makes sense for them to do that at today's prices, as well as silver's anticipated prices.
Taking one mine as an example, Primero's San Dimas mine, with which SLW has a contract with, produced 4.5 million ounces of silver last year, at today's prices, if they produce the same amount of ounces in 2011, they could sell those at $200M, SLW is paying them $18M for them. This is too good to be true.
Again, this is just my opinion, and if the price of silver breaches 50, I'm selling this baby because I would think my assumptions would become much more likely to happen...
As for takeover of mines in Bolivia, see my post on the latest post above from front page of La Razon - Bolivia.
Miners unions dont want it as they'd take a pay cut (40,000 --> 15,000) working for the state plus have to deal with a serious influx of unessessary workers.
SLWs contract and future ones may be as good as gold ( or silver ) LOL be there is doubt now and the market doesnt like doubt especially if the small guy thinks the big investors know something. I think Barnes leaving is raising big questions.
Well it is like you borrow $1000 from a friend to help set up a business and promise you would share half of the profit from your business going forward.
But then one day you realized that you are giving your friend $2000 or even $5000 every year for his 50% profit when your business grew unexpectedly well.
If you are a honest and nice person you would continue doing this till forever...
But we all know that business man are typically not so honest and nice especially in front of big money...
Even if they do not break the contract, they have a million other ways to walk around you, who knows what is behind that strike thing? It could be one "work around" of the contract.
Actually this has long been my concern too......
Business people always try to maximize their profit, I cannot imagine all those mines continue to faithfully and happily execute the contract negotiated when silver was $12 an oz.
When they watch today's price, they will probably run their brain in full power to figure out some way to get off the hook, if not by brute force...
so how do you get off the hook if you are GG or ABX and you are giving all your silver away for nothing?
You buy SLW for $20B and instantly get accretive earnings, increase your margins and obtain intimate knowledge of your competitors mines.
You must not be familiar with South American Court systems. Even in the U.S. it takes many years to collect. Im wondering of Barnes departure is a rat leaving the ship thing or if there was a disagreement over re-negotiating with the miners over higher payments. The market hates unknowens and I think this may be the case here. Of corse Neither I nor you really know whats happening.