Silver prices have Idaho's Silver Valley companies booming


By Nicholas K. Geranios
Associated Press
via Helena Independent Record
Helena, Montana
Saturday, May 12, 2007

KELLOGG, Idaho -- As a precious metal, silver doesn't have the allure of gold. As an investment, it's not as hip as Google.

But dowdy old silver is suddenly chic.

Silver prices are at their highest in more than 25 years, and mining companies are riding an economic boom. Silver -- heavily used in computers, cell phones, and other electronics, plus jewelry and photography -- is suddenly one of the hottest commodities in the world.

Here in Idaho's Silver Valley, the handful of surviving mining companies are enjoying record revenues and big expansions. Two publicly traded companies -- Hecla Mining and Coeur -- are having banner years.

"In 2006 we reported the highest earnings and lowest cash costs for silver in the history of our 116-year-old company," said Phil Baker, president of Hecla Mining Co. "We now have the potential to set another record in 2007."

The worldwide price for silver is more than $13 an ounce, highest since the metal reached $20 in 1980. Before last year silver hadn't been in double digits since 1983.

At The Silver Institute in Washington, D.C., they call silver "the indispensable metal," because a bit is used in every computer and cell phone and in many other industrial applications. Silver is a superior conductor of electricity and is very durable, said Michael DiRienzo, director of the institute.

As a result, stockpiles of the metal have disappeared even as demand is rising.

Silver jewelry is also popular in China and India, two huge markets with growing numbers of affluent consumers. The worldwide market for silver jewelry soared from $1.4 billion in 2000 to $2.6 billion in 2005, he said.

That demand makes up for big drops in the market for photographic paper and for silver in currency, he said.

The amount of silver used for jewelry exceeded the amount for used photographic paper for the first time in 2005, he said.

Many experts say silver remains a good investment. Mark O'Byrne, managing director of Gold and Silver Investments Ltd. in Ireland, speculated that silver prices could reach $20 in 2007, as demand grows while the supply does not keep up.

"It is estimated that 95 percent of the silver ever mined has been consumed by the global photography, technology, medical, defense, and electronic industries," he wrote in a recent commentary. "This silver is gone forever."

Silver production worldwide remains flat, and the amount of silver mined has been less than demand every year for the past 15 years, O'Byrne said. The difference was made up by stockpiles that are now depleted.

That means production is not likely to grow much even as prices go up, O'Byrne said.

Peru and Mexico are the two largest silver producers in the world. The United States ranks eighth. Two of the nation's largest silver producers are based in Coeur d'Alene, Idaho.

Earlier this spring, Coeur d'Alene Mines Corp. announced a deal that would make it the largest primary silver producer in the world. Coeur is acquiring all the shares of Bolnisi Gold NL of Australia and Palmarejo Silver and Gold Corp. of Montreal, in a transaction valued at about $1.1 billion. The deal allows Coeur to expand into Mexico, the world's second-largest silver producer.

"With this transaction we are establishing Coeur as the clear leader in the silver mining industry," said Dennis E. Wheeler, Coeur's chairman, president and chief executive officer.

The deal is expected to close in the third quarter.

At Hecla Mining, based in Coeur d'Alene, Idaho, officials are looking to dramatically expand mines such as the Lucky Friday in nearby Mullan that have been producing silver for six decades. For the first time in half a century, the company is conducting a major exploration program on its 40-square-mile property surrounding the Lucky Friday mine.

Vicki Veltkamp, head of investor relations for Hecla, said silver is benefiting from a general boom in metals prices.

"China and India as they become more developed have a tremendous demand for all types of base metals," Veltkamp said.

There's also plenty of new exploration in the Silver Valley, a narrow gap in the Rockies about 70 miles east of Spokane, Wash., that produced much of the nation's silver in the early 20th century but which has been economically depressed since the 1980s.

"There's a lot more activity in the Silver Valley," Veltkamp said.

One place where the boom has not been reflected is in the stock price for Hecla and Coeur.

Hecla's is stuck at around $8.50 per share on the New York Stock Exchange lately, with a 52-week range from $4.05 to $9.89. Coeur's price is around $3.60, which is near the 52-week low. The high is $6.40.

Hecla officials believe their stock price is not reflecting the company's strong bottom line these days.

"Precious metals are always interesting to people, but they've been out of favor for so long it takes a lot of reeducation of the market," Veltkamp said. "I think the market is sitting back and watching this."

But she noted that Hecla's price is up 90 percent from last year.

In 2006, the company reported record sales of $217.4 million and record profits of $68.6 million. The sales figure was 30 percent higher than the second-best year in company history, and profits were 20 percent higher than the second-best year, Hecla said. In 2005 the company had reported a loss of $25.9 million, or 22 cents per share.

The rising fortunes of Hecla and Coeur will not likely result in a big job bump in the Silver Valley, as many mining jobs have become automated.

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