MONEY, METALS AND MINING

Published by: David Morgan Volume 10 - Issue 12 - December 2008

"Money is the barometer of a society's
virtue. When you see that trading is
done, not by consent, but by
compulsion... when you see that in
order to produce, you need to obtain
permission from men who produce
nothing... when you see your laws
don't protect you against them, but
protect them against you... when you
see corruption being rewarded and
honesty becoming a self-sacrifice...
you may know that your society is
doomed." "Atlas Shrugged"
Wish You A Joyful Christmas.
Happy Holidays from all of us
here at Silver Investor.
The Big Picture
Page 1
Silver News
Page 2
Mining Stock Comments
Page 6
As Ludwig von Mises stated the final collapse of the financial system cannot
be avoided, the question becomes whether the crisis should come sooner as
the result of a voluntary abandonment of further credit expansion, or later as
a final and total catastrophe of the currency system involved."
This is what we focused on last month and the picture has not become any
clearer at this point, meaning that the credit system continues to unravel and
the next big shoe to drop will be the credit card fiasco. It is a fiasco because
so many for so long have done exactly what they were taught by big
government. Borrow all you can and pay it back in cheaper dollars. This
certainly was the plan of many that borrowed on their credit cards and by
other means to keep their life style or “invest”.
Now as Mises has stated the credit system is having a hard time expanding.
Yes, we are well aware of the massive amount of credit being thrown into the
system, but most of that money is now really flowing as of this time. Longer
term we still lean toward the fact that the “death of the dollar” is going to
take place, but the road to the final destruction of the U.S. dollar is going to
be difficult indeed.
Credit card loans are some of the highest interest loans available to the
financial industry and these loans are normally packaged up and sold to
pension plans or insurance companies. A great deal for some time, until the
loan default rate becomes too high, at present the default rate is increasing
just like it is doing in the real estate sector and the last major financing of a
“package” of this debt was pretty much ignored by the market. This is not a
good sign.
Our thinking comes back to the error your publisher made in the early
1980’s when interest rate shot up sky high. Being somewhat “overeducated”
in the way all fiat systems eventually end, it was my thinking that interest rates
are not only a function of return but also a function of

Asset Allocation If the risk is great the “potential” interest rate is high because the chance of
Page 12 default is so much greater. Those readers that were in the markets at that
time will recall that even short term U.S. Treasuries got to over 15%. My
thinking at the time was that this type of interest rate was a prelude to a
collapse of the currency and that the debt would not be paid off, but rather

