Mike Gleason: It is my privilege now to bring in 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 also been an outspoken voice about the manipulation that has been occurring in the futures market pricing of silver.

It’s a real privilege to have him on with us again today. Keith, thanks so much for joining us and welcome back.

Keith Neumeyer: Thanks Mike. I think we have got lots of juicy things to talk about.

Mike Gleason: Yeah, we certainly do. To start off here Keith – and before we get into the subject of manipulation, which I definitely want to cover with you today – next week Donald Trump will be sworn in as the next president here in the United States and it will mark a new era in American politics. It will also mark the first time in nearly a decade that we don’t have a democrat in the white house. It’s a new environment here for metals investors. We know many are wondering what a Trump presidency is likely to mean for metals and commodities as a whole. What are your thoughts on the subject? Will Trump and his policies ultimately be good or bad for precious metals?

Keith Neumeyer: I’m not even sure who in the office as the presidency really matters. We’ve gone through decades of presidents. Donald Trump, he talks a good story and I know there’s lots of optimism around him taking on the presidency. It’s interesting that during the election campaign everyone is saying doom and gloom if Trump gets in. Now everyone’s saying it’s going to be great for the world that he’s coming in. He’s going to industrialize the United States, it’s going to be great for metals and copper, uranium’s moving, everything seems to be moving. The Dow’s setting new highs or close to new highs. S&P’s doing the same thing.

So, there’s a ton of euphoria surrounding all of this. I think we’re just going to go back to the normal thing that we’ve been noticing or witnessing for the last decade where the Federal Reserve continually does what it does and manipulates markets and prints money. And I think all that will be very supportive for precious metals.

Mike Gleason: Keith, you have been an outspoken advocate for more honest metals markets and price discovery for years now. The people at GATA, the Gold Anti-Trust Action group, yourself, and many others have been making the case for manipulation. And it was certainly well supported with plenty of evidence but it wasn’t until recently that we got “smoking gun” evidence turned over by Deutsche Bank as part of their settlement in a civil class action suit. There are chat logs and voice recordings of metals traders at major bullion banks planning and executing schemes to cheat their own customers and other players in the market. So I’m sure none of this was surprising you Keith, but what went through your mind when you saw the transcripts and read up on this information which was recently released?

Keith Neumeyer: I think vindication would be the simplest way of describing it. I think that people sometimes put me in a bit of a quack category even though I don’t look at myself that way at all. Being an ex-trader myself and knowing how the financial markets work and seeing a lot of things that are happening on a daily basis with my own eyes. I know that this stuff happens and has been shocking to me that there’s been so many people that are saying, “No, no, it’s not possible. There’s no manipulation.”

We see the LIBOR scandal, we’ve seen other scandals where manipulation has been proven. There’s been billions and billions of dollars in fines paid by the banks for manipulating a variety of different markets. Yet, for some reason people have said, “Oh, no the gold and silver market are unique. They’re not manipulated.” Which is a complete joke and of course they are manipulated and have been manipulated for over thirty years. It’s nice to see that one of the banks has come out and actually admitted to it. And I think that’s going to create a whole series of events occurring over the next couple of years. I’m optimistic that the banks will get out of the market and we will see true price discovery as a result.

Mike Gleason: You spoke directly with one of the attorneys leading the class action suit against Deutsche Bank and a handful of others. Tell us what you can about that conversation. Are you expecting First Majestic to join that class or would you expect to form a new class, perhaps represent producers specifically? What did you learn that you can share with us publicly?

Keith Neumeyer: I actually have thought of doing something specifically from the producers but unfortunately the mining companies for the most part aren’t very supportive of this. I don’t really know why. Whether they just don’t want to waste their time or feel like they’re wasting their time in dealing with lawyers or paying legal bills or spending management time on these types of issues. I just can’t speak for them. I know it’s important to me personally, it’s important to our shareholders, it’s important to our employees and the communities that we’re active in. So I feel that it’s our responsibility, it’s my responsibility to at least try to do something to create change and that’s what I’ve been doing.

