Demand for Physical Silver Rising Faster Than Supplies
Important analysis by rare coin and bullion dealer Patrick Heller, Liberty Coin Services, Lansing, Michigan.
Thanks to Diddleysquatz on Microcap Kitchen Canadian Stocks for spotting this!
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Extract from article dated April 7 2011
Whatever the accurate data, the demand for physical silver is rising faster than supplies. Less than 30% of all newly mined silver comes from primary silver mines. Most newly mined silver comes from mines where it is a byproduct or co-product of copper, zinc, lead, and gold recovery. The primary factor that drives production at the non-primary silver mines is the price of the other metals. As a consequence, a soaring silver price does not immediately translate into higher mine production from this source.
Even with primary silver mining operations, there is a longer time lag in responding to higher prices. Whereas it used to take about three years from discovery to an operating mine, it now often takes ten years. Beyond the additional slowdown from more government permitting work required to develop a mine site, there are problems such as the shortage of geologists to confirm the value of a discovery. Mine company executives tell me that it is not unusual to have to wait a year or more for a geologist to complete previous commitments and be available to help them.
Overall, it can take years for higher silver prices to translate into a huge increase in mine output. From 2009 to 2010, the average silver price increased about 75%. Mine output, in contrast, only increased 2.5%.
With fundamental long-term shortages of silver supply versus demand, prices should rise over time, even if there was no increase in demand from people worried about the falling value of the US dollar.
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Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” a monthly newsletter covering rare coins and precious metals. Past issues can be found online at libertycoinservice.com Pat Heller is also the gold market commentator for Numismatic News. Past columns online at numismaster.com under “News & Articles”. His bimonthly columns on collectibles can also be read at lansingbusinessmonthly.com under “Articles” and “Department Columns.”His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at 1320wils.com. |
