Silver gains new respect with mining crowd
PDAC convention
Drew Hasselback
Financial Post
Tuesday, March 07, 2006
Silver companies are basking in the glory of a new-found respect, attracting much attention amid the glitter of one of the world's largest mining conventions.
The 74th annual Prospectors and Developers Association of Canada convention officially kicked off in Toronto yesterday, attracting a record crowd of at least 12,000 attendees. Investors, visitors and mining executives crammed display booths from more than 700 companies.
All were looking for news of the latest discovery in one of the hottest metals booms in decades.
With the price of silver recently breaking through the psychological barrier of US$10 an ounce for the first time since April, 1987, silver stories were a focus of much interest. Silver closed yesterday at US$10.04 an ounce, up US1.5 cents.
Convention-goers hustled to get the latest information on exploration and production companies searching for silver in Mexico and Peru.
This is quite a change from a couple of years ago. While it is often viewed as a precious metal, silver is mainly used for practical applications, such as the production of photographic film or high-end electronics. In recent years, moribund silver prices meant the metal was viewed by many as neither precious nor practical.
"There were some naysayers who didn't believe silver was going anywhere," said Robert Archer, chief executive of Vancouver-based Great Panther Resources Ltd. He founded the company in 2003, convinced the reduction in silver demand for photographic film would be offset by increased demand for electronics.
"There had been a lot of misconceptions against silver because of the photography issue," he said. "It's more than offset by the increase in demand from the industrial sector."
Great Panther is one of several juniors that have set out to revive dormant mining operations in traditional silver-producing countries, such as Mexico.
Great Panther's Topia mine started production last December, and production at another project called Guanajuato is scheduled to hit full stride by the end of this year. With those two assets, Great Panther expects to produce 2.6 million ounces of silver a year.
The interest is coming from more than just industrial demand. The market is awaiting the launch of a new exchange traded fund that will buy and hold physical silver to capitalize on rising prices. The ETF would hold about 130 million ounces of silver, an amount equal to more than 15% of annual silver demand, and just over the 120 million ounces of known above-ground inventory.
"An ETF will create new demand for silver, as silver bulls currently have difficulty investing in the metal, other than a handful of silver equities and through silver coins," said Michael Curran, an analyst with RBC Capital Markets in a note to clients yesterday.
Global demand for silver is about 800 million ounces a year, with only 600 million ounces coming from mines. The remainder comes from the recycling of used photographic film or the above-ground stockpiles.
"There's been a renewed investor interest that didn't exist two years ago," said Robert Quartermain, president of Silver Standard Resources Inc. The Vancouver-based junior has a portfolio of 16 silver exploration properties.
"People looking at the inroads of digital cameras assumed it would impact industrial demand for silver, when in fact silver's main use is in the manufacture of electronic components -- your Palm Pilots, cellphones, your BlackBerrys and so on. That's the driving force," Mr. Quartermain said.
This is all great news for companies just starting to tell their story.
Silver Eagle, a privately-held company, recently raised $7-million in private financing for its exploration project in Mexico. Silver Eagle is contemplating a public offering.
"We're not here with three years' worth of work into this just because the silver price has gone up," said Peter Karlechuk, spokesman for Silver Eagle.
And Jorge Ganoza Durant, president of Vancouver-based Fortuna Silver Mines Inc., expects his company to produce its first silver this year.
Mr. Durant's company recently bought the Caylloma silver mine in Peru, which has an estimated 7 million ounces of reserves. Fortuna has just invested in upgrades to the mine's processing plant and improvements to underground access.
"It's a turnkey project for us," said Mr. Durant, a 36-year-old mining engineer whose family once owned an operating silver mine in Peru. He recently hired his father as a company vice-president to help run the new operations.
"I've been in the mining business since I was two years old," Mr. Durant said.
© National Post 2006
canada.com |