We are offering free access to the Members Only Section for anyone that signs up
before the end of the year-- December 31st 2008 (first time subscribers only). If you
help us, you help yourself because the more pressure-- BUYING pressure we can put
on silver and gold the more the price will move UP for both the metals and the
mining shares. Have a Healthy, and Happy Holiday Season.
 reneged upon. How wrong I was—the best move that
could have been made at that time would be to switch out
of gold and into the safe and high yielding U.S. Bond or
Treasury market.
However, today it is far different for the United States than
it was in 1980 and the world is pretty much saturated with
dollars, yet the dollar has had a rally. This is temporary in
our view but the real weakness in the dollar may take
several months to manifest. So, for now we are sticking
with the forecast shown in last month’s report as to our
expected time frame.
If you wish to get to the extreme understanding of the
financial condition today, we suggest you can do it on a
micro level. Ask yourself if you had to live off of your
savings starting today – how long could you survive? This
is essentially what is taking place in the credit markets
currently. Those that have money to lend are asking huge
premiums well above 10% for example. In fact read the
interest rate that Coeur d’Alene (CDE) financed at recently
to get an idea. This is because no one knows what the
U.S. dollar will be worth in the future and the market
conditions are so tight that the lender can ask for and
receive almost any rate they choose.
This of course has not spilled over into the bond market—
yet. We add the word yet because those that hold a great
deal of the U.S. debt are not convinced that the
deflationary conditions will turn around. Certainly, we are
not 100% sure, but the roll-over of the current debt must
continue and this is what we believe will almost guarantee
the death of the dollar.
The financial powers that be, know all of the above and
therefore some assurances are probably being made
behind closed doors to protect the holders of U.S. bonds
either through a backing of some type (gold perhaps?) or
maybe some collateral is already in place unknown the
American people. I doubt this highly but it has surfaced in
our research.
Remember in basic finance it is the bond holders that are
first in line under default conditions. This means if you
were investing in a producing mine for example and were
a bond holder (debt holder) and the mine failed. You
would be first in line to receive the break up value of the
mine. This would be land positions, mill, mining
hardware, office equipment. I am sure you get the picture.
Equity holders only share in “profits” and are secondary to
the bond holders. In our example, if the breakup value of
the hypothetical mine were to satisfy the bond holders in
total, then the shareholders would divide up the remaining
tangible assets.
2 WWW.SILVER-INVESTOR.COM THE MORGAN REPORT Decembr 2008
This brings us back to the basic question of whether or not
the U.S. bond is secured in any way? It is highly doubtful
– the basis of the bond market is most likely just as stated
ad nausem, the full faith and credit of the United States.
This really means the ability of the U.S. to tax the citizens.
On top of that haven’t the present authorities already
added a lot of bailout money (loans to Wall Street) on the
backs of U.S. citizens already? This is not adding up to a
pleasant ending.
For new subscribers, make sure you own real metal (coins
preferred) before buying any mining company senior or
junior. Silver and Gold are the only monetary assets that
stand alone outside the financial system and therefore
continue their safe haven status regardless of the twists
and turns of today’s financial world.
Bloomberg put out some interesting news regarding the
silver market stating that refined silver output in China has
peaked and it could stop growing because less will be
produced as a result of halting of mine expansions, higher
costs for production and lower prices received for the
metal itself.
Zhou Juqiu, chairman of the gold and silver division at the
China Non-ferrous
Metals Industry Association, said in an interview. Output
may rise to nearly 10,000 metric tons this year from 9,092
tons in 2007, he said. Silver prices have more than halved
from an 18- year high in March after hedge funds and
speculative investors sold commodities to raise cash, while
recession fears reduced demand for industrial use of the
precious metal. China's annual silver output growth
already slowed to 10 percent last year compared with an
average 30 percent between 2001 and 2006, Zhou said.
`There won't be much growth going forward'' in the next
few months, Zhou said. While producers are still ``doing
ok,'' they are faced with an increasingly difficult
environment, including tighter financing and reduced
export market, he said.
In July China revoked the export rebates on silver to
control use of limited natural resources. This will force
China to rely on imports to fill the needs for the precious
metal.
said Li Xiaoni, vice president of China
Chamber of Commerce of Metals, Minerals & Chemicals
Importers & Exporters.
The country's consumption already accounts for 70 percent
of the global total for industrial use, she said. China's
consumption of silver has grown by over 10 percent
recently reaching 4,000 tons last year, Zhou said. China
Copyright © 2008
 has 26,000 tons of silver reserves, about 9.6 percent of
the global total, and the fifth biggest in the world, he said.
About 60 percent to 70 percent of China's silver is the
byproduct of smelting for lead, zinc and copper, he said.
Many have asked about potential default on the Comex
for silver in the December contract. This is doubtful in our
view based on the public data, but as the expression goes
“every little bit” helps.” During our trip to Europe for the
Silver Summit in three main cities London, Paris, and
Munich it was relayed to this writer that the silver delivery
times from the LBMA keep getting moved back. In fact it
was suggested that any “default” might actually take place
out of London rather than New York.
This is an interesting idea and we do not mind sharing
with our members only. However, even though the source
was top-notch it is still considered a rumor by us and
therefore should be considered such by you. However, if
we examine this a bit further we know when there was
essentially a default in nickel in London the Association
required those that had physical to “loan” it back into the
market for those that were on the wrong side of the
market.
In today’s world black is white and up is down. Very little
makes sense and sometimes even when you win you can
end up “losing.” This does not mean that you should give
up on this area of your portfolio. In our studied view
nothing will be doing better in the future than the precious
metals and eventually the underlying mining shares (that
survive).
Several have asked if the bottom is in, and we certainly
want to be careful but it does look like the bottom is here
with gold’s recent breakout. Once silver is trading above
$10.50 and holds that level we will be much more assured
the bottom has been seen.
We had the pleasure of getting an interview with Mr. Hugo
Salinas Price recently, this interview was shared with some
of our German Associates and we thank them for their
suggestion.
Mister Salinas Price, please tell us something
about your background?
I spent my active life in business as
General Manager of a business founded by my father in
1950 - a radio manufacturer. I joined the company in
1952, at 20, after dropping out of three Universities,
because I found them boring and not to my taste.
Copyright © 2008 December 2008 THE MORGAN REPORT WWW.SILVER-INVESTOR.COM
I have always had an interest in Economics, which I shared
with my father. The business developed into a TV
manufacturing business which sold its products directly to
the consumer; this led to the establishment of our own
stores, selling many other products. Today, my company is
run by my son; we no longer manufacture, we are retailers
with many stores in Mexico and other countries of Latin
America.
I retired at age 55, left my son in charge, and he has done
extremely well. I am more a thinker than a businessman,
so I did well in moving out and leaving son in charge. I
might say, that NOT having obtained any degree
contributed to not stunting my intellectual growth. I am a
self-educated man.
