SILVER NEWS

Where are the silver bulls?

Few listed resources subsectors are more reviled than that mining, developing and exploring for silver bullion.

Author: Barry Sergeant
Posted: Tuesday , 18 Nov 2008

JOHANNESBURG - 

Across the broad landscape of globally listed mining companies, silver bullion miners, developers and explorers are less wanted than anything else. Looking at 43 names listed in the category, the average stock price loss from highs, measured on a weighted basis, is currently around 83%, leaving especially the smaller stocks fully vulnerable to facing the prospect of shorter term bankruptcy.

Silver bullion itself is 56% off its highs, seen in March this year. But, amid the apparent dire state of affairs for both silver bullion prices, and stocks operating in the silver space, bullish comments and forecasts remain the order of the day. This week, ScotiaMocatta insisted that in spite of poor demand outlook in the short term, the long-term outlook for precious metals remains bullish, and that "silver is well placed to outshine gold".

Pan American Silver president and CEO Geoff Burns noted last week that despite the global financial crisis, "the physical investment market remains very strong as common investors are accumulating physical silver and gold during turbulent times. I personally believe they will be handsomely rewarded for their foresight," he told analysts and investors during a conference call to discuss quarterly financial results.

In his opening address to the successful London Silver Summit on 5 November specialist precious metals and natural resources fund manager Ned Naylor-Leyland said the "death of fiat money will happen". He argued that a new series of Bretton Woods discussions getting under way at the end of this month will at least focus people's minds on the idea of a precious metals backing for world currencies.

During a conference call on 4 November Hecla Mining president and CEO Phil Baker insisted that long-term fundamentals for silver have never been better: "While there is a great deal of short-term uncertainty about the prices of the metals we produce, I believe in the long-term the fundamentals have never been better . . . Silver like gold should eventually perform well as a result of the impact of all the liquidity injection into the economy by the Fed and Treasury in what we believe will be the ultimate impact on the US dollar".

While conceding that current silver prices are probably "the exact opposite of what most would have predicted in these economic times," Silver Wheaton president and CEO Peter Barnes declared on 3 November that "we're more bullish than ever on the price of silver as a result of what's happening on the global markets today". In a conference call to discuss the company's financial results, Barnes said that "while nobody knows how long it will take to get through this crisis mid to long-term prospects for the silver market continue to look very promising".

Investors are nowhere near buying the story, but the bulls are apparently nowhere near holding off. Dennis Wheeler, president and CEO of Coeur d'Alene, declared earlier this month that while the global credit crisis wreaks havoc with the mining industry, "overall, we continue to see a positive supply/demand fundamental picture, particularly on the supply side". During a recent conference call to discuss financial results, Wheeler noted that 75% of silver production is a by-product of base metal mines.

The suggestions are that recent dramatic drops in prices - as in the case of silver bullion - for copper (down 59% from highs), lead (down 64%) and zinc (down 60%) delay certain projects from streaming, and curtailment or even closure of certain existing operations. While price falls remain essentially an external factor, given that miners are price takers in most senses, the real danger for silver may be its ignominy, like some other commodities such as cobalt, as mainly a byproduct.

Of the world's top 15 silver miners by physical volume, just three, Fresnillo, Pan American Silver, and Volcan, rank as primary silver bullion diggers. Separately, investor demand for listed silver stocks may have been partly cannibalised by specialised exchange traded funds which hold silver bullion, currently worth USD 2.5bn, on behalf of investors. These ETFs started appearing during 2006, a time when listed silver stocks traded at a premium to their gold peers.

 

