Silver

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This article describes a commodity traded on a commodities exchange. View articles referencing this commodity.

 

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Michael Luddy

Toni Straka

Silver is a precious metal that is used in a wide array of industrial applications as well as in jewelry and photographic film. Industrial applications (for example computers, cell phones, TV, batteries, pharmaceuticals) made up about 54% of the world’s silver fabrication demand in 2007.^[1] As a whole, demand for silver has been growing faster than annual production since 1990,^[2]and silver inventory has dropped 98% from 1942 to 2004, 5.9 billion oz to 115 million oz, respectively.^[3] Silver is even more scarce than gold as the above ground supply of silver was about 5x less than that of gold in 2006.^[4] The effect of the falling supply of silver coupled with increasing demand from the US economic slowdown has lifted silver prices to their highest point since 1981 (2007 average silver price = $13.38 /oz).

Silver Uses

This table gives an overview on global supply by producers and demand by industry sectors from 1999 to 2008.

Natural Occurrence / Physical Properties

Silver is often found in a free state, but is also found in good concentration in ores like Argenite. Silver gets it's chemical symbol Ag from the latin word Argentum. Although it is an excellent electrical and thermal conductor, it's cost keeps it from wide use for these applications.

Companies/Funds Helped by Rising Silver Prices

Silver Mining Companies

• Pan American Silver (PAAS): Pan American is the world's largest primary silver miner with silver production of 17.33M oz in 2007. Just over half of their silver comes from metal byproduct production.

• SILVER WHEATON CORP (SLW): Silver Wheaton has long term contracts with 5 different silver mining companies which allows Silver Wheaton to buy silver from these mines at an almost fixed purchase price of around $3.90/oz. As a result, Silver Wheaton gets all of their revenues by then selling this silver in the market.

• Silver Standard Resources (SSRI): Silver Standard acquires and develops mining properties. The company owns or has large stakes in several mines but does not directly mine silver themselves. Silver Standard has 1.5 billion oz of silver from these mines. Silver Standard could potentially be a silver miner as the company plans to start mining in Argentina in 2009. Silver Standard estimates that the Pirquitas mine in Argentina will produce 10M oz of silver per year.

Other Silver Mining Companies

• Abcourt Mines (ABI.V): Gold, silver and zinc in Quebec

• Alexco Resource (AXR.TO): Silver in Canada

• Apex Silver Mines (SIL)

• Apogee Minerals (APE.V): Silver, lead, zinc in Bolivia

• Aquiline Resources (AQI.TO): Silver and gold in Argentina, Canada and Mexico

• Arian Silver (AGQ.V): Silver in Mexico

• Aura Silver (AUU.V): Silver in Canada, El Salvador, Mexico, USA

• Aurcana (AUN.V): Silver, gold, lead, zinc in Mexico

• Aurex BioMining AG (not listed): Silver in Austria

• Avino Silver & Gold Mines (ASM.V): Silver, gold, zinc, copper, lead in British Columbia

• Barrick Gold (ABX)

• Bear Creek Mining Corporation (BCM): Bear Creek has 70% stake in one of the largest silver deposits in the world. Silver, gold in Peru

• Canarc Resources (CCM.TO): Silver in South America

• Canasil Resources (CLZ.V): Silver, gold, copper, lead, zinc in British Columbia and Mexico

• Capstone Mining (CS.TO): Silver in Mexico

• Chariot Resources (CHD.TO): Silver and copper in Peru

• Chesapeake Gold (CKG.V): Silver, gold, zinc in Mexico and the USA

• CMC Metals (CMB.V): Silver in Canada

• Coeur d'Alene Mines (CDE)

• Compania de Minas Buenaventura (BVN): Precious metals in Peru, 16.757 mil oz ('09)

• Continuum Resources (CNU.V): Silver, gold in Mexico

• Cornerstone Resources (CGP.V): Gold, silver, copper, nickel, VMS, potash, and uranium properties in Canada and Ecuador

• Cream Mineral Resources (CMA.V): Silver, gold, base metals in Canada, Mexico and Sierra Leone

• Dia Bras Exploration (DIB.V): Silver, copper, zinc in Mexico

• Eagle Plains Resources (EPL.V): 35 gold, silver, uranium, copper, molybdenum, zinc and rare earth mineral projects in Canada

• Eastfield Resources (ETF.V): Gold, copper, silver, nickel, molybdenum and Platinum Group Metals in Canada and USA

• Endeavour Silver (EDR.TO): Silver in Mexico

• Esperanza Silver (EPZ.V): Silver in Mexico, Peru

• Excellon Resources (EXN.V): Silver in Mexico

• First Majestic (FR.TO): Silver in Mexico

• First Point Minerals (FPX.V): Silver, gold, base metals in Mexico and the Americas

• Fortuna Silver Mines (FVI.V): Silver in Mexico

• Fury Exploration (FUR.V): Silver in Canada

• Genco Resources (GGC.TO): Silver in Mexico

• Gitennes Exploration (GIT.TO): Silver, gold copper in Peru

• Goldcorp (GG): Silver in Guatemala (4.2m oz 2009) and Mexico (Penasquito 1 bil oz 2P)

• Gold Hawk Resources (CGK.V): Gold, silver, lead, zinc and copper in Peru

• Golden Goliath Resources (GNG.V): Silver, gold in Mexico

• Great Panther Resources (GPR.TO): Silver in Mexico

• Hecla Mining Company (HL): Silver, gold in Mexico and USA

• Hellix Ventures (HEL.V): Silver, gold in Mexico

• Herencia Resources (HER.L): Silver, lead, zinc in Chile

• Hochschild Mining (HOC.L): Silver in Argentina, Chile, Mexico, Peru

• Huldra Silver (HDA.V): Silver in Canada

• Impact Silver (IPT.V): Silver in Mexico, Dominican Republic

• International Minerals (IMZ.TO): Silver, gold in Ecuador and Peru

• Intrepid Mines (IAU.TO): Silver, gold in Australia and Indonesia

• Journey Resources (JNY.V): Silver, gold, lead, zinc in Mexico, Peru, USA

• Kenrich-Eskay (KRE.V): Silver, gold in Canada

• Kimber Resources (KBR.TO): Silver, gold in Mexico

• Kings Minerals (KMN.AX): Silver, gold, copper, rhenium, molybdenum in Australia and Mexico

• Klondike Silver (KS.V): Silver in Canada, Mexico

• LKA International (LKAI.OB): Silver, gold in USA

• Logan Resources (LGR.V): Precious metals, base metals and uranium in Canada

• MacMillian Gold (MMG.V): Silver, gold in Mexico

• MacMin Silver (MMN.AX): Silver in Australia

• MAG Silver (MAG.TO): Silver in Mexico

• Marifil (MFM.V): Silver, gold, base metals in Argentina

• Meridian Gold (MDG)

• Mexican Silver Mines (MSM.V): Silver in Mexico

• Milner Consolidated Silver Mines (MCA.V): Silver in Canada

• Minefinders (MFL.TO): Silver, gold in USA

• Minera Andes Inc (MAI): Silver, gold producer/explorer in Argentina

• Milner Consolidated Silver Mines (MCA.V)

• Mines Management (MGT.TO)): Silver, copper in the USA

• Minco Silver (MSV.TO)): Silver in China

• Mindoro Resources (MIO.V)): Silver, base metals in the Philippines

• Mountain Boy Minerals (MTB.V)): Silver, gold, base metals in Canada

• Normabec Mining (NMB.V)): Silver, gold in Canada and Mexico

• Orko Silver Corp (CVE:OK): Silver in Mexico

• Oremex Resources (ORM.V): Silver in Mexico

• Oro Silver (OSR.V): Silver in Mexico

• Pacific Comox Resources (PCM.V): Silver, gold, molybdenum, base metals in Canada