When and how or because of which event did
you discover your love for silver?
When we had a financial seizure in
Mexico, in the Spring of 1995, with a new devaluation, I
pondered on just what was the cause of this perpetual
instability of my country, Mexico. I identified the cause as
the absence of real money. You see, the country had
"borrowed short and lent long", the classic cause of
financial ruin. And there was no long-term borrowing
possible, because that requires stable money. In my first
essays, I proposed a complete change of our monetary
system, from fiat to silver money. As time went on, I
realized that this would be politically impossible.
Thus, I refined my proposals in favor of the introduction of
silver, in parallel with paper money, as a defence for
savers from the ravages of inflation. One day, out of the
blue, came the final idea: the silver coin must
1 not have a monetary value engraved upon it, because
silver is going up due to inflation and industrial use.
2 the monetary value must be a Central Bank quoted
value, which can go UP when silver goes up, but
3 this quote must never be diminished - otherwise, the
coin will never become money along with fiat money.
The coin will always have a slight overvaluation with
regard to its intrinsic silver value.
This will keep the coin in permanent circulation and never
allow the coin to reach the "melting point", which is what
has happened to ALL the silver coinage which once existed
in the world.
In the year 2004, your article, “Silver’s three
flags” caused a stir amongst silverbugs. What is your
conclusion after the last four years? Do you still see serious
chance that the dream becomes true?
3
 Few people outside Mexico realize to
what a great extent this measure is favored by the Mexican
people. Two polls by established polling companies, have
revealed the same result: 81% of the Mexican people
would like to have silver money. The support for
monetizing the "Libertad" silver ounce is very widespread.
The Lower House and the Senate will pass this measure,
perhaps even by unanimity, if a half dozen leaders decide
to take the plunge. The absolutely disastrous condition of
world finance and the great problems headed our way,
make this measure very attractive as a means of protecting
the savings of families and inspiring confidence in our
country, and hope for better times. We may be very close
to success.
The Mexican Libertads meet a big demand from
other countries. Do you see a continuation of this trend, or
could it happen in your opinion, that the export of the
coins will be limited to keep the silver in Mexico?
I have not mentioned this important
point hitherto, because I have not wanted to frighten the
Lawmakers with the enormous importance of this
measure. The fact is, the world is hungry for real money.
The monetized silver coin will become, I have not the
slightest doubt, and one of Mexico's most important
exports, for the whole world will want our product. As
Mexico's silver is monetized and silver is subtracted from
the industrial market, I can see the silver ounce bringing in
$50 dollars a piece. We could easily export 50 million
ounces of "Libertad" coins a year. So you see, in a world
where it is becoming more and more difficult to export
anything - everyone is retrenching - the silver ounce, once
monetized, will become a SUPER PRODUCT, very
desirable by all the people of the world.
: The demand for silver is as big as it has been
for a long time, the stocks are getting depleted and more
and more mines are closing down because of the present
problems of the financial markets respectively the
substantial drop of the base metal prices. What is the
reason in your opinion that silver is still so cheap?
Silver is mainly an industrial metal which
still retains monetary prestige. But industrial
use determines the price. Industry is getting hit very hard
in the present crisis, so that is one factor that depresses the
price. The other factor is the clear manipulation of the
price of silver on the Comex. This manipulation can only
be defeated by TAKING SILVER OFF THE MARKET, and
that can be done by finding a new use for
it: MONETIZATION.
In your comments you discussed the “fractional
banking system”. You clearly show that redistribution takes
place from those who don’t borrow money to the people
4 WWW.SILVER-INVESTOR.COM THE MORGAN REPORT Decembr 2008
borrowing money to spend it for consumption. What
possibilities does a saver have in the present system, to
protect himself being betrayed by this mechanism? Is there
another possibility besides the investment in precious
metals or the use of the savings for consumption?
The person who saves monetized silver
(monetized according to our plan), is not affected by
inflation. The inflation will only make the price of silver
rise, and that will make the quoted monetary value of the
"Libertad" ounce rise with it.
My argument, in favor of the measure I propose, is
that wealthy people have financial advisors who can steer
them to profitable stocks and even suggest other
currencies and a thousand strategies. The mass of people
are utterly defenseless. They need a SIMPLE way to protect
themselves from inflation and "fractional banking" which
causes it. The saver who puts away silver ounces, can
sleep at nights, knowing that his investment will never
evaporate in inflation.
The MONETIZED silver ounce is a great stimulus to
saving and it does not require high interest rates, which
are negative for industry and commerce. The MONETIZED
silver ounce reduces the urge to spend and increases the
urge to save, which is the basis for prosperity, and
importantly, the basis for TRANQUILITY AND PEACE OF
MIND, which is so lacking in our world today.
Do you think that a silver standard or a bimetal
standard is feasible and desirable? If yes, how would you
increase the money supply according to the economic
growth, and how will you prevent growth problems or
even deflation in such a system?
I am not talking about a silver standard,
because I think that politically, the world is going to have
to live with inflation for many years to come. (I do hope I
am mistaken).
I don't think about money supply and economic growth. I
think about the need that humans have, to live peacefully
and tranquilly, secure in the knowledge that they have
reserves to meet emergencies. That is the center of my
focus: the human being and his needs. Fiat money is
highly damaging for SOCIAL mental health. Why do you
think there is such a huge demand for drugs today? I
attribute this abnormal condition to the psychological
disorders that spring from the total uncertainty that
destroys so many people's plans for life. Real
money satisfies a real need that human's have, it makes
them feel better.
I'll let the Masters of the Universe who think that they run
things, worry about growth and deflation and tinker with
Copyright © 2008
 fiat money to their heart's content. Just let us have: REAL
SILVER MONEY. The mass of people don't give a tinker's
damn about "growth". But they DO care about having
savings put away, that are not going to turn into junk
through inflation. That's the reason for monetizing silver.
In your article “A perpetual War on Gold?”, you
mention a big crisis’, which leads to a bigger monetary
role of precious metals. The physical demand for gold is
very big. Is the big crisis and the end of the war on Gold “
imminent?
We are certainly in the "Big Crisis". Let us
see what the Masters of the Universe decide in their
meetings. My opinion is that - they will do nothing of any
value. All talk of "regulation" and "transparency" and
"accountability" and "watchdogs" and "early warning
systems" is simply nonsense.
1. There can be no enduring stability in this world without
gold as the basis for settlement of international balances.
2. Governments and financial rascals will go on inflating,
as long as currencies are not redeemable into gold and
3. There would be a need for a CLEARING MEDIUM, and
that must be 90 day Bills of Exchange, as explained by
Prof. Antal E. Fekete. But - don't expect all this to happen
any time soon.
I think that a simple measure, the monetization of a silver
coin according to the method I propose, is something
VIABLE, NOW. It can be done by one country, it does not
need a long-drawn-out series of international conferences.
It is a beginning that is pregnant with many derivations
which will be beneficial to humans. It can be likened to a
seed that can grow into a mighty tree. We have to start
from the bottom up, not from the top down. We have to
