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+74% later, Wall St. Journal notices silver only to try to talk it down
Big advertiser J.P. Morgan Chase & Co. will be pleased.
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Price of Silver Soaring
Investor-Fueled 74% Gains Dwarf Gold; Race to Open Mines
By Carolyn Cui and Robert Guy Matthews
Sunday, December 26, 2010
BIG CREEK, Idaho -- An unexpected surge in investor demand is sending silver prices soaring—and speculators and mining companies are digging in.
In the past four months, the metal has upended forecasts, rising 51% to a series of 30-year highs, before inflation. Silver closed Thursday at $29.31 a troy ounce, up from $16.822 at the beginning of 2010.
Among the four major precious metals—the others being gold, platinum and palladium -- silver is up 74% this year, on track to be the second-best performing commodity after palladium, which is up 86%. Gold, by contrast, is up 26% and copper just under 28%.
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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property
Company Press Release, October 27, 2010
VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:
-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.
-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.
-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.
Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.
"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."
For the company's full press release, please visit:
Prices are rising despite oversupply and a lackluster recovery in industrial demand. Many analysts expected those factors would keep a lid on prices in 2010. What they didn't expect was an overwhelming flow of money into the market from investors eager to ride a commodities rally.
"This is a story almost entirely about investment," says Stephen Briggs, senior metals strategist at BNP Paribas.
The global silver appetite partly reflects world economic improvements. Investors from the U.S. to China turned to "hard" assets such as copper and other commodities in part as a hedge against inflation worries. Silver benefits from a dual role as industrial commodity and precious metal.
Here in the mountain-ringed Silver Valley, historically one of the world's largest silver production regions, workers are busy punching through rocks to open passages in the Crescent Silver Mine, which closed more than a dozen years ago when prices of silver dipped to $5 to $6 an ounce.
Even if prices retreat to $15 an ounce -- a level seen as recently as early this year -- some prospectors say they can break even, which means development will continue. "I think we are starting a new era in mining here," says Greg Stewart, president of United Mining Group, which has an 80% interest in the Crescent Silver Mine.
Exchange-traded funds backed with silver have enabled investors to invest in a market that traditionally was harder to participate in. The largest silver ETF, the $10.2 billion iShares Silver Trust, has seen a $1.1 billion net inflow for the first 11 months of this year. In recent months, concerns about inflation, the European debt crisis and the U.S. Federal Reserve's recent moves to boost the economy have driven investors to hard assets, also benefitting silver prices.
The craze has reached the coin market. In November, silver American Eagle coins sold by the U.S. Mint amounted to 4.26 million ounces, a monthly record in the agency's history.
Silver's reliance on investors to prop up the price could cause it to tumble suddenly. "When investor support for the metal fades, the downside is going to be pretty substantial," says Credit Suisse analyst Tom Kendall. He forecasts an average price of $30.10 per troy ounce next year as "a lot of factors that have led people to buy silver would still be there in 2011." But he cautions, "The number is only going to be achievable as long as fresh money keeps moving in."
Silver's all-time high was set in January 1980 at $48.70 an ounce, or $129.32 when adjusted for inflation.
This year investors are expected to pile a record $4.5 billion into the silver market, accounting for 24% of the world's total demand, says GFMS Ltd., a metals consulting firm in London. That's the highest level, in dollar terms, in decades. Silver's relatively small market size—$19 billion compared with $170 billion for gold—has also played a role in amplifying the impact of investors, according to GFMS.
The strength in silver prices has prompted a flurry of development around the globe and pushed anticipated production in 2010 to 733.2 million ounces, up 3.3% from 2009 levels, and up 14% since 2006.
Silver has some inherent appeal due to its industrial use in electronics, silverware and coins. And reserves are limited. According to the U.S. Geological Survey, there are fewer years of U.S. silver production left in the ground than any other precious metal including gold.
The recent price increase has been fueled by other factors in addition to investor interest. For instance, China recently abolished an exports tax rebate on metals. That has resulted in a 59% decline in silver exports.
China is a major silver producer and was a big exporter until 14 months ago. Strong demand there, coupled with the elimination of the tax break to protect domestic natural resources, have led Chinese producers to slash exports.
Concerns are lingering over excess supply. The market is set to see a surplus of 64.4 million ounces in 2010, says Barclays Capital, which could curb prices. This year's surplus will be 16% smaller than 2009's but much higher than previous years.
Overall, silver production has been rising steadily in the past five years, with most of the growth coming from mines in Mexico, Latin America, and Australia. Gold Corp., a Vancouver-based mining company, expects to more than triple output at its mine in Mexico, Penasquito, which is expected to produce 10 million ounces of silver in 2011, up from about 3 million ounces in 2009, according to GFMS.
Another new mine, Coeur d'Alene Mines Corp.'s Palmarejo silver and gold mine in Mexico, is also ramping up to produce 9 million ounces annually. And BHP Billiton, which owns one of the largest silver mines in the world, Cannington, is looking to increase production and extend the life of the mine, located in Australia.
So-called junior miners like United Mining Group, which has an interest in the Crescent Silver Mine, are much smaller than mining giants like BHP and Rio Tinto. They often lack the capital or expertise to run a mine, which requires costly equipment and infrastructure. Instead, their geologists often scout projects and then sell an interest in them to larger companies.
United Mining Group is issuing shares on the Toronto Stock Exchange to raise up to $8 million to develop the Crescent Silver Mine, which is more than 90 years old. Located in Idaho's Silver Valley—an area peppered with colorfully named mines like Lucky Friday, Sunshine and Bunker Hill—it is expected to begin production in early 2012, with output just over 1 million ounces.
"The whole industry is like feast or famine," says Mr. Stewart of United Mining.
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Prophecy Drills 71.17 Metres of 0.52% NiEq
(0.310 % Nickel 0.466 g/t PGMs +Au and 0.223% Copper)
from surface at Wellgreen Project in the Yukon
Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit: