May 2011

Lustre restored

Evolving industrial applications and strong investor interest are putting the shine on silver

By Eavan Moore

The flotation circuit at Pan American Silver Corp.’s Huarón operation in Peru | Photo courtesy of Pan American Silver Corp.

The brilliant and beautiful shine of silver gives it a starring role in jewelry and tableware. But it is useful for more than just baubles and holiday dinners. This precious metal is also the best conductor of electricity and heat of all the metals; it is also among the most reflective. It is ductile, malleable and antimicrobial, making it uniquely suited to a range of industrial applications. Silver also has long functioned as a store of wealth, an investment in uncertain times.

As demand for the metal outpaces supply, its price and profile have risen. An ounce of silver on the spot market hovered around US$5 for 20 years, but prices have not returned to that level since 2004. Amid inflation concerns of the last few months, silver spiked to highs of more than US$36. New applications for silver, and its bullish market outlook, may lead the public to improve its familiarity with the metal.

A complex ore

Silver usually appears with some combination of gold, copper, lead and zinc. In fact, only 30 per cent of silver produced globally comes from primary silver mines. The remaining 70 per cent is mined as a by-product. This means that levels of silver production are somewhat dependent on the market value of gold or base metal, and are relatively unaffected by silver prices. This makes low cost a priority for primary silver miners, says Geoff Burns, president and CEO of Pan American Silver Mines. “Whether demand is strong or soft, there’s a certain level of silver that’s going to keep coming to market, just because there are other metal mines, where silver is a by-product, that are going to keep producing, regardless of the silver price.”

In light of its higher prices, by-product silver previously thought unrecoverable has attracted new interest. Guy Deschênes, research scientist at CANMET, reports more interest from gold companies in silver extraction methods in the last three years. He observes that Barrick Gold’s ongoing “Unlock the Value” competition, initiated in 2007 to increase recovery of silica-enclosed silver, has been followed by a similar call from Newmont Mining this year.

A Latin focus

The Americas lead in silver production. Peru became the world’s leading silver producer in 2002, with Mexico in second place. But silver is mined in other locales as well: China, Australia and Russia also rank high.

Mexico’s rich silver belt is a hotspot for silver mining. Todd Anthony, manager of Investor Relations at First Majestic Silver, says that the strong labour force and quick permitting process make Mexico an attractive place to mine. “Politically, it’s also very stable,” he adds.

According to Hugh Clarke, vice-president of corporate communications at Endeavour Silver Corp., it has only been possible for foreigners to own mining projects in Mexico since 1993. “The Spaniards, and then the Mexicans, were the world’s best at looking for surface expressions, picking up the vein and then mining it. But as soon as the vein was gone, that would be it. Their exploration expertise was really not their strong point.” That means that companies, largely Canadian explorers and miners, have been able to apply new exploration techniques and make major new discoveries, says Clarke.

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