The banker would burst into laughter, and (if he was polite) would warn the mining executives not to let the door hit them on their way out. While bankers see nothing wrong with taking our money which we deposit with them, and gambling it on any and every "investment" which tickles their fancy; these hypocrites would never dream of allowing ordinary people (i.e. non-bankers) to do the same thing with their money.
Conversely, if this same mining company approached the bank for a loan, and provided them with statistics on the amount of silver being consumed in various industrial applications (old and new), the bankers would behave in a much different manner. Assuming that the mining company demonstrated that they could mine their silver at a cost below the current price, the banker would happily reach for his cheque-book.
This leads us to a fundamental "truth" in the precious metals sector: investment demand (i.e. "speculative" demand) does not stimulate mine production (except in a very belated manner - only after inventories have been exhausted), while industrial demand does stimulate higher levels of mine production, because the bankers will finance new mine-production based upon that level of industrial use. As an aside, it was because gold is not used to a great degree "industrially" that the bankers had to "persuade" the world's largest gold miners to enter into vast "hedging agreements" - which simulated the same market conditions for gold: maximizing production at the lowest, possible price.
In a true "equilibrium", this industrial production and demand would not cause silver to trade at a price well below its fair-market (equilibrium) value. However, the bankers ensured that the silver market could never reach such an equilibrium by continuing to dump their waning stockpiles of silver onto the market.
Here I am sure there are a few astute readers who will question my characterization of the "demand model" for silver. They will point out that most of the world's silver is still produced as "by-products" of other mining. In other words, it is a secondary product of mines which primarily extract gold or copper or lead/zinc. Thus, others will argue that industrial demand for silver could not directly stimulate silver mining, and therefore total silver production.
In fact, while that argument has theoretical merit, in practical terms it is incorrect. To begin with, if silver was properly priced, many of the mines where silver is currently produced as a "by-product" of other metals would instantly become "silver mines" - with the other metals becoming the "by-products".
Regular readers know that the long-term gold/silver price ratio averages roughly 15:1 (over a period of nearly 5,000 years). Given that silver occurs in the Earth's crust at roughly a 17:1 ratio versus gold, there is obvious, objective validation for such a ratio. In addition, given that most of the world's stockpiles of silver have (literally) been consumed, any rational valuation of silver would have to be at a ratio of 15:1 or less.
With the price of gold currently at $1200/oz (and with that price being the result of market-manipulation), clearly the fair-market price for silver would have to be a minimum of $80/oz today. In addition, in mines where silver is currently produced as a "by-product", the industrial demand for silver (i.e. the silver "credits") is still fully considered in determining whether any particular mine will be financed to go into production - but with those decisions also being based upon demand for the other metals.
Given that the price of silver has been highly correlated with most of those other metals, my analysis still holds true. However, even in a world where the gross under-pricing of silver means that there are few (official) "primary" silver mines, there are still "mining companies" able to obtain financing only for silver, but based upon polymetallic mines, where silver is officially a by-product.
Silver Wheaton (SLW) is officially classified as a "silver mining company", however what it is really is a "silver marketing company". What Silver Wheaton does is to buy-up the future production-streams of silver from other miners (where silver is a mine byproduct), and then as that silver is produced, it sells this silver onto the market at the prevailing "spot" price. Apart from the ingenuity of this business model, what is relevant is that Silver Wheaton goes to a bank for financing, to buy-up the production-stream of a particular mine - and Silver Wheaton obtains that financing based upon industrial demand fundamentals for only silver.
Thus, even in a market which has been horribly distorted through manipulation, the principle which I articulated earlier is still applicable: the industrial demand for silver is an important factor in helping the bankers suppress the price of silver. Obviously, the limiting factor in the bankers' game of market-manipulation is the amount of bullion they have to dump onto the market.