start with a measure that will help the individual human
being, not with a huge reorganization of international
finance - which cannot be done, anyhow.
One more question regarding the “war on
Gold” – will we now soon see the nationalizations of big
Gold mining companies, that you mentioned in your
article? In a way, the present crisis would provide the
perfect excuse for doing this.
In this world, there is no horror that can
be ruled out. I would not put nationalization past some
governments. But, there is a great deal of above-ground
gold in existence. Nationalizations of mines would only
make that stock all the more valuable. I have been urging
the adoption of the monetization of silver, saying that
when the nasty stuff hits the fan, there will be so much
disorder that no one will be thinking straight and it will be
impossible for any rational measure to be adopted by
Legislators who are in a state of absolute panic.
Copyright © 2008 December 2008 THE MORGAN REPORT WWW.SILVER-INVESTOR.COM
By the way, our Mexican Legislators are much, much
better QUALITY HUMANS, than those in the US.
Outstanding among US legislators, of course, is Dr. Ron
Paul, who has endorsed our plan. I have the highest
respect for him.
You have very liberal views, according to the
Austrian School in economics. Isn’t there the danger that
the present crisis will lead to a harsh backlash in the
worldwide efforts for this concept?
Theories may be misunderstood. The
silver coin is never misunderstood! Not even in its present,
un-monetized condition. Wherever I present a silver coin,
looks center on it in fascination. I can go to Outer
Mongolia and get a meal and lodging, for a silver coin.
Silver is universally respected. It has no enemies and it has
friends throughout the world.
I think I ought to mention that the Association of which I
am President, is hosting a gathering on December 2, of all
the people who have supported our measure, and I am
impressed, astounded, at the number of important people
- Governors of States, for instance - who are going to
show up. We will have Congressmen who are extreme
Leftists, having drinks along with Congressmen who are
Rightists.
It is truly amazing to me, how silver has drawn together all
the different political currents - people from all the political
parties will be at the gathering. Truly, it makes me feel
very humble and grateful for the opportunity and
privilege of having done this, for my country.
I pray for success, for the benefit of the Mexican people.
And I thank you, for your interest!
Each time I turn on my screen, the prices of silver equities
and 'spot silver' bring a look to my face that makes me
wonder whether I should rename this contribution 'sucking
on a lemon corner'. Over here in the UK, silver still merits
no more interest than do lead or zinc…well, maybe I am
exaggerating slightly – but not much.
Despite the UK economy lurching about like a zombie
from a 70s 'B' movie, the great British public is still
succumbing to wishful thinking with regards to
macroeconomic reality. Even now consumers are still
spending what they don't have – footfall at the newly
opened 43 acre Westfield shopping centre in London
brought local traffic to a standstill. I am sure that readers
of the Morgan Report will be unsurprised to hear that there
5
 are no Bullion dealers at Westfield to justify the numbers
of people flocking there!
On a brighter note, bullion dealers in London are seeing
much higher volumes and the Investment Professionals I
talk to show more interest in discussing Precious Metals,
however this is yet to translate into any significant capital
flows into the bombed-out Silver and Gold markets. No
doubt, given the choice between UK Government Bonds
and Physical Silver, 99% of the market here would buy the
Bonds without a moment's hesitation. Over the past
couple of months I have watched an endless stream of TV
'documentaries' about the Credit Crunch, its origins and
potential solutions, and NOT ONCE have I heard
reference to Fiat Currency, Fractional Reserve Lending,
Gold or Silver. The Investment Community here still all
sing from the same hymn sheet – it is 'deflation, deflation'
– the market here has yet to seriously consider the intrinsic
worthlessness of the underlying fiat paper. It will come
soon enough though, and people's confidence will
disappear with breathtaking speed when the horrible truth
takes hold of the public mind.
Keynesians love the idea of a 'Goldilocks' economy –
warm it up, cool it down, however to my mind it is more
like an Alice in Wonderland economy. To highlight this
pervasive mindset, back in March of 2008 the Office for
National Statistics in the UK added Muffins and Memory
Sticks to the UK RPI measure. Not what a Silverbug would
generally use to measure inflation….Government data,
the input measures used to quantify returns and the UK
macroeconomic picture is so far from reality that the
Ministry of Truth is having to work overtime just to keep
up. While people's nominal returns were positive, it was in
the collective interest to keep these 'through-the-looking-
glass' goggles firmly in place, why query the government,
we are all 'making money'? Now, however, I implore
everyone to rip those goggles off and look at the picture
as it really is, despite the horror of reality at this moment
of final fiat capitulation.
Further to the above, I refuse to waver from my rationale
for investing in silver, one based on fundamentals and
historical cycles and the need to protect oneself against the
banking fraternity and their Ponzi schemes. I reference in
conclusion the well-worn phrase of George Soros:
"Identify the trend whose premise is false and bet against
it." This can be painful in the short-term as the market will
indeed stay irrational longer than you can stay solvent, but
not if you own physical and equities bought without
recourse to margin.
From your Limey Friend,
Good to see you in London again…
6 WWW.SILVER-INVESTOR.COM THE MORGAN REPORT Decembr 2008
Several have asked what your editor is doing currently.
The answer is “playing it safe” by buying top tier
companies that have good production, management, and
decent balance sheets. These are the companies
purchased most recently.
, (AUY) Yamana Gold, Inc. engages in the
acquisition, financing, exploration, development, and
operation of precious metal mining properties in Brazil,
Argentina, Honduras, and Nicaragua. Yamana is
primarily a gold producer but also produces other metals,
copper being a fair component. Yamana holds interests in
the San Andres gold mine and prospective exploration
grounds in Honduras, the Gualcamayo gold project in
Argentina, and prospective exploration concessions in
Nicaragua. Yamana Gold was founded in 1980. At one
time your publisher was very familiar with the
management. Currently this company produces gold at
one of the lowest cash costs in the industry and yes we are
aware that there is a copper component, however all
things considered this company is one of the safest to buy
at the current time.
Mine operating earnings as of last quarter were $44.4
million (after a non-recurring mark-to-market adjustment
and inventory adjustment) and $414.6 million respectively.
The net earnings of $150.2 million, or $0.21 per share.
Cash flow from operations of $0.14 per share.
Total production of 235,406 gold equivalent ounces
(GEO) and 728,124 GEO respectively and the average
cash costs after by-product credits of $140 per GEO and
$(40) per GEO respectively.The copper production was
44.4 million pounds.
The company strengthened its cash position through the
sale of Yamana's 40 per cent joint venture interest in the
Rossi Mine in Nevada for total consideration of $29.2
million. The interest was non-core and sold to Barrick
Gold which was the majority owner and operator of the
mine. Additionally the company realized significant value
in the Company's copper hedge program by monetizing a
portion of its longer-term contracts.
"The global economy is currently experiencing one of the
most unsettled times in recent history. With the severe
correction in the capital markets, and illiquidity in the
credit markets, a sociopolitical and economic shift of
incredible proportions is taking place," said Peter Marrone,
Chairman and CEO of Yamana Gold. "In the context of
this environment, successful companies will be the ones
that are able to maintain flexibility, continue to generate
cash flow, preserve capital and maximize cash balances.
At Yamana, our goal has consistently been to complement
