My own outlook is for silver to rise above the $10 level in 2005, and possibly even reach $15. China has been the story behind the rise in price of most commodities recently. For example, China is now the world's largest consumer of copper. There are no central bank holdings of copper to sell off or surpress the price. Before the Chinese economy heated up and increased demand for copper, the world copper market was depressed for many years. Some mines went out of production, and exploration activity went to the back burner. Well now the above ground copper stocks are vanishing, and prices have risen to compensate. I point all this out as an example to illustrate the way supply/demand works in the real world. China is expected to become a leader in the consumption of silver as well, and is forcasted to increase consumption from 10 million ounces in 2000 to over 48 million ounces of silver by 2006. Where is that silver going to come from? Most economists suggest that silver production is already in deficit to current demand, and that deficit has been met with consumption of above ground stockpiles. New silver projects and production is slower than the rate demand is increasing. I have no interest in the conspiracy theories to answer your question, I am just trying to comment on the observable realities affecting the market. So I think silver has to rise in price.
GNG has no silver resources, or reserves, or the expectation of production within even a 2-3 year time frame. So we are not in position to benefit from an increase in silver prices directly. However, investors have shown that any increase in a commodity will make all companies involved in that commodity more desirable. Look at the rise in uranium, and how juniors with very limited value that were in possession of uranium propesctive properties rose in value by hundreds of percent. I could see that same effect for GNG. Also, I think GNG is leveraged to discovery. A major new silver deposit uncovered by this company will immediately add intrinsic value to the company that will be reflected in the share price. There is no speculative premium reflected in the current price for GNG whatsoever. The outstanding share structure is very strong. So any new influx of intestors into this stock, will rapidly increase the price of the shares.
As for FR, they are very much in position to directly benefit from rising silver prices. They have current production that will become enormously profitable as silver prices rise. They have several projects that will be in full production within an 18-month time window. They are also active in exploration to increase the resources controlled on their property, building intrinsic value along the way.
I do not wish to put price targets on either stock, firstly because I have been proven wrong so often lately, but also because the events that will drive the share prices are difficult to predict. Will GNG make a major discovery this year? Will silver break out this year? Make your own estimates for those two factors and you will have an answer to work with.
I think a PF set up to benefit from silver should have both producers and explorers represented. GNG and FR are very good examples of both, and I own shares in both companies, and will be buying more of each within a few weeks.
cheers! COACH247
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I have picked up a few GNG, and already own FR from the placement this year
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