Silver Stocks & Bullion Gaining Ground

Silver output is expected to increase in 2012 due to increased production from Mexico and Argentina.

Silver stocks and silver bullion have been on the upswing over the last month – the shiny white metal has tacked on more than 20 percent. Today, the Global X Silver Miners ETF (NYSE:SIL) advanced $0.86, or 3.5%, hitting a high of $24.71 per share before retreating back to the $24.34 mark. Investors may be taking safe haven in precious metals after the European financial crisis asserted itself again this week.

In a recent report, The Silver Institute stated silver production has also been increasing lately. According to the institute, the growth in silver production is being driven by new projects in Mexico and Argentina, “This change came about as a result of increased production in primary silver mines and as a by-product of lead/zinc mining. For the first time, Mexico eclipsed Peru as the world’s largest silver producing country.” China, Australia and Chile round out the top five silver producers. The report also highlighted that industrial fabrication using silver is expected to increase by 37 percent between 2010 and 2015. The anticipated increase will shift demand from approximately 488 million ounces to 666 million ounces. Despite the increase, TD Securities lowered its price target for silver in 2012 from $40 to $35 this week.

Silver guru David Morgan made an appearance at Vancouver’s Cambridge House Mining Conference on Monday. Morgan is bullish on silver stating the increase in global money supply is a “pervasive issue” within the financial markets. Going forward, he thinks the real opportunities lie in the mid-tier silver producers (complete interview below).

Pan American Silver (profile TSX:PAA) and Minefinders (profile TSX:MFL) made headlines on Monday when the companies announced they reached an agreement for Pan American to acquire Minefinders for $15.60 per share, valuing the transaction at $1.5 billion (CDN). Pursuant to the deal being approved by each companies’ shareholders, Geoff Burns, President and CEO of Pan American, stated, “Given the location of Minefinders’ assets, we believe this acquisition is logical and consistent with Pan American’s vision to become the largest, low-cost primary producer of silver in the world.” Minefinders also controls significant gold assets.

Following the announcement, GMP Securities lowered its price target on Pan American to $40.50 from $46.50 as analyst Craig West noted the dilutive nature of the transaction from an earnings perspective.  Analysts were more positive on the deal from Minefinders perspective. Desjardins Securities analyst, Brian Christie, said in a note to clients, “We view the proposed transaction positively, as the offer represents a significant and immediate premium to Minefinders’ shareholders.”

Today, Vancouver-based Fortuna Silver Mines (profile TSX:FVI) said its 2011 silver production jumped 31 percent and forecast nearly 50 percent jump in the metal’s output this year. The company cited expansion at its San Jose mine in Mexico will increase output and lower its silver production cost in 2012. For 2012, the company provide production guidance of 3.7 million ounces of silver and 17,400 ounces of gold. Earlier this week, First Majestic Silver (profile TSX:FR) announced the completion of its La Parrilla mill expansion to 2,000 tonnes per day. Keith Neumeyer, President & CEO stated, “We are very pleased with the completion of this major new expansion at La Parrilla. Our Mexican construction team should be recognized for their hard work and tireless efforts and should be congratulated for completing the construction while keeping the older mill operating.” recently connected with Mr. Neumeyer – CLICK HERE – for the exclusive interview.

Mike Luft

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