Copyright © 2008
 sustainable production growth with increases in cash flow,
always with an eye toward preservation of cash. We
remain committed to maintaining and increasing our
already robust cash reserves by increasing cash flow,
containing costs, mitigating expansionary capital where
appropriate and divesting non-core assets. The recent sale
of our minority interest in the Rossi mine highlights
Yamana's ongoing commitment to maximizing our cash
position and concentrating on our core assets. Equally, the
value of our copper hedges represents, subsequent to
quarter end, the significant embedded value in other
assets. We are well positioned with cash, cash equivalents,
and growth, both in production and cash flow, and other
valuable assets."
"Finally, the quarter just ended represents, in our view, the
high water mark for costs in our industry and
improvements in costs should begin to show as this year
comes to an end," Mr. Marrone continued. "We are
beginning to see significant decline in the cost of fuel, with
oil at current levels, consumables and other products. The
appreciation of the United States Dollar against local
currencies, particularly the currencies in Brazil
(approximately 26 per cent from the third quarter) and
Chile (up 30 per cent from the third quarter), should
further assist our cost structure."
, (GG) Goldcorp, Inc. engages in the
acquisition, exploration, development, and operation of
precious metal properties in the Americas and Australia. It
focuses on gold, silver, and copper. The company owns a
100% interest in the Red Lake gold mine comprising the
Red Lake Complex and the Campbell Complex in
Canada; the Penasquito gold project, the San Dimas gold-
silver mine, the Nukay gold-silver mine, the Los Filos gold
project, and the El Sauzal gold mine in Mexico; and the
Marlin gold-silver mine in Guatemala.
Goldcorp has 100% interest in the Peak gold mine in
Australia, the Amapari gold mine in Brazil, the Wharf gold
mine in the United States. Additionally, the company has a
37.5% interest in the Bajo de la Alumbrera gold-copper
mine located in Argentina, a 40% interest in the Pueblo
Viejo gold development stage project in the Dominican
Republic, a 68% interest in the Musselwhite gold mine in
Canada. Further Goldcorp has a 50% interest in the La
Coipa gold-silver mine in Chile, and a 51% interest in the
Porcupine gold mine in Canada.
It holds a 50% interest in the La Coipa gold-silver mine
located in Chile, a 21.2% interest in the El Limon gold
exploration project in Mexico, a 40% interest in the South
Arturo gold exploration project in the United States, and a
35% interest in the San Nicolas zinc-copper exploration
project in Mexico. The company has joint ventures with
Copyright © 2008 December 2008 THE MORGAN REPORT WWW.SILVER-INVESTOR.COM
Kinross Gold Corporation, Barrick Gold Corporation, Teck
Cominco, Ltd., Northern Orion, and Xstrata.
Obviously this company is spread out in enough places to
give stability from a geopolitical point of view. When Rob
McEwen was primarily involved the company used to
“bank” some of the gold production, in fact it was
suggested by me the company might consider doing the
same thing with silver. Well, Mr. McEwen has long since
left the company and the gold has been sold, yet this is
one of the heavy weights of the industry still and it was
purchased recently by your editor.
Revenues increased 5% to $552.2 million on gold sales of
550,500 ounces. Dividends of $32.1 million were paid
during the quarter. The Gold Eagle acquisition was
completed. Cash and equivalents at September 30, 2008
were $454 million. Goldcorp remains debt-free. The
Company reaffirms 2008 production and cash cost
guidance.
“We are pleased with our solid performance in the third
quarter as well as our continued strong cash position,”
said Kevin McArthur, President and Chief Executive
Officer. “We remain wellpositioned to execute our growth
programs. Given market uncertainty and the metals price
environment, we will continue to be disciplined in our use
of capital, with an emphasis on successful completion of
our cornerstone Peñasquito project.
, (AEM) Agnico-Eagle Mines Limited,
through its subsidiaries, engages in the exploration and
development of gold in northwestern Quebec, Canada.
The company holds interests in LaRonde Mine, and
Goldex and Lapa mine projects, as well as in the Bousquet
and Ellison properties located in the Abitibi region of
northwestern Quebec; Kittila mine project located in
northern Finland; and Pinos Altos project located in
northern Mexico. As of December 31, 2006, it managed
exploration in 77 properties in central and eastern
Canada, 12 properties in the United States, 1 mining
license and several claims and reservations in Finland,
and 2 properties in Mexico. The company was founded in
1953 and is based in Toronto, Canada.
This company is generating strong earnings and cash
flows and its gold production is set to increase to 300,000
oz expected in 2008. However the real kicker is the
potential to increase gold production by 2010
from the 2007 rate. Existing projects provide potential to
increase gold reserves to 18 million to 20 million ounces
by year end 2008. Potential for several five million ounce
gold deposits is driving additional internal growth
opportunities. I know some analysts can give several
reasons why this company is “overvalued” but we like it
and rate it very high. Your editor recently bought this
7
 company. Also the company has secured additional
financing if required to $600 million if memory serves.
, (PAAS) Pan American Silver Corp.
engages in the exploration, acquisition, development, and
operation of silver properties.
It also focuses on copper, zinc, lead, and gold minerals.
The company has mining operations in Mexico, Peru,
Argentina, and Bolivia; and has non-producing silver
resources in the United States and Argentina. It owns and
operates the Quiruvilca silver mine, the Huaron silver
mine, and the Morococha silver mine in Peru; La
Colorada Mine, Mexico; and San Vicente, Bolivia. Pan
American’s development projects include the Alamo
Dorado silver project in Mexico and Manantial Espejo in
Argentina. The company was founded in 1979 and is
headquartered in Vancouver, Canada.
- Quarterly silver production of 4.9 million ounces, up 9%
from Q3 2007
- Cash costs increased to $6.61 per payable ounce
of silver
- Sales of $79.5 million
- Cash flow from operations of $22.7 million.
- Mine operating earnings of $15.5 million.
- Net income of $6.4 million or $0.08 per share
Commissioning of Manantial Espejo mine in Argentina is
underway, with first silver and gold production expected
before the end of 2008.The company made a discovery of
a significant new high grade silver zone at the Morococha
mine in Peru. The production forecast for 2008 was
maintained at 18.8 million ounces of silver.
"There is no question that our financial results were
negatively impacted by the sharp decline in base metal
and silver prices that started in the middle of the third
quarter and gathered speed towards the end of
September" said Geoff Burns, President and CEO.
"However, we increased our silver production, still
generated net earnings for a 10th consecutive quarter,
delivered a respectable $22.7 million in operating cash
flow, maintained a healthy working capital position with
no debt and are now starting up our newest and lowest
cost silver and gold mine. In short, we are well positioned
to continue to deliver growth, weather the difficult price
environment we have just entered and at the same time
take advantage of the strategic opportunities that are
becoming more prevalent."
8 WWW.SILVER-INVESTOR.COM THE MORGAN REPORT Decembr 2008
This company has been smashed down like all we have
followed but still maintains strength from a production and
income perspective, therefore it will be one of the first to
recover and strongly sought by institutions later in the
cycle.
We recently put the following question to Silver Wheaton,
as we were unclear about their ability to achieve sales
targets if the base metal miners were to close down their
operations. This morning we received a response Brad
Kopp, Director, Investor relations, which is copied exactly
as received by Bob Kirtley of www.gold-prices.biz and
uranium-stocks.net along with other natural resource web
sites.
As most silver production is a by product of Zn/PB mining
and some of those mines are closing down, how does
Silver Wheaton protect itself should the agreed silver
production be not forthcoming?
