Silver in the spotlight Wednesday, 17 October 2012 Brooke Showers A FUNDING frenzy for emerging silver projects has been sparked by increased demand and a wave of investment into the “more affordable” safe haven precious metal, pushing prices higher. Comex silver prices on the New York Mercantile Exchange have consistently fetched more than $US30 per ounce in the past two months. During September, the monthly average price for silver was $33.59/oz and in recent weeks, the price spiked as high as $35.10/oz. This marked a vast improvement on the range-bound $26.70/oz and $28.40/oz that silver attracted during July and August. According to corporate and investment banking group BNP Paribas, silver is the hare that is set to outpace the steady “tortoise gold”. BNP Paribas said improved sentiment towards precious metals stemmed from further central bank action which triggered the price rise. “Buying interest has been gradually gaining traction, as disappointing economic data raised the chances of the Federal Reserve launching a third round of quantitative easing,” BNP Paribas said. Silver, alongside other precious metals, rose strongly on the back of the Federal Open Market Committee’s August meeting and US Federal Reserve chairman Ben Bernake’s speech in the same month. “An advance of the euro versus the US dollar suggests that concerns over the European sovereign debt are subsiding and risk appetite is rising, supporting a higher price for silver,” BNP Paribas said. “Recent trends in the silver price have tracked fairly closely to the EUR-USD exchange rate. “Mine supply is set to grow further this year, although the rate of growth has been scaled back and Comex inventories are still near their peak.” BNP said silver had since entered a key test area to validate whether the prices were sustainable. Emerging Australian silver producers have been attracting a flurry of investment activity to ramp-up their silver projects amid growing silver demand. MacPhersons Resources, which is developing the Nimbus silver mine in Western Australia, recently completed a $A12 million capital raising, following a placement and investment from an off-take partner. MacPhersons managing director Morrie Goodz told MiningNewsPremium.net the silver price should comfortably head to $US50-$100 an ounce over the next two years, or even earlier. “Among most of the metal forecasters and bulls in North America, there is a firm belief that the silver-to-gold ratio is going to get back more in line with historic averages,” Goodz said. “Historic averages range from about a 16-20 ratio between the gold price and the silver price.” Silver is tipped to grow more quickly than gold, Goodz said, with silver moving up 20-25% in value in the past couple of months compared to gold, which rose about 10%. “That ratio between the two metals is slowly but surely approaching historical records and averages,” he said. “As it gets there, the silver price will trend to somewhere between $US50 -$100 per ounce, if gold stays where it is.” In August, Red Kite subsidiary RK Mine Finance entered an off-take agreement with MacPhersons to purchase a fixed 12 million ounces of silver from Nimbus. RK Mine Finance also subscribed for 15.8 million MacPhersons shares at 41.8c for $A6.6 million and a further 5.3 million shares, valued at 38c each for $2 million. MacPhersons also raised a further $4 million through a separate placement. “What that response did is it showed us there is substantial support in the market place, in particular, from big players such as Red Kite,” Goodz said. “They are committed to see the project grow and of course, long-term they see this great opportunity for them to be able to market our metal.” Production at Nimbus is scheduled for the third quarter of next year, producing at a rate of 2.5 million ounces per annum over the first three years. Based on optimisation studies, the two historical pits onsite are being developed into one silver super pit, with a resource upgrade due next month. Goodz said silver was a growth industry, with its attraction as a hedge and use in the biomedical industry boosting demand. “Right now, 85% of the silver is being consumed for industrial purposes and that is growing substantially,” Goodz said. “Really, the area of growth is computer electronics. Because silver is such a high-quality conductor, it is now becoming the metal of choice for ultra-small computer chips. “It’s estimated that there is anywhere between $50-$100 worth of silver that goes into every laptop computer, smart phones and similar electronic devices.” Silver is also tipped for substantial growth due its medical properties. It is being increasingly used in sensitive areas where sterilisation is critical and features in a variety of medicines. According to Northwest Territorial Mint, silver is increasingly viewed as a safe haven asset and store of value that preserves and protects wealth in times of economic distress. “Precious metals have a proven record of being smart investments during times of crisis and turmoil,” Northwest said. “Many investors find silver to be an attractive investment because of its lower, more attainable price than gold.” With gold prices slowly creeping towards $US1800/oz, more investors are turning to silver bullion as a cheaper, yet secure, alternative. As income levels have risen in emerging countries such as China, India and Brazil, more consumers have begun demanding silver products as an investment. Goodz said gold was becoming so valuable, it was proving difficult for a large portion of the world’s population to purchase and handle. “So silver is seen as being the next best opportunity for people to secure their financial future,” he said. “Overall, there is an increase in the quantity of silver that is being put away as a safety net for future financial security.”
MRP Price at posting:
39.5¢ Sentiment: Buy Disclosure: Held
