Silver Investing Coverage From Peru

Notes From The Peru Prevails

Filed by Louis James, Senior Editor, Casey’s International Speculator

Last month I visited Peru again, penetrating perhaps a bit deeper but certainly higher up in the Andes than I’ve gone before. No nose-bleeds, but I’m not ashamed to admit that scrambling over rocks in search of boiling textures at 5,300 meters (17,400 feet) elevation left me wheezing like Darth Vader.

But I found them, laying atop the gold zone at the silver project of one of the companies I came to Peru to look at. I’ve never seen boiling textures on such a large scale, but everything else at the project is big, so why not?
 

 

Cavities left by exceptionally large calcite crystals in a silicified vein outcropping – just the sort of thing you want to see when looking for veins containing precious metals. That’s my lens cap in the photo. The crystals were inches long, instead of the usual millimeters or centimeters.

What it boils down to is that I like Peru better than ever.

I’m particularly pleased to see weakened support behind leftist firebrand Ollanta Humala in his second bid for the presidency. This was hard to quantify, especially while bouncing along in a jeep over “roads” that are little more than a pair of tire ruts carved into a cliff, while attempting to keep tally of the political signage. But I’m certain there were more campaign signs for candidates other than Humala, even in the rural provinces where he was strongest in the last election.
 

These lines are a typical Peruvian mountain road – I was not joking about the cliffs. The lighter lines are footpaths. Note the discoloration between the lower road and the upper switch-back. That’s actually an old high-grade working.

The impression I gathered from numerous Peruvians I spoke with was that Humala is widely perceived as a negative for the country’s economy, and that the leading candidates are genuinely pro-business (within a Latin American context, of course). Perhaps most important, the majority of the people of native descent I spoke with had only one thing on their minds: jobs.
 

These three gentlemen I came across on another company’s project expressed no concerns about drilling, open pit mines, new roads, chemicals, etc. All they wanted was work. Note the green rocks scattered all around them. Those are copper oxides.

And no wonder, with so many people still living in mud-brick houses with no electricity.
 

These young girls live on the farm you see behind them, with no electricity and a nearby creek for water. When I see such things, I feel proud to be a part of the market’s invisible hand, reaching out to help them with real jobs and training for their parents, not a government handout that keeps them dependent.

It’s also a good sign when village elders smile and wave at passing company vehicles, rather than scowling. There are many more anecdotal positive signs, but they don’t prove anything. My sense, however, is that the typical Peruvian knows the country has always benefitted from mining and wants to see it flourish, so long as it’s done responsibly – and frankly, so long as those who are impacted see what’s in it for them.

That’s good, because the rocks in Peru are often spectacular and have been subjected to less exploration in recent decades than in many other places, leaving lots of potential for new discoveries.
 

Quartz, semi-massive and massive sulfide material, in a zone about 20 meters wide and several hundred meters long, with good grades of gold, silver, copper, lead, and zinc.

That’s it in a nutshell. The economic numbers we reported in our more quantitative analysis last month jive with my personal evaluation on the ground. Along with Colombia and Chile, Peru is one of my favorite mining jurisdictions in South America, and I expect we’ll see more opportunities to speculate on Peru plays in the near future.

Of the three companies Louis visited in Peru, he deemed only one fit for becoming the new silver pick for Casey’s International Speculator at the time… a silver monster that subscribers immediately benefitted from owning, up 23.7% in the first month. Learn more about how Louis’ boots-on-the-ground approach has been yielding amazing stock winners – click here.

Doug Casey: How You Can Survive the Upcoming Financial Apocalypse

Here's an excerpt from the latest issue of Conversations with Casey - an absolutely must read that Doug Casey and his team publish every Wednesday. If you're not yet a subscriber, I'd highly recommend it - it's a free pub, so you can't beat the price, and Doug definitely doesn't pull any punches!