• Palmarejo Silver and Gold (PJO.V): Silver, gold in Mexico

• Pan American Silver (PAA.TO): Silver in Bolivia, Mexico, Peru

• Pershimco Resources (PRO.V): Silver, gold in Mexico

• Piedmont Mining (PIED.OB): Silver, gold in USA

• Portal Resources (PDO.V): Silver, gold in Mexico, USA, gas and oil in Mexico

• Quaterra Resources (QTA.V): Silver in Mexico

• Redcorp Ventures (RDV.TO): Silver, gold, copper, lead, zinc in Canada

• Revett Minerals (RVM.TO): Silver, gold, copper in USA

• Rio Tinto (RIO): Silver produced in Utah, 6.862 mil oz in 2010, 8.569 mil oz in 2009

• Royal Gold (RGLD)l: Silver royalty claim on Penasquito and Dolores

• Sabina Silver (SBB.V): Silver in Canada

• Scorpio Mining (SPM.TO): Silver in Mexico

• Sell Us Gold (SUG.Co): Silver, gold, in Texas,USA

• Silvercorp (SVM.TO): Silver in China

• SilverCrest Mines (SVL.V): Silver in Chile, El Salvador, Mexico

• Silver Dragon Resources (SDRG.OB): Silver in China

• Silver Eagle Mines (SEG.TO): Silver in Mexico

• Silver Fields Resources (SF.V): Silver in Canada, Mexico, USA

• Silver Grail Resources (SVG.V): Silver in Canada

• Silvermet (SYI.V): Silver in Canada, Turkey

• Silvermex Resources (SMR.V): Silver in Mexico

• Silver Quest Resources (SQI.V): Silver in North America

• Silver Standard Resources (SSRI): Silver in Argentina, Australia, Mexico, Chile, Peru, Canada, USA

• Silverstone Ressources (SST.V): Silver in Mexico

• Silvercorp (SVM.TO)

• Silver Wheaton (SLW): Silver in Greece, Mexico, Peru, Sweden

• SNS Silver (SNS.V): Silver in the USA

• South American Silver (SAC.TO): Silver in Bolivia, Chile

• Southern Silver (SSV.V): Silver in Mexico, USA

• St. Eugene Mining (SEM.V): Silver, lead, zinc in Canada

• Starcore (SAM.TO): Silver, gold in Mexico

• Stealth Minerals (SML.V): Silver, gold, copper in Canada

• Sterling Mining (SRLMQ.PK): Silver in USA

• Stroud Resources (SDR.V): Silver, gold, natural gas in Mexico

• Teryl Resources (TRC.V): Silver, gold, copper in Alaska

• Tumi Resources (TM.V): Silver in Mexico, Sweden

• UC Resources (UC.V): Silver, gold in Mexico

• US Silver (USA.V): Silver in the USA

• Valencia Ventures (VVI.V): Silver in Australia, Canada, Chile, USA

• Yale Resources (YLL.V): Silver in Mexico

Silver Exchange Traded Funds (ETFs)

Many of the ETFs buy actual silver reserves as backing to the fund. As a result, ETFs make up about 50% of the world's silver market.^[5]

• iShares Silver Trust (SLV): This is an ETF that has silver reserves of over 180M oz.

• Central Fund of Canada (CEF): This ETF has about 45% of its reserves in silver while the remaining 55% is in gold.

• ETFS Silver (SLVR): This ETF tracks the DJ-AIG Silver Sub Index.

• ETFS Physical Silver (PHAG): This ETF is backed by silver bullion.

• ZKB Silver ETF: This is a silver ETF entirely backed by physical silver. This ETF is not open to US investors.

 AGQ is an ETF which obtains twice (200%) the gains or losses in the price of Silver.

Companies Hurt by Rising Silver Prices

• Signet Group (SIG): Signet is an affordable jewelry company. The company is more vulnerable than its high-end competitors to rising silver prices because Signet is less able to raise its prices due to its lower-end client base.

