And they asked someone in the crowd, asked them about why was silver not on the critical minerals list. He said, well, we didn’t consider it. It’s likely an error on our part. The list doesn’t get updated until 2025, so we’re going to review it for the upcoming list. So we’re lobbing them to get silver on the US list in 2025. But then we decided, hey, let’s start looking at Canada, the land of Arcadia.

Well, hello there, my friends. Chris Marcus here with you for Arcade economics and quite excited today because as you can see, I have Keith Neumeyer of first Majestic Silver joining me and we’re going to dig into a few silver related topics. Also touch on some first majestic progress at the end. Although main thing that I wanted to go over with Keith and get your opinions on is that you were part of a group that sent a letter to the canadian minister of energy and natural Resources asking that silver be included on the critical minerals list.

Obviously there’s a lot of metals on there and we talk plenty about the importance of silver and going green and a lot of the other things that are happening in the world in the midst of a deficit, which not just reported by Silver Institute, but you had an interesting study you guys cited in the letter that was also coming to the same conclusion. So, Keith, it’s great to have you here today.

How are you? Well, it’s great seeing you again, Chris. Good opportunity today. You know, gold’s up big, silver’s up big. So it’s a great day to discuss the metals and what’s going on out there. Yeah, well, why don’t we start with the letter and perhaps you could tell us how that came about. Again, as I mentioned, there are about 20 people from the industry that participated and perhaps you could let us know where that came from.

And we were a little bit shocked when we saw the USGS, I think they call themselves the United States government, whatever department it is. They came out with their critical minerals list last year, I think it was in July or August, and it had copper on it, it had zinc on it, 50 minerals or 50 metals and some, most people have never even heard of. They’re on the periodic table, of course, but no one knows what the heck they’re used for.

But nevertheless, they had this list. And so our team here decided to take the bull by the horns and they contacted the US government right away. And then one of the congressmen, they had a hearing like a month later. And I could get you details if you really want, because there’s actually video, it’s actually on YouTube. You could see this guy, a government official being interviewed and they asked someone in the crowd, asked him about why was silver not on the critical minerals list.

He said, well, we didn’t consider it. It’s likely an error on our part. The list doesn’t get updated until 2025. So we’re going to review it for the upcoming list. And so we’re lobbying them to get silver on the US list in 2025. But then we decided, hey, let’s start looking at Canada because we heard through the Gillian, our girl that’s in charge of this, heard that the canadian government’s going to publish a critical minerals list in May of this year, May of 2024.

And she said, well, there’s a great opportunity for her to jump on board. So she contacted all the government authorities. She contacted a bunch of silver mining companies. She got 20 companies, including ourselves, CEO’s of these companies to sign a letter, which is pretty amazing that all these CEO’s actually came together. I was surprised that they all put their signature on a letter like this, but they did.

And the letter was submitted to the canadian government. And we’ve talked to them a couple of times since the letter was submitted. There was a meeting just a couple weeks ago. They’re not telling us whether they’re going to put silver on the list or not, but they are telling us that it’s going to get published in May. So we’re optimistic it’s going to be there. We’ll see. We do know France is also going to be publishing a critical metals list.

We also think it’s Spain is also doing the same thing. There’s a variety of european countries that are also going to be published in these lists. Yeah, and actually you touched on what was going to be my next question there, if you’ve heard anything back. So it sounds like they’re at least acknowledging that they’re looking at it and considering it. No decision yet. And can you explain for people what would actually change if it does get listed as a critical mineral, how that actually what they actually would conceivably do and how that would affect the market? Yeah, you know, there’s differing views out there.

You know, some people, you know, think it’s, you know, negative. You know, others think it’s positive. I personally think it’s positive myself. You know, Canada, United States, you know, we, you know, we import a lot of silver. The United States actually imports silver. And yet, you know, both Canada and the United States have large endowments of silver in the ground, but it’s just not being mined. And it’s not being mined because permitting takes forever.

The costs are just outrageous to get metal on the ground due to regulatory restraints and all those types of issues. So if the government could loosen the strains a little bit and then potentially speed up permitting for metals that are on the critical minerals list, that would assist the mining sector to meet demands that are currently there. It’s obvious because we’re in huge deficits in many of these metals.

