Peter Schiff of Euro Pacific Capital - Trading the Gold-Silver Ratio and Review of Weststar Resources

Share Article

Economist Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital Inc, made public in mid-March 2011 his opinion on precious metals with an explanation as to why silver will continue to outperform gold. Since his comments the gold-silver ratio improved significantly in favor of silver ; silver surged from US$35/oz (at a ~40:1 ratio) to a nominal high of essentially $50/oz on April 25, 2011 (a ~31:1 ratio). Silver then had a dramatic pull back to $33.60/oz on May 16, 2011 (back to a 45:1 ratio) and is now setting up for the next surge as the same arguments by doubters about silver bear resemblance to when gold rose to US$800/oz a few years back, invoking calls of a bubble from doubters, but then surged above $1000 and now comfortably sits above$1500. Silver too should now surge as the preferred, practical, popular, and affordable precious metal.

Economist Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital Inc, made mid-March 2011 his opinion on precious metals with silver continuing to outperform gold due to the fact silver has a historical ratio of 16:1 and was historically pegged in the Coinage Act of 1776 at 20:1, plus silver is favored for possessing the properties of both a precious metal and an industrial metal.

Peter Schiff has made a number of accurate economic prediction over the last half decade from the real estate crash in December 2006 to the bullish rise of precious metals. With spot gold now at ~US$1,525/oz and Silver at ~US$37.67/oz the Gold-Silver ratio now sits at ~40:1 again. Schiff aptly pointed out that when the dollar was established in the Coinage Act of 1776 the Act essentially pegged the gold-silver relationship at 20:1 because the dollar was defined as '1/20th an ounce of gold or 1 ounce of silver." With the ratio up high like it is now Schiff believes it makes sense to favour silver. Schiff did however state (in mid-March 2011) "If it got to 25:1 or 30:1 then I would think you could certainly back-off" – which is exactly what occurred in the markets over the last 45 days, demonstrating how astute precious metal investors can make money simultaneously exposing themselves to silver and gold and trade the weighting of the ratios.

Since Schiff’s mid-March 2011 comments on the gold-silver ratio it has become clearer that the global fiscal landscape is now in the process of finding out a new way of exchanging goods around the world; it can no longer be the US dollar because of the fiscal mess of the USA, Japan and Europe. We are witnessing currency reevaluation as a result of unsustainable and overwhelming levels of government debt -- currently for every dollar the US spends they are borrowing 40% and cutbacks being talked about represent miniscule amounts in relation to the size of the expenditures. Silver and gold are the only two currencies that can’t be devalued (you can’t just print with a printing press) and that’s why they are seeing strength.

Peter Schiff offered insight into how he views ownership of physical precious metal versus ownership via equities (in related mining stocks) - Schiff believes people should own both and stated he is weighted towards equities; "I have more of my money in investments in gold mining companies than I do bullion." Schiff sees the physical metal as representing stored value (money), whereas mining companies are 'investments'; a precious metal mining company takes on risks in exchange for the reward that comes with discovery and value creation from when it takes gold and/or silver that is buried in the ground and brings it out of the ground where it has practical value. Schiff views his mining stocks as a shareholder in these companies saying "I own the ounces they have in their reserve in the ground, part of which you own".

Schiff did not offer specific investment vehicles to capitalize on however Market Equities Research Group offers below some possible ways for exposure to precious metals including a review of Weststar Resources Corp. a unique Canadian-based mineral exploration mining company focused on high-grade gold-silver production potential in Mexico. Weststar intends to re-develop and build ounces at La Paloma. The project is host to several silver and gold occurrences and a high-grade past producing gold and silver mine with a historic mine plan that sets up a near term cash flow scenario for WER.V shareholders.

A full review of Weststar is available at http://www.miningmarketwatch.net/wer.htm online.

Simple ways to gain exposure to precious metals are to buy a senior producer focused ETF such as Market Vectors-Gold Miners (GDX), Global X Silver Miners ETF (SIL), or a junior focused ETF such as Market Vectors Junior Gold (&Silver) Miners ETF (GDXJ). However the problem with these ETFs is that they funnel attention to a select few companies whereas there is a large universe of fast growing gold and silver stocks that offer exceptional risk-reward scenarios. One such company that appears poised for upside share price appreciation in 2011 is Weststar Resources Corp., its La Paloma Silver and Gold Project in Mexico hosts a high-grade past producing gold and silver mine. The mine was closed in 1927 just as miners were preparing to conduct the first mining below surface. Using exploration shafts the miners had blocked off large zones of high-grade material; an initial 44,300 tonnes were to have been excavated at an assayed average grade of 6.64 g/t Au and 500 g/t Ag, however a miners strike shut the mine down and the operation was put in abeyance for over half a century -- part of the plan for WER.V is to go into the mine and start removing the material. La Paloma currently supports small scale mining operation on site and Weststar will look to increase the scale of operations. The historic mine is only a small portion of the potential as it only produced from ~200m of the ~1600m total strike length of the main epithermal vein structure. The Veta Ancha workings (which literally mean "wide vein" in Spanish) alone hosts a government reported historic (non NI 43-101 compliant) 'resource potential' of 750,000 tonnes grading 4.19 g/t Gold and 123 g/t Silver -- that is on just one section of one tunnel and does not include the aforementioned blocked off sections of the 1927 mine plan. A back-of-the-envelope calculation looking at only a 200m x 200m block of the historically known mineralized area using the average grade found in historical documentation of 4 g/t Gold and 400 g/t Silver, there appears there is potential for over a billion dollars of in-situ value of precious metals (ignoring recovery costs & metallurgy) and that is just going down to 200m. WER.V will drill to open-pit potential of 300 ft. The 160-hectare project hosts several silver-gold occurrences with immense latent potential which have not had the benefit of modern exploration. Weststar has 80% Ownership via interest to earn (currently under LOI), 2% NSR.

Investors in WER.V have an opportunity to gain exposure to a growing precious metals exploration/mining company in the process of exposing serious potential value at the La Paloma silver-gold project. With only ~13M shares outstanding (~19M fully diluted) and trading under CDN$1.00 WER.V is poised for significant upside revaluation to better reflect the inherent precious metals value.

A full review of Weststar is available at http://www.miningmarketwatch.net/wer.htm online.

This release may contain forward-looking statements regarding future events that involve risk and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual events or results. Articles, excerpts, commentary and reviews herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned. Readers are referred to the terms of use, disclaimer and disclosure located at the above referenced URLs.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Fredrick William
Visit website