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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (35827)	4/20/2009 9:13:29 PM
From: LoneClone	Read Replies (1) \| Respond to of 193231

With Silver Likely To Trade At Over $12 Long-Term, Most Silver Specialists Look Undervalued By Alastair Ford minesite.com What’s the bull case for silver? According to a recent note from RBC, the answer comes in three parts. First, there’s the ongoing likelihood that the US dollar will weaken, and that precious metals, including silver, will strengthen as a direct consequence. Second, although demand for the use of silver in photographic processing is falling, the slack will be more than taken up by strong investment and other industrial demand. And third, although increasing supply is likely in the longer term as new primary mines open up, for the immediate future the reduction in base metals mining in response to weaker metals prices has meant that the formerly significant contribution from secondary silver production has now dropped away. Well, and good – so what does it mean for the price? Using a three year forward curve as determined by its UK-based bullion traders, RBC reckons that silver will average US$11.00 per ounce for 2009 and 2010, and that it will rise slightly to US$11.25 for 2011. The broker’s long term silver price remains set at US$12.50. One further significant development that’s likely to materialise in the near term is that ratio of the gold price to the silver price will revert nearer to its five and ten year average. During the last quarter of 2008, gold ran away with itself, against silver, and against virtually everything else. At its peak an ounce of gold was worth 85 ounces of silver, as against a long-term average of 60 ounces. The average silver to gold ratio for the whole of 2008, however was back at the more palatable 60 ounce mark, while for the first quarter of 2009 the price of an ounce of gold has averaged around 72 times that of an ounce of silver. RBC reckons that a further rebalancing of the price back to the average of one ounce of gold to 60 ounces of silver is likely as 2009 progresses, based on the fundamental reasons outlined above. Gold bulls might disagree, but on the other hand even if the inflation spectre does begin to loom large and gold shoots up once again, there’s not necessarily any reason why silver shouldn’t follow gold in a more closely correlated fashion than it did in the crazy days at the end of 2008, when all things economic seemed out of kilter. Of course, silver is notoriously volatile, given the schizophrenic division of demand between industry and investment buyers, neither of which tend to buy at the same time as the other. When the global economy is looking bullish the industry buyers dominate, and when it’s bearish, the investment buyers move in. Which way the price goes is, in a sense, all a matter of degree. To add to that RBC also points out that we are about to enter a period of traditional weakness as regards the silver and gold price. But, having said all that, most silver specialists seem currently to be trading on the basis of a US$8.00 or US$9.00 silver price, according to RBC’s analysis, so there’s some scope for a sector re-rating as markets gradually re-balance following last year’s crash. RBC’s current favourites are Pan American Silver and Silver Wheaton, the former having “an above average growth profile”, while the latter was “oversold” during the latter part of 2008. To widen that out, the broker also notes several recent examples of corporate activity in the silver sector, including Silver Wheaton’s friendly takeover of Silverstone, Excellon’s offer for Silver Eagle Mines, and Fortuna Silver’s recent acquisition of 100 per cent control at its San Jose silver project in Oaxaca, Mexico. We’ll be taking a closer look at developments at Fortuna fairly soon here on Minesite, as key man Simon Ridgway is due in London next week. RBC also notes that over US$700 million has been raised by silver companies alone since the last quarter. A small portion of that has flowed into the coffers of Minesite subscribers like Great Panther, and more yet may flow through. One thing’s for sure, though, at the current price of over US$12.00, silver’s a long way from the doldrums it was in a few years ago. The US$5.00 prevailing price that we had from 1999 through to 2003 now seems a distant dream. Whether they know it or not, this is the good times for the silver miners.