Silver, gold prices should continue rising - Coeur CEO
Coeur d'Alene's CEO, Mitchell Krebs, expects the prices of silver and gold to continue rising on healthy demand even as economic uncertainty persists.
Posted: Friday , 18 Nov 2011
The prices of silver and gold should continue rising as economic uncertainty persists, according to the chief executive of Coeur d'Alene Mines Corp (CDE.N: Quote, Profile, Research, Stock Buzz), the biggest U.S. silver miner.
"As long as we see things like the EU (Euro zone currency turmoil) and as long as we run the kind of deficits here -- neither of which we see being cleaned up in the short term -- those two things will continue to be positive backdrops for gold and silver," Mitchell Krebs told Reuters in an interview.
"Demand is very healthy," he said of silver. "The reason we are at $35 an ounce right now is because of investment demand."
Silver was selling for $34.03 per ounce on Wednesday, while gold slipped to $1,774 per ounce.
Krebs, who recently took over as CEO of Coeur d'Alene, after being its chief financial officer, said both metals tend to be viewed as investments during economic uncertainty, although silver also has a strong industrial demand.
"Directionally, I think silver and gold both have a lot of positive fundamentals underpinning them." he said on the sidelines of a Dahlman Rose & Co mining conference in New York.
"A lot of them are common to the two metals, but silver is a little bit different because of its industrial component.
"Over the short term, silver will be more volatile than gold. It's a smaller market, silver tends to move more percentage-wise than gold. But I think we'll see things continue to move upward as we end the year."
Krebs said photographic demand for silver had dropped off dramatically in recent years as digital technology replaced film. But new demand was coming from several "clean" industrial sectors, including solar and water purification, as well as TV's, batteries and medicine.
Cars also have a lot of silver content, such as in GPS systems and electronics, he said.
Krebs said Coeur was on track to produce 19.5 million ounces of silver and 220,000 ounces of gold this year from its three major mines in Bolivia, Mexico and Alaska.
That represents a 19 percent increase in silver production and 40 percent rise in gold production over last year.
The increase was due mainly to the fact that for the first full year the three mines were all operating at the same time.
But he said the estimate had been pared back because of lower expectations at its Kensington gold mine in Alaska, which began operating in July 2010.
"It probably opened a little too soon and things had not been completed," he said. The company will take six months to address underground construction and development issues.
Coeur originally expected to produce 100,000 ounces of gold there this year and that was scaled back to 85,000 ounces.
Next year, Krebs said, Kensington will produce about 4,000 ounces per month for the first six months before production is pushed up. By 2013, production will be at 130,000 ounces of gold per year, at costs of around $700 per ounce -- down from $990 now.
Krebs also said the company faces a labor shortage in the area, with levels about 25 percent below capacity.
"There is a tightness in the industry in general, and not just miners, but technical talent and engineers," he said. "And it's going to get worse."
Coeur's stock closed down 2.4 percent at $28.74 on the New York Stock Exchange.
(Reporting by Steve James, editing by Bernard Orr)