I did reach out to the lawyers that are involved in this particular case. It is a bit of a long process. It’s not been deemed a class action lawsuit yet. I know a lot of the headlines have been misquoting the actual lawsuit. They’re trying to get it elevated to a class action lawsuit. Once it does get elevated, assuming they’re successful in doing it, then that’s the time where other plaintiffs such as First Majestic will then jump onto the case. I’ve made it quite clear to the lawyers involved in this that First Majestic would be willing to join if they felt it would help the situation… either prior to it being elevated to a class action lawsuit or as it gets elevated to a class action lawsuit we’re available in either case. We’re basically just on hold and waiting to see how this all transpires.

Mike Gleason: Do you have an opinion about the settlement amount Deutsche Bank roughly a hundred million dollars combined for rigging in gold and silver. Is it reasonable? Will the evidence that they provided likely yield much larger settlements or damage awards for other banks involved?

Keith Neumeyer: What is reasonable really? When you see these markets get whipped around the way they do and these banks are making hundreds of millions, if not billions of dollars in profits over several years basically manipulating these markets. Now they may not call it manipulation but as far as I’m concerned it is manipulation. Nevertheless, how do you put a value on that type of profit? Do you go back 20, 30 years? I think it almost becomes impossible to put an actual value on the damage that they’ve created. The amount of jobs worldwide that get lost as a result of metal prices dropping and the way they have over the last five years. Market caps that have been erased by 50% or more in some cases. The list goes on and on and on. So the damage is in the multi multi billions. I just don’t know what a judge would actually deem a true value of such activity.

Mike Gleason: I know you’ve been trying to recruit others in your space to come out against these price manipulation schemes – you spoke about that a moment ago. And you decided to hold back some of your production in the past, not release it onto the market because you believe the price was being suppressed. It’s confusing to us how you can be getting so little support from your mining executive colleagues when it comes to raising a stink about the manipulation that is so clear. Now we’re not in the industry ourselves but we do follow it fairly closely.

It seems to me if I were running a business that was being adversely affected by the schemes being carried out by some of these low-life traders and trading institutions to suppress the price of the product my company sells that I would be doing whatever I could to shine a light on these practices. But that’s not the case and it’s really just you that’s talking about this manipulation publicly. Why is that, Keith? Are they beholden to the same banks that were asking them to speak out against here? What is it?

Keith Neumeyer: I just think it’s the characters of the individuals that run many of these mining companies. I’ve said multiple times that the executives that run mining companies tend to be conservative. The mining industry is a very conservative industry. It’s been an industry that’s always got its head down and trying to always do what’s right because often the mining industry does come under some extra scrutiny because it’s deemed a dirty business by some individuals. So, I think that mining executives tend to shy away from things that could put a spotlight on them or their companies.

I’m just not of the same ilk. I think that it’s very important to speak up and it is frustrating for me that there aren’t more executives out there that are joining the fight because I do think it’s important.

Mike Gleason: As one of our recent podcast guests, Bill Holter said, “It’s no longer conspiracy fiction, it’s conspiracy fact,” this whole manipulation scheme. Yeah, it’d be great to see others really recognize that there’s something that needs to be done here and obviously it’s truly happening.

Now in another interesting story that’s come out recently, WikiLeaks published a memo sent from London to the U.S. Treasury Department in 1974 before the futures market for gold and silver were established. It discussed the expectations that the futures markets would discourage ownership of physical metal. They anticipated that paper trading would dwarf physical trading and that there would be tremendous volatility. It certainly looks like they got exactly what they were expecting. What is your take on whether we can expect government regulators to ever take action? Have you by chancing any indication that the CFTC is looking at the evidence turned over by Deutsche Bank and considering charges themselves? What can you say there?

