Fresnillo PLC has withdrawn its offer to buy Mag Silver. Fresnillo has not been able to conclude the independent valuation of Mag required under applicable Canadian securities laws in order to permit the offer to proceed and it is not clear to Fresnillo when or if this will happen. Mag ended the day down C$0.23 at C$5.32.

Victoria Gold bucked the downward trend after reporting a drill intercept of 2.5 grams gold per tonne over 274.3 metres at is Helen zone on the Cove project in north-central Nevada. Victoria added C$0.01 to close at C$0.39.

Shares of Andean American Mining fell C$0.055 to C$0.235 after the company reported that its Invicta project has a projected capital cost of $65.3 million with a net present value at an 11 per cent discount rate of the five-year free cash flow net of debt amortization of $159-million. All this using a gold price of $900 per ounce and copper price of $2 per pound.

Worries that the global economic recovery will be slower than some had been anticipating put pressure on resource stocks. Will we get the usual rebound on Tuesday or will the selling continue? We will see.

Source: Resource Stock Roundup: Tuesday, June 23rd, 2009

Nickel fell below the $4 level a couple of times, but each time managed to claw its way back over the mark, and closed just above it at $4.003/lb., down better than 3 cents. Zinc was flat until New York opened, then sold off to end at $0.4884/lb., down more than 2 cents. Aluminum was down steadily through the day, just coming off its intraday lows at $0.6542/lb., down more than 3¾ cents, while lead was modestly lower at $0.4309/lb., down two-thirds of a cent.

Copper fell for the sixth straight session, to the lowest levels since May 2005, as the dismal employment figures hit all the industrial metals hard. The metal has now shed 19% in the past six days, the most prolonged slide in nearly a year.

“This market is so sensitive to any kind of bad economic news,” said Michael K. Smith, of T&K Futures & Options in Port St. Lucie, Florida. “With all the bad news out there, copper can really only go down.”

Smith became the latest to voice a sentiment once unimaginable, saying that, “I don’t see any reason why copper couldn’t fall back to $1 … The sentiment in the market is terrible…”

Rising stockpiles also helped pressure copper downward. Inventories monitored by the LME soared by 4,325 metric tons, to 297,300 tons yesterday. That’s the highest level since January 2004, and represents around six days of global consumption.

There’s no light at the end of any tunnel, according to Christoph Eibl, of New York’s Tiberius Asset Management, who predicted that the global recession will reduce demand for industrial commodities, including copper, through 2010.

In company news, striking Mexican workers have halted production at the world’s top silver mine and two major zinc mines after the government arrested union officials, the mines’ owner said.

Workers dropped their tools at the massive Fresnillo silver deposit in the state of Zacatecas late Thursday, according to mine owner Fresnillo Plc, the precious metals subsidiary of Penoles.

Source: No Floor For Industrial Metals

Esperanza Silver and partner Silver Standard (NASDAQ:SSRI) tabled a 31% jump in measured and indicated gold resources at their San Luis project in Peru. The new tally is 347,000 ounces of gold running 22.3 grams gold and nearly 9 million ounces of silver grading 578 grams silver per tonne. Esperanza ended the day up C$0.01 at C$0.50, while Silver Standard closed at C$11.05, for a C$0.04 gain.

As we mentioned on Monday, Mag Silver announced that a subsidiary of Fresnillo PLC, intends to make a formal offer to Mag Silver shareholders for all of the outstanding shares of Mag for $4.54 in cash. Mag closed at C$5.79, up C$0.83 on the day.

Evolving Gold cut 2.74 grams gold per tonne over 131 metres at its Rattlesnake Hills project in Wyoming. The junior ended the day up C$0.02 at C$0.24.

As if the falling economic activity is not enough for Canadians to worry about, the Federal opposition parties have joined forces in an effort to unseat the current minority Conservative government. The vote is set to go to the House of Commons on Monday. We will see what Wednesday trading has in store.

Source: Resource Stock Roundup: Wednesday, December 3rd, 2008

Waratah Coal added C$0.26 to close at C$1.51 after the company and Mineralogy Pty. Ltd. entered into a definitive support agreement, in conjunction with a revised offer by Mineralogy or a wholly owned subsidiary of Mineralogy to buy Waratah at C$1.60 per share in cash.

Animas Resources managed to add C$0.015 to close at C$0.415 after reporting an 8.5 metre drill intercept running 2.98 grams gold per tonne at its Berta area on its Santa Teresa project in Mexico.

