First Majestic CEO Keith Neumeyer: Don’t Laugh, We Could See $100+ Silver by Mike Gleason, Money Metals Exchange
Exclusive Interview with First Majestic CEO Keith Neumeyer on Metals, Mining, and Manipulation
Q&A with First Majestic CEO Keith Neumeyer
Mike Gleason, MoneyMetals.com: It is my privilege, now, to be joined by Keith Neumeyer, founder and CEO of First Majestic Silver Corp. One of the top Silver mining companies in the world.
Keith has an extensive background in the resource and finance sectors, and has been an outspoken voice about concerns that there is some level of price suppression going on in the silver futures market. It’s a real privilege to have him on with us today.
Keith, thank you so much for joining us, and welcome.
Keith Neumeyer, First Majestic: Well thanks, Mike, I appreciate your time.
Mike Gleason: Well, there’s so much I want to ask you about, so I’ll just get right into it now.
As we’re talking here, we’re seeing a continuation of a modest but positive price action in the metals. A rally seems to be a longtime coming here. I’m sure it’s a welcome sight to folks like you. We’ll see if it ends the week on an up note, here, and if the rally can continue.
I want to start out by asking you about the futures market, which you have been openly critical of. There is some concern that exchanges, like the COMEX may be impeding discovery of the true market price for gold and silver. There have been many examples of games being played. You’ve got huge sell orders being dropped on the markets in the middle of the night or during other periods of low liquidity. Then, you have banks actually admitting to rigging the London Fix and sticking it to their own customers.
The evidence piles up, but regulators are turning a blind eye. If prices for precious metals are being suppressed, it’s producers like you who are harmed. It doesn’t seem like it can go on forever. So how do you see this ending for the COMEX, can it be reformed, Keith? What are your thoughts there?
Keith Neumeyer: Well, it is nice to finally see the metals moving over the last two weeks, actually. We’re now a month into the year, and it’s been a pretty good start for miners. Hopefully it does continue through the next several months.
Interestingly enough, as you probably know, we saw two fixes in London, one last week on Tuesday, I believe it was, $0.85 below spot. That’s the first time that’s ever happened. I talked to our traders, who trade in metals, and it’s completely unexplained. There was a couple of news articles that showed up and, of course, the banks who are behind this Fix have been completely silent on the fact that this has happened.
Then, the next day, on a Wednesday, the Fix was $0.10 below, which is obviously a lot less of a big issue, but it’s still below the spot. Two days in a row we had a Fix that was below spot prices, which has gone completely unexplained to all of the suppliers.
Fortunately, First Majestic doesn’t have a lot of its product that is affected by the Fix, because we produce most of our silver in the form of doré bars. Our doré bars are based on spot on days that we decide to sell our metal. But we do produce some of our silver in the form of concentrates. And those concentrates are affected by the Fix, which is unfortunate.
Some mining companies, who have 100% of their production, for example, based on their Fix were very dramatically affected. It’s not the COMEX, this is the London market, obviously. But it’s all the same. These are the same players that trade in the COMEX, the same players that trade in London, trade on the LME and trade in this market, they trade on these prices. It is completely contrary to general market forces.
My issue with the COMEX is clear. I’ve said, quite honestly, “create a system, whereby, they have to have a system in place where they can go 100 times what’s in the vault, for example.” We have a fractional banking system, we know it’s there, but they can sell unlimited ounces in the form of paper and there’s no limit. All I am saying is create a limit whereby the banks can sell 100 times what’s in the vault. I’d prefer it much less. I’d prefer it 10 times, but that’s probably unrealistic.
But right now, when you can trade a billion ounces a day, and the miners are only producing 800 million ounces a year, that system, in my view, is broken.
Mike Gleason: Yeah, more ounces traded on paper in a single day than are produced globally in an entire year. It’s truly mind boggling.
Keith Neumeyer: Yeah, that ratio is nuts.
Mike Gleason: Yeah and it seems totally unsustainable. I would think something will have to give at some point.
You’ve purposefully held back some of your production because you would rather hold some the silver on your balance sheet rather than trade it for cash. You’ve called on others in your industry to do the same. Basically saying, “Let’s not let the market have our silver until something changes with the price-setting mechanism for our product.”
Are you getting any traction on this, Keith? I know that many miners might not have the financial strength or available cash, at this point, to hold back some of their production. But do you see others following your lead on that?
Keith Neumeyer: Well, of course all of the miners are in stress right now. But I’m not asking for a big deal. For one month’s of production, for us, First Majestic, we’re a small player in the whole scheme of things. We produce 18-19 million ounces of silver, which is a big number. Of 800 million ounces that’s produced in a year, that’s a small number.
I was actually in New York just a few weeks ago, and I was surrounded by a number of executives at a dinner. I quite clearly stated in the room, and there’s about 30 people around the table, 20 or 30 people around the table, and I said, “Look, let’s take a month. Let’s hold back our production in June of 2016.” I can tell you, everyone in the room could afford to do it. We could afford to do it. We would still be producing. Everyone would still be working. We just simply wouldn’t sell our silver.
Now, again, this goes back to the concentrate sellers. It’s more difficult for the concentrate sellers to do it, because they have contracts in place. They have to deliver their metal into these contracts. Their ships pick up the metal, their concentrates, and goes into the different smelters around the World. It’s a little bit more difficult for them.
If you’re producing doré bars, it’s a lot easier for those doré producers to do exactly what I’ve asked them to do. I didn’t get