Coeur Sees Silver Rout Overdone on Bullish Demand Outlook

May 29, 2014 4:16 pm ET

(Updates with closing share price in fifth paragraph.)

May 29 (Bloomberg) -- Coeur Mining Inc., which started mining silver almost a century ago in the Rocky Mountains of Idaho, said a price slump for the precious metal is probably exaggerated as demand surged last year.

Silver used in electronics, which represents about half of industrial demand, will rise as much as 5 percent this year, Chief Executive Officer Mitchell Krebs said in an interview from Toronto. A rebound in investor appetite for silver bars and coins will also aid the recovery, he said. Shares gained.

“The big X factor is the investment demand -- overall investment demand has been stickier than gold, and that’s why prices have come off,” he said. “A global economic pickup gives a more bullish scenario for silver.”

Coeur, based in Chicago, plans to become cash-flow positive between the second half of the year and 2015 after a cost- reduction program and as prices recover, Krebs said. Silver stocks including those of larger-peer Fresnillo Plc have slumped in the past 12 months as silver slid 15 percent.

Coeur shares fell 0.6 percent to $6.79 in New York after slumping to a five-year low. The stock is down 37 percent this year. Silver futures for July delivery fell 0.2 percent to $19.01 an ounce in New York today.

Silver’s weakness is exaggerated because of its correlation with gold prices, Michael Lewis, global head of commodities research for Deutsche Bank AG said May 20 in Singapore. Gold futures in New York tumbled to a 15-week low in New York yesterday after investors sent U.S. equities to a record high.

Electronics Demand

Total physical demand for silver rose 13 percent in 2013 to a record on retail investment in silver bars and coins, the Silver Institute said in a study it published May 14. The institute is financed by silver producers.

This year demand from the electronics industry will drive growth, Krebs said. Industrial uses for silver, including electronics and photography, represent about half of total demand.

The silver market will receive a boost as larger mines such as BHP Billiton Ltd.’s Cannington mine in Australia, the world’s largest silver mine, end production, Krebs said. Scrap availability is also falling, he said.

Coeur produces silver from mines in Alaska, Nevada, Bolivia and Mexico. The company plans to complete a feasibility study on its Preciosa silver project in northern Mexico that contains some of the largest reserves of the metal in the world, Krebs said.