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XMFSinchiruna (27.35)

What they consider strong, I consider weak

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April 14, 2009 – Comments (7)

In a perfect example of how even the more "bullish" analysts fail to grasp the big picture in looming price-drivers for precious metals, this investment bank considers a silver price forecast of $15.85 in 2010 quite high, and probably expects us all to hail the arrival of sufficiently bullish calls. Not by a long shot... when gold experiences it's big run through the $1,650 level and onto $2,000 over the coming couple of years, silver will briskly reclaim its prior high above $20 and make its way towards $50 per ounce. I have been targeting $50 per ounce for silver since I first started investing in precious metals back in 2003/2004, evidenced later by my early pitches here in CAPS starting in 2006. Nothing has changed, except that macroeconomic developments have transpired more quickly and in a grander scale than I could have imagined, which will more than make up for the reduced global industrial demand implied by the severity of this stagflationary depression.

They did nail one thing in this report, though.... they referenced my slingshot effect, if not by name. :)

http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=81809&sn=Detail

Canadian investment bankers Versant Partners forecast the price of silver to average $13.85/oz this year, $15.85/oz in 2010 and $11.75/oz on a long term basis.

"Although correlations have contracted, silver remains more volatile than gold partially as a result of the small size of the silver market, lower inventory levels, and its dual role demand drivers," said Versant mining analyst Anthona Curic.

"Therefore, silver tends to exaggerate gold's movements, trailing on the upside but outperforming and subsequently overcorrecting on the downside," she added.

Versant advises that gold prices will likely remain strong, subject to some volatility in the near term. "Silver, which follows gold, is expected to likewise maintain support at a strong price level."

Curic believes that "the current environment continues to provide an opportunity to invest in silver equities and we expect the price of silver to outperform the price of gold and for silver equities to outperform gold equities."

Having recently initiated coverage on silver, Versant selected companies it believes fit the following investment criteria:

• Quality projects with attractive resource and production growth potential;

• Limited geopolitical risk;

• Highly experienced senior management and technical team; and

• "Lastly, given our outlook that silver prices will revert to normalized long-term prices we have selected equities that remain economically robust in a US$11.75/oz gold price environment."

Among the silver explorers and miners recommended by Versant are Bear Creek Mining (TSX-V: BCM), ECU Silver (TSX: ECU), First Majestic Silver (TSX: FR), Fortuna Silver (TSX-V: FVI), Orko Silver (TSX-V: OK), Silver Wheaton (TSX: SLW), and Silverstone Resources Corp. (TSX-V: SST). 

 

7 Comments – Post Your Own

#1) On April 14, 2009 at 10:44 AM, dudemonkey (39.48) wrote:

I like the idea of the 'slingshot effect' and I've been searching for other instances where multiple factors come together to "slingshot" an asset class/stock value up.  Your description of this was good.

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#2) On April 14, 2009 at 12:44 PM, CanZen (26.81) wrote:

Thank you for for your post.  I find it quite difficult to choose an entry point for silver.  Sometimes it appears to follow the market, at other times it appears to be the inverse.  I expect the current rally to loose steam, possibly rather abruptly, but for a rally to continue into the summer and then potentially to see new market lows out in the future sometime.  This is based on what I have heard from TAers as well as those more focused on fundamentals, although I realize these are all best guesses.

Based on fundaments, would you expect silver to march by the beat of its own drum in the near future or do you expect better entry points in the near future?

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#3) On April 14, 2009 at 1:01 PM, XMFSinchiruna (27.35) wrote:

CanZen

I consider it misguided to try to forecast such short-term gyrations within a manipulated market such as silver. The fundamentals clearly demand higher silver prices, while illegal naked short selling on the COMEX tries to keep a lid on prices. The remainder of my thoughts on the topic are documented here throughout the blogs, and I encourage you to go digging for more if you are intent on forming a best-guess for whether or not we'll see better entry points. When silver is $50, I don't think you'll care much whether you paid $12.50 or $11 per ounce for your silver. 

dudemonkey

Congrats. Looks like one of my colleagues published your views on the silver story. :) 

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#4) On April 14, 2009 at 1:03 PM, XMFSinchiruna (27.35) wrote:

Disclosure: I am long Endeavour Silver

 

http://www.marketwire.com/press-release/Endeavour-Silver-Corp-TSX-EDR-974200.html

Endeavour Silver Production on Target in First Quarter, 2009; Produces 609,548 oz Silver (Up 21%) and 2,481 oz Gold (Up 73%) or 783,218 oz Silver-Equivalents (Up 30%) Compared to Q1, 2008 VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 14, 2009) - Endeavour Silver Corp. (TSX:EDR)(NYSE Alternext US:EXK)(NYSE Amex:EXK.A)(DBFrankfurt:EJD) announces that silver production from the Company's two operating silver mines in Mexico, Guanacevi in Durango State and Guanajuato in Guanajuato State, came in on target in the First Quarter, 2009, totalling 609,548 oz silver, up 21% over Q1, 2008.

Gold production also rose in the First Quarter, 2009, up 73% to 2,481 oz compared to Q1, 2008, resulting in silver-equivalent production rising 30% to 783,218 oz compared to Q1, 2008 (assuming a 70:1 silver:gold ratio based on current gold/silver prices - we do not include base metals as silver-equivalents).

Bradford Cooke, Chairman and CEO, stated, "Endeavour enjoyed another strong quarter of silver production in Q1, 2009 compared to Q1, 2008. We put the brakes on our production growth late last year due to the low silver price but now that the silver price has rebounded, and thanks to our recent financings, new capital projects are now underway at both mines that should facilitate a +20% expansion of silver production to the 2.7-2.9 million oz range in 2009."

At Guanacevi, Q1, 2009 production totalled 423,970 oz silver from 51,073 tonnes (567 tonnes per day) grading 326 grams per tonne silver and 0.56 gpt gold (10.6 oz per ton silver-equivalent), with metal recoveries averaging 79.3% for silver and 88.1% gold. At Guanajuato, Q1, 2009 production amounted to 185,578 oz silver from 34,658 tonnes (456 tpd based on a 6 day week) grading 189 gpt silver and 1.70 gpt gold (9.0 opT silver-equivalent), with metal recoveries averaging 88.1% for silver and 88.6% for gold. Please click here to view the Guanacevi Mine: http://www.edrsilver.com/s/Guanacevi.asp.

Like 2008, silver production is expected to be relatively flat in Q1 and Q2 but should climb substantially in Q3 and Q4 as the three new mines at Guanacevi (Alex Breccia, Santa Cruz and Porvenir Dos) and two new mines at Guanajuato (Lucero and San Jose) that are now under development enter into production. Underground mine development accelerated during the 1st quarter, as 1408 meters of new access ramps and drifts were completed at Guanacevi and 707 meters were completed at Guanajuato. Please click here to view the Guanajuato mine: http://www.edrsilver.com/s/BolanitosMine.asp.

Endeavour Silver Corp. (TSX:EDR)(NYSE Alternext US:EXK)(NYSE Amex:EXK.A)(DBFrankfurt:EJD) is a small-cap silver mining company focused on the growth of its silver production, reserves and resources in Mexico. Since start-up in 2004, Endeavour has posted four consecutive years of growing silver production and resources. The organic expansion programs now underway at Endeavour's two operating silver mines in Mexico combined with its strategic acquisition program should help Endeavour achieve its goal to become the next premier mid-tier primary silver producer.

 

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#5) On April 14, 2009 at 3:04 PM, CanZen (26.81) wrote:

Sinch, I anticipated this response, but thought I would give it a try anyway :)

I have read a number of your previous posts, but perhaps I missed the key point that was likely covered in an earlier discussion.  What is the underlying reason for the banks to depress the value of silver?  Once the banks had accumulated reserves, why wouldn't they allow the top to blow and see their holdings multiply in value?

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#6) On April 14, 2009 at 4:24 PM, XMFSinchiruna (27.35) wrote:

CanZen

The banks make money by shifting constantly between long and short positions and manipulating the movements in both directions, but to maintain that luxury they must protect against the kind of break-out that the structurally impaired USD would otherwise imply in an unhindered marketplace. Now that they have a virtually unlimited supply of freshly printed ones and zeros to throw at these relatively small markets (silver is actually tiny), and as long as the SEC refuses to protect those markets from manipulation, their best interests will continue to be served by keeping the lid on and mking fortunes off enhanced volatility.

You'd better believe, though, that when the day comes that these markets edge out of their ability to maintain control, they will position themselves firmly on the long side in a heartbeat and make further fortunes on the reversal of their own practices.

Amazingly, because the silver market is so small, all it would tak would be a handful of millionnaires with commitments to take delivery of physical bullion from the COMEX to reveal the fraud rampant in the naked shorts of the futures exchanges and initiate a new valuation paradigm based not on paper proxies, but rather on actual availability of the physical metal itself.

Paper silver and paper gold, for this reason, are no better than paper USD federal reserve notes.

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#7) On April 14, 2009 at 5:03 PM, CanZen (26.81) wrote:

Here's to hoping that day arrives...eventually!  I really appreciate your feedback.

Jeremy

Looking to add a position is SLW in the near future

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