A few days
ago Ed Steer made this comment in response to
First Majestic's 2nd quarter financial
... here's an interesting item from that report..."In
addition to cash, First Majestic was carrying 574,000 PSLV (Sprott Physical Silver Trust) units at quarter end with an approximate market value of
$6.65 million...and 100 Silver Futures contracts representing 500,000 ounces of silver valued at $1.7 million including the unrealized gain
and the margin requirement.
The Company is currently holding 150 contracts
representing 750,000 ounces
of silver at an average cost basis of
ounces of paper silver? They mine this stuff...and buy paper silver?
I'm sure that JPMorgan laughed with glee as they sold them
the Comex futures contracts. You can't make this
stuff up! It makes me want to sell my position in the company at the open this morning, but I won't.
the following response from their Investor
Hi Ed –
Hope all is well. Thanks for reading our news release yesterday, however, I’m honestly quite surprised to read your comment below in today’s G&S Daily
Neumeyer (like yourself) is a silver bull and employs the use
silver futures to trade
the volatility in the market.
By utilizing some of the
top physical metal
traders in the world (whom trade
approx.. 70% of the world’s
silver market), we have access to valuable information. Furthermore,
this activity is nothing new… for more than 2 years our shareholders have benefited from this activity. For the first half of 2012, First Majestic
has realized a gain of $2.3M; 2011 +$2.4M; 2010
Quite frankly, I realize your issue is not with the trading activity; it’s directed at the use of Comex futures. Your
concerns have been received
and we always appreciate valuable shareholder feedback.
- the use of stops are not practical for professional trading…
explain to me the difference
between the mindset expressed in this response and how the "banksters"
and hedge funds operate? What is being described
is speculation using other people's
money, pure and simple.
We have no real appreciation
of the risk of using
futures, which after MFGlobal and PFG one would have
to acknowledge has some risk of loss of one's margin associated with it - "concerns have been received" is all that is said.
But it is OK because they are trading off inside information
of sorts from top traders and it
has been profitable (so far)!
Basically what we have is a
miner's silver flow being used as the base off which the CEO speculates on silver prices. It reminds me of Sons of Gwalia which failed due to a hedge book which blew up when production/reserves were not sufficient to meet the committments - the hedge book part of the business was
far too big relative to
the operations with little margin for error.
If Mr Neumeyer wants to speculate on silver I'd suggest doing
it in separate vehicle like a hedge fund and keep the miner just doing mining. That way the performance of the speculation
is clear for all to see and if it blows up it won't
affect the ongoing mining operations.
Or am I just old fashioned?