from canuckistan's national post, re paas:
Gates touch turns Pan Am Silver to gold
Stock up 17% since June 5: Miner positioned as prime beneficiary of silver price rally
Jason Chow
Financial Post
Wherever Bill Gates goes, a herd will follow.
Ever since the world's richest man upped his stake in Pan American Silver Corp. to 14% from 9%, the stock (PAA/TSE; PAAS/NASDAQ) has enjoyed a meteoric rise. The stock has risen 17% since Mr. Gates expanded his stake on June 5, closing in Toronto yesterday at $5.65 and in New York at US$3.70.
Not only good for public relations, the Gates move, combined with a $9.0-million stock issue completed last week, allayed fears the company was in a liquidity crunch.
Moreover, Pan American has the greatest leverage to silver of any company in North America. With depressed commodity prices, Pan American Silver had been having trouble making its ends meet.
"The Bill Gates factor had two things: One, it draws attention to the stock. But more importantly, the company didn't have much cash. Along comes Bill Gates and he satisfies that issue," said analyst Barry Cooper of CIBC World Markets.
Silver is bound for a rally, the experts say. The stockpiles are depleting quickly while demand remains strong. China, which control up to 15% of the world's supply, continues to be the wild card in the silver market and has been selling a substantial amount of its reserves, keeping prices low.
Silver prices, however, are heavily influenced by movements in the gold market. How they work together is too difficult to define, said Mr. Cooper, but a correlation exists.
"Gold and silver are going to go up together. They're not going to go up one to one, but there is some connection there."
And whenever the silver rally comes, Pan American will be the prime beneficiary, according to Haytham Hodaly, an analyst with Salman Partners in Vancouver. The company has started production at its Huaron mine in Peru and he thinks Pan American could emerge as number one in the industry.
"Longer term, it's a good story. It has potential to become the largest if not the only large silver player out there."
At the moment, silver prices aren't looking like they are going anywhere and the company better pray for an upswing or else it will have to make another appeal to the public for more money.
"With silver at US$4.30 levels, the company's not making a lot of cash. What they really need is for silver prices to rise. Otherwise, they'll have to do another issue down the road."
Though the stock's recent rally is impressive, the analysts aren't budging from their forecasts and recommendations they set in mid-May.
Mr. Hodaly said he's sticking by his "accumulate" rating and his 12-month price target of $6.50. Mr. Cooper is maintaining his "hold" rating and US$3.50 price target.
"I'd like to see something fundamentally change in the silver market before I change my outlook," Mr. Cooper said.
Besides Bill Gates, two well-known billionaires have made waves in the silver market. Super-investor Warren Buffett reportedly bought 130 million ounces of the precious metal in 1998 and former hedge fund guru George Soros owns a large stake in Apex Silver Mines Ltd.
Why would they be so excited about silver? Both analysts think such moves could be a long-term bet on a simple supply-and-demand game.
"They're looking at it fundamentally, and silver is one of the best-positioned metals for the future," said Mr. Hodaly.
PAN AMERICAN SILVER CORP.:
CEO: Ross Beaty
Ticker: PAA
Listed: Toronto Stock Exchange
Head office: 1500-625 Howe St. Vancouver, B.C. V6C 2T6
Telephone: (604) 684-1175
www.panamericansilver.com
chow@nationalpost.com |