Silver’s not the only metal that we’re in deficits on, but the mining sector needs to be supported more by governments to get these metals out of the ground and get them into industry and do the green things that the governments are pushing. And the advancements of the electrical, you know, circuit around the world, you know, needs metal. And it’s just. It’s, you know, it’s. There’s no way around it.

So we need more copper, we need more silver, we need more zinc. And these are metals that the mining sector just doesn’t really want to mine right now because there’s just no money in it. Yeah. And it was interesting. I’ll pull the letter up here again, because one of the criteria that they have is required for a national transition to sustainable, low carbon and digital economy. Certainly we have seen that that is the case with silver.

And then down here, mention something that you just spoke to. The Carnegie Endowment for International peace reviewed silver, and the key takeaways was that they included an 8. 5% silver deficit. If countries without free trade agreements with the USA are excluded, and a 56. 5% deficit of countries with fragile democracies are excluded. So certainly in the midst of the plans to go green seems a bit significant. I’m curious if this doesn’t get listed, or let’s say that things just continue on with the current arrangement we have, and price sits around 25 or $30, what do you think ultimately happens? I mean, how do you see this playing out? Do we at risk of getting to a situation where there’s a shortage and someone doesn’t get their metal? Is that become an inevitability at the current dynamics? That’s going to be, Chris? I think we’re there.

Where the silver is coming from, who knows? I remember that famous. I’ve said this before in other interviews, and I’ll repeat myself. I remember that famous photograph of Putin holding that gold bar. He was downstairs in one of their big vaults, I gather, in Moscow, and it was quite fascinating. He was quite proud they were buying a lot of gold at that time. This is a few years ago.

And I looked at that, I zoomed in and along the back wall was all these pallets of silver. And they go, wow, geez, that’s a. That’s a lot of silver. I couldn’t add it up. Of course. Who knows exactly how much silver was there, but it’s non reported. We have a 400 million ounce deficit last year, of which 100, and call it 20 millionoz was recycled. So call it a 300 million ounce deficit, or even 250 million ounce deficit.

Whatever the number is, it’s a big deficit. So these assets are coming from somewhere. We do know that China is a buyer of silver and they don’t export. It’s illegal actually for China to export silver. We know India is an importer of silver, the United States is an importer of silver. So where it’s coming from, God knows. But there is a limit to the supply. The ETF’s aren’t dropping.

The ETF’s are around a billion ounces and have been around a billion ounces, plus or minus five or 10% over the last five years. So that’s a pretty sticky investor. So the other hoards that are out there, I guess, are private hoards held by people that aren’t disclosing or potentially governments. But there’s only so much. And I think we’re at a point now where people are waking up to silver.

It’s not performing as well as gold, but I still think it’s going to. And I don’t. I just think if we don’t see $30 throwing by the end of this year, I’ll be very, very surprised. Yeah, and you mentioned India in there. And obviously, I’m sure you saw they had that, what turned out to be a record monthly import figure of about 70 millionoz in February. So rumors, I don’t know if that’s the right word, but Alistair McLeod reporting that he’s hearing that they had trouble sourcing some of their silver from refineries, had to go to Comex.

And certainly, as you mentioned, we’ve seen inventories coming down around the globe over the past couple of years. And one of the things I was thinking about is you mentioned the deficit being reported at 250 millionoz, which as you said, is quite large. And also raises the question that, let’s say you had a $40 or $50 silver price. We’ll assume for this example, that mining costs haven’t gone up any more than they have.

But just at that level, and we’ll again assume that it stayed there long enough that the industry feels that’s a bit of a constant price. Still, even at that price it would seem like 250 millionoz. You might not be getting anywhere near that. Is that fair to say? Obviously you see this firsthand every day. What kind of price are we looking at to get that much production? Obviously we’re ball parking, but any thoughts on that? Yeah, the problem is that metal prices don’t stay at one price for extended periods of time.

As a miner, I’ve been in the mining sector for 35 years and we try to do budgets every year. We have a big company that we manage, I think first and Jessica’s revenue was somewhere north of $600 million last year. There’s a lot of money. We employ over 4000 people. There’s a lot of moving parts in our business that we have to manage. One of the things that we have to guess is the metal prices because that’s where our revenues come from.

