Use access key #2 to skip to page content.

speedybure (< 20)

Silver: A Must Read For Those Who Believe In The Silver Story & The Implications For The Miners

Recs

18

July 21, 2009 – Comments (6) | RELATED TICKERS: SLW , SLV , SSRI

Like Gold, most people dismiss silver mostly because their is a stigma among the mainstream that label those who embrace this metal as having some type of fetish. This comes out of sheer ignorance - as silver is the metal of the future. Silver plays two roles, of which both are of great importance. To avoid the much talked about inflationary hedge aspect, I will write just a few sentences for those unaware of this charateristic.

 

Silver as a store of value - Like Gold, Silver is seen to be a store of value and for good reason. It too has been been used as a worldwide currency for well over 5,000 years. This is because it has always been chosen by the people as an ideal medium of exchange. (Gold for larger purchases and Silver for smaller denomination transactions). This was due the physical charatersitics of these metals i.e durability , inability to replicate , a adequate level of scarcity, etc. So as we embark into the era a unprecendented inflation, silver will be right next to gold as the ideal protectors of REAL WEALTH.

Silver For Industrial Use- Now and In the Future - what most people don't realize is that silver has become an essential metal in our everyday lives. this trend will continue but at an accerlerating rate. Most people think of the common industrial uses, photograhic uses, silverware, jewelry and coinage as capturing all that is silver and these uses will see little to no impact in the demand for them. On the Contrary, as silver has recently caught the attention of the medical community for its ability to fight off bateria growth and promote healing. Without getting into in depth terminology, silver interrupts bacteria's to form chemical bonds, without which the bacteria has no choice but to die. To avoid going off on a whole discussion about the numerous other applications that are being looked into amongst the medical community, I will leave it at that.

Before I get to the imporant development and the biggest catalyst for silver going forward, it is also worth mentionining silver lenses have proved superior in fighting off harmful rays in addition to conducting light transmission in such a way that people don't need to change glasses when moving from outdoors to indoors or vice versa. This is a rather new trend but is being used more and more, currently just under 15% of total production. One last note before i get into the really exciting applications, is silvers use as a component in solar panels ( which I believe is bogus, but the green movement will have solar at the forefront).

Silver is starting to become a neccessity in water purification, much for the same reason mentioned above (the ability to fight off bacteria). Silver is replacing harsh chemicals i.e Bromine, Cholorine which are inferior for obvious reasons. Although the previously mentioned chemicals will continue to be used, the shift has slowly begun favoring silver, especially in building new water supply systems. Silver destroyies legionnaires disease, which is cause via a buildup of bacteria in the piping of these systems. Not to mention the superiority it will have in personal water filters which currently used charcoal among other things.

Now for what I believe will be the an enormous catalyst for Silver. I am referring to the new Silver-Oxide batteries (which have been developed and tested already) and will soon hit the market, most likely in Q4 09'. the following was taken from an article I read and is very informative :

"Everyone who uses laptops or cell-phones these days is at least partially aware of the battery technology everybody uses in those devices. Lithium-ion and lithium-polymer batteries have literally changed the world of portable devices, making them lighter, while also extending useful battery life. They have become the most common type of battery used in consumer rechargeable devices. The alternative comes in the form of silver-oxide or silver-zinc technology. Silver-zinc batteries can run up to 40% longer than the equivalent lithium-ion battery. Over 95% of the primary elements in the battery can be recycled. There are no heavy metals or toxic chemicals in modern silver-zinc batteries. Plus, their water-based chemistry make them free from the risk of thermal runaway, fire, and explosion.

There is little doubt that these batteries are a safer, greener, longer-running choice for laptops and cell-phones. With a little more development, their future looks very bright. The technology has the backing of some heavy hitters, as well. For example, Intel Capital has invested in a silver-zinc battery manufacturer named Zinc Matrix Power (ZMP) or Silver Matrix Power (SMP)

Laptop manufacturers are in the process of examining silver-zinc batteries for use. ZMP claims at least one laptop maker already has designs in the queue with an eye toward introduction in their high-end laptops in mid 2009. Eventually, we may even see after-market, drop-in replacement batteries engineered to retrofit older laptops with this safer technology. Expect advertising to tout extended run times and the "green" aspects as major selling points." 

Imagine the implications of this fact, as they are incredibly telling for the future prices ( more on the supply later). One just needds to imagine the widespread use it will have, especially as those society's in emerging countries begin to use battery intensive electronics such as laptops or just your everyday cheap and simple electronics.

