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Investment in silver ETFs reached a record high last month.
Coming off the Christmas holiday, silver edged higher on Thursday as investors covered short positions and hunted for bargains during what has become a month-long downward trend for the precious metal.
Trading was thin, with investors keeping a close eye on White House-Congress talks aimed at preventing the US economy from plunging into recession in 2013. On Wednesday, John Boehner, Republican House of Representatives speaker, urged the Senate to act to pull back from the so-called “fiscal cliff.”
The United States faces $600 billion in tax hikes and spending cuts beginning in January unless a deal is reached to either replace or delay them.
Spot silver rose to $30.40/oz, up 1.32 percent on the day’s opening price, before settling at $30.18. Silver for March delivery last traded up $0.17 at $30.20 an ounce (oz).
Investment through silver exchange-traded products reached a record high of 18,854 metric tons last month — more than nine months of global mine output — according to data compiled by Bloomberg. Holdings are currently valued at approximately $19.2 billion.
Silver recorded a positive year, lagging behind only platinum in gains for precious metals. While that might please bulls, the metal’s price swings over the past quarter cannot be ignored. Silver’s 100-day historical volatility is almost twice as high as that of gold, meaning investors have been subject to high-risk investments. The metal advanced 7.7 percent, to $30.40 per oz, throughout the year — a gain on the 5.4-percent increase recorded by gold.
Company news
Pan American Silver (TSX:PAA) suspended work on its Navidad silver project in Argentina’s Chubut province due to the local government’s failure to pass a regulatory plan for mines and a proposed bill that is likely to cause sharp tax rises across the sector.
“We’ve suspended new investment in Navidad until we have legislation in Chubut that will allow us to develop the project,” said Pan American Silver Argentina’s business director, Ricardo Zarandon.
Chubut’s provincial governor sponsored legislation that will introduce a new 5-percent net smelter-return royalty on top of the current royalty of 3 percent, according to a report by The Wall Street Journal. Earlier this year, the company stated that it would suspend further investment in the project if the legislation came into law.
At the time, Pan American noted, “[t]he Company’s initial review of the effects of the proposed legislation, when coupled with the current inflationary environment in Argentina, indicates that the increased provincial participation will render the Navidad project uneconomic at any reasonable estimate of long-term silver prices.”
No bill has been passed, but the uncertainty has clearly proven too much for the company. Pan American has spent over $82.5 million developing the project over the past two years, according to its website.
Metals Channel reported that a study of analyst recommendations at major brokerages shows that Silver Wheaton (TSX:SLW) is the number one broker analyst pick on the Metals Channel Global Mining Titans Index. The index is comprised of the top 50 global leaders from the metals and mining sector, and the companies on it are continuously updated to reflect the changing market environment.
Based upon Silver Wheaton’s current agreements, its forecast attributable production in 2012 is approximately 28 million silver equivalent ounces. That amount is expected to rise to 48 million silver equivalent ounces by 2016.
Junior company news
Santacruz Silver Mining (TSXV:SCZ) announced the completion of an updated NI 43-101 mineral resource estimate on its Rosario project, located in Mexico’s Charcas Mining District.
It listed highlights including measured mineral resources of 270,000 tonnes grading 210 g/t silver, 0.94 g/t gold and 3.69 percent zinc. Indicated mineral resources were recorded at 711,000 tonnes grading 163 g/t silver, 0.88 g/t gold and 2.6 percent zinc.
The company confirmed that both the Rosario I and II veins are open in all directions, with 2 kilometers of untested NE-SWE strike length. Limited drilling below the 200-meter level provides potential to further expand the resources.
Santacruz’s president, Arturo Préstamo, noted that the company remains on schedule to achieve commercial production at the project within the first quarter of 2013.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.