• Tiffany (TIF): About 30% of Tiffany's revenue comes from non-gemstone silver jewelry.

• Eastman Kodak Company (EK): Kodak increased prices 20% in May 2008 largely due to rising silver prices.^[6] Silver nitrates and halides react with light and are used in photographic film.

• FUJIFILM Holdings (FUJI): Fuji increased prices 20% in May 2008 largely due to rising silver prices.^[7] Silver nitrates and halides react with light and are used in photographic film.

Silver Supply and Demand

In 1980 the price of silver climbed to $50/oz from only $5/oz two years earlier. The reason for this was a massive discrepancy between supply and demand. Previous to 1980 the US government tried to keep silver prices low by periodically loaning out silver from the 2 billion ounce silver inventory that it kept in the U.S. Strategic Stockpile. They loaned out the silver in return for silver certificates, essentially an IOU. By the time the contracts were up, there was a demand of 4 billion ounces of silver, but in reality, there was only 2 billion ounces of silver in the market. As a result prices skyrocketed to make up for the gap between supply and demand.^[8]

Today, the majority of silver demand is from industrial applications. Industrial application demand has risen every year since 2001 and now makes up 54% of silver demand with 455.3M ounces. At the same time, above ground supply of silver decreased 8% and government sales (more government sales means more supply) decreased 46% in 2007, primarily because China and India did not sell much silver that year. In addition, silver mining is struggling to find new silver sites and keep up with demand (silver mining grew 4% in 2007).^[9]

Factors that Influence Silver Prices

• The Effect of Silver Stockpiling: Silver is one the best conductors of energy which makes it an important component in most electrical devices. It is also a very good reflector of light making it valuable to producers of mirrors, windows, and other glass products. When silver prices rise, large companies that are dependent on the metal tend to hoard it.^[12] This can further drive up demand, as was the case with palladium. In 2000, the Russian supply of palladium was disrupted causing prices to rise. In response, companies who used palladium in their products began to stockpile the metal.^[13] This drove prices up to $1,100/oz from $330/oz previously.^[14]

• Silver is a Byproduct Metal: About 80% of mined silver is gathered as a byproduct of other metals, such as copper, nickel, zinc, and lead.^[15] . Most of this metal comes from mines outside of the U.S. When the dollar falls against other currencies, the cost for importing these metals rise and demand falls, driving down silver production..

• Shorting Silver: On the Commodity Exchange (COMEX), the silver short position is very large. In fact, silver is the world's only commodity that has a short position which is larger than both its global production and inventories.^[16] The extent of this position has been created by naked short selling, which means shares are sold without an arrangement or promise of a borrower. This large short position helps to keep silver prices lower than they may be otherwise.

• Countries Buying and Selling Silver: When countries sell their reserves of silver in the market they increase the supply of silver available. However, in 2007, sales from countries dropped 46% because China and India did not sell as much silver as they did in the past.

• Mine Production: Although the majority of silver is produced as a byproduct of other metals, 20% comes from actual silver deposits. Mine production grew only 4% in 2007 to 670.6M oz and additional silver deposits are becoming increasingly difficult to find. ^[17]

References

1. ↑ Silver Supply Index
2. ↑ Silver Prices
3. ↑ The Case for Silver
4. ↑ Silver is More Valuable than Gold
5. ↑ Commodities Corner Silvers More Sparkle
6. ↑ Kodak raising prices
7. ↑ Fujifilm forced to raise prices
8. ↑ The Price of Silver in 1980
9. ↑ Silver Supply Index
10. ↑ Silver Supply Index
11. ↑ Silver Supply Index
12. ↑ Why Silver is More Valuable than Gold
13. ↑ Wikipedia:Palladium
14. ↑ Palladium Spot Price
15. ↑ Commodities Corner Silvers More Sparkle
16. ↑ Why Silver is More Valuable than Gold
17. ↑ Silver Supply Index
18. ↑ Silver Supply Index