The Supply Side: Instead of going into an in depth analysis, I will instead just briefly summarize the results of a U.S geological survey concerninig silver. Well first off, no one knows how much silver is below ground! But there is a huge deficit when they measured the amount that would be feasible to sell at $15/oz. When I say huge, I mean a quantity that will prove unsustainable for the immediate future. Of course this does not take into account the stockpiles above ground, but that has been dwindling as silver mining has been neglible the last 1.5 years. Now don't get confused with me saying we are running out of silver or something absurd like that. The previously mentioned survey determined there was ample amounts of silver but one big problem. This silver lie so far down in the earth, that even conservative estimates are projecting a selling price of $30/oz for this to be feasible. ( This is not a well hidden fact, as it is very to easy to find numerous surveys like this from a number of credible sources). I have also seen estimates nearly double that of the conservative projections.

Conclusion: Silver should not only be looked as an inflationary hedge rather through fundamental supply and demand measures. The non-inflationist can merely look at this as a bonus and focus on the fundamentals, which is something you can't do with gold.

As for The Silver Miners, I think they are possible the best way to play this, should you believe in the silver story (barring futures). 

6 Comments – Post Your Own

#1) On July 21, 2009 at 11:09 PM, Bays (29.97) wrote:

great analysis, speedy!

Rec and follow.

Report this comment
#2) On July 21, 2009 at 11:16 PM, nuf2bdangrus (< 20) wrote:

Very well written.  I happen to like platinum better, as it is 16 times scarcer than gold, and is priced very close to it.  I missed eilver at 12, because I felt more delfation was coming.  But I am watching it closely.

Report this comment
#3) On July 22, 2009 at 8:19 AM, Bkeepr100 (< 20) wrote:

Agreed, silver will be one of the new components of the new wealth.  Gold, silver and to a much lesser extent platinum could be thrust to the forefront when the current fiat monetary system collapses of it's own weight.

I do have to say the $30 figure would be for the short term (about 2 years or so).  Long term you could see silver at a minimum of 3 to 4 figures in this Precious metals bull market.  This PM bull run has plenty of legs left, IMHO.  Especially with the way the political ruling crass maroons have been tossing paper around and devaluing the currency of the US.

I can see silver topping both gold and platinum in price because of the useage, scarcity, and other factors behind the price of silver.  Many of these factors have been pointed out for many years by Ted Butler in his analysis of the silver position.

Don't buy paper silver! Get the real item while you can and store it.  Your heirs will thank you for such a smart move in the future.

Report this comment
#4) On July 22, 2009 at 8:49 AM, XMFSinchiruna (27.12) wrote:

Speedy,

Thanks for another excellent post! As you may know, silver miners comprise the majority of my precious metals exposure, which in turn constitutes a full 85% of my real-life holdings. I'm way-long CDE, and celebrating the start-up of Palmarejo and their recent cash infusion on a profitable asset sale. I'm way-long Great Panther, Endeavor Silver, and ECU Silver. Several others are in the mix, but since I've been accumulating I can not name names at this time. :)

My financial future is significantly ties to the fate of silver, which is a far better feeling to have than having it tied to some debt-ridden piece of paper.

Silver prices this quarter have been sufficient for miners to be earning some cozy profits, so I expect some good things out of this earnings season.

Bkeepr100

Wow, and I thought I was the ultimate silver bull! :) You're getting miles ahead of yourself if you're expecting 4-digit silver prices or price partity with gold.

$30 is a nice consevative near-term target for gold's next breakout towards $1,200-$1,250. $50 makes an excellent (and plenty-exciting) medium-term target for the march to $1,650, with $100 being the most bullish long-term target I can endorse given our present degree of visibility of the fiscal situation. It may well go beyond $100 in a scenario where gold is pushed well beyond $2,000, but talk of four digits is pure fantasy IMO.

Also, silver will never reach price parity with gold. The natural scarcity ratio between the two metals of about 15:1 will ensure that.

I agree silver remains a terrific buy anywhere sub-$20, but I don't need dreams of $1,000 silver to make that assessment. $50 will be a great start, and we'll reassess the situation as we approach with greater clarity. 

Fool on!

Report this comment
#5) On July 22, 2009 at 5:44 PM, speedybure (< 20) wrote:

Sinch,

I to have Silver equities comprosing about 50-55% of my equity portfolio, so my fate as well likes in the fate of this metal. But like you I have extreme convinction for this strategy in the future, as others ignorance provides opportunity for the well informed. Again, like you I'm accumulating as new capital is flowing in thus making me hesitant to go into an indepth analysis. Obviously, because you write for the site you may have different restrictions, but I simply don't do it because it would feel like I'm trying to push equiity picks onto others.

I'm a very methodical investor which can cripple me at times due to the fact that it takes me quite a while to analyze the company i.e I begin be reading the lastest annual report and of course the footnotes, then move onto the quanatative analysis. Have you written any pieces on ECU or GREAT PANTHER? I would love to read if them if you have.

 

Report this comment
#6) On July 23, 2009 at 11:00 AM, InflationSilver (99.95) wrote:

Great post.

Report this comment

Featured Broker Partners


Advertisement