Thanks for your email. In the current economic
environment, certainly there is always a risk of production
cuts; however, we’ve received no indication from any of
our partners that their operations are in jeopardy of scaling
back production. Keep in mind, year to date,
approximately 85% of Silver Wheaton’s silver sales have
come from three mines, San Dimas, Yauliyacu and
Zinkgruvan. Each of these mines has been in production for
over 100 years and survived through numerous commodity
cycles. In addition, Zinkgruvan and Yauliyacu are low cost
producers, offering a key advantage in today’s low metal
price environment. Given their extensive operating history,
we feel that the probability of one of these mines shutting
down is very low. In fact, each of these operations is
planning to increase production over the next few years.
Most of our future growth will result from Goldcorp’s
flagship asset, the Penasquito mine. Now a flag ship asset
of Silver Wheaton, Penasquito is scheduled to commence
production from the phase one sulphide mill in mid-2009.
Once Penasquito is in full production, our share of its silver
sales is expected to average almost 8 million ounces per
year. There have been no delays to their schedule and,
Penasquito promises to be a long-life, profitable asset for
our company.
When Silver Wheaton completes new silver stream
agreements, its partners provide completion guarantees
regarding certain minimum production criteria by specific
dates. If an operation fails to meet its minimum target rate
on or before a certain date it may be considered an event
of default and Silver Wheaton can terminate the
Copyright © 2008
 agreement and demand repayment of any remaining
balance (default fee). Silver Wheaton may also have
security interest in properties and equipment but these
may be subordinate to other creditors. If an operation
scales back or halts production after meeting the
requirements of the completion guarantee, Silver Wheaton
simply would receive scaled back silver deliveries from that
operation. However, once the operation commences and
ramps up production, silver deliveries would resume as
per the terms of the original silver stream agreement.
This stock has been beat up beyond what it
deserves and we will take the IR man at his word, however
a lot of financing has gone into this company and any
delays or production scheudules that are not on time could
impact the price. Caution is the word here until the silver
market stablizes above the $10.50 level. High risk takers
can take a shot, but we prefer to play it safe at this point.
Every January we painstakingly interview many juniors
mining companies and report our findings to you. This is
be in our annual forecast issue – our next issue – the
January Morgan Report. At this point all the juniors we
have decided to keep are worth keeping in our view. We
definitely like Impact Silver at this level as well.
As bad as things are half of the juniors in the speculative
section have improved this month. As stated earlier the
bottom may be in, and we certainly think we are due for
some more strength.
David,
Based on what Ted Butler has revealed, I believe that the
silver market has been manipulated by big banks....but
what are the chances that the government, in concert with
a few major banks which hold large sums of metals, have
been manipulating the silver (and gold) market for THE
SOLE PURPOSE of keeping the value low enough that
investors will not flee to gold instead of treasuries?
Knowing full well what they are doing every time they print
more money and that the day will come when the value of
the dollar is low enough that folks will flock to metals. So
they keep the price squashed enough that it is a BIG
deterrent and keeps people buying the dollar. Then if
inflation truly gets away from them, they simply confiscate
gold and silver at a low "fair market value". Is this
possible? Because none of the fundamentals vs. the price
Copyright © 2008 December 2008 THE MORGAN REPORT WWW.SILVER-INVESTOR.COM
of silver makes any sense to me. If the Dow plunging
777 points finds silver going DOWN.....then what in God's
name will make it go up?
I would love to have your opinion on this theory. We have
always had a strong conviction that precious metals,
based on history, is where we need to be to protect our
assets. But what happens if the government, having also
studied history, is changing the rules? Thanks, Debbie
I think you have it basically correct, the powers
that be financial and nice government men as Franklin
Sanders refers to them are doing their best to keep gold
and silver from looking like worthwhile investments as the
paper money machine unravels. My point—the truth will
come out, maybe not as we want, or in the time frame we
prefer but the truth will be available (known to many) to all
before this whole corrupt system implodes to it final
demise.
I simply do not see confiscation in the cards, if either metal
were to be confiscated it would be gold not silver. Yes, I
am well aware that Charles Savoie has a different opinion
than I, but you asked me. Silver is just too small a market
to do the government and good and the logistics nearly
impossible. How can you confiscate a laptop using silver?
Only go after silver coins? Which ones and why? The
advantage of the “industrial” aspect of silver is that having
it confiscated is almost impossible.
Gold on the other hand poses a bit more of a problem but
again it is doubtful to me that it would be confiscated. In
the 1930’s only about 20% was turned in by citizens
according to an interview I heard in my youth given by
John Exter. I still advocate having both gold and silver
and if you are convinced that Big Brother is going to make
you turn in your precious metals we have made
suggestions recently to get some outside of the U.S.
jurisdiction.
Bottom line—gold and silver will become very sought after
in a few years, making it very difficult for your editor to
announce a sell, because during the mania phase
everyone will be seeking the precious metals and if/when I
say sell many will think me a traitor or perhaps losing my
mind. But that is some time off in my view.
Dear David,
As always, thank you for your insight into the metals
markets.
With the significant difference in price between these two
markets, it would seem to be a huge opportunity for
9
 dealers and high wealth investors to take delivery on gold
and silver futures contracts. I understand that you yourself
have done so recently with a mini silver contract.
Once delivery is made, the investor would own it at a
considerable discount to the physical price and the dealer
would be able to turn around the gold and silver quite
quickly at a handsome profit. If it truly is this simple, why
is this not happening with countless dealers and investors
around the world? This leads me to a few questions:
1. What kind of problem would this create for the paper
market? Would they indeed be able to deliver a large
number of futures contracts, especially since during
normal times most contracts are closed out prior to
expiration?
2. What effect would this have on the price in the
precious metals paper market?
3. Has this large a discrepancy in price between the
physical and paper markets occurred in the past? If so,
how was it resolved at that time?
It seems to me either the paper price must move up, the
physical price must move down, or a combination of the
two. On the surface it would appear that the most likely
scenario would be for the paper price to move up. That in
itself would have both a fundamental and technical effect
on the markets causing the price to move higher very
quickly.
Certainly, if I were a dealer, I would very quickly take
delivery of gold and silver, fulfill my backlog of orders,
while pocketing a margin that is normally never available
in the precious metals market. If the current price
difference were to continue, it would seem likely that this
very situation could very well take place with the upcoming
December futures contract in gold and silver.
I hope you will be able to provide some additional insight.
This may be too simplistic a view of the situation. Perhaps
I am missing something.
All the best, Mark.
You are not missing much, but from my read
you may be missing the difference in forms of silver and
gold. The industrial or commercial delivery from the Comex
for both gold and silver are far different from the retail
market. For example the 1000 oz. Comex silver bars,
would have to be reprocessed into 100 oz. bars, or
