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RedChip's long history of success includes the first to issue independent research coverage on Starbucks in 1992. Other names RedChip discovered as they were on the cusp of becoming Blue-Chip stocks were: Nike™, MarketWatch.com™, Daktronics™. Over the years, RedChip has evolved into a... More
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  • Bullish Silver Market Could Provide Shining Opportunities for South American Silver 0 comments
    Aug 17, 2010 3:09 PM | about stocks: TMIAF
    In times of economic turmoil, investors have historically gravitated toward precious metals as a hedge against inflation. Although investors have been flocking to gold since the 2008 economic collapse, silver has also been a popular investment option. Investment in silver rose 90% in 2009, following an 84% rise in 2008. Moreover, silver outperformed gold in 2009: silver prices increased 62.8% last year, compared to a 32.6% increase for gold.

    The numbers look promising for 2010 as well. Silver is expected to trade as high as $21 by the end of 2010, according to the median in a Bloomberg survey of 27 analysts and traders. Analyst Chintan Parikh of the CPM Group, a New York-based commodities market research and services firm, predicts that silver prices could reach $25 by year’s end. Silver traded at an average price of $14.67 in 2009. 

    Industrial demand is likely to be a key growth driver for silver in the coming months and years. Silver can be used in the areas of power transmission, germicide and anti-bacterial agents, solar cells, water purification, catalytic agents, soldering products, bearings, batteries and photography. Industrial demand fell in 2009 due to the global recession but is expected to rebound in 2010 given an improvement in global GDP, industrial production and stock replenishment. According to a June report produced by UK-based commodities research firm VM Group on behalf of Fortis Bank Nederland, demand from new industrial uses for silver is likely to increase 400% over the next 10 years.

    While main growth areas in the past have been electronics and photographic equipment, novel areas of silver demand are likely to emerge from the renewable energy and health sectors. Over the past decade, the photovoltaic (PV) industry has emerged as a significant user of silver. The PV industry’s silver use is estimated to have reached 28 million oz in 2009. Industry projections put silver purchases at 186 million oz by 2020.

    With America’s aging baby-boomer population reaching its golden years and U.S. healthcare reform potentially adding an estimated 32 million patients to America’s healthcare system, demand for medical services is predicted to increase. Silver’s use as an anti-bacterial substance in medical equipment and applications is expected to be boosted in the future once new technologies using silver gain acceptance.

    Growth in these sectors could open up new opportunities for South American Silver Corp. (OTCBB: SOHAF, Toronto: SAC.TO). The mineral exploration company is engaged in the exploration and development of the Malku Khota silver-indium project in Bolivia and the large-scale Escalones copper-gold-molybdenum project in Chile. The Malku Khota project is one of the world’s largest undeveloped silver-indium deposits, with indicated silver resources of 144.6 million oz and inferred silver resources of 177.8 million oz. The project is expected to commence production in 2014. Due to its low initial capital costs ($103.37 million) and low operating costs ($3.75 per oz), the payback period is estimated to be 1.4 years from the start of production. A comparable silver mining project, Bear Creek Mining Corp.’s Corani project in Peru, has an estimated payback period of 3 years.

    In recession and in prosperity, silver is always in demand. As manufacturers worldwide find more uses for silver, SAC could prove to be a sterling investment.

    Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.



    Disclosure: SAC.TO is a client of RedChip.
    Stocks: TMIAF
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