And if we guess wrong, then all of a sudden that affects a lot of different things. So if we predict $25 silver and then $2,000 gold, and next thing you know, silver is $22 a company of our size. Just doing the math in the back of my head, that’s a $75 million revenue hit for us on a $3 move on silver. So all of a sudden what do we do? We’ve got to start laying off people or we have to start reducing exploration programs.

We gotta, whatever we have to do, cut costs somehow to make up for that loss of revenue. So I’ve said many, many times over the last 20 years since I put first and Jetset together, because just this last September, September 2023, we just celebrated our 20th year anniversary. And I’ve said through that period of time, I say, look, give me $20 silver prices forever and I can make a good business from it.

The fluctuations silver goes to. When I put the company together, silver was $5. And I put it together based on my thesis that silver would reach its old high of 50, which it did. It took ten years to get there, but I didn’t expect it was going to drop all the way to twelve. And that was devastating for everyone. Me neither. And that was just ridiculous. And we’re at 25.

25 is a reasonable number. We’re doing okay at 25. It’s not fantastic. But if governments want to achieve the objectives that they’re pushing on all of us, which I think we’re pretty well all supportive of for the most part in equation, we think that the electrical grid worldwide could be improved and we could do better things and better quality motors and changing the grid and so on. All those are wonderful goals to achieve.

It’s going to take a long time to do it. It’s going to likely take 100 years. It’s not going to be 2030 or 2040 or 2050. You’re talking about changing entirely way of electrifying the planet. It took us 100 years to get to where we are today. It’s going to take 100 years to change it. But nevertheless, that’s going to take a ton of metal. And governments have to work with the mining sector, not against the mining sector.

If we’re going to achieve these goals together, as a human race, we need to work together. Yeah. And especially if we get anything like what a recent report from Oxford Economics came out with. They were doing an analysis on growth in industrial demand over the next ten years. Again, how the world changes over the next ten years, we’ll take with a grain of salt. But at least to the degree that they did a solid research study, we forecast global output of end users of industrial silver will increase by 46% in real terms.

So obviously we’ve seen growth already. We’ll see if that manifest yet. Certainly a lot of demand out there. That’s a crazy number. So we produced no. Well, the mining sector produced 820 millionoz of silver last year. The human race consumed 1. 2 billionoz. It’s expected that we’re going to consume 1. 4 billionoz in 2024. I don’t know that the mining sector was going to produce more than what it did last year.

So call it 820, call it even, call it 850. You know, whatever the number is, you still have a huge deficit that’s growing year and year and year. That number 46% that you just flash up on the screen, back in my head, 1. 4 billion times 46% is again, close to almost over 2 billion. So you’re at 2 billion consumption. Where does it come from? Well, that is the question that a lot of us in the silver community are wondering.

And again, why? I think it’s great that you guys got together and sent that letter to the canadian government. I think people appreciate that and that you’re getting some attention on that. And certainly we’ll look forward to hearing when they have some sort of answer back. Although in one other piece of news that came out earlier this week, I wanted to say congratulations as first majestic mint is now up and running.

And I know you’ve been working on that for about a year. Talked briefly about that last time when it was getting close, but this came out just a couple of days ago. And perhaps you could tell people about having the mint open now. Yeah, well, thanks for bringing that up, Chris. I was just there this week. Our team flew down and we just had a look at the first bars being produced.

And it took us a while. Building a mint is a little bit more complicated than what I thought it was going to be. It was my idea. Let’s go build a mint. And I figured it would take a few months to build it, but it took almost a year. But it’s looking fantastic. All state of the art equipment. It’s quite wonderful. We’re producing 510 ounce bars plus keto bars.

We’ll expand that line, but for now, we’ll just be producing those three products. And we started sales, so sales are coming through the website. You’re on the first majestic website right now. We actually. The mint itself has its own mint now. There it is there. Firstmint. com. And both sites are currently live. There it is there. That’s our first run, the first mint bars. And within a couple of months, we’ll end up shutting down the first majestic site.

