$20/oz. Silver forecastGOLD & SILVER ANALYSIS
METAL PRICE TO LEVEL OFF AND FALL IN 2008-2009
Toronto broker GMP forecasts $14.25 average silver price with spikes to $20/oz
Toronto’s Griffin McBurney Securities has initiated coverage of four primary North American Silver producers, forecasting that “silver will reach new highs this year.”
Author: Dorothy Kosich
Posted: Wednesday , 11 Apr 2007
RENO, NV -
As Griffiths McBurney Securities (GMP) recently launched coverage of primary North American silver producers, the Toronto-based broker's analysts forecast an average silver price of $14.25/oz this year with potential short-term spikes in the metal price to $20/oz.
Claiming that "silver will reach new highs this year," metals analysts Craig West and Stefan Axell suggested that silver's early March correction "provides a good buying opportunity for certain silver equities."
"Given the average silver price to date, our forecast implies an average silver price of $14.25 per ounce for the remainder of 2007," the analysts forecast. "We also note that the physical silver market continues to tighten, in part due to growth in the silver ETF. With this in mind, we expect the silver price could experience peak prices well above our average price forecast, possibly up to $20 per ounce."
"In 2008 and 2009, we expect the silver price average will level off and begin to fall as new production from mines comes online," they added.
Observing that only 30% of new silver comes from primary silver mines, GMP forecasts "continued growth in mine supply at an increasing rate from 3.7% in 2006 to 4.8% per year in 2010, as new mines currently under construction are brought on line."
West and Axell said they view the silver ETF "as a barometer for investment demand for silver, and also note the impact that it has on the physical market for silver. They asserted that "investment demand will continue to be the main driver of silver prices in the coming year, and we believe growth in the silver ETF, which is up nearly 30 million ounces since the start of 2007, is an indication of this continuing investment demand."
Meanwhile, the analysts noted that "as we expect investment demand for silver will continue to grow this year, we expect the current strong relationship between silver and gold to be maintained."
The analysts also predicted a 6% growth rate in industrial applications of silver this year.
PRIMARY SILVER PRODUCER RATINGS
Initiating coverage of Silver Wheaton (NYSE, TSX: SLW), GNP gave the Vancouver-based miner a "BUY" recommendation and a US$12 per share target price. The analysts noted that "Silver Wheaton's share price has underperformed its peers since the start of the year, and we view the stock as undervalued."
Observing that Silver Standard Resources (NASDAQ: SSRI, TSX: SSO) "has the largest resource of any publicly traded primary silver company, with total resources of over 1.2 billion ounces of silver, GMP rated the Vancouver explorationist "BUY" with a price target of US$42/share.
"Although we would typically expect a company entering a development phase to underperform its peers, we believe Silver Standard is an exception to the rule," said the analysts, who also noted that "Silver Standard is well financed."
GMP gave Vancouver-based silver miner Pan American Silver (NASDAQ: PAAS, TSX: PAA) a "HOLD" recommendation and a US$32 per share target price. While Bolivian politics has made GMP cautious with its forecasts for Pan American Silver, the analysts said they expected the start-up of new operations in Mexico and in 2009 in Argentina "will not only provide growth but also improve the diversification of Pan American's portfolio of assets."
Idaho-based silver miner Coeur d'Alene Mines (NYSE, TSX: CDM) also garnered a "HOLD" recommendation from the analysts, who set a target of US$4.25/sh. The analysts expressed concerns about the litigation, which is delaying the start-up of the Kensington project in Alaska, and assigned a higher rate of risk to the San Bartolome project in Bolivia. "While we agree with the company that a government nationalization of Bartolome is unlikely, we believe the outcome of government plans to increase taxes in the mining industry is uncertain."
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