Higher silver prices predicted

Silver prices have shaken off a 15-year depression to trade in the $12 to $14 per ounce range, and prices could reach as high as $20 per ounce within the next 15 months, a metals analyst said Thursday.

Jeffrey Christian, managing director of CPM Group, a metals research firm in New York City, gave the bullish assessment at the fourth annual Silver Summit in Coeur d’Alene. The conference attracts silver producers and investors.

Investment activity is a significant part of silver’s rosy outlook, Christian said. In 2006, investors were net buyers of silver, erasing a 15-year trend of net selling in the market place. In historical cycles, a trend of net buying typically precedes sharp run-ups in silver prices, according to Christian.

Currently, much of the purchasing is coming from the Middle East and India, and it’s driven by political concerns, he said.

“People in the Middle East are scared,” he said. “They’re convinced that the U.S. will invade Iran and Syria before the 2008 election.” Instead of investing in their own currencies, they’re buying gold and silver for its role as a storehouse of value, Christian said.

Silver prices languished in the $4 to $5 per ounce range for much of the 1990s, so the higher prices are good news for Idaho’s Silver Valley. Mines in the valley are adding workers, and the workers are receiving bonuses based on rising silver prices. Last year, mine employees in Shoshone County earned an average of $57,000.

Higher prices will increase worldwide silver production by an additional 170 million ounces annually within five years. “But you shouldn’t be scared of it,” Christian told a roomful of investors. In addition to high investor demand, the use of silver for batteries and electronics is increasing sharply, and will provide buyers for the additional silver produced, he said.

More than 400 investors were expected at the conference, which continues today at the Coeur d’Alene Inn and Conference Center. The silver producers represented at the conference were primarily small firms such as Genco Resources Ltd. of Vancouver, B.C., which was busily hawking itself to potential investors. Genco operates a small mine in Mexico, producing about 750,000 ounces of silver each year, and is exploring a larger area in hopes of finding other potential mines.

“We’re here to tell the story,” said Gregory Liller, Genco’s president. Events such as the Silver Summit link the firm with a receptive audience, he said. The event attracts investors who like metals in their portfolio, and want to get in early on firms they hope will grow and strike it rich.

Dr. Kevin Foley, a Yakima cardiologist, has attended the Silver Summit for four years. He likes having a chance to talk directly with company CEOs and geologists and to trade tips with other metals investors.

Foley’s currently invested in companies that mine for gold and silver, plus copper, nickel and molybdenum, which is used to harden steel. He said he started adding mining stocks to his portfolio after “being burned” by rapid drops in the value of Internet stocks in 2001.

“I’m a little crazy,” said Foley, noting that 25 percent of his portfolio is currently metals, which are typically considered a riskier, more volatile investment. But he said he finds the balance sheets of smaller companies more transparent, and is comfortable with the risk involved in small metals stocks.

“People underestimate the risk in conventional investments,” Foley said. “Sometimes, these small mining companies are described as lottery ticket. I don’t think that is a fair comparison.”