Buffett’s Gamble Helps Restore Silver’s Luster Legendary Investor’s Purchases Boost Silver Price To 11-Year High

Atlas Mining Co. President Bill Jacobson spoke for most of the silver industry Wednesday when he said: “God bless Warren Buffett.”

Buffett’s Omaha, Neb.-based Berkshire Hathaway Inc. investment firm Tuesday announced it has been buying up silver since July 1997, when it was selling for $4.60 an ounce. Silver prices soared Tuesday on the news, climbing 36 cents to close at $6.61 an ounce.

Wednesday, silver prices rocketed into a price range not seen in 11 years. New York spot silver closed yesterday at $7.25.

In the Silver Valley, stock activity was brisk for industry giants and juniors alike.

Osburn-based Atlas - one of the “junior” firms trading on the stock market - had a 10 percent increase in its stock value, closing the day up 63 cents on volume of 25,000 shares.

“Maybe the Silver Valley can become a mining community again,” Jacobson said, adding that Buffett’s purchase of nearly 130 million ounces of silver over the past six months has endorsed the value of silver as an investment.

“My hat is off to all of the people who stayed here and survived the lower prices,” he said. “They deserve whatever they can reap now that prices are higher.”

The psychology of silver has been negative since the mid-1980s, despite strong fundamentals based on supplies that now are at a 13-year low.

“Silver has been seen as a dog,” said Bill Davis, executive vice president and chief financial officer for Sunshine Mining & Refining Co. “Now the smartest investor in the world is saying silver is worth getting into.”

Sunshine stock climbed 40 percent Wednesday, closing up 44 cents on volume of 11.5 million shares. Sunshine was the second most actively traded stock Wednesday on the New York Stock Exchange.

“You don’t see many days like this,” Davis said. “It’s been a long time coming, but people are finally buying into the silver story.”

Sunshine has tripled its silver production since 1995, and plans to triple it again - to a total of 18 million ounces a year - by 2000.

Hecla Mining Co., whose stock jumped $1.63 and traded almost 2 million shares Wednesday, has been positioning for better prices since 1996. At that time, the company produced 3 million ounces of silver a year. Production increased to 7 million ounces in 1997.

“Hecla has been expecting an increase in the price of silver for some time and we increased our production substantially because of that,” said Vicki Veltkamp, director of public relations for Hecla. “The price has actually been going up for more than a month, but people have just been watching it.

“Now they’re jumping on the bandwagon.”

At The Silver Institute in Washington, D.C., communications manager Christy Roche said above-ground inventories in the Comex warehouse, a New York commodities exchange, have declined for five years while demand has been rising.

Use of silver by the photographic industry - which represents one-third of all demand for the metal - rose 3 percent in 1997, according to a year-end survey of film manufacturers.

“So it’s not surprising that an astute investor like Warren Buffett realized the fundamentals were strong and purchased that amount of silver,” Roche said.

The timing for silver’s run couldn’t have been better for Fred Brackebusch, president of the New Jersey Mining Co. in Kellogg. Brackebusch closed his merger with Plainview Mining Co. last week, giving New Jersey a spot on the over-the-counter bulletin board. His new stock closed up 10 percent Wednesday on a volume of more than 22,500 shares.

The New Jersey gold mine near Kellogg shows promise for silver intercepts, Brackebusch said.

“Our plan was to possibly shift our focus to silver at the mine,” he said. “Now we’re definitely going to do that.”

Tim Major, a broker at Pennaluna & Co. in Coeur d’Alene, said investors have stormed through the door opened by Buffett’s announcement.

“This is one of the biggest trading days we’ve seen in a year,” Major said on Wednesday. “People are coming out of the woodwork.”

Pennaluna broker Ron Nicklas said this week’s move into the $7 range marks the first time silver has topped that price since spring 1987, when the metal went from $6.50 to $10 and back to $6.10 in a single day.

Because Buffett is a long-term holder and, even at $850 million, silver makes up less than 2 percent of Berkshire Hathaway’s investment portfolio, market watchers say his endorsement could bring on the bulls.

“We bit the bullet so hard for so long we broke some teeth,” Davis said. “Now I think we’re in for a long uptrend and a bullish environment.”

He added: “Six months from now, $7 silver will look so cheap that people won’t believe they didn’t buy it at that price when they had the chance.”

, DataTimes ILLUSTRATION: Color Photo