Most silver market players have long since resigned
themselves to the fact that the white metal’s average price for the year
will likely be significantly lower than was initially expected — back
in April, HSBC (NYSE:HSBC) cut its 2013 silver outlook to $26 per ounce from $33, while earlier this month Canaccord Genuity reduced its 12-month forecast to $23 per ounce from $32.50.
However, if recent reports from China and Japan are to be believed,
silver may be poised to benefit from an unexpected source of demand: the
solar power industry.
China and Japan step up
Though silver is perhaps best known as an investment tool, it is not
without other sources of demand, one of which is the solar industry.
In an article published
last week by Casey Research, Jeff Clark, senior precious metals analyst
at the firm, notes that while photovoltaic technology, the backbone of
the solar industry, did not begin registering on silver demand charts
until the turn of the millennium, the amount of silver consumed by solar
panel makers has risen approximately 50 percent per year since that
time.
Currently, it accounts for 5.6 percent of all industrial silver use,
but, as mentioned, two factors mean that amount may be set to increase.
The first is the fact that on July 4, China’s State Council said it
will stand behind a plan, originally put forward by the nation’s State
Grid, to raise China’s solar generating capacity to 35 gigawatts (GW) by
2015. That is 67 percent higher than the previous target of 21
gigawatts (GW) and will mean a yearly addition of 10 GW from 2013 to
2015, according to Clark.
Second, Japan, China’s western neighbor, will increase its solar
generation capacity by about 5.3 GW this year, David Franklin and David
Baker state in a Sprott’s Thoughts report.
Also this year, the country’s domestic solar power market is expected
to reach $19.8 billion, meaning that it will pass Germany as the world’s
largest solar market.
Potential market impact
The key question, of course, is exactly how much impact these factors will have on the silver market as a whole.
Franklin and Baker give a clear outline of their likely effects,
stating that as per information from the Silver Institute, making 1
megawatt of electricity requires up to 2.8 million ounces of the white
metal. If China and Japan end up increasing their solar generation
capacity by as much as they currently plan — a combined total of about
27 GW — together they will require around 91 million ounces of silver.
That’s up to 11 percent of global mine supply by 2012 numbers, a fairly
sizeable amount.
Looking longer term, they point out that silver used in solar panels
cannot be recycled; once it is used, it is gone forever. That means
solar generation has the potential to put ever-increasing pressure on
the silver market, particularly if other countries follow China and
Japan’s lead in upping their solar generation capacity. What’s an investor to do?
Franklin, Baker and Clark all appear to agree that the silver market
could benefit significantly if all goes as expected in China and Japan.
However, those who are not yet convinced should consider watching future
silver price forecasts to see whether they take the two countries’
plans into account; Franklin and Baker state that so far no 2013 silver
price forecasts have incorporated these announcements.
Investors who are ready to leap into the market might take a leaf out
of Clark’s book — he finishes his article by emphatically advising
investors to “buy silver now.”
Andra kvartalet blev resultatmässigt klart svagare än vi räknat med även
exkluderat nedskrivningen som görs av projektet OX-NLA. Framför allt är
det FoU-kostnaderna som dragit iväg mer än väntat. Zubsolv är nu
godkänt för den amerikanska marknaden och lansering planeras till i
början av september. Ett sinnrikt utformat avtal med
kontraktsförsäljningsorganisationen, Publicis Touchpoint Solutions, gör
det möjligt för Orexo att sälja Zubsolv på egen hand. Vi har efter
rapporten gjort relativt omfattande ändringar i våra prognoser, främst
till följd av den kommersiella strategi bolaget nu väljer. Ändringarna
ger ett starkt positivt utslag för vårt motiverade värde som ökar till
113 kronor per aktie (95 kronor).
"I put more faith in the gold side mostly because so much
silver is produced as a byproduct. Only about 25 percent of silver
actually comes from silver mines. Having silver mines shut down doesn’t
really have that big of an overall impact because so much of silver
still gets produced as a byproduct no matter what the price of silver
is. So we tend to look at gold from that perspective more than silver."
"And when I see mines shutting down because they can’t work at $1,250
gold, or $1,300 gold, more expansion projects being cancelled or
deferred, that tells me that we have hit a bottom. The supply side is
just not there. And once you see tightening on the supply side that puts
price pressure on the commodity. There are all sorts of other factors,
but having that price pressure sure helps. I do think it indicates we
are at a bottom."