stamped into coins to be sold in the retail market. The
spread is wide enough at this time for this to be worthwhile
but many dealers are waiting to see, before commiting to
this added expense, because if the market does loosen up
10 WWW.SILVER-INVESTOR.COM THE MORGAN REPORT Decembr 2008
they would have “wasted” money for equiptment or
processing costs that turn out to be a poor decision.
There is always a price difference in normal markets but it
is slight 3% or so in gold and maybe 7% or so in silver.
From my experience in this market there has never been a
huge difference like this. Where the paper market was far
less than the physical market. However, there was a huge
difference when the paper price of silver hit near $50 the
physical market in Los Angels was bid back to $35 per
ounce for physical silver.
Eventually the market prices will converge for the metals
where the industrial (paper) price and the retail (coin
dealer) price will move to the normal spreads. At this time
it is too early to know which one will move, but the more
people that put pressure on the market by taking silver off
the Comex the more likely it is that the paper price will
have to move higher. The market as I have stated before
could probably deliver 25 million ounces off the Comex
before any real “problems” would develop for the Futures
Market. This would take some time at the present rate of
demand and cannot be done by one individual because
as stated previously in other reports the Comex limits an
entity to 7.5 milliion ounces.
As a further note, according to data from the Office of the
Comptroller of the Currency, a division of the U.S.
Treasury Department, of the $135 billion of gold
derivatives contracts (including futures and options)
controlled by financial institutions, JP Morgan controls $96
billion (71.11 percent) of these contracts and HSBC Bank
USA controls $34.4 billion (25.48 percent). In other
words, just two players control almost all gold derivatives
contracts in the entire United States.
I was asked by one of my longest subscribers to give a
little hope or inspiration to everyone. Well certainly that is
a worthwhile request and let me begin with a letter I
received recently from a local denizen.
I attended the Liberty meeting on Friday night (Oct. 24 in
Spokane) at Aunties Book Store and have pondered your
presentation through the weekend. As I commented to
you while shaking your hand, I appreciated not only the
message you brought, but the passion you showed in your
delivery. I am a subscriber and have been reading a
great deal about the markets, the national and world
economy, etc. and of course trying to understand where
we are headed and how long we may be on the road.
Your insights have been instrumental in helping find some
answers to where some financial protection may be
available. I considered using the word security in place of
Copyright © 2008
 protection, but with the present conditions, I'm not sure
there is much real financial security. I feel the very
foundations of our faith, country, and world are being
shaken.
Thanks for expressing your vision to help make a
difference, Denny H
OK, so what message can I give? One is that you all make
a difference every single day of your life. Your attitude is
about the only thing you really have much control over,
sure many think they can plan their future and project their
future earning and on and on, but ask those that have
been hit with health issues, or a hurricane just how much
control they really had?
But with an attitude of “this recession may hurt you but I
continue to look for opportunity”
Many millionaires were made during the Great
Depression, by taking a look at everything and asking the
right questions. How can I do something better? What do
people need? What do I want/need that really will really
make a difference in my life? And therefore in the life of
others.
Proctor and Gamble created Ma Perkins using radio (a
newer medium in the 1930’s) to bring its products to the
fore. This was very successful. The Internet has leveled the
playing field tremendously, nearly anyone can become a
movie producer –via you tube or a radio star—pod casts,
or a writer using websites or blogs.
I usually look for what people have, not what they have!
What kind of crazy statement is that? Well, I look for the
internal qualities of people, integrity, honesty, sincerity,
willingness, open mindedness and on and on. I am not
that interested on what someone has externally, how much
money, cars, houses, boats, toys, etc. This might seem odd
coming from someone so tied to the financial sector but
with my over half century on the planet I have noticed in
my experience that most that have the right qualities inside
produce similar results on the outside. Wealth in other
words is an inside game as much as anything else.
When times get tough it brings out the best in the best
people, unfortunately it also brings out the worst in the
worst. This readership is some of the highest quality
people I have ever had the privilege of meeting, and I
ought to know I have met many of you over the years.
Never give up, enjoy being your best every day, smile it
costs little and above all be grateful for what you do have.
As I stated during my Idaho Silver Summit speech if you
have any savings at all you are among the richest 8% of
the world. Unless you have traveled to many third world
Copyright © 2008 December 2008 THE MORGAN REPORT WWW.SILVER-INVESTOR.COM
countries the real poverty and unsanitary living conditions
are merely a TV show on the National Geographic’s
Channel. The reality is everyone reading this report has
plenty to be grateful and thankful for, and with that…
I would like to remind everyone that silver makes an
excellent Holiday gift. I still have some of the silver dollars
I collected well before I became a teenager. Yet I cannot
recall the countless other gifts that I have received over the
years that have slipped my memory. Up until very recently
we were selling the "Bullion Sellers Report" on our website.
This was a review of most of the dealers that are
supported by GATA.org. The difference is we made actual
purchases and gave the actual transaction details, the
markup which did vary significantly, the time it took to
deliver, etc. However, we recently took this product off of
our website because so many precious metals dealers are
having difficulty finding product or making timely delivery.
However, one dealer that we know rated very high was
Miles Franklin. Andy Schectman is one of the principals of
this company and is he has assured me that Miles Franklin
can deliver 100 oz. silver bars within the U.S. in about
seven business days. They do have a fair supply of other
silver and gold products as well. This probably does not
have to be mentioned, but to be safe I will. Do not expect
to buy silver or gold for the "normal" mark-up of a few
percent. Those days are over at least for now. If you want
to buy gold or silver near the paper quoted price in New
York or London you will need to buy it in commercial
form. Certainly you are encouraged to shop around.
Details: Miles Franklin Toll Free: (800) 822-8080 or (800)
255-1129 Main Phone: (952) 929-7006.
Having said that for our Canadian friends we have been
told that the Bank of Nova Scotia is one of the world's
largest precious-metals dealers. If you go to the Hollis
Street branch in Halifax, Nova Scotia, or the King Street
West branch in Toronto, they'll sell you Canadian Maple
Leaf coins at a 3.7% premium to spot and one-ounce
wafers at a 2.6% premium to spot. Be advised we have not
tested this out, only received it from another newsletter
writer.
As for Miles Franklin we know because we have dealt with
them many times, including getting my wife's IRA set up for
a gold and silver retirement plan. If you choose to call
Andy Schectman or Miles Franklin you might mention the
Morgan Report. It won't hurt and it just might hasten your
order, but I cannot promise that.
Anyone interested in helping us during this Holiday Season
is encouraged to let anyone on their email list know we
are running a promotion to full access to this part of the
website until the end of the year December 31, 2008. I
wish each any everyone of you a fantastic Holiday Season,
Until next month, wishing you health above wealth and
wisdom beyond knowledge, David Morgan
11
 This section is for serious money where an investor can place up to ten percent of their Precious Metals Eq-
uity money in each company. Please spread out in this sector.