As I have pointed out on many occasions, between 1990 and 2005, official silver inventories plummeted by approximately 90%. It is simple economics that any good which is grossly under-priced will be grossly over-consumed. Faced with the abrupt end to their silver-manipulation (which would make it much more difficult to continue to manipulate the gold market), the bankers fell back upon their oldest and most-favorite swindle: they sold paper to people, and pretended that the paper represented actual silver - and thus "SLV" was born.
This is such an obvious sham that I simply lack the space to go until all of the clearly fraudulent implications of this fund, so I will restrict myself to just a couple of facets. From 2005 to the end of 2008, after silver inventories plummeted by 90% in just 15 years (due to being grossly under-priced), we are supposed to believe that inventories suddenly 'made a U-turn' - and tripled over the course of just four years.
Regular readers will be familiar with the following chart, which shows the progression of "official" silver inventories - along with the small caveat attached to the graph. These official inventories include every ounce of ETF-silver, and SLV (by far the largest silver-ETF) was created at the beginning of 2006. As of the beginning of 2009, ETF-holdings represented roughly 2/3 of total "official inventories".
Anyone with even a slight understanding of markets should recognize the obvious sham here. An "inventory" is the amount of a particular good warehoused and ready-for-sale. Conversely, the units of SLV (and all other bullion-ETF's) represent privately-owned silver which has obviously been taken off the market. As a matter of elementary logic, it is impossible for even one ounce of silver to be both an "inventory" and an "ETF". It can be one (silver-for-sale) or the other (privately-owned) but not both.
Thus, at the end of 2008, two-thirds of official, global inventories of silver were nothing but an obvious paper-sham. Of even greater interest, I have been unable to find any more-recent statements of official inventories. Apparently the quasi-official "consultant" (none other than the infamous Jeffrey Christian and The CPM Group) who produced this data has decided that it's better to simply hide all inventory data - rather than to attempt more clumsy shams of this nature.
Making this massive fraud potentially much more egregious, the supposed "custodian" for most of this silver is JP Morgan, which holds the world's largest "short" position in silver, the most-concentrated position in the history of commodities markets. In what is obviously not a "coincidence" the total size of the global short position has stayed roughly equal to the (supposed) total holdings of "bullion-ETF's". However, those massive short positions are never audited, meaning that JP Morgan (and the other bullion-banks) have never been able to show they have more than half the silver necessary to cover both their short-positions and "custodian agreements" with the ETF's.
What this directly implies is that as of 2009, as much as 2/3 of total global inventories of "silver" was literally nothing but banker-paper - and we can only assume that their massive fraud has expanded in the time that has since elapsed. While industrial demand for silver helped the banksters in their nefarious (and illegal) schemes for many years, it is now industrial demand which is certain to destroy the bullion-banks.
While a gold-investor might be capable of being duped into buying banker-paper, and mistakenly believe that the banker-paper is "as good as gold", you can't use banker-paper to make silver bearings, or silver mirrors, or silver batteries, or silver solar cells, or silver anti-bacterial products. The bankers market-manipulation has progressed from merely dumping the silver which they held, to the much more fraudulent practice of passing off their worthless paper as "bullion".
In doing so, they have eliminated the possibility of the price of silver merely "correcting". What has become totally inevitable after 50 years of constant manipulation of the silver market is that this market is poised for the most spectacular default in the history of commodities markets - even more so than in the gold market. Companies which require silver to continue the existence of their businesses will be ready to bid-up the price of the commodity to multiples many times greater than an investor merely making a discretionary purchase.
We can only assume that when a silver default occurs that it will bankrupt JP Morgan. Keep in mind that while the nominal value of JP Morgan's silver, short position is in the billions of dollars, thanks to the testimony of Jeffrey Christian at the CFTC hearings we know that this short position has been leveraged by somewhere around 100:1. Furthermore, the potential loss on any/every short position is infinite - since there is no "maximum price" which silver could not (theoretically) surpass.
As the old saying goes, "For every winner in a trade there is a loser." There must be a few investors out there who would like to get on the "winning side" of a trade with JP Morgan?