And we’ll just have this site. This site will be selling first majestic bars as well. Right now, it’s just selling first mint bar. So right now we have the two websites selling silver products that’ll be merged into one in the coming months. So, yeah, it’s pretty exciting. Yeah. And I know a lot of the shareholders and people in the silver community, again, are often wanting companies to sell more direct to the public.

So something that you guys are in the process of doing and know you’re at 10% now and possibly going to even increase that. So we’ll keep an eye on how things come along there. Let me tell you why, Chris. Yeah. So we trade. Think about these numbers for a second. So the paper market trades a billion ounces a day. Silver billion ounces. Let’s say there’s 320 trading days in the year.

So that’s 320 billionoz of paper silver trade in the year rounded down to 300 million or 300 billion just for the hell of it. So you have 300 billionoz of silver trading every year. The banks know exactly what’s coming to their doorstep because they know the miners are producing 820 millionoz. And those ounces are going to come through their door. And they know when those ounces come through their door and they’re selling, pre selling those ounces in the paper market to commercial buyers and as they write these contracts, it’s in their best interest to keep the price relatively stable so that they’re not offside on that order from Sony that just came in for 50 millionoz of silver to build their televisions.

So the leverage, it just is something in the order of 400 to one. So for every one physical ounce of silver being produced by a mining company, it’s leveraged 400 times in the financial markets, through the paper markets. So us, as a mining company, we produce 10 millionoz of silver year and 25 million equivalent if we include gold, but just on pure silver basis, 10 millionoz of silver.

So that’s being leveraged 400 times. So if I get the math right here, that would be 4 billionoz of paper silver. So if we put all our ounces through our own mint, I’m removing 4 billionoz of paper silver out of the market. Well, that’s one of the things that always struck me about silver, where you don’t necessarily need a big gap somewhere to have an issue with all of the leverage.

And I think we saw maybe a little hints of that back in 2021. I thought it was interesting when I hear Rick rule talk about how he was trying to find the 50 millionoz that they put into the PSLV, and he described, he said, we went to New York, cleared out, was there Chicago, Ottawa, Montreal, Boston. And you see how the inventories have come down since then, and that we’re in a deficit.

And it was that tight back then. Makes you wonder how tight things could conceivably be now. And certainly think that’s nice that you’re taking the metal direct. So, one, two quick other questions before we wrap up. Just wanted to check in. Obviously, at law in cantata, you’ve had the issue with the water. I know that you’ve been doing drilling there and was just curious, anything in the last couple of months that you could update people on how things are coming along there? And also that you, in the last guidance, you mentioned that basically you’ve planned for a worst case.

So anything that goes well, there could be an upside. And so if you could touch on that a little bit. Yeah, sure. I can tell you we’ve had some success in the last few weeks. It’s still not enough to hang our hat on and say we’re good. We are on the 11th hole for water, which is a lot of holes. We didn’t think we’re going to have to drill eleven holes to find water.

That was a little bit of a surprise to us. We figured there’d be two, three, four holes, and we’d be done. But it was elusive. We had to bring in some experts to help us out. And the last couple holes have been pretty good. There’s water there. We just need to pipe it, and that takes time. So there’s. Because these holes are spread out, and you got to join them all to the system and put all the infrastructure in place.

So that’s currently underway based on. I don’t want to say too much, because we need to put some news out to make sure that we’re good, but we’re expecting by June, July that we should be back to normal. We’re crossing our fingers. It’s not 100% yet, but that’s kind of our expectations. Okay, well, that certainly seems like good news, especially based on the way you position guidance ahead of that and other thing I wanted to check in and in on was Jarrett Canyon.

Obviously, you’ve been doing some exploration there and been, I guess, is almost about a year since now already since the mine was shut down. And anything that you guys have learned and discovered or that you can share in terms of steps going forward. Yeah, no, it’s been definitely a learning curve. I think the winters in northern Nevada surprised us. I can tell you it surprised our Mexicans. We brought up a number of our talent from Mexico to work in northern Nevada.

That was quite the interesting situation. We did, unfortunately, shut it down just based on costs and based on the amount of investment that was required. And we had hoped that we could produce metal at the same time. We improved the operation, but it just proved to be too expensive, and we had to take a step back. So we’re still doing all those improvements where drilling will start, I guess, in June.