Goldcorp (GG), Yamana Gold (AUY), Agnico Eagle (AEM).

Pan American Silver (PAAS),

In this section (table below), only place money you can afford to lose. We will use a trailing stop of 15
percent from the time we feature a speculation in the list below. If a featured company falls to a level of 15 percent
below the date the company was featured, we will issue a sell.

Energold EGD.V (EGDFF) 1/02/07 C $1.40 -36%

Endeavour Financial EDV.TO (EDVMF) 7/2/07 US $9 - $10 -56% No Stop

Minco Silver MSV.TO (MISVF) 9/30/07 US $1.90 -81%

Silver Crest SVL.V (STVZF) 9/30/07 US $1.10 -71%

Klondike KS.V (KLSVF) 5/31/08 US $0.23 -70%

Endeavor Silver EDR.TO (EXK) 7/3/08 US $3.10 -58%

Mines Management MGT.TO (MGN) 7/3/08 US $2.61 -62%

First Majestic FR.TO (FRMSF) 8/4/08 US $4.08 -60%

Prices as of November 29, 2008

We are keeping our recommendations although technically stopped out on many, for the reasons
explained in September. Gold is preferred to silver at the present time and we will adhere to want the market is telling
us. Next month we will review many of the top tiers that have hit our list this year.

The Morgan Report is published on the first of the month. Rates for one (1)
year are US$129.99 for e-mail. Stone Investment Group, 21307 Buckeye Lake Lane, Colbert, WA 99005; 509-464-
1651.

Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to
completeness or accuracy. Because individual investment objectives vary, this Summary should not be construed as advice to meet
the particular needs of the reader. Any opinions expressed herein are statements of our judgment as of this date and are subject to
change without notice. Any action taken as a result of reading this independent market research is solely the responsibility of the
reader. Stone Investment Group is not and does not profess to be a professional investment advisor, and strongly encourages all
readers to consult with their own personal financial advisors, attorneys, and accountants before making any investment decision.
Stone Investment Group and/or independent consultants or members of their families may have a position in the securities
mentioned. Mr. Morgan does consult on a paid basis both with private investors and various companies. Investing and speculation
are inherently risky and should not be undertaken without professional advice. By your act of reading this independent market
research letter, you fully and explicitly agree that Stone Investment Group will not be held liable or responsible for any decisions
you make regarding any information discussed herein.

12 WWW.SILVER-INVESTOR.COM THE MORGAN REPORT Decembr 2008 Copyright © 2008