Selected silver stocks
	Stock	From	From	Value
PRODUCERS	price	high*	low*	USD bn
Fresnillo	GBP 0.98	-83.0%	3.0%	1.055
Silver Wheaton	USD 2.78	-85.8%	8.6%	0.699
Pan American Silver	USD 10.04	-77.2%	12.4%	0.811
Hochschild Mining	GBP 1.16	-77.1%	25.1%	0.535
Silver Standard	USD 8.28	-79.8%	54.8%	0.519
Coeur d'Alene	USD 0.52	-90.0%	26.8%	0.287
Hecla Mining	USD 1.31	-90.0%	32.3%	0.222
Volcan	EUR 3.60	-82.8%	19.6%	0.382
Silvercorp	CAD 1.66	-84.4%	1.2%	0.206
ECU Silver	CAD 0.58	-77.7%	5.5%	0.115
Apex Silver	USD 0.74	-95.9%	63.7%	0.043
First Majestic	CAD 1.26	-78.1%	44.8%	0.076
Silverstone	CAD 0.46	-87.2%	15.0%	0.046
S. Métallurgique d'Imiter	MAD 242.00	-66.6%	0.0%	0.455
Endeavour Silver	CAD 1.20	-73.3%	20.0%	0.048
Excellon	CAD 0.22	-88.8%	2.4%	0.028
Fortuna Silver	CAD 0.53	-85.3%	39.5%	0.037
Great Panther	CAD 0.29	-83.1%	61.1%	0.019
Genco Resources	CAD 0.32	-91.9%	68.4%	0.011
Impact Silver	CAD 0.29	-84.7%	65.7%	0.011
Revett Minerals	CAD 0.08	-91.7%	14.3%	0.005
US Silver Corp	CAD 0.04	-95.7%	0.0%	0.007
DEVELOPERS & EXPLORERS
Abcourt Mines	CAD 0.08	-86.4%	23.1%	0.004
Apogee Minerals	CAD 0.04	-92.6%	33.3%	0.002
Aquiline Resources	CAD 0.93	-92.0%	19.2%	0.048
Arian Silver	CAD 0.05	-91.1%	25.0%	0.005
Aura Silver	CAD 0.04	-91.3%	100.0%	0.001
Avino Silver	CAD 0.38	-78.7%	111.1%	0.006
Bear Creek Mining	CAD 0.80	-91.5%	37.9%	0.036
Esperanza Silver	CAD 0.48	-77.0%	54.8%	0.019
Klondike Silver	CAD 0.08	-78.1%	33.3%	0.006
MAG Silver	CAD 4.70	-70.4%	33.5%	0.188
Mexican Silver	CAD 0.11	-87.8%	69.2%	0.004
Minco Silver	CAD 0.46	-89.0%	39.4%	0.012
Mines Management	USD 0.85	-81.3%	77.1%	0.019
Oremex Silver	CAD 0.08	-85.3%	275.0%	0.002
Orko Silver	CAD 0.40	-81.2%	42.9%	0.035
Oro Silver	CAD 0.08	-93.3%	23.1%	0.002
San Anton Resources	CAD 0.05	-95.8%	11.1%	0.004
Silvercrest	CAD 0.30	-80.2%	55.3%	0.011
Silver Eagle Mines	CAD 0.07	-92.7%	7.7%	0.003
S American Silver	CAD 0.16	-80.0%	6.7%	0.007
Southern Silver	CAD 0.04	-89.9%	33.3%	0.001
Averages/total		-85.0%	39.4%	6.032
Weighted averages		-83.1%	16.3%
GOLDS WITH NOTABLE SILVER
JSC Polymetal	USD 2.67	-72.9%	167.0%	0.841
Minefinders	CAD 4.58	-67.4%	13.1%	0.186
Gammon Gold	CAD 4.01	-64.2%	14.2%	0.392
Kimber Resources	CAD 0.75	-62.1%	41.5%	0.038
High River Gold	CAD 0.09	-97.4%	125.0%	0.023
New Gold	CAD 1.10	-88.7%	3.8%	0.191
Ovoca Gold	GBP 0.03	-84.3%	23.5%	0.017
WORLD'S TOP SILVER PRODUCERS (2007)
BHP Billiton	GBP 8.76	-60.3%	15.7%	82.121
Polska Miedź	PLN 24.20	-79.8%	20.5%	1.600
Fresnillo	GBP 0.98	-83.0%	3.0%	1.055
Kazakhmys	GBP 2.36	-88.0%	12.3%	1.893
Pan American Silver	USD 10.04	-77.2%	12.4%	0.811
Goldcorp	USD 19.97	-62.1%	44.3%	14.554
Volcan	EUR 3.60	-82.8%	19.6%	0.382
Buenaventura	USD 12.48	-70.9%	38.7%	3.431
JSC Polymetal	USD 2.67	-72.9%	167.0%	0.841
Southern Copper	USD 11.50	-72.6%	26.0%	10.017
Hochschild Mining	GBP 1.16	-77.1%	25.1%	0.535
Rio Tinto	GBP 24.35	-66.0%	24.4%	52.760
Coeur d'Alene	USD 0.52	-90.0%	26.8%	0.287
Oz Minerals	AUD 0.73	-82.0%	9.0%	1.490
Xstrata	GBP 7.95	-82.1%	16.0%	11.591
SILVER ETFs
iShares Silver Trust	USD 9.35	-54.9%	10.7%	2.054
ETFS Silver	USD 9.33	-55.9%	9.0%	0.183
ZKB Silver	CHF 1,085.00	-48.5%	13.4%	0.280
Averages/total		-53.1%	11.0%	2.517
Weighted averages		-54.3%	10.8%
Spot silver/oz	USD 9.42	-55.9%	11.4%
* 12 month
Source: market data; table compiled by Barry Sergeant