This presentation on silver is a rare work showing the inlimited potential for investors with a decade long investment horizon

1. Buy Silver before it “DISAPPEARS
DISAPPEARS”
Vinit Bolinjkar

2. President Lyndon Johnson on Silver
Excerpts of his speech: 23rd July 1965
"Now, all of you know these changes are necessary for a very simple reason--silver
is a scarce material. Our uses of silver are growing as our population and our
economy grows.
The hard fact is that silver consumption is now more than double new silver
production each year. So, in the face of this worldwide shortage of silver, and our
rapidly growing need for coins, the only really prudent course was to reduce our
dependence upon silver for making our coins.
If we had not done so, we would have risked chronic coin shortages in the very
near future.”

3. Silver
 Once in a CENTURY investment opportunity.
 Asymmetrically skewed Risk to Rewards Ratio,
favoring value.
 More of an industrial metal than being a Precious.
 Modern Warfare - A Huge Guzzler Of Silver.

4. Silver- Shortest reserve life amongst all mineral resources.
 Only 14 boz of silver reserves remain at the end of 2008, we are already
hitting “end silver’.
 The underground reserves will not last for more than 10-12 years at the
present rate of mining and consumption.
 Profile of the reserves base is only good for another 26-27 years.
World Metal (Under Ground Reserves)
in billion ounce2005 Production Reserves Reserve Base Reserve Life Reserve Base Life
Aluminium 0.03 Large Large >100 years >100 years
Iron 0.04 2.3 5.3 52.2 >100 years
Copper 482.3 13824.9 27328.4 28.70 56.70
Zinc 321.5 6430.2 13503.4 20 42
Lead 106.1 1961.2 4179.6 18.5 39.4
Nickel 45.0 1800.5 4179.6 40 92.9
Molybdenum 5.8 250.8 546.6 43.3 94.4
Tin 9.6 176.8 321.5 18.3 33.3
Silver 0.6 7.9 16.7 12.3 26.1
Platinum & Palladium 0.0 2.1 2.3 >100 years >100 years
Gold 0.1 1.2 2.6 15.1 32.6
*Silver Reserves in 2011 are ~4.9 bn ounce

5. Country wise break up of silver world reserves
&
Reserve Base along with market share
30% World Silver Reserves
25%
25%
21%
19% 19%
20%
% share
14% 14% 14%
15% 13%
10% 10%
9%
10% 7% 7% 6% 6%
6%
5%
0%
Poland Rest of Mexico Peru Australia China United Canada
World States
Reserves Reserve Base

6. Silver Usage 2010
6%
8%
19%
55%
12%
Industrial Applications Coins & Metals Jewelry
Photography Silverware

7.  World Silver holdings reduced to a mere 72 million ounces over the period.
 India & China reportedly had largest silver holdings which started getting
depleted from 2001 with China selling in excess of 50 million ounces in 2001.

8. Silver Holdings of India
100
90
80
70
60
Moz
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009 2010

9. Above Ground Silver Reserve under severe strain
 Mined for over 500 years, but lost its status of being a store of
monetary value subsequent to demonetization and now is
increasingly used as an industrial metal.
 Has become an indispensable metal with its superior qualities
of electrical and thermal conductivity, superior strength,
malleability and ductility.
 Over a period of 65 years, since 1942, the demand for silver
has been so strong that it has always out paced mining supply.
The exception being the mini recession of the early 80’s.

10. Silver Scarcity: A Growing Reality
 Demand outstripping Supply: Deficit prevailing for 60+
years
 Demand in the range of 750 - 900 moz and the deficit
supply of 150-200 moz has been financed by the sale of
national silver and above ground stocks.
 As per US geologist only 9 billion ounces are remaining & At
the present mining rate (500- 600 mn ounces p.a.), these
reserves won’t last us for more than 12-13 years.
 Silver market : Too small for today’s billion dollar
funds
 Market inventories thins while investment demand
explodes

11.  Usage to rise exponentially as world embraces
technology
 Silver: Rediscovered as a monetary store of value
 Till 2007 the silver investment demand was not more than 7%
of total demand.
 Growth in the silver ETF and the coin demand issued by the
State mints increases demand to the range of 12-25%.
Currently, the ETFs are expected to add 150-180 moz
representing a growth of over 50% yoy.
 Gold Silver Price Ratio : Upside down in consideration to
the future silver shortages
Historically, the silver gold ratio has been 1:15, due to the volume
of mining. Demonetization has moved the ratio in favor of gold
(price wise) to 1:73. In future the ratio will get more skewed in
favor of silver as more gold mined increases the above
ground reserves and silver being a wasting asset, becomes rarer.
Over the next 6 to 7 years volume wise this ratio can be expected to come
down to 1:2 and eventually equalize in 12 -13 years.

12. Deficit has overshot the mined silver by almost 100%.

13. On an average the deficit is 38%.

14. Cumulative Deficit
12000
10000
8000
moz
6000
4000
2000
0
43
48
53
58
63
68
73
78
83
88
93
98
03
08
E
E
13
18
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
years
Cumulative Deficit of 65 years at 8.18 boz has reduced the
over ground accumulated silver reserve (of over 5000 years)
by 36.8% to a mere 13.93 boz.

16.  We FORECAST that this DEFICIT IS ONLY GOING TO GET
ACUTE. Availability of silver from the above ground resources
of silver is facing competition from the investment demand for
bullion and coinage and diminishing silver scrap recycling.
 Silver Deficit mainly funded by –
 Government Sales
 Scrap Sales
Almost 65% of silver produced is mined as a by product of
base metal mining like copper (28%), zinc and lead (30%).
Both Lead and Zinc reserves are in a terminal stage like silver
and their reserves are estimated to last not more than 20 – 22
years

17. Silver Demand
 Grew at a robust clip of 6% CAGR from 370 moz in 1984 to
904 moz in 2000. Since 2000, the demand has been
stagnant in a range of 850-950 moz.
 Since 1999, the photography segment (demand of 228 moz
or 26% of total demand) has fallen by almost half to 113
moz in 2008.
 As digital photography becomes ubiquitous, we forecast
that the demand from this segment (which has been
subjected to a de-growth of 6.7% CAGR during the last
decade) is further expected to implode to 10 moz by 2013,
at a de-growth of 17% -19% CAGR.

21. Demand Matrix

22. Shift in demand pattern

23. We FORECAST that total silver demand will grow at a CAGR
of 5% till 2013.
The overall demand contraction is expected to be balanced
out by the growth in newer initiatives in the industrial
segments (which should reach 150 moz by 2013) and
surge in demand for coins (which is expected to grow from
65 moz in 2008 to 169 moz by 2013, CAGR of 16%).

24. Silver Usage
 Moved from being an investment commodity to an industrial metal.
 Traditionally silver usage was more than 54% in photography.
With the advent of digital technology, the usage has diminished
sharply & this demand is further expected to crash sharply as
traditional photography becomes obsolete.
Silver Dem and vs World GDP ex US
30% 7%
25%
6%
20%
15% 5%
10%
% growth
5% 