Silver Survey 2011 Presentation

8/6/2019 Silver Survey 2011 Presentation

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or ver urveyor ver urvey

Philip Klapwijk Philip Klapwijk ,,th th , ,


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GFMS Limited

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PricesPrices

DemandDemand

SupplySupply

InvestmentInvestmentOutlook forOutlook for 20112011


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he Silver Pricehe Silver Price40

US$/ozUS$/oz Average Average Year Year--onon-- IntraIntra--

30

20102010 20.1920.19 37.6%37.6% 78.4%78.4%JanJan--Mar 2011Mar 2011 31.8631.86 88.2%88.2% 23.5%23.5%

25 $ / o z

15

20 U S

10

5Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Source:Source: Thomson ReutersThomson Reuters


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US Dollar and Euro PricesUS Dollar and Euro Prices40

/oz /oz Average Average Year Year--onon-- IntraIntra--

30 o z20102010 15.2315.23 44.6%44.6% 92.0%92.0%JanJan--Mar 2011Mar 2011 23.2023.20 89.5%89.5% 15.9%15.9%

20

25

E u r o

15 o z a n

d

US$

5

10 U S $

Euro

0Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Source:Source: Thomson ReutersThomson Reuters


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Silver, Gold and Base Metals PricesSilver, Gold and Base Metals Prices220

silver

180 0 ) tin

140

160

n 1 0 = 1

0

nickel

120 d e x ( J

copper

gold

80

100 I zinc

60

Jan-10 A r-10 Jul-10 Oct-10 Jan-11

Source: GFMS, ThomsonSource: GFMS, Thomson ReutersReuters


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Quarterly Correlation of Daily SilverQuarterly Correlation of Daily Silver PricesPrices

1.0

0.8

n t

Gold

0.4

.

o e f f i c i

0.2

e l a t

i o n

-0.2

. C o r

Copper

-0.4Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10

Source:Source: GFMSGFMS


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Gold / Silver Ratio 1968Gold / Silver Ratio 1968- -20102010

90

70

50

60

3040

10

20

01968 1973 1978 1983 1988 1993 1998 2003 2008

Source: GFMS Ltd.Source: GFMS Ltd.


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Gold / Silver Ratio 2001Gold / Silver Ratio 2001 20112011--toto--datedate

90

80

70 Average 62:1 Average 62:1

50

40Jan-Mar 2011 = 44:1

30

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: GFMS Ltd.Source: GFMS Ltd.


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Real and Nominal Silver PricesReal and Nominal Silver Prices60

1980 average: $1980 average: $55.5355.53

50 1980s peak of $49.45 equals to1980s peak of $49.45 equals to

over $130 in real 2010 termsover $130 in real 2010 terms40

$ / o z

20

U S ..

10

0Nominal PriceNominal Price

Source: GFMS, ThomsonSource: GFMS, Thomson ReutersReuters


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PricesPrices

DemandDemand

SupplySupply

InvestmentInvestmentOutlook forOutlook for 20112011


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World Silver FabricationWorld Silver Fabrication Demand in 2010Demand in 2010Total Fabrication Demand in 2010: +12.8% to 878.8 Moz

Silverware

Coins & Medals12%

6%

IndustrialApplicationsJewelry

Photography8%

Source: GFMS Ltd.


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World Silver FabricationWorld Silver Fabrication Annual Changes: Annual Changes: 20102010 lessless 20092009100

80

60

u n c e s

20 i l l i o n

0

-20Industrial Photography Jewelry Silverware Coins &

Applications Medals

Source: GFMS Ltd.


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IndustrialIndustrial Fabrication by EndFabrication by End- -UseUse

1990: 272.61990: 272.6 MozMoz 2010: 487.42010: 487.4 MozMoz

E & E excludingE & E excludingOtherOther

E & E excluding

Photo VoltaicsOthero oo o o a cso a cs

Brazing AlloysBrazing Alloys

PhotoPhoto VoltaicsVoltaics

Ethylene

EthyleneEthyleneOxideOxide

an o ersan o ers OxideBrazing Alloys

and Solders

PhotoVoltaics

Source: GFMS Ltd.


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Industrial FabricationIndustrial Fabrication500

400

s

300 n o u n c

200 M i l l i

100

0

Source: GFMS Ltd.


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Global Semiconductor BillingsGlobal Semiconductor Billings350

s ) Other Asia/Pacific

300

( m

i l l i o

Europe

Japan

200 i p m e n

t mer cas

150 e r o f s

50

100 N u m

0

Source: SIA


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Industrial offtake rebounded b 20.7% to 487.4 Moz inIndustrial offtake rebounded b 20.7% to 487.4 Moz in2010, a fraction shy of the pre2010, a fraction shy of the pre- -crisis record in 2008.crisis record in 2008.