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(Conversations with Casey: Interviewed by Louis James, Editor, International Speculator)

L: Doug, last time we spoke, you said quite a bit about debt, in the context of your expectation that the euro is on its way out. At the end of that conversation, you mentioned, of course, that the problem is not limited to Greece, nor the eurozone. America as a country has become a world-class debtor, and many Americans seem to think a maxed-out credit card is a reason to get a higher credit limit, not to economize. It’s like a global epidemic. Let’s talk about debt.

Doug: Sure. This is a story that’s going to end very badly for a lot of people. I’ve said this before, in many different ways, but I think it’s worth saying again, because most people just don’t grok it…

L: Grok. From the Martian word for “drink” and “understand.” In Heinlein’s novels, water was a critical element of Martian culture – makes sense, for a desert planet. When you grok knowledge, as when you drink water, you don’t just hold it in your mouth and spit it out. You take it into yourself, it goes into your blood, and eventually into every cell in your body; it becomes part of you. This is heavy-duty understanding… Sorry for jumping in with the spontaneous lecture. I just suspect many readers will not know the term.

Doug: Or put another way, in the negative case, most people just don’t get what money really is – and what it isn’t. They take it as a given, as part of the cosmic firmament. But it’s not. A prime example of this is the mistaking of debt for money, a phenomenon David Galland pointed out in a Casey’s Daily Dispatch a few weeks ago. This is why the entire world’s monetary system today is headed for a disastrous failure. And this is absolutely inevitable. There’s no way around it.

L: Why?

Doug: Because you can’t use debt as money. As I’ve pointed out before, Aristotle, in the fourth century BC, was the first person to define what money is. And what is it? It’s a store of value and a medium of exchange.

The paper we use today is a medium of exchange – it got that way because governments made it illegal not to accept it – but it’s not a good store of value. And it’s rapidly and radically becoming less of a store of value. What we use as money today is actually not money; it’s currency. Technically, that’s simply a word that indicates a government substitute for money.

What does make for good money? Again, Aristotle gives us the answer. It’s something that has five characteristics: it’s durable and divisible, consistent and convenient, and has value in itself.

L: Some of our readers who’ve studied Austrian economics challenged us on that last bit, last time we talked about gold, because, as the Austrians pointed out, value is subjective. But you don’t mean some sort of value that’s independent of people making value judgments. You mean that people value something that makes for good money, because of its innate qualities – not something “valued” because of government threats of force.

Doug: Right. And for these reasons, gold is almost certainly the best thing to use for money. Not because I say so, nor because Aristotle said so, but because, over time, people have found it to be the most durable, divisible, consistent, convenient, and inherently valuable thing to use. Silver is also good, but it’s less durable because it corrodes. And less convenient, in that it takes about 60 times more of it – at the moment – to offer the same value as gold. Copper is the next traditional step down the ladder.

L: That, plus one reason that’s pertinent today but was not a problem in Aristotle’s world: gold can’t just be printed up on the arbitrary whims of those in power.

Doug: That’s the big one. Using metals as money takes the whole matter out of the hands of the government and its bureaucrats.

L: But we don’t use gold today…

Doug: No, as per David’s example, it’s as though a bunch of friends without any real money started exchanging IOUs for money, and then after a while forgot that the IOUs were supposed to represent, and be redeemed in, real money.

The problem with this is that, in the case of the IOUs between friends, paper is based solely on hope and trust. One can move away, or die, or turn dishonest, or become insolvent – many other things could happen. A guy stuck with a dead man’s IOU has nothing.

With government IOUs, or currencies, it’s worse, because they can increase the number of IOUs in circulation without telling anyone – that’s what inflation is. Since the government creates the IOUs, it gets the benefit of spending them before the inflation they create raises prices, which is basically stealing from the people. And, of course, sometimes governments do “die,” leaving the holders stuck with nothing, just as with the IOUs between friends. In fact, it’s arguably far more likely that such problems will arise from trusting a government to print IOUs than from trusting a friend.

[To read the full 8-page interview with Doug Casey and what he thinks will happen to the American middle class, sign up here.]