We have been monitoring the bullion price of silver and of the companies which mine it for several years now. The biggest silver profit-making opportunity of all will come when Fresnillo, the Mexican company which controls the world's largest silver mine, joins the FTSE100 on Wednesday.
On Friday, its shares were priced in preparation for the IPO at 555p. Its capital stood at £3.98 billion. Serious investors must scrutinise the world's financial press for views on the Fresnillo share price. The silver price rise has recently been exhibiting characteristics which reflect the vastly increased use of the metal in electronics.
It trails the rising gold price, making it obvious that once again powerful financial interests, most probably the Saudi princes and the American-Arab oil lobby are at their old game of cornering the world silver market. They could rightly see the dollar as a 'bombed out' world currency. A staggeringly appreciating euro, with little or no political clout behind it, is as yet completely unreliable as a store of value.
The American superpower insists on buying up the world's oil. It has only 10 years of oil reserves to go. This is a situation which is bound to make the Arabs desire to see gold have a greater store of value function than it has had in recent times. Behind the Bunker Hunt scheme to corner the world silver market in 1980 there was undoubtedly a connection with the devastating inflation of the 1970s during which period the world stock exchange markets delivered nothing to investors. Are we now moving into a similar decade? It might just be so.
Some analysts believe $200 oil is just round the corner. In 1980, silver at one time touched $54 and gold $860. Gold has recently been around $1,000 and silver at $19, but the old gold and silver figures corrected for inflation are still far above present valuations of the metals. Gold has yet to be over $2,000 to be anything near what it was in 1980. The same might be said for silver, which has even a longer way to reach the prices provoked by Bunker Hunt's, and the Saudi princes' silver cornering manoeuvre of 1980.
The coming Fresnillo IPO must be seen against the might of Saudi royal money and its self-righteous belief in the justice of its cause. In 1980, Saudi silver ambitions were buffeted, but they certainly did not go away. At that time London's The Sunday Times said that Hunt's ambitious were destroyed by the American-Jewish banking lobby. The big question is whether the Saudis will have once again the American oil Arab lobby to help them in the shape of a new redoubtable Bunker Hunt, the fabled discover of Libya's oil. This is unlikely.
Fresnillo money-making opportunities must be evaluated also against the actual price experience of the silver struggle of 28 years ago, which must be compared with its present experience. Silver declined prodigiously in the early 1980, from $54 to about $15 and less. High volatility is to be expected.
The Fresmillo share price seems likely to jump forward, helped in no uncertain terms by the recent booming performance of miners such as BHP Billiton and Kazakhmys.
johnazzopardivella@hotmail.com