Nya uppgifter pekar på att den nya dongeln Chromecast endast
var början då Google uppges arbeta på en förbättrad version av sin
tv-box.
I onsdags visade Google upp den nya tv-dongeln Chromecast
som låter användarna strömma ljud och bild från flera olika
webbtjänster till en tv-apparat. Chromecast styrs med en smartphone
eller surfplatta som kör Android.
En rapport i Wall Street Journal i
går avslöjar dock att Chromecast endast är en del i ny strategi från
Google. Enligt källor som talat med Wall Street Journal kommer den
tidigare satsningen på Google TV att få ett rejäl ansiktslyft med stöd
för både video kamera och en rörelsesensor likt Microsofts Kinect.
Googles chef för Android och Chrome,
Sundar Pichai, meddelade i en intervju att den nya versionen av Google
TV att bli en ”komplett Android-lösning för tv-apparater”. Han ville
dock inte avslöja några tekniska detaljer kring den nya versionen av
företagets tv-box.
Sundar Pichai uppger inte något
datum för när den uppdaterade versionen av Google TV kommer att bli
tillgänglig, men hoppas kunna visa upp en rad samarbetspartners på
CES-mässan nästa år.
Enligt en ny rapport är Google nu större än Facebook, Netflix och Instagram tillsammans på den nordamerikanska marknaden.
Vi visste sedan tidigare att
Google är stort på nätet, men en ny rapport som publicerades i går visar
i siffror hur stort företaget verkligen är.
Rapporten som är genomförd av det
amerikanska mätföretaget Deepfield visar att Google och företagets
tillhörande tjänster nu står för 25 procent av all internettrafik i
Nordamerika.
Det betyder enligt Deepfield att
sökjätten är nu större än Netflix, Facebook och Instagram tillsammans.
Det är en kraftig ökning de senaste tre åren. När Deepfields förra
rapport publicerades 2010 stod Google för cirka sex procent av all
internettrafik i Nordamerika.
Siffrorna baseras på mätningar av
trafiken som strömmar genom de största stamnäten i Nordamerika, samt
mätningar av både datorer och mobila enheter.
Ezra Gottheil på analysföretaget
Technology Business Research uppger att han inte är förvånad över de
senaste siffrorna och att Google ökat så kraftigt de senaste åren.
– Google skapar bra produkter. Jag skulle säga att Gmail, Youtube och Map står för den största delen av ökningen, säger Ezra Gottheil.
Enligt honom borde andra
internetföretag ta lärdom av Google och erbjuda produkter eller verktyg
som hjälper användarna att hitta information och kommunicera på ett
enkelt sätt.
Spartacusinvest har kortfattat i ett blogginlägg om Yara och Kina kommenterat SIAF. "Se till exempel Sino Agro Food
ett bolag jag efter en förfrågan tittade lite snabbt på men snabbt
tackade nej tack till. Svårtolkad balansräkning och ett icke existerande
kassaflöde gjorde inte saken svår."
"Yara är heller inte en "walk in the park". Inget inom jordbruk är det.
Som jag påtalat förut så är framtiden alltid osäker. Det finns en mängd
faktorer som är svåra att förutspå. Jag väljer dock alla dagar i veckan
hellre ett bolag som uppvisar ett positivt kassaflöde, ger relativt goda
utdelningar och har en stark balansräkning med kassa och reala
tillgångar än ett bolag som betalar
sina räkningar genom att trycka upp nya aktier, tillgångarna består av
landrättigheter och redovisade vinster består av fordringar."
Det är sant Sino Agro Food betalat räkningar genom att trycka upp aktier, den största delen av bolagets tillgångar är landsrättigheterna och kassaflödet är inget att tala om hitills.
Men det är ett företag inom uppbyggnad, som återinvesterar allt och satsar på växa snabbt. "Bära eller brista" är väl konceptet. Det kommer nog förmodligen bära men är ju givetvis högrisk innan bolaget blivit starkt kassaflödespositivt. Men har prognostiserats att SIAF kommer bli just "starkt kassaflödespositivt" till nästa år. När det inträffat kommer värderingen att bli en annan. Den försiktige avvaktar. Men man måste chansa ibland för att kunna vinna.
Silver Investing News (SIN) recently had the chance to speak with
Kevin McArthur, president, CEO and director of Tahoe Resources (TSX:THO5,NYSE:TAHO), about his company’s
flagship Escobal project, located in Southeastern Guatemala.