We have $10 million worth spending on exploration at Jerry Canyon, which is quite a lot of money. That’s the largest drill program that we know of in at least 15 years, and our goals are pretty excited about it. They’ve got some high expectations, a lot of untested ground we’re drilling into. So we’re crossing our fingers that they pull off something that they’re expecting, and we’ll know by the end of the summer, and then we’re going to have to make investments into the mill as well.

So we’re telling people that it’s a 2026 story back in production in 2026. We’re hoping that’s not too aggressive, but that’s the current expectations. Okay. Gives you a little time there and certainly will be exciting to see where gold and silver are trading by time. That rolls around. I guess that’ll be the last one for you. Any thoughts on this rally? That it’s a little different because we haven’t seen the Fed say this or the Fed say that, really, as the particular driver and gold, as we’re recording on Thursday, about 22 40, about to hit the quarterly close, and hopefully that’s leaving you smiling a little bit today.

I know, first, majestic share price doing well on this Thursday. And any final thoughts on the rally there? I have to admit it surprised me looking at Kitco right now, and I’m saying it’s $2,200 plus. Wow. We’ve been wishing for $2,200 gold for ten years. So it’s finally here. Silver’s driving me crazy. It should be 30, but it’s barely getting through 25. But it’ll catch up. But I honestly do think this is 2000 all over again.

I still think that we’ve got this. Everything is going up right now. We got the stock market going up, we got bitcoin going up. We got gold and silver. I don’t think there’s a single asset out there that’s going down. Maybe real estate, but generally speaking, everything is going up. So everyone’s making money, everyone’s happy, everyone’s portfolios are great, and I’m waiting for that shoe to drop, so I’m always suspicious.

I’ve been in this industry for a long time, so I’m waiting for the Dow to crack, the Nasdaq to crack, and all that money to come floating into the resource sector, which is exactly what happened in 2002. The Nasdaq hit 5000 in March of 2000. I remember that very, very clearly. And over the three years after that, the Nasdaq went down to 800. Went from 5000 to 800 in three years.

And where did all that money go? It went into the resource sector and real estate, because people were going after real assets. They oh, we can’t keep investing money in these stupid high tech stories, and companies are losing money with no revenues and all these storytelling companies, blah, blah, blah, blah. And the market woke up and said, we’re going to stop investing in that group of assets and we’re going to start investing in mining.

And all that money flowed into the mining sector. And we had a ten year bull market from 2002 to 2012, which was a spectacular market. We’ve got gold went from 250 to 1900 and silver went from five to 50. And use those same kinds of numbers today. So that’s ten times on silver. Call $20 if you want to call $20. 10. Times, that’s $200 silver, eight times on gold from whatever number you want to pick.

But those are big, big numbers and I don’t think it’s that impossible to see those kinds of crazy numbers on this next big run. Yeah. And especially with some of the conditions out there that we discussed earlier, whether you do get an issue overtly with the supply, again, what is the fair price versus what could happen in a short squeeze. Interesting. Looking at what’s going on in the cocoa market and obviously in a chaotic market condition, a lot of things become possible.

And Keith, in either case, I appreciate everything you shared here, and again, helping to lay out some of the dynamics going on and also discussing that letter, which I appreciate that you guys put together and I know a lot of other people do, too. I will mention that people can find out more information at first majestic. com dot and Keith, any final words before we close up for today? Yeah, people can follow me on Twitter as well.

It’s just simple. Just Keith Neumeyer on Twitter. I don’t do a lot there, but feel free to follow me there. But I’m the chairman of First Mining gold, a small development company that trading at stupidly ridiculous prices. And of course, I’m the CEO of First Majestic silver. Founded both of those companies 20 years ago for first majestic in 2015 for first mining gold. Yeah. So feel free to follow us and if you do have questions, feel free to call us as well.

All right. And I’ll have the links to both his Twitter feed and first majestic in the description field below. So, Keith, thank you again for making some time. Hope you have a happy Easter. Always great to catch up with you and we’ll look forward to doing this again soon. That’s great, Chris, thanks for your time. .

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