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Coeur looks to higher silver prices ahead
Coeur d'Alene Mines CEO, Dennis Wheeler, expects the silver price to maintain its upward path in 2009 on investor interest, recovering industrial demand and static output.
Author: Frank Tang
Posted: Tuesday , 02 Jun 2009
NEW YORK, (Reuters) -
The price of silver will rise further in 2009 following a sharp rally in May, fueled by a combination of rising investor interest, recovering industrial demand and flat industry output, the chief executive of Coeur d'Alene Mines Corp said on Monday.
"Silver is now being looked at as a separate asset class and as a safe haven, and some sense that the economy may be bottoming," CEO Dennis Wheeler of the Idaho-based silver producer told Reuters in an interview.
"Silver is demonstrating its advantage both for investors and as a leading industrial metal," Wheeler said.
In May, spot silver rose nearly 30 percent to over $15 an ounce, its biggest monthly gain in at least 10 years, thanks to the dollar's weakness and gold's rise. It was at about $15.60 on Monday.
Wheeler said that strong investment demand, reflected by the growth of silver-backed, exchange-traded funds, would further boost silver prices.
U.S.-based iShares Silver Trust and London-based ETF Securities currently hold a combined total of more than 310 million ounces of silver bullion, equivalent to nearly half of the annual industry output last year.
Industrial demand accounted for about half of the total fabrication in 2008, and silver investment was at just 7 percent, according to research firm GFMS.
Year to date, silver has risen about 40 percent, outperforming gold's 11 percent gain during the same period.
"Silver has a stronger base because of its industrial demand feature. So, I am not surprised that we have seen this price performance for silver compared to gold," Wheeler said.
SILVER TO RISE, VOLATILITY HIGH
Wheeler forecasts silver to rise to a range between $16 and $18 an ounce for the rest of 2009, with a degree of price volatility.
"This is an uncertain world that we are living in. Who knows what may trigger more investment into silver and gold as inflation hedges or secured asset buys," Wheeler said. "You will undoubtedly see some price swings from time to time."
Wheeler expected that both silver and gold to be supported by similar factors such as declining supply, very few new discoveries and shrinking reserves.
"Nothing on the horizon is going to change that (flat supply), so we are going to have silver deficits over the long term by a considerable margin," he said.
The worst economic crisis since the Great Depression has forced many silver mines to shut due to falling demand and lower metal prices. Silver output is expected to drop further because of the loss as a by-product from base metal mines.
Mining analysts said the higher price of silver should help producers, which had overspent on expanding mines when silver hit a peak of over $21 an ounce in March 2008.
Asked if Coeur's Palmarejo mine operation in Mexico was affected by the swine flu, Wheeler said "I think that issue is largely behind Mexico."
Wheeler says he still expects the Palmarejo mine at full capacity to produce 120,000 to 125,000 ounces of gold, and 9 million to 10 million ounces of silver annually. (Editing by Christian Wiessner)