Main drivers of the stron rise were continued robustMain drivers of the stron rise were continued robust emerging market economies growth, industrialized worldsemerging market economies growth, industrialized worldsrecover from recession and i eline restockin .recover from recession and i eline restockin .

Most areas of endMost areas of end- -uses enjoyed gains, particularly in photouses enjoyed gains, particularly in photo

main area that disappointed was construction inmain area that disappointed was construction in

All regions, bar the Indian Sub All regions, bar the Indian Sub- -continent, saw gains, withcontinent, saw gains, with..


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JewelryJewelry & Silverware Fabrication& Silverware Fabrication300

250

Silverware

n o u n c e s

100 M i l l i o

Jewelry

50

0

Source: GFMS Ltd.


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Jew ellery Fabrication: Silver, Gold, P latinumJew ellery Fabrication: Silver, Gold, P latinum

-- earear ercen age anges n eman : oercen age anges n eman : o0 0

-5

1 t o 2 0 1

-15

-10

a n d : 2

0

-20 n g e d e m

-30

-25 %

c h

-35

Source: GFMS Ltd.


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Consumer Film and Digital Camera SalesConsumer Film and Digital Camera Sales

1605

120

1404

Di gi

t al k s

1003 am e r a

o l l s / d i s

602

S al e s ( i

o n s o

f

401

i l l i on s )

B i l

00

Source: Photofinishing News Inc., Lyra Research Inc.


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Photo ra hPhoto ra hPhotographic demand for silver posted its smallest lossPhotographic demand for silver posted its smallest lossin nine years in 2010, falling by 8% to 72.7 Moz.in nine years in 2010, falling by 8% to 72.7 Moz.

Its share of total fabrication demand fell to ust aboveIts share of total fabrication demand fell to ust above 8%, compared to 30% in 1990.8%, compared to 30% in 1990.

slight drop in demand from the medical sector, theslight drop in demand from the medical sector, thearges area ese ays o p o oarges area ese ays o p o o- -re a e s ver eman .re a e s ver eman .

In contrast, global demand for film rolls fell by 25%,In contrast, global demand for film rolls fell by 25%,driven by ongoing migration to digital systems.driven by ongoing migration to digital systems.


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World SilverWorld Silver Supply in 2010Supply in 2010Total Supply in 2010: Up 14.6% at 1,056.8 Moz

Hedging6%

Scrap20%

Production

70%Government

Sales

Source: GFMS Ltd.


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World Silver SupplyWorld Silver Supply Annual Changes: Annual Changes: 20102010 lessless 20092009100

80

60

o u n c e s

20 M i l l i o

0

-20Mine Production Government Old Silver Scrap Producer

Source: GFMS Ltd.


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Mi P d i b S M lMi P d i b S M l


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Mine Production by Source MetalMine Production by Source Metal

14

10

12

6

8

o u n c e

2 M i l l i o

-2

-6

-

Source: GFMS Ltd.


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Mine ProductionMine ProductionWorld silver mine output rose by 2%, or 17.6 Moz lastWorld silver mine output rose by 2%, or 17.6 Moz last

, . ., . .

An increase of 5% was recorded from both the lead/zinc An increase of 5% was recorded from both the lead/zincand primary silver sectors.and primary silver sectors.

build up of production at projects which began operationsbuild up of production at projects which began operations,,

Palmarejo.Palmarejo.

Largest gains seen in Mexico (+15.3 Moz), China (+10.0Largest gains seen in Mexico (+15.3 Moz), China (+10.0Moz) and also Australia (+7.4 Moz), with the mostMoz) and also Australia (+7.4 Moz), with the most

noticeable decline in Peru (noticeable decline in Peru (- -7.4 Moz).7.4 Moz).


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Producer Hed inProducer Hed in2010 saw a marked return to net producer hedging, with2010 saw a marked return to net producer hedging, with

. .. .of this occurred in the fourth quarter.of this occurred in the fourth quarter.n e ma n e g ng was con uc e y yn e ma n e g ng was con uc e y y- -pro uc s verpro uc s ver

producers, to risk manage a nonproducers, to risk manage a non- -core revenue stream.core revenue stream.mpor an a ons o e g o a e ge oo seen rommpor an a ons o e g o a e ge oo seen rom

Frisco,Frisco, Barrick Barrick andand Volcan Volcan..Four consecutive years of deFour consecutive years of de- -hedging activity had left thehedging activity had left theendend--2009 hedge book at a two2009 hedge book at a two--decade low.decade low. As such As such

ere was e n e way o e ver es o prov e anere was e n e way o e ver es o prov e anoffset, as several producers moved to lock in higheroffset, as several producers moved to lock in higherpr ces a e apr ces a e a - -en o .en o .

