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Why Don’t Miners Stop Selling at Artificially Low Prices?

by Lobo Tiggre
Tuesday, March 15, 12:00pm, UTC, 2022

Ever since I was a little boy—and I mean that literally, as I was one of the “little guys” always picked last for sports teams—I’ve hated being pushed around.

Maybe that’s why I became a libertarian anarchist as an adult. I loathe the state, its bureaucracy, and its theft (taxation) of my productive capacity for ends I consider counterproductive, unethical, and destructive. But I don’t ignore the state, its laws, its minions, and the consequences of its policies when I invest, just because I don’t like them.

No investor or speculator should.

Suppose I said I’d refuse to invest in copper, silver, or any of the energy minerals because I don’t like the green agenda being advanced by governments around the world. That’d be my right; I can forgo the gains in these commodities if I want to.

But imagine that I wrote that the prices of the minerals needed for the new energy paradigm are going lower because the green agenda shouldn’t exist…

You would rightly question my objectivity and usefulness as a commodities analyst.

Why belabor the obvious?

Because emotional investors often forget or ignore the obvious.

That creates opportunities for contrarians when mainstream investors do it. But gold bugs and other resource investors aren't immune to the error.

I can tell from click rates that many resource speculators are not heeding me on the importance of “ESG BS” going forward. They don’t like it and don’t want to hear about it. That’s their prerogative. Still, I must say that burying one’s head in the sand is no way to maximize positive investment outcomes.

One particular example of mixing ideology and investment I’ve been asked about lately is why more gold and silver miners don’t hold back sales of their output. A certain well-loved silver miner is often cited as an example of being one of the “good guys” for doing this.

After all, if prices are manipulated to artificially low levels, they can make more money selling at better prices in the future. Indeed, if prices will be much higher when the manipulation ends, don’t they have a responsibility to wait and sell at those higher prices? And if all producers got together and stopped selling, wouldn’t that bankrupt the shorts, end the manipulation, and bring on a freer market with honest price discovery?

Miners of the world, unite!

Not so fast…

In the first place, it’s inconsistent to criticize Greens for burdening the mining industry with their ideological agenda and then turn around and ask miners to forgo revenue for a different vision of the greater good.

A mine is a business. Mining companies exist for the benefit of their owners—shareholders—not to save the world from JP Morgan and Darth Vader. Happily, this, by Adam Smith’s invisible hand, does tend towards the greater good.

But even if miners did want to take on the Cabal of Evil Manipulators, who says they'll succeed?

What if miners withhold production from the market this quarter due to low prices—and then the manipulators send prices even lower next quarter… and the one after that?

If “too big to fail” banks have government backing to manipulate prices lower, why on earth should anyone imagine that miners can outlast them in a direct contest?

Taking this to the most basic level, don’t forget that withholding inventory from sales means forgoing revenue. Slashing the top line cuts the bottom line—and that eats up cash reserves fast.

One might think that a miner with a billion dollars in the bank could tighten its belt and last a while, but a company that big also spends big. Very few miners can withstand loss of revenue for more than brief periods.

The only way to really cut losses for any extended period is to shut the mines down.

But that has its limits too. The only way to do this without damaging the mines is to keep them in good shape with high-level “care and maintenance” budgets. (Mines are holes in the ground with a natural tendency to cave in, flood, and deteriorate in myriad ways.)

And then there are obligations under offtake agreements, royalty and streaming deals, mining licenses, labor union contracts, and many more factors that could bankrupt a company or cause it to forfeit assets if management decided to stop producing when they could.

That means that even if a few companies could stop selling for long enough to make the manipulators eat their shorts, the majority that couldn’t take it for even one quarter would never join the fight. For them, it’d be suicide. And that makes it highly unlikely that enough supply could be held off the market for long enough to achieve victory.

Call me a traitor if you like, but as an investor, I’d sell my shares in any company that announced it’s going to prioritize fighting the Cabal of Evil Manipulators over profits.


I might turn around and give the money to a non-profit fighting the bad guys.

But I wouldn’t see that as an investment. It would be charity. A donation to a cause I could believe in, if one could show me an effective strategy I thought had a chance of working.

I’m not against fighting crooks.

I’m just against confusing that with investing or speculating for profit.

That’s my take,



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