Miners, Bankers and Investors Eye Silver–the Versatile PM
COMMENTARY—ProspectingJournal.com—2011 has been a rollercoaster for silver, the once “Poor Man’s Gold.” Indeed, silver fans are beaming with optimism these days (though slightly shaken), as the precious metal still has a ways to go if it wants to sit at its historical price ratio with gold . . . If manipulation doesn’t keep bashing it down.
Analysts from both sides of the fence have been throwing around the recent comments from Eric Sprott, legendary silver investor and CEO of Sprott Asset Management, regarding the recent silver takedown from its April 26 peak of almost $50. Sprott recently told Silver Investing News, “In my heart of hearts I believe it was a manipulation. There was no market. It was a setup. They just pushed it down. It was ridiculous.”
The “they,” of course, refers to CME and its 5 margin increases, connected to JP Morgan and HSBC in a well-orchestrated takedown. Like the Hunt brothers’ infamous 1980 attempt to corner the silver market, this recent takedown was meant to take control of more silver holdings. So we have CME’s silver manipulation, the banks’ greed, conspiracies about wanting to keep silver devalued—the usual.
But rather than analyze the takedown, I’m interested in Sprott’s overall message: “Silver has always been a currency, people are now treating it as a currency, and it’s a very, very small market. There is no way that with roughly $50 billion of silver inventory around that we can make it a currency, so I see the price going much higher.”
Utah has just implemented legislation to make silver and gold legal currencies, while PMs have gained underground support in cities across the US. Even Mexican politicians called for a silver standard at one point. QE3 is also looming and with it more unsolved debt issues, meaning increased currency devaluation and fear: bad for everything, but likely good for silver. The EU is looking worse by the day and all we seem to hear in the news is how China and India are buying more PMs: once again, good for the price of silver.
Silver’s strong emerging industrial and monetary use, now helped by ongoing headlines hailing its virtues, is helping a handful of high-potential Canadian miners gain recognition. Silver mining giant Pan American Silver (TSX: PAA) is the world’s second-largest primary silver producer. With seven mines in Mexico, Peru, Argentina and Bolivia, PAA’s First Quarter 2011 Highlights (unaudited) for 2011 consisted of consolidated silver production of 5.3 million ounces, record mine earnings of $96 million, record net earnings attributable to common shareholders of $92.2 million and record operating cash flows.
United Silver Corp (TSX: USC) has recently announced a joint-venture agreement with New Jersey Mill, which will establish the Crescent Silver Mine project in Idaho, for production in Q1 2012. The Crescent Silver Mine, located on Idaho’s famed Silver Belt, has historically produced 25 million ounces of silver at an average grade of 27.0 opt. Great Panther Silver Limited (TSX: GPR) has also recorded a record quarterly net income of $7 million, thanks to its flagship operation, the Guanajuato Mine Complex in Mexico, which consists of 28 claims totaling 1,107 hectares.
With a geological ratio to gold of 17:1 and a historical ratio to gold of 15:1, it’s a no-brainer that the current price of silver is highly undervalued. And with over a billion ounces of silver being traded a year and yet only around 900 million produced, silver miners (and investors) have a lot to look forward to.
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