RBC says silver demand will continue to outpace new mine supply

RBC Capital Markets estimates that most silver equities will be reflecting a long-term silver price of $13/oz, well below the current spot price of $16.44/oz.

RENO, NV - 

RBC Capital Markets Tuesday maintained its outlook that global demand for silver should continue to outpace new mine supply this year.

RBC's silver price forecasts remain unchanged at $15 per ounce this year and beyond.

The silver price average $14.65/oz in 2009, a 2% drop from 2008, RBC metals analysts noted.  For 2009, silver mine production is believed to have risen 2% over 2008.

The analysts maintained their positive outlook for silver in the short-to-medium term of one to three years, based on:

1. Continued fundamental outlook for a weaker U.S. dollar, which will likely result in strong precious metals prices.
2. Fundamentals for silver remaining positive, with demand increase for industrial and investment segments forecast to more than offset the continuing decline in photographic demand.
3. Medium- to long-term concerns for increasing primary silver supply remains, which the analysts believe could eventually cap the upside for silver prices.

In their analysis, RBC anticipates silver production will increase in the near future with large scale operations either currently ramping up or scheduled for start-up over the next few years including Coeur's San Bartolome in Bolivia, Pan American's Manatial Espejo in Argentina, Coeur's Palmarejo mine in Mexico, Goldcorp's Peñasquito in Mexico, and Barrick's Pascua-Lama in Argentina and Chile.

Noting that total silver ETF holdings grew by 122 million ounces last year, the analysts expect "continued strength, but at slightly lower levels than seen in 2009, with our forecast of 90 million ounces of silver ETF demand."

RBC Capital Market's preferred silver investment is Silver Wheaton, which the analysts called "the top growth story among the North American silver, with attributable silver production forecast by the company to double from 16 million ounces in 2009 to 32 million ounces in 2012."

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