Keith Neumeyer: In my discussion I had with the lawyers that are involved in the case, they did say that there is a variety of different government agencies looking into this. It’s not just one agency. They didn’t want to give me too much specifics and nor should I probably repeat exactly what they said, but they did say that it is being looked at very seriously and they’re confident or at least have some confidence that there will be some action taken, but what that is at the end of the day, who knows? Because we all know that, unfortunately, the banks are very powerful and the governments quite often don’t even understand what the banks are doing.

Because with all the spoofing and high frequency trading that takes place around the world, it’s very complex and it’s very difficult to monitor and very difficult to police. Even the best regulators have a challenge monitoring it all. So there is that, but I try to be optimistic even though that Wikileaks that came out – which I did actually re-tweet on my Twitter account, which, for interests sake, is @keith_neumeyer.

I shouldn’t have been surprised when I read it, but I was actually quite surprised when I read it. It was very clear that the paper trading that was created back in the 70s was created for the purpose of dissuading Americans particularly from owning physical metal. You put all these pieces together, the unlimited short positions that institutions and banks can carry in the metals environment for precious metals and look at the governments are not wanting people to actually own metal. So there’s a lot of reasons why there’s a game that continually goes on and on and on. But I am confident that there is change afoot with individuals like Trump and some of the new government officials in Europe who’ve lost their old posts. So, we are seeing a bit of changing in the guard worldwide. So, I’m hopeful that over time that as new politicians come in and start running these governments in a more transparent way that we will get proper and true price discovery in markets.

Mike Gleason: What can the average metals investor do here, Keith? For instance, should shareholders of mining companies be calling in to the investor relations departments and urging the managements to speak out about the manipulation and strongly encourage the executive team to join Keith Neumeyer in the fight against futures market manipulation? What can people do, Keith?

Keith Neumeyer: Well it’s frustrating to me is my name in the headlines by myself. I would like to see “mining companies are fighting against” – have a collective group of companies get together and fight the faction. But the will out there just doesn’t seem to be there. And as I said it is quite frustrating for me and for investors or shareholders out there who are listening to this podcast, feel free to do that. We, at First Majestic, get regular emails for the last several years from investors demanding that we take action. And of course send us all the stuff that you can imagine. It’s printed or broadcast, we get everything from our shareholders. We know what people are saying out there.

And I would imagine if First Majestic’s getting all this information and all this pushing from our investors, I’m sure other mining companies must also be getting the same kind of emails from their people as well but I just don’t see it having an effect unfortunately.

Mike Gleason: Last year there was a fantastic but brief run up in prices during the first half of the year in the mining sector, but here we are with prices back at or below the cost of production for miners with marginal deposits. Nevertheless prices are certainly well above their late 2015 lows. We know First Majestic has some great properties and a low cost of production compared to many others in your space, but talk generally about how miners are doing? Are people able to raise capital where needed? Are enough operators profitable at current prices? What’s the state of the industry here and give us your outlook for this year, both for the miners and then also for the bullion itself?

Keith Neumeyer: Well I suppose it depends on what country your in. If you’re a producer in the United States you’ve got more challenges because the currency that your costs are based in has gone up substantially. Your revenue is also based on U.S. dollars so it could be a wash. But in countries like Mexico for example or many other countries around the world, operators in those countries even Canada have done much much better because the currency. We’re selling metals in U.S. dollars and our costs are in pesos or Canadian dollars or what have you, depending on where you’re located.

In addition to this currency moves, the mining industry has improved itself quite a lot over the last five or six years, out of necessity obviously. The miners are resilient and we do often sometimes in bull markets go out on spending sprees and that’s exactly what happened. A lot of debt was accumulated and marginal assets were brought or purchased or brought into production. And that is now open and unwound. The balance sheets of mining companies are much healthier positions today. First Majestic for example got more cash in the bank today than it ever has in the history of the company, and it’s been in business for 15 years. So, the profits are coming in the door. Not that silver at 16 bucks is that exciting but nevertheless we’re making money at $16 an ounce. I can tell you clearly four or five years ago if silver was at 16 bucks we would of been losing money. So, I think we’ve done a great job in reducing our costs and then the miners across the board have.

