Industrial demand accounts for nearly half of total silver demand, but demand for silver as an investment has been the main driver of record silver prices in past years. In 2013, investors have continued to view the white metal as a cost-effective means of wealth preservation. The US Mint has reported record-high silver coin sales for the first half of this year despite the 28-percent drop in value seen in the paper markets.
“Sales of silver coins by the U.S. Mint are heading for the best start to a year since at least 1986 as prices slumped,” reported Bloomberg earlier this week. So far this year, silver coin sales from the US Mint have totaled 24.03 million ounces. This impressive number has the Mint’s acting director, Richard Peterson, suggesting that 2013 may be a record-breaking year for US Mint silver coin sales. In 2011, the Mint hit a record 22.3 million ounces in the first half of the year and went on to sell a year-end total of 40.02 million silver ounces. Globally, total demand for silver coins and medals reached an all-time high of 118.2 million ounces in 2011.
Nearly half of that impressive 1H 2013 US Mint silver coin sales figure is comprised of the all-time monthly high of 7.5 million ounces reached in January — which prompted a suspension of sales due to a lack of inventory — and the 4.1 million ounces in sales reached in April. While strong buying in April was attributed to bargain hunting after the silver price fell 16 percent in two days, to a low of $23.61 an ounce, January is traditionally a bright time of the year for physical silver sales — in January 2011, the Mint sold 6.42 million ounces worth of silver coins followed by 6.1 million ounces in January 2012
Speaking of seasonality in silver prices, June heralds the start of the ever-dreaded doldrums, when silver sales and silver prices ebb. In recent weeks, notes The Wall Street Journal, silver coin sales volumes at the US Mint have “slackened,” with just 1.6 million ounces sold so far this month. That’s not too bad when you consider that US Mint silver sales for the entire month of June totaled 3.4 million ounces in 2011 and 2.85 million ounces in 2012.
Analysts expect investment demand for silver, including silver coins and bars, to pick up in early September — the next uptrend in the silver seasonal cycle. Known as the “September increase,” it’s the first big rally in silver prices following the summer doldrums, making the summer months an excellent time for bargain shopping in the physical market.
Silver ore producers becoming silver bullion sellers
A few silver producers are positioning themselves to take advantage of rising demand for physical silver as wealth preservation by offering investors the ability to purchase specialty silver coins and bars online.
First Majestic Silver (TSX:FR,NYSE:AG) is the only mining company selling its own production in the form of silver bullion. Investors can purchase a wide array of high-quality 0.999 fine silver products from its secure online silver store, including 0.5-ounce and 1-ounce coins, 5-ounce ingots and 50-ounce bars. Last month, First Majestic announced that it had tripled the NI 43-101 compliant proven and probable reserve estimate at its San Martin mine in the state of Jalisco, Mexico. The reserve estimate now totals 22 million silver ounces, increasing the mine’s life to 9.5 years and upping annual output to between 1.4 and 1.6 million ounces of rough silver.
Avino Silver & Gold Mines (TSXV:ASM,NYSEMKT:ASM) sells 0.999 fine silver 1-ounce coins. Earlier this month, Avino announced updated resource estimates on the San Gonzalo and Avino mine systems located on its Avino property near Durango in West-Central Mexico. The San Gonzalo mine resource estimate includes measured and indicated resources totaling 2,803,315 troy ounces of silver and 18,551 troy ounces of gold, as well as an inferred silver resource totaling 8,158,834 troy ounces of silver and 49,549 troy ounces of gold, all at a base case cut-off grade of 150 g/t for silver equivalent. The Avino mine resource includes an indicated resource totaling 10,835,338 troy ounces of silver and 72,207 troy ounces of gold and an inferred resource totaling 7,068,831 troy ounces of silver and 75,858 troy ounces of gold using a base case cut-off grade of 100 g/t silver equivalent.
Great Panther Silver (TSX:GPR,NYSEMKT:GSL) sells 1-ounce silver coins and 1-, 5- and 10-ounce silver bars all minted from 0.999 fine silver. Last month, Great Panther reported first quarter 2013 production at 607,501 silver equivalent ounces, a 9-percent increase from the same quarter in 2012, but a 10-percent decrease from the record production set in the previous quarter. “Existing capacity and continued improvements at the Guanajuato and Topia processing plants will help provide the foundation for growth in 2014 and beyond,” states the press release.
Pan American Silver (TSX:PAA,NASDAQ:PAAS) sells 0.999 fine silver bullion minted at the Northwest Territorial Mint. Pan American’s specialty silver products include ½-ounce and 1-ounce silver rounds as well as 1-ounce, 5-ounce and 10-ounce silver bars. The company reported first quarter of 2013 silver production of 6.3 million ounces, a 14-percent increase over the same period in 2012, due to the addition of low-cost production from the Dolores mine, acquired in March of last year.
Securities Disclosure: I, Melissa Pistilli, hold indirect investment interest in Avino Silver & Gold Mines.