By Melissa Pistilli-Exclusive to Silver Investing News

Despite mixed actions in the silver price over the last week, market analysts remain confident silver is on an upward trend. No new stimulus plans out of China, central banks slashing interest rates, and depressing job loss numbers out of the US are all signs that the global economic crisis is far from over. The once grim outlook is growing increasingly darker, “triggering a rout in equity sentiment and renewed safe-haven demand into precious metals,” said James Moore at thebulliondesk.com. 

Jerome Bunde, a stockbroker with Pennaluna and Co, points to decreasing trust in the value of the US dollar as a driving force behind precious metals prices. “The good thing about it is the silver prices are on an upswing and it’s very likely it will move higher as long as the global financial crisis is not solved,” added Bunde.

The word out of Toronto and the Prospectors and Developers of Canada Association (PDAC) last week is that silver prices are set to perform very well this year. Oliver Frank, CEO of Silver Capital AG, told conference attendees that silver is likely to reach $25 an ounce of silver by year’s end.  The German fund manager predicts that silver is soon to begin a sustained trend reversal and will climb to $15 an ounce over the next three months. He expects highs of $20 to $21 an ounce by the end of the summer.

Rising silver prices coupled with dropping mining operation costs over the next year will benefit emerging primary silver producers immensely, said Frank.  Especially prosperous will be those miners who increase their silver holdings and production levels. Already, “money managers and other smart money are shifting more of their cash positions into the stocks of silver producers,” he noted.

Mergers and Acquisitions More Likely

A recent study out of PricewaterhouseCoopers (PwC) reveals the reality faced by many of Canada’s junior mining companies who have been hard hit by the financial crisis.  Their stock prices beaten into the ground, a large percentage can’t raise the cash needed to fund everything from exploration and development work to daily administration. According to the report, market capitalization for all TSX-V listed mining companies fell 73 per cent during the period from the end of June to the end of November of 2008.

Len Boggio, senior partner with PricewaterhouseCoopers’ B.C. mining practice, points out that the market cap drop is linked to falling metals prices, which doesn’t bode well for exploration to early production-stage juniors.  ”Until some confidence in the market returns and investors are willing to shoulder risk again, many projects will remain dormant,” says the PwC report. “Some companies without proven resources will disappear altogether as they run out of money to cover even the most basic administration.”

According to Boggio, the climate is ripe for mergers between cash-flush miners and those strapped juniors with promising projects. “Many companies that had spent the earlier part of the year doing deals or resisting unwelcome overtures finished the year looking at over-stretched balance sheets, preparing for write-downs, and welcoming back potential buyers with open arms,” notes the PwC report.

Excellon Resources Buys Silver Eagle Mines

In December, the financial crisis had forced Silver Eagle Mines Inc [TSX: SEG] to suspend its operations and downgrade work to care and maintenance only on its primary asset, the Miguel Auza mine in Zacatecas, Mexico.

Now, Excellon Resources Inc [ TSX: EXN] has decided to take advantage of the company’s low share price and has agreed to purchase Silver Eagle for approximately C$3.5 million in stock. Silver Eagle shareholders will receive 0.2704 Excellon common shares for each Silver Eagle share held. Excellon will also give Silver Eagle a bridge loan of $500,000 and any other reasonable amounts needed to finish closing the deal.

In return, Excellon gains access to the Miguel Auza mill, which it plans to use to process the silver, lead and zinc ore it produces from its neighbouring Platosa mine. “We get access to a very good quality mill immediately, which was sort of a big hole in our operations,” said an Excellon spokesperson. The company had planned to construct its own mill at the Platosa mine, but this purchase will save them time and money.

“This is a very positive development for Excellon as it will give us immediate access to a recently expanded, modern mill and will allow us to start processing our own ore almost immediately,” said Excellon Chairman and CEO Peter Crossgrove. “In addition, we have also acquired a large land package that holds significant exploration potential.”

The mill will allow Excellon to increase near-term production at Platosa to 150 tonnes per day and to 250 tonnes per day or more in 2010. As for the Miguel Auza mine, the company plans to keep it on a care and maintenance basis until its future potential is explored. On Monday, shares of Excellon on the TSX were trading at .23 cents, down from a 52-week high of $1.85.