Every dollar makes a huge difference, particularly for First Majestic and many other larger companies. If you’re producing 20 million ounces in silver a year, an extra dollar an ounce that’s 20 million extra dollars that most of that just drops right to the bottom line. So, the leverage is pretty good. We’ve seen silver go from $13.30 low in February to $21 high in August. Now it’s back to $16. It’s been a very volatile year. It’s hard for investors or shareholders to stomach the move. The miners are doing okay so I’m optimistic. Once we get a little bit of fire under this market and this bull market is actually moving as we expect it. It’s going to be moving over the next year or two. I think the mining stocks are going to do very very well just because of the fact that they’re much much healthier today than they were previously.

Mike Gleason: Well, as we begin to close here Keith, any final comments on maybe the supply situation in silver? I know we’ve been reading some interesting things about that and how we’re dipping into further into a deficit there. Any other closing comments here before we wrap up?

Keith Neumeyer: Yeah. Silver’s always been in a deficit, at least for the most part. It’s in another deficit it’s just continually in deficit and that’s been burning away at the above ground supplies of the metal. Which really hasn’t shown up in price which is surprising to me. So, it hasn’t really caught on that there is actual supply issues with silver. Quite interestingly everyone’s hearing about the zinc story and zinc’s gone from basically 80 cents to 1.25, it’s corrected a little bit now but that’s a pretty major move on zinc. The whole talk behind that is how zinc is in a shortage. It is in a shortage because a couple mines did close. But it’s not in a deficit. Also, that shortage is going to fix itself by 2018 with another couple of mines opening. So, this is very short term phenomenon yet people are all getting excited about this zinc story which is fine short term but longer term it really doesn’t make much sense to be getting too excited about zinc.

With silver, mind you, every single year we have a deficit and it’s been going on and on and on. Consumption of the metal continually rises. We’ve had a couple years of consecutive production decreases on a global scale. And we’re mining, as I said many times, nine to one. For every one ounce of gold, we’re only mining nine ounces of silver. We’re trading at about 70 to one which just does not make any sense to me. So, I think there’s going to be a huge supply squeeze in silver. Investors should be looking in the silver space quite seriously in my view.

Mike Gleason: Yeah, we certainly agree that it should get very exciting for silver at some point. Not if, but when. And when it does it’ll be certainly great for all of us who have been following the space and have long since been investing in the metals and in the miners. I think that day will come at some point here before long.

Well Keith, we certainly want to thank you for your efforts and for you sharing your comments with us today and we wish you and your business’s continued success. Great to hear about where you’re at here right now with First Majestic. And to that end, before we let you go, please tell listeners about how they can get more information on First Majestic and also First Mining Finance, we didn’t get a chance to speak about that today. So for anyone wanting to potentially invest in either of those companies can find out more. Tell them how they can do that.

Keith Neumeyer: I have a Twitter account, First Mining Finance, First Majestic Silver are both on Twitter as well. Look them up there for regular announcements on the happenings of those companies. Obviously, our websites, FirstMajestic.com or FirstMiningFinance.com. Please feel free to call the 1-800 numbers, ask for investor relations, Derek at First Mining and Todd Anthony at First Majestic Silver. They’re both there to answer any questions and I would suggest to people that if they’re looking at these companies they should call the companies for due diligence.

Mike Gleason: Excellent stuff, thanks again Keith. We sincerely appreciate it. We hope we can catch up with you again before long. Also wish you a great weekend and take care.

Keith Neumeyer: Well thanks very much and Happy New Year. And I hope that we get to see much much higher metal prices by the end of 2017.

Mike Gleason: Absolutely. Well that will do for this week. Thanks again to Keith Neumeyer, founder and CEO of First Majestic Silver Corp, ticker symbol AG on the New York Stock Exchange. One of the largest and most successful primary silver producers in the world.