Title Digging Deeper - Silver Degree of recognition National Media name/outlet ResourceStocks Magazine Media type Duration/Length/Size 1p Country Australia Date 17/05/12 Description Silver has enjoyed a rise to prominence over the past decade as the price of ‘poor man’s gold’ has matched the upward trend of that ‘other’ precious metal - gold itself. Indeed, silver proponents take a strong view that silver’s price rise has at times been even more spectacular than gold – and would have a strong case in absolute percentage price-growth terms based on year-on-year analyses this century.
Looking to the fundamentals of the silver market, silver has something of a dual or split personality so to speak. That is; silver has the dual quality of being both a precious metal – therefore acting more like a currency than commodity – but also a strong industrial metal.
Fabrication uses for silver include jewellery and silverware, coins and medals, photography and electrical/electronic applications. Further applications exist in solders, alloys and catalysts. Global silver fabrication demand in 2011 hit a new record at around 28,000 tonnes, buoyed by strong demand for coins and medals. Additionally, as a precious metal, silver is also subject to significant investment demand, with various funds, including Exchange-Traded-Funds (ETFs) holding significant physical metal stocks, estimated up to 15,000 tonnes. Of this tonnage, the World’s largest silver backed ETF, iShares Silver Trust advised that its holdings sat above 9,600t in April 2012. Electrical and electronic uses continue to grow strongly whilst silver demand for photographic use has been in absolute decline for over a decade now. India is a major consumer – as is Europe, China, the US and Japan.
Silver is traded on exchanges such as COMEX and LME, with prices continuously available online, for example via precious metals site Kitco.com (http://www.kitco.com/). Long-term silver bulls have been handsomely rewarded. Silver was trading at just US$4 per ounce back in 2001, rising steadily to reach over US$20 per ounce in 2008 and then shoot above US$40 per ounce during 2011. Prevailing 2012 prices in the US$25 per ounce to US$30 per ounce range offer the potential for attractive returns to those new mine projects able to procure development finance and commence production.
Silver mine supply is often as a co-product or by-product with other metals whereas scrap supply originates from silver’s end uses in photography, electronics and catalysts. The principal silver ore mineral is argentite (AgS2). Silver occurs in close association with lead-zinc mineralisation and, as such, is produced as a by-product of lead-zinc mines. Silver is also a common by-product for several styles of gold deposit and at some copper mines. The largest producing countries are Mexico (~4000 tonnes annual production), Peru (~3500 tonnes), China (~3000 tonnes), Australia (~2000 tonnes) and Russia (~1500 tonnes). Poland, Chile, Bolivia are also significant producers at around 1300 tonnes each per annum along with the US (1100-1200 tonnes). Africa is a modest silver producer totalling only some 500 tonnes per annum.
Within Australia, silver is produced in Queensland at Mt Isa (by London-listed Xstrata Plc) and at Cannington (by BHP Billiton), in New South Wales at Broken Hill (Perilya Limited, PEM) and as a by-product at South Australia’s Olympic Dam (BHP Billiton) along with a number of smaller mines where silver is a by-product of VMS copper-zinc and copper-gold deposits. Additionally, a small silver credit also often occurs at ‘pure’ gold mines, such as those of the Kalgoorlie region where silver concentrates in the mine-produced gold dore and is recovered during refining. Silver grades can run into hundreds of grams per tonne in individual exploration drillholes. At Mount Isa the run-of-mine silver grades are 150g/t Ag whereas at Broken Hill, the typical grade is around 50 g/t Ag.
After suffering more than gold in the general recent pull-back of commodity prices (notably from late 2011 onwards) silver has in the second quarter of 2012 started to benefit from its industrial metal credentials despite some ongoing nervousness about the global economy. That said, it is still investor demand that will exhibit most influence over near-term future prices. New mine projects have been proceeding – with those who have secured project finance in what remain difficult capital markets very well placed. With global interest rates unlikely to begin rising notably before 2014, silver’s price is likely to remain at attractive levels for new mine producers over 2012-13.
Consensus analyst’ views on silver are not unlike their views for gold. That is, analysts consider that silver prices will remain elevated so long as investors seek a safe haven (akin to gold’s role as a store of value) and that investors believe silver to be such a defensive asset. Like gold therefore, analysts foresee silver prices maintaining strength through 2013 before a gradual retrace in price.
Investment choices abound amongst ASX-listed companies seeking to develop silver projects. Selected companies with present and future projects including silver as a notable revenue stream include Alcyone (AYN), Argent Minerals (ARD), Cerro Resources (CJO), Cobar Consolidated Resources (CCU), KBL Mining (KBL), Kingsgate Consolidated (KCN), Kingsrose Mining (KRM), MacPhersons Resources (MRP) and Malachite Resources (MAR).
Additionally, Investigator Resources (IVR) 2011 South Australian silver discovery has deservedly received significant market attention as it emerges on to the development radar for new silver projects.
Watch that space.
Producer/Author Aspermont Publishing Persons Allan Trench