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Pan American Silver Corp. Message Board

  • ckmb54 ckmb54 Feb 10, 2004 8:50 PM Flag

    Not surprised to seeSilver get above $7

    :Silver's resurgence prompts city firm to buy Peru mine U.S. dollar, demand makes Hunt brothers' metal precious again, vaulting price to $6 Michael Kane All that glitters is not gold. Silver is also enjoying its day in the sun after languishing for 20 years. In fact, the other precious metal has outshone gold in percentage gains over the past 12 months, with prices vaulting to the $6 range from the $4 range. Analysts say that's partly the result of the weakening U.S. dollar, but also because demand is exceeding supply and more silver is being used in electronic products.It all spells stepped-up activity by Vancouver-based junior miners such as Pan American Silver Corp.,which Monday announced a binding deal to buy the Morococha silver mine in Peru for $35 million US.Historically, the Morococha operation has produced about 3.5 million ounces of silver a year,together with significant amounts of by-product zinc, copper and lead. "It is an excellent addition to Pan American's assets and will help us achieve our mission of becoming the world's leading primary silver producer in the near future," said Ross Beaty, Pan American chairman and CEO. Silver was out of favour for about two decades after the Hunt brothers of Texas tried to corner the market in the late '70s. "The result was that people weren't looking for new silver projects and you had inventories being drawn down," said Bob Quartermain, president of Silver Standard Resources in Vancouver, a partner with Pan American in South America. "Demand has outstripped supply for more than 14 years and we continue to see increased usage of silver in electronics." An important characteristic of silver is that it does not spark when an electrical current passes through it. That makes it ideal for very fine electrical connections where miniaturization is important. Beaty said American and Chinese government stockpiles of silver have been largely depleted and the commonly cited declining silver use in photography "seems to be a triumph of fiction over fact." While less silver is being used for film as people switch to digital cameras, he says the printing process requires silver and more prints are being made. "We also use silver every single day in 100 different places, from our mirrors to our cars to our cellphones." He said that's why Pan American is actively looking for new mines. While silver is more readily available than gold, almost all of it is consumed in forms that are uneconomic to get back, says precious metals analyst David Morgan, who hosts the U.S. Web site
    "There might be 10 cents worth of silver in a cellphone, for example, but it would cost you a dollar in energy to melt the phone down and get it back. "So we're basically using it up and forward-looking companies like Pan American and Silver Standard are both out there buying up properties cheaply until the silver crisis hits and the above-ground supply is whittled down to next to nothing."
    Morococha is about 80 kilometres from Pan American's 4.5-million-ounce-a-year Huaron underground silver mine. The acquisition will increase Pan American's annual Peruvian silver production to more than 10 million ounces and will allow many administrative efficiencies with the company's other two Peruvian underground mines and its Lima administrative office. Silver closed Monday at $6.43 an ounce, down from a recent high of $6.80. Haytham Hodaly, a senior mining analyst at Salman Partners Inc., in Vancouver, said he remains bullish on the metal. "It will be a while before we start to see $50 silver as we did in 1979-80 with the Hunt brothers, but I wouldn't be surprised to see silver get above $7 this year, at least for a little while," Hodaly said.

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