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Silver bulls seize day at major gold industry parley
Mon Sep 25, 2006 7:52 PM ET
By Steve James and Rachelle Younglai
DENVER, Sept 25 (Reuters) - At North America's major annual gold industry conference, the talk on Monday was about silver -- and how the price of bullion's less attractive rival could climb even higher.
"I think silver will be potentially more explosive than gold," Ian Telfer, chief executive of Goldcorp. <G.TO>, told Reuters during the Denver Gold Forum.
Telfer, who said he was "really bullish" on silver, predicted the price could hit $20 per ounce in the next two years.
Phil Baker, chief executive officer of Hecla Mining Co. <HL.N>, agreed, saying during his presentation: "We see a lot of potential for it to go even higher.
"Fundamental indications are very good and with investment demand like we have not seen in two decades, we see the price continuing to rise."
Asked afterwards to be more specific, Baker told Reuters: "There will be volatility, but we will see the silver price generally rise in the $15-$20 range and stay in place for the next four to five years.
"There will be some input if the base metal complex falls, but what happens in the next five to 10 years, who knows? Maybe the mines will produce more than the market needs."
Silver, which hit a 23-year high in April of $13.38 per ounce, was selling on Monday for around $11.30. Since last year's Denver Gold Forum, the price of gold soared to its highest level in a quarter century. It is still higher than it was at the start of the year, even though it has dropped to around $580 per ounce from a high of $640.
Telfer explained silver's change in fortunes thus: "The difference between silver and gold is that silver gets used up, gold doesn't. Gold just gets moved around, whereas silver gets used up so inventories of silver are low."
That's why he is bullish on silver -- a view shared by Coeur d'Alene <CDE.N>, the world's largest publicly traded silver producer.
"There is a bullish trend in the silver market and the prospects are for these conditions to continue," said Chief Financial Officer James Sabala. "That's because of a fundamental continued imbalance between mine supply, relatively low above-ground stocks and continued speculative interest.
"These factors caused silver prices earlier this year to reach their highest level in more than two decades. But our bullish view of the market goes beyond short-term excitement at the spike in prices," he told the Gold Forum.
The optimistic view of the market is largely based on the long-term growth in demand for silver, he said. "Silver is the world's most widely used metal above and beyond the well known uses in coins and photography."
He noted silver is used in electronics, water purification systems, health care, textiles and wood preservation. "Overall silver demand has been driven primarily by record-setting growth in industrial applications. We don't see any sign of a significant letdown in this segment," Sabala said.
Also the Electronic Trading Fund, which began trading in April, has already taken approximately 100 million ounces of silver off the market, he said. And although mine production rose last year it still lagged consumption for the 17th consecutive year.
"That's one of the reasons silver has outperformed gold in the recent market and we expect it to continue to do so."
Sabala said two-thirds of Coeur's revenue is from silver and it does not hedge silver or gold.
"We are poised to report strong production and low cash costs for 2006, with our net income for the first half of this year already exceeding that for the full year 2005," he said.
© Reuters 2006. All rights reserved.
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