Silver Set to Shine Again in India

MUMBAI – The relentless slide in silver prices has been termed a temporary aberration by silver producers in India, who insist that since silver has had its biggest run in the shortest period of time, there is bound to be profit taking by certain investors.

“Give it some time. The market will correct,” said an unfazed senior official at Hindustan Zinc. The company is targetting a 43% increase in production in the next financial year, 2012-13.

Vedanta Group, through its subsidiary Hindustan Zinc, in enroute to also becoming one of the largest integrated silver producers globally. The aim is to ramp up production from its Sindesar Khurd mine, in Rajasthan.

Also set to follow is is Hindalco, which is likely to produce 60-70 tonnes of silver by 2012-13. Hindustan Copper is also ramping up silver production.

With India currently placed at the 15th spot of top silver producing nations, silver producers across the country have charted out growth plans that will place India amongst the top 10 silver producing nations within a very short time. The aim – total silver production should cross 20 million ounces over the next two years.

SILVER SHOW

Vedanta group chairman was quoted by newswire agencies as saying that once the company’s Sindesar Khurd mine reaches full capacity by the end of 2011-12, the firm would have a capacity of 16 million ounces of refined silver per annum.

The Hindustan Zinc official, who did not wish to be quoted, said the company’s new 1.5 million tonne mill at Sindesar Khurd had commenced production towards end-Q3FY11.

“For the financial year 2012, we would have registered silver production capacity of 500 tonnes, which will push us into the slot with most other biggies,” the official added. The non-ferrous metals company had produced 70 tonnes of silver up until the end of December 2008.

Metal companies in India are riding on a continued rise in base metals prices. Keen to push the envelope is Hindustan Copper.

Company sources said the firm had exported just 3.6 tonnes of silver last year, but since the company sells copper concentrate, it factors in the price of silver at the time of evaluation.

An analyst with a foreign brokerage firm here said metal producer Hindalco, which posted a 6.6% rise in its fourth-quarter net profit to $158.3 million, has been affected, as have other silver producers, because of recent moves to raise margins on silver.

STOCK PLUNGES

On Thursday, Indian stocks succumbed to global selling pressure and slumped massively. The metals sector slumped 3% on the Bombay Stock Exchange, with Hindustan Zinc down by 3.5% and Hindustan Copper down by 1.9%.

Silver appears to be driving Hindustan Zinc’s performance. The 41% rise in the production of lead concentrate in the March quarter has helped the firm turn in good numbers, analysts said. The concentrate contains silver, which also enhances realisations, they said, adding that silver sales are expected to rise sharply this year as well.

For Indian consumers though, silver seems to be on their mind. The white metal has gained 57% so far this year against gold’s 6.6% rise.

State-run MMTC expects a 50% jump in turnover in 2010-11. According to an MMTC official, silver imports by the agency stood at 150 tonne during February. The official said the markets are getting reconciled to high prices.

The firm is planning to import 50% more silver this fiscal year at 1,200 tonnes.
Bank premiums on silver have also doubled over the past five days, despite the plunging international price. Analysts maintain that all of this clearly indicates that silver is set to shine in India.

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