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Stirling silver revival

HIDING in the shadow of the gold price rebound, the silver price has quietly crept back up to six and half-year highs.

The rise has sparked early interest in the US with many Internet chat rooms, analysts and investor newsletters talking up the commodity’s outlook.

While Australia is the world’s third largest silver producer, only a handful of silver players are listed on the Australian Stock Exchange and reaction to the increase has been muted.

On January 13 silver slipped back from highs of $US6.74/oz to $US6.50/oz, after beginning its climb in November.

Silver has traded at levels between $US4.50/oz and $US5.50/oz for almost 15 years.

The rise is said to be driven by a number of factors including silver’s negative correlation against the weakened US dollar, a decade long supply deficit and increased demand from China and India.

The last time the silver market stirred interest was in 1998 when legendary US investor Warren Buffet reportedly purchased more than 130 million ounces of the metal and prices spiked to $US7.80/oz.

Local analysts appear mixed in their views on silver’s outlook, suggesting the metal might be at some kind of crossroads.

There are some predictions of strong price rises while others argue that the current increase lacks fundamental support to sustain longer-term highs.

The confusion appears to be over the use of silver in camera film, which is said to be losing out to the digital camera market.

Global digital sales in 2003 for the first time surpassed sales of traditional film cameras according to US metals analyst Eidetic Research.

However, Eidetic says the digital photography revolution has not yet diminished silver global demand figures.

Despite the longer-term confusion there is a confidence in the shorter-term price rise.

Mining analyst for global resource investment bank RFC Richard Harris released a report on silver last month saying the fundamentals were in place for its price to possibly spike to between $US8/oz to $US10/oz within the next few years.

His report says the world’s silver stockpile has been depleted to between 300 million to 500 million ounces over the past 10 years and with both silver demand expected to increase and supply to remain constant conditions are right for a price rise.

 “Plus with a continued weaker US dollar  . . . people are going to look for harder assets such as silver which has only just started moving in price,” Mr Harris says.

He says Anvil Mining, Macmin Silver and Perilya offer excellent leverage and exposure to higher silver prices.

Gold Corporation (Perth Mint) treasurer Nigel Moffatt said, he did not believe the fundamentals could sustain a price rise in silver.

Despite selling a lot of silver jewellery into China, Mr Moffat said one of silver’s main markets, the photographic film industry, was in decline as the digital photography market stole the show.

“Silver is a far more speculative metal than gold is,” he said.

“In terms of why most of the people who tell you that silver is going to go, they can’t actually answer that question, apart from to tell you it is too cheap.”

Paterson Ord Minnett senior client adviser Tony Locantro said there were several interesting silver explorers in Australia.

“Macmin Silver is the most popular, they have the Texas Project in Queensland,” he said.

“They have been around for a while but have moved from 3 cents to 24 cents. Malachite Resources have basically got some old silver mines and actually just had a gold discovery.”

Macmin, with a 14-million-ounce resource is drilling for silver at Texas, Queensland and Malachite has several silver and gold projects in northern New South Wales including Boonoo Boonoo and Conrad projects.

Macmin Silver executive chairman Bob McNeil said the company had all the appropriate approvals and was set to mine. It was simply waiting on higher silver prices.

This is understood to be because of low silver grades.

While Malachite resources managing director Garry Lowder said it had historical data that supported higher grade silver than Macmin, however, Native Title issues as well as an undefined resource had yet to show anything economical.

Mr Locantro said TriOrigin Minerals was another listed player.

“They have got an 18 million ounce silver resource in the Lachlan Fold Belt, New South Wales and are actually looking to double it,” he said.

“Other Australian silver explorers include Golden Cross Resources, which has some silver exposure but is still in the early stages, Bolnisi Gold has silver interests in Mexico and Platsearch NL has silver exposure in the Broken Hill area.”

BHP Billiton’s Cannington mine in northern Queensland is the world’s largest silver mine.

 After reduced production in 2003 it was reported to be increasing output this year.

Perilya, Kagara Zinc and Consolidated Broken Hill are other Australian companies producing silver.

All silver produced in WA is currently a by-product of other mined commodities.

WA-based Legend Mining ceased production at Australia’s only primary producing silver mine Elizabeth Hill, also located in WA, in 2000 after mining more than 2.5 million tonnes of silver.

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