CDE has reported PEA results for Preciosa project showing satisfactory profitability for $25 or higher silver and total loss for silver below $21. Most likely, the numbers do not include money that CDE spent to buy the project right before PM drop. Basically, they look like idiots now, while PAAS guys can probably feel something better.
Anyway, Preciosa numbers are another confirmation that silver mining needs in neither new mines nor new projects. It needs in closing many mines and shelving most projects; the sooner the better.
since cde bought orko with 100mill cash and 11million shares lets say at 24.00 and cde has a 70million buyback program, at moment those shares can be replaced now for 11.50 and cde still has 200mill left from loan arranged for offer- there is only 12 million budgeted in 2013 to drill out and pea and another similar amt in 2014 for feasibility study before the construction decision in 2nd half of year-this was considered a top world deposit and in mexico -will silver recover, if not preciosa will be a great banked deposit bought cheap if we repurchase shares -how many viable deposits are there now in relatively safe countries with silver at these prices-drilling this out along with optimization may lower cash costs, this also is a very large land package, cde may have bought before big drop but nowhere near silver top but after a two year pullback- cde has assembled quite a building team joe Phillips ,kennedy and Mitchell from taseko -with Phillips and kennedy expertise in areas cde has existing mines this can only help the company, Phillips has stated this is the best time to build a mine-after paas paying what 1.5 billion for mfn and add navidad I don't think being critical of cde pickup in this time frame is warranted-this purchase also balanced a large resource exposure in Bolivia-you guys know about that and argentina then add your 3 high priced Peruvian mines we all got problems at these levels-but preciosa is just a project at moment-
The million dollar question is silver prices and what is a natural level to equate supply and demand. Is the drop due to PM fund and ETF withdrawals, someone pushing silver down in the futures mkt, or just the absence of (probably investment) demand? The first and the last are certainly culprits, and unlikely to reverse in the short run.
Sadly, all the primary miners could go away, and if there is little investment demand,, then supply and demand would be in balance since so much silver is mined as a byproduct.
I think that immediate reason for PM drop was reversal in investment demand, i.e. PM investors changed mode from buy to sell and ETFs (GLD, SLV, etc) were the most common places for this change. It caused big short-term oversupply of PM market and anyway it doesn’t take much to send particular market plunging when demand comes from either entirely (gold) or mostly (silver) investment (no consumption).
Also, I agree with you that it doesn’t look that market fix can be quick and underway. In this situation (prolonged slump) silver primary producers are more vulnerable than gold ones, because pure silver deposits are rarer things and companies had to exploit deposits of lesser quality. It can be said that average gold mine had better profit margin, in good times, than average silver mine.
As of now, it is still possible to find few companies on gold side capable to show better than break-even results at current PM pricing; nothing on silver side. It indicates that process of sector cleaning (closing non-viable enterprises) can start on silver side earlier and go deeper. At this point, holding silver stocks is riskier than holding gold ones and, by sector fundamentals, both PM sides are neither value nor growth investments; it is a big hole (with few casino opportunities), in investment sense.