Photo by: Bloomberg
TORONTO (miningweekly.com) – Currently bullish on silver, analysts are saying the possibility of triple-digit prices for the grey metal is not beyond the realm of possibility.
A panel of experts in the silver industry recently came together in Vancouver to discuss the prospects for the precious metal, sketching a somewhat positive outlook as underinvestment and growing industrial uses kept demand growing at a steady pace, while sagging base metals prices were removing secondary silver production from the market.
Silver supplies were expected to decline as several base metal mines, responsible for producing about 75% of silver worldwide as a by-product, were being put on care and maintenance in anticipation of higher prices.
“We see underinvestment in mines not exploring or developing enough. They are not taking care of the things that will ensure their growth in the next cycle. This will, however, bring a price swing-up as underinvestment continues,” stated primary silver producer Hecla Mining president and CEO Phillips Baker Jr.
Pan American Silver chairperson Ross Beaty described silver as being somewhat schizophrenic, because it was seen as both an industrial metal as well as a precious metal. Because of this, he noted, silver had done much better than base metals after a six-year bear market.
“Demand for silver just keeps growing and, coupled with a turnaround in markets, [this] bodes well for the metal,” he said, adding that other currencies would probably do much better than the US dollar later in the year, which augured well for precious metals.
First Majestic Silver president and CEO Keith Neumeyer was convinced that 2016 seemed to be the start of a new cycle.
He explained that, as one of the few primary silver miners, First Majestic did not expect the past four years to be as tough as they had been. The company had to restructure about four times to be able to produce profitable ounces, and that meant laying off about 1 500 workers. It had also been implementing automation projects in Mexico, getting those operations on par with standards of mine automation seen in the US and Canada. He noted that Hecla had advised unions that additional cuts to the workforce were coming.
Neumeyer lamented the lack of good pure-play silver assets available for mergers and acquisitions on the market.
Trading at about 72% below its all-time high of $48.70/oz, panellists believed that silver had recently possibly put in its bottom at $13.58/oz.
“We are past the bottom – the demand for silver is spectacular. India is a strong driver,” said Hecla’s Baker.
President and CEO of the world’s largest precious metals streaming firm, Randy Smallwood, agreed, noting that demand was growing, especially from the industrial applications side. However, there was less upside for base metals.
“There is pressure on the by-products side, with not a lot of growth expected in the near future. Silver is in the process for tighter demand. When other precious metals move, silver will move more,” he said, confirming why the company was still bullish on silver.
Smallwood noted that 2015 was one of Silver Wheaton’s busiest years, with about $2-billion in deals. He mentioned, however, that there were currently not a lot of good projects on the market that grabbed his attention. He also mentioned that the company only had limited capital available to make new acquisitions.
“If you look at the fundamentals, I believe in triple-digit numbers. We are consuming more silver than ever and neither Wall Street nor Bay Street has woken up to this fact,” said Neumeyer.
Cyclical analyst Bo Polny agreed, and saw a crash of the century taking place on October 2. This would not be a stock market crash, but a significant geopolitical event that would spell the end of fiat currencies and send gold and silver prices to record highs – triple digits, in the case of silver, before the year is out.
Spot silver prices on Friday gained about 1% to $15.01/oz.