Silver market-2008

U.S. Silver is doubling its Galena Mine production from 2 million ounces to 4 million in '08;

Sterling's return of the Sunshine Mine to production will serve up another 2.8 million ounces;

Hecla's Lucky Friday will remain in steady-state production next year, but a new winze extending from the 4,050-foot level to 8,000 is in the works, as is a new surface-breaching shaft, and there are whispers throughout the company of a brand new mine, either between the Lucky Friday and the Star, or between the Star and the Dayrock or Tamarack.

We haven't sunk serious shaft in the Coeur d'Alene District since the Silver Shaft and the Caladay in the early 1980s. Now, we are talking about two, three, or even four new ones, as exploration progresses at the Hecla, Bunker Hill and the Silver Royal Apex properties.

The $20 million that Hecla spent on the Silver Shaft at Lucky Friday and that Callahan Mining (now part of Coeur d'Alene Mines, and gone away) in 1980 translates in this day's Fednotes to about $60 million. Multiply that by four or five new shafts in the Coeur d'Alene Mining District and you have, in flat U$D, about what the net worth of this camp was back then.

We are, in this time of increased production, also poised on the verge of a silver price explosion that will make 1980 look like mere foreplay. We polled pundits from Spokane to Toronto and nobody is seeing single-digit silver ever again. James Turk thinks $27 is reasonable. Sprott's John Embry sees a sea change: “The key is, and this cannot be over-emphasized, is that all this money we've created, all this shit has blown up and people are going to turn to precious metals.” Thirty bucks to Embry is a no-brainer.

All the silver mines in the Silver Valley's Coeur d'Alene Mining District will be producing silver for substantially less than $10. Hecla has screwed costs down to $4-something at the Lucky Friday thanks to lead and zinc credits; Sterling will weigh in below $8 at Sunshine; U.S. Silver, which inherited a hideous cost structure from Coeur d'Alene Mines at Galena, will be in the same ballpark. Silver could crash to $12.50, or even $10, and we would wail and gnash our teeth accordingly, but the profits here are going to be tremendous, legendary, anyway.

So comes the inevitable phone call. “David, are there any good plays left in the Silver Valley?” To which we can only answer: “Put on a blind fold and throw