S S lS S l


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Scrap SupplyScrap Supply

crap supp y ncrease y o a new recor g ocrap supp y ncrease y o a new recor g o

215 Moz in 2010215 Moz in 2010, despite a continued slide in silver, despite a continued slide in silverrecovered from photographic applications.recovered from photographic applications.

Much of the rise was due to higher scrap receipts from theMuch of the rise was due to higher scrap receipts from the

industrial sector, itself a result of tighter environmentalindustrial sector, itself a result of tighter environmentalle islation cou led with a shar rise in silver rices.le islation cou led with a shar rise in silver rices.

Recycling fromRecycling from jewelry jewelry and silverware also rose notably,and silverware also rose notably,

..


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Net Government SalesNet Government Sales100 Others

80Russia

China

60 o u n c e

40 i l l i o n

20

02001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: GFMS Ltd.


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Government SalesGovernment Sales.. ,,

a massive 188% on the previous years level.a massive 188% on the previous years level.

uss auss a accoun eaccoun e or eor e u o governmenu o governmen sa es ansa es anapparent disposals from the country nearly doubled inapparent disposals from the country nearly doubled in2010.2010.

Other official sales last year were small scale andOther official sales last year were small scale andrelated to the melting of old coins.related to the melting of old coins.

atat 110110 Moz atMoz at endend--2010.2010.


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Identified Bullion StocksIdentified Bullion Stocks (end(end--year)year)

1200 Others Comex

1000

s

Government European Dealers*

800

n o u n c

600 M i l l i

200

0

Source: GFMS Ltd.; *includes ETF holdings


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Market Shifts FromMarket Shifts From Deficit to Deficit to Surplus Surplus

950

1000

900

e s

(fabrication demand)

800 i o n o u n

700 M i l l

SUPPLY

600

650

5501990 1995 2000 2005 2010

Source: GFMS


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PricesPrices

DemandDemand

SupplySupply

InvestmentInvestment

Outlook forOutlook for 20112011

Sil (Di )I d R l P iSil (Di )I d R l P i


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Silver (Dis)Investment and Real PriceSilver (Dis)Investment and Real Price25200

r e

20120

l s i l v e r s

Net InvestmentNet Investment

1540

80 pr i c e i

o u n c e

10-40

0 2 0 1 0 M

i l l i o

5-80 ol l ar s /

0-160

- z

Source: Silver Institute, GFMS Ltd. Investment refers to the Implied Net (Dis)Investment series only.


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WorldWorld Investment*Investment*6.0300

5.0250

3.0

.

150

S $

B i l l

o u n c e s

2.0100

i o

n

M i l l i o n

1.050

0.00

2001 2003 2005 2007 2009

*World Investment is the sum of Implied Net (Dis)Investment and Coins & Medals.*World Investment is the sum of Implied Net (Dis)Investment and Coins & Medals.SourceSource:: GFMSGFMS

ETF Silver HoldingsETF Silver Holdings


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ETF Silver HoldingsETF Silver Holdings

35

40700

Sprott Physical Silver Trust

30

500

Other

Zrcher Kantonalbank

ETF Securities

20

25400 U

S $ o

u n c e

iShares Silver Trust

Silver Price

15300 o

z

M i l l i o n

10

100

00 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10

Source: Respective ETF issuers

Investors* Net Positions in Comex Silver FuturesInvestors* Net Positions in Comex Silver Futures


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Investors * Net Positions in Comex Silver FuturesInvestors * Net Positions in Comex Silver Futures

36004000100

) Comex Settlement PriceAverage Positions (Moz)2010 264

2800

320080

o u s a n

d -

240060 c e n

t s r

a c t s

, t

160040

/ o

z

n s ( c o n

80020 t p o s i

t i

0

400

0

N

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11*Non-commercial & non-reportable net positions in futures taken as proxy for investors positions.

Source: CFTC


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PricesPrices

DemandDemand

SupplySupply

InvestmentInvestment

Outlook forOutlook for 20112011


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Mine production will record another increase in 2011, withMine production will record another increase in 2011, withou pu expec e o reac some oz. ey o s w e anou pu expec e o reac some oz. ey o s w e anacceleration of growth in Mexico, though widespread increasesacceleration of growth in Mexico, though widespread increases

..Net producer hedging is likely to remain a strong component of Net producer hedging is likely to remain a strong component of

..

Scrap supply is forecast to increase in 2011, due to higherScrap supply is forecast to increase in 2011, due to higher

Government sales are difficult to predict, opportunistic salesGovernment sales are difficult to predict, opportunistic sales

could emer e on an rice rallies.could emer e on an rice rallies. Overall, supply currently projected to rise a further +/Overall, supply currently projected to rise a further +/- - 3% this3% thisear or rou hl 30 Moz.ear or rou hl 30 Moz.

Outlook forOutlook for 2011:2011: DemandDemand


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Outlook forOutlook for 2011:2011: DemandDemandGrowth in industrialGrowth in industrial demanddemand will slow significantly in 2011,will slow significantly in 2011, owing to aowing to a

higher base means +/higher base means +/- - 4040 MozMoz could be added to demand, easily takingcould be added to demand, easily taking

it to a new record level.it to a new record level.PhotographicPhotographic demand willdemand will drop again, although this will have littledrop again, although this will have littleimpact as current level of demand already so low.impact as current level of demand already so low.

Jewelry is likely to rise further in 2011, chiefly as benefits of ongoingJewelry is likely to rise further in 2011, chiefly as benefits of ongoingrecovery in economy and higher gold prices should outweigh therecovery in economy and higher gold prices should outweigh the

SilverwareSilverware should fall, a result of ongoing secular shifts plus high prices.should fall, a result of ongoing secular shifts plus high prices.

-- The silver market will remain in substantial surplus this year but thisThe silver market will remain in substantial surplus this year but thismetal will be absorbed by investors at much higher average prices.metal will be absorbed by investors at much higher average prices.

Outlook forOutlook for 2011: Silver Price2011: Silver Price


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Outlook forOutlook for 2011: Silver Price2011: Silver Price Average spot price in Q1 2011 was $31.86 basis the London fix. Average spot price in Q1 2011 was $31.86 basis the London fix.

-- -- average price recorded in the same period of 2010.average price recorded in the same period of 2010.

The gold:silver ratio has fallen sharply to 37:1 just recently, comparedThe gold:silver ratio has fallen sharply to 37:1 just recently, comparedwith an average of 62:1 in 2010.with an average of 62:1 in 2010.Silvers traditional high price volatility and trading range are factors toSilvers traditional high price volatility and trading range are factors tocons er: rea y yearcons er: rea y year- - oo-- a e ra ng range .a e ra ng range . - - . an. anaverage Q1 2011 price volatility 39.6% (gold 12.9%).average Q1 2011 price volatility 39.6% (gold 12.9%).

..volatility in a smaller and less liquid market than gold is attractive tovolatility in a smaller and less liquid market than gold is attractive tocertain investors, with many now eyeing the allcertain investors, with many now eyeing the all- -timetime--high of $50/oz.high of $50/oz.2011 may well see silver reach or even exceed $50/oz, in part basis2011 may well see silver reach or even exceed $50/oz, in part basisstrong probability of gold peaking comfortably above $1,600/oz.strong probability of gold peaking comfortably above $1,600/oz.


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hank ou for our attention!hank ou for our attention!

While every effort has been made to guarantee the accuracy of the information in this document, GFMSWhile every effort has been made to guarantee the accuracy of the information in this document, GFMS

DisclaimerDisclaimer

. ,. ,specific investment objectives, financial situation or particular needs of any specific recipient orspecific investment objectives, financial situation or particular needs of any specific recipient ororganization. It is published solely for informational purposes and is not to be construed as a solicitationorganization. It is published solely for informational purposes and is not to be construed as a solicitationor as an offer to buy or sell any commodities, securities or related financial instruments. No representationor as an offer to buy or sell any commodities, securities or related financial instruments. No representation

, , ,, , ,the information contained herein. GFMS Limited do not accept responsibility for any losses or damagesthe information contained herein. GFMS Limited do not accept responsibility for any losses or damagesarising either directly or indirectly from the use of this document.arising either directly or indirectly from the use of this document.

Copyrigh t GFMS Ltd. 7 th April 201 1.

This document is the copyright of GFMS Ltd. No part of this document may berepro uce , s ore n a re r eva sys em or ransm e n any orm or y anymeans without the prior written permission of the copyright owners.

Silver Survey 2011 Presentation

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