Silver Trades Down as Thomson Reuters GFMS Predicts Higher Demand in 2013

Silver Trades Down as Thomson Reuters GFMS Predicts Higher Demand in 2013

Silver fared much the same this week as it did last week. Though physical demand for the metal remains strong — the US Mint broke its yearly sales record for American Eagle silver coins on Tuesday — it traded under $21 for much of the week. 

The white metal started off the week on a fairly positive note, trading in a tight range of $21.31 to $21.40 until fairly late on Monday. However, that calm was not to last — as the day drew to a close, the white metal slipped down to $21.08.

Tuesday brought a continuation of that fall. Again, silver remained reasonably steady early in the day, but fell as the afternoon wore on, dropping sharply to $20.68 and later sinking as far as $20.60. Speculating on what may have caused the decline, Capital Trading Group said in its daily report, “[p]erhaps silver was undermined by hawkish comments from the US Fed’s Fisher regarding an eventual end to QE3, or perhaps silver was simply disappointed in news that silver derivative holdings declined yesterday afternoon.”

Wednesday brought a fresh decline for the white metal — midway through the day, it reached $20.52, its low for the week thus far. Capital Trading Group again said that the fall might have been brought about by hawkish comments from the Federal Reserve, also commenting that in the current economy, a decision to end quantitative easing could push silver below the lows it reached back in June.

Faring a little better today, silver managed to rise as high as $20.86, over a dollar off from where it stood on Monday, but not quite as low as it was yesterday. The white metal closed at $20.75 per ounce.

Thomson Reuters GFMS’ silver outlook

Better silver-related news came on Wednesday with the release of Thomson Reuters GFMS’ interim silver market review.

GFMS states in the report that it expects fabrication demand across all sectors except photography to grow this year, with the jewelry and silverware sectors both experiencing 6-percent growth. On the supply side, the firm sees mine production growing by 4 percent in 2013, to 815 million ounces, with “growth in production primarily coming from the United States, Mexico and the Dominican Republic.” However, it expects that increase to be offset by an 8-percent fall in scrap supply.

In terms of price, GFMS said that silver averaged $24.51 for the first 10 months of the year, down 20.71 percent compared to the year-ago period. The firm now expects prices for the metal to average $24.24 for the entirety of 2013. Moving forward, it sees silver’s duality — the fact that it can take its cues from both gold market developments and the industrial world — continuing to play a role in pricing.

Company news

Most companies that put news out this week were releasing third-quarter results. Among those was streaming company Silver Wheaton (TSX:SLW,NYSE:SLW). Though it started off the week by announcing an early deposit gold stream agreement for the Guyana-based Toroparu project with Sandspring Resources (TSXV:SSP), it released its Q3 results the next day.

During the quarter, the company’s attributable silver equivalent production came to a record 8.9 million ounces (6.8 million ounces of silver and 34,800 ounces of gold), up 17 percent from the 7.6 million ounces it achieved in the year-ago quarter. Its revenue came to $166.4 million, up from $161.3 million in the third quarter of 2012. However, its net earnings came in at $77.1 million, down 36 percent compared to the year-ago period.

Tahoe Resources (TSX:THO,NYSE:TAHO) released its third-quarter results the same day, also providing a forecast for 2014. The company recorded a net loss of $15.5 million, or $0.11 per share, also commenting that during the quarter it both produced and shipped the first concentrate from its Escobal mine; plans are in place to ramp up to full production of 3,500 tonnes per day at Escobal by the first quarter of next year.

On Wednesday, US Silver & Gold (TSX:USA,OTCQX:USGIF) reported its Q3 results, commenting that at the beginning of the quarter, it implemented a small mine plan in order to “reduce costs and focus on increasing mine cut-off grade.” Thus far, the plan has allowed the company to achieve a variety of positive results, including a 13-percent reduction in cash costs from the year-ago period, a 6-percent increase in head grade and October silver production of about 175,000 ounces at an average ore grade of more than 15 ounces per ton.

Even so, the company reported a net quarterly loss of $3.5 million, higher than its $1.8-million loss in the third quarter of 2012.

Pan American Silver (TSX:PAA,NASDAQ:PAAS) provided its results for the third quarter earlier today, stating that it achieved net earnings of $14.2 million, or $0.09 per share, and is on track to meet its silver and gold production forecasts for the year. During the quarter, it put out 6.7 million ounces of silver, a 7-percent increase from the year-ago quarter, as well as record gold production of 41,600 ounces, up 48 percent from Q3 2012.

Prior to the results release, the company’s board of directors approved a dividend of $0.125 per common share. It is Pan American’s fourth dividend this year.

Finally, in an interesting turn of events, Chile’s Codelco said that its $3-billion Ministro Hales mine project, which is set to reach production in the first half of 2014, will produce silver as well as copper, allowing the company to become one of the top 10 silver producers in the world.

Junior company news

Kootenay Silver (TSXV:KTN) on Wednesday reported assay results from three further drill holes at its Mexico-based Promontorio silver project, where it is currently completing a resource expansion program. Highlights include DH 193, which returned 218 grams per tonne (g/t) silver equivalent over 45 meters (107 g/t silver, 0.99 gold and 2.83-percent lead and zinc), including 415 g/t silver equivalent over 22 meters (209 g/t silver, 1.78 gold and 5.24-percent lead and zinc).

The next day, El Tigre Silver (TSXV:ELS) announced that it plans to exercise its option to exploit the surface tailings from the former Lucky Tiger Combination Gold Mining mine. The tailings are situated on concessions in Sonora, Mexico that belong to El Tigre.

Stuart Ross, CEO of El Tigre, commented, “[w]e are confident to be moving forward with our early production project at El Tigre. The past two years of evaluation culminated in a very positive prefeasibility study that provided a comprehensive technical and economic analysis of the selected development option for the reprocessing of the tailings material based on an estimation of the mineral resources and reserves contained within the tailings material. The revenue from production will allow El Tigre to continue to develop the in-situ resources on the property with minimized need to go to the equity markets.”


Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

US Dollar and Fed’s Next Move Continue to Tarnish Silver Prices

US Mint Beats American Eagle Silver Coin Sales Record

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