Shares of Nuinsco Resources added C$0.005 to close at C$0.04 after Rainy River Resources bought the bonus payment and a royalty on claims that cover Rainy River’s core holdings in northwestern Ontario. The price tag was C$50,000 in cash and 200,000 shares. Rainy River ended the day down C$0.02 at C$0.68.

Paramount Gold and Silver (AMEX:PZG) reported that the Clavos 66 and 99 targets have inferred resources of 1.5 million ounces of gold equivalent on the San Miguel project in Chihuahua, Mexico. Paramount ended the day down C$0.01 at C$0.63.

A stock to watch during Tuesday trading is Mag Silver. After the close the company announced that a subsidiary of Fresnillo PLC, intends to make a formal offer to Mag Silver shareholders for all of the outstanding shares of Mag for $4.54 is cash. Mag closed at C$4.96, down C$0.96 on the day.

Not a good start to the tax loss selling month of December. We will see what Tuesday trading has in store.

Source: Resource Stock Roundup: Tuesday, December 2nd, 2008

Right now some metals are poised to reach new all-time highs because of production deficits (aka lack of supply), while other metals still remain hostage to an onslaught of new supplies – so their prices are dropping.

Silver falls in that “too much supply” camp. More than any other precious metal this year, silver’s prices will be put to the test. We’re all waiting to see if silver’s price can hold up under the growing bombardment of new production.

Over the last five years, silver prices have surged more than 250% to just under US$17 an ounce at the moment. On May 20th, my Commodity Trend Alert (CTA) service, turned “neutral” on silver, after my CTA subscribers earned big profits on several existing open silver positions since 2003.

But the tides have turned. And now rising supplies are forecasting a sizable silver correction.

Meanwhile, gold is still soaring. Gold production peaked in 2001 and continues to decline this year, which is VERY bullish for gold prices. But that’s certainly not the case for silver and to a lesser extent, palladium.

Could Silver Break Away from Gold?

Gold and silver generally track each other in a bull or bear market. When gold goes up, silver goes up and vice versa. But in this case, a divergence might be possible, if only temporarily.

In the base metals arena, a similar price divergence has already happened after seven years of generally spectacular gains for the complex. These include namely copper, lead, tin, nickel, iron-ore (steel), aluminum and zinc. Over the last 18 months, nickel and zinc prices have crashed while tin, lead and copper prices have posted gains. It’s not impossible for metals to break away from the primary uptrend if supplies begin to saturate individual fundamentals.

Over the last 12 months, gold prices have risen 37% while silver has gained 31%. Both metals continue to track each other on a total return basis.

But thus far in 2008, gold prices have risen just 8% while silver has rallied 15%. The fundamentals, however, don’t support silver’s higher returns this year.

Will Investor Demand Support Silver?

Gold is rapidly approaching its first year of net supply deficit while silver is increasingly becoming a net surplus commodity. And according to textbook economics, rising supplies eventually dilute a rising price trend and drag prices back down.

Considering the demand for both silver jewelry and silver industrial supplies is waning, the bulk of global demand for silver will have to come from investors going forward. This will come mainly from exchange traded funds like SLV or the iShares Silver Trust in the United States and other silver ETFs traded in London and Zurich.

I have serious doubts investor demand will continue to support silver at these levels without suffering a major correction first.

The iShares Silver Trust has already seen a massive increase of silver accumulation since 2006 – over 180 million ounces. Silver supply has surged since 2001, according to GFMS, a precious metals consultancy firm, rising to 670.6 million ounces. Unless investor demand consumes this rising supply – and more is projected in 2008, then prices will decline. That’s because industrial demand has probably peaked.

Last year, industrial demand for silver increased 7.2% to a record 455.3 million ounces, according to the 2008 World Silver Survey. That offset the long-term decline in demand for traditional usage, mainly in photography, jewelry and silverware.

But another survey by Barclays Capital points to alarm bells for the silver market. The survey shows new supplies just hit the market this year. Barclays believes mine production will grow by 6.5% in 2008 and faster than last year’s increase of 3.6%. That could create possibly the largest surplus of silver in over 20 years.

A disappointing initial public offering (IPO) in London is another bearish signal for silver bulls.

Mexican silver company, Fresnillo PLC, went public in London earlier this month and declined 7.5% on its debut – that’s a bad sign. Despite stronger silver prices this year, the IPO was not received well in the markets.

Gold and Platinum: Precious Metal Kings

Though I’m not predicting a long-term silver decline, I think it’s time to reduce your exposure during current price strength. The big picture for sister metals, gold and platinum, however, remains incredibly bullish because supplies continue to tighten.