In the interview below, McArthur discusses when the company plans to reach
production, the benefits of operating in Guatemala and where he thinks silver
prices are headed. He also discusses Tahoe’s new corporate social responsibility
(CSR) initiative.
SIN: Can you start by giving our readers a brief overview of the Escobal
project? Why should investors be excited about it?
Kevin McArthur (KM):The company is building the Escobal
project to world standards; our goal is to build a world-class mine that we will
operate responsibly. It will produce 20 million ounces of silver per year. The
attributes of this deposit are such that we believe we will be leading the
industry in free cash flow per share, earnings per share — eventually, our goal
is to lead the industry in dividend yield also. We think we can demonstrate
organic growth and also deliver community sustainability. In doing so, we’ll be
able to deliver long-term shareholder value, which is basically what this
business is all about.
Specifically, the deposit is set apart from silver deposits around the world
for four main reasons. Number one, it’s very high grade. It’s got silver, lead7, zinc8 and gold9, but the silver itself amounts to over 350 million ounces
in the measured and indicated category at over 400 grams per ton. It’s also got
very wide veins, so we can put very large equipment into the underground
operations and drive the unit cost down. Because of grade and width, we believe
that our cash cost will be the lowest, or at least in the lower decile or
quartile of cash costs for silver mines. Second, it’s got geologic
prospectivity, which I touched on earlier — it continues to grow, so we believe
we’ll continue to add value over time. Third, it’s in an area where there’s
excellent infrastructure. That is very important in this business. We’re not
4,000 meters up in the Andes and we’re not way up in Northern Canada in Nunavut
— we’re in Guatemala. There’s paved road access, we’re an hour and a half from
the capital city of Guatemala, there’s water, there’s power and there’s a nearby
community, so we don’t have to establish a camp to live in. As I mentioned, the
elevation is moderate. We’ve got a management team there on the ground. Most
importantly, the mine is almost complete. We’re just starting our commissioning
activities now and we expect to be in production — at least early production —
in the fourth quarter of this year, with revenues exceeding costs by next year.
We’ll have that, we hope, on a sustainable basis. This will be a fabulous
mine.
SIN: It sounds like you’re moving quickly toward commercial production.
What are the things that need to happen before you get there?
KM:A lot of those things have been done. We’ve derisked the
project to a great extent and we understand the deposit. The biggest hurdles we
had were getting our permits on a timely basis, but we’ve received all of our
permits and established all of our derisking milestones according to the
schedule that we posted in 2010. So we’ve been hitting our timelines nicely.
The construction of the mill and underground development of course is usually
a horse race. We had a real advantage in that we were permitted for underground
development back in February 2011, so we were able to drive 5×6-meter declines
into the mining areas at a very early stage. Infrastructure and mill
construction has gone on since 2011. We’re currently ready with the mine, and
we’re very close to mill completion — as I said, we have now started the mill
commissioning activities.
Our next challenge will be those commissioning activities, getting the mill
up and running in time to hit our goal of full-scale production early next year.
We’ve done the derisking along the way and basically completed all of the
technical work, so we feel pretty good about it.
10
Fine ore bins.
SIN: The Guatemalan government recently announced a two-year moratorium on
granting new mining and exploration licenses. My understanding is that Escobal
will be unaffected, but your press
release11 on the topic says you’ll be
pulling back on some “regional work.” Can you talk about that situation a
bit?
KM: First of all, it’s only a proposal for a two-year moratorium. The
president proposed that Congress approve it. The reason is so that the Energy
and Mines Ministry can devote its time to working with Congress on a revision to
the mining law. This is a revision that’s been contemplated for some time.
They’re considering approving the royalty that we’re already committed to paying
through our agreement with the president — our royalty on the minerals we
produce is 4 percent plus an additional one percent to outlying communities. The
revision is also aimed at encouraging community participation in the approval of
mining projects and for assurances on the closure of mines. So there are a
variety of things that are being looked at under the new mining law.
The two-year moratorium hasn’t been approved yet, but we think that it will
be. Essentially, the Energy and Mines Ministry is not processing new
applications at this point. But as you stated, we are not affected by it because
we have licenses in and around our property where we can do exploration that we
would anticipate will grow the resource over time and will add to mine life. But
we have a 2,000-square-kilometer area where we have regional concessions, some
of which haven’t been approved yet, that we’re not going to able to do work on
until we have approval. So we’ll have to halt our plan to commence regional work
until the situation gets resolved.
SIN: Leaving aside the moratorium, what would you say are the
advantages/disadvantages of working in Guatemala?
KM:There are some great advantages. First of all, you’ve got
to go where the precious metals are, and Guatemala has very good geology and a
very good business environment for mines. I think Guatemala is a little bit
misunderstood in terms of the business environment, but it’s a very positive
place to do business. As I said, we received our permits and have received
positive support from the government in permitting the mine and also great
support from the business community in establishing this brand new company in a
very short period of time. So there are very solid advantages to Guatemala on
the business end.
It’s also a fully-functioing democracy. There were 30 years of civil war that
ended in the ‘90s, and since then there’s been a good democratic government in
place with peaceful transfer of power to a new president and congress every four
years. The democracy in Guatemala works very well. As I said, I believe because
of the noise that comes out of Guatemala it’s misunderstood, but we have found
it to be a very good place to operate.
12
Crusher.
SIN: Ira [vice president investor relations at Tahoe] mentioned that your
focus is on long-term share price appreciation, and it looks like things are
going well so far. With many companies struggling, how do you account for your
success? Is there a particular strategy you’re living by in these
markets?
KM:We look to be a high-grade silver miner with underground
mines and intend to continue growing the company with that kind of profile. A
lot of us on the team worked for Glamis Gold — I was the CEO — where we
delivered shareholder value by looking for assets that were unusual in terms of
all of the attributes I’ve described Escobal as having. We were always looking
for a 15-percent hurdle rate on any business propositions we made, including
acquisitions and mine expansions, and we didn’t use our stock to buy assets
unless we got an adequate rate of return. During Glamis’ years from 1999 to
2006, we built five mines, and our share price moved dramatically during that
time period because we made smart decisions and always demanded a rate of return
that was higher than what other companies would demand.
We have internal models for hurdle rates and the way we operate, making sure
that we always balance all stakeholder issues. And when I say stakeholder, I
mean shareholders, employees and communities. We feel that if we find the right
balance between what shareholders need, what our employees wish and what
communities require, we will be a successful operator. Finding that right
balance, we feel, is key to a successful mining company.
SIN: Recently there has been some speculation that silver prices have
hit bottom13 and are set
to head upward. What is your opinion?
KM: Well, I’m a little bit biased here, but I came out of retirement
to run this company and I felt that silver was a good metal to be associated
with. There’s always supply-demand issues regarding precious metals, and the one
advantage that silver has over gold is that there’s a fair amount of industrial
demand that doesn’t go away. Also, the silver that goes into making products
does not get recycled because it just doesn’t pay to pull the silver components
out of a cell phone, for instance. Quite the opposite is true for gold. Almost
all gold that has been mined historically still sits on the surface today in
various forms. So I think the supply-demand dynamic for silver is very good, and
because of that I think we’ll see silver prices doing well.
The thing about silver prices dropping is that it’s a curse and a blessing.
The blessing comes in a funny way in that the all-in cost of sustaining mine
production is higher than today’s silver price when you look at averages in this
industry. Therefore, the supply-demand curve will start to be impacted over a
period of time because marginal mines and mines that are not making money will
have to close if the silver price stays where it is today or goes lower. So
there’s a natural buffering capacity in the industry that will happen.
The reason I would speculate that silver prices will go up is for currency
reasons. Gold and silver are competitors in the currency business, and compared
to western currencies, gold and silver should hold up quite well and do very
well considering that western currencies are being printed at a runaway pace. I
don’t necessarily look at silver prices going up. The way I look at the world is
that the paper money that is going to be used to purchase this silver and gold
is going to be falling dramatically in value; therefore, you have to use more
dollars to buy an ounce of silver, so the silver price goes up on a relative
basis . If you follow that to its logical conclusion, you can see a much higher
silver price in the future.
14
Ball mill.
SIN: Is there anything else you’d like to add?
KM: We have just recently started a big initiative in the company, and
it relates to getting our final permit in April of this year. The initiative is
on CSR. Not only do we want to become the new leader in the silver space, but we
want to operate responsibly with that balance that I spoke about between all.
stakeholders We’ve started a new division in the company so we have equal weight
between operations, finance, exploration and now CSR. We’ve hired BSR to help
guide our plans both corporately and in country. We just recently put out a
press release that describes some of the things that we’re doing in our CSR
programs. I want to highlight that as something we strongly believe in. We will
have more news on the initiative going forward. SIN: Thank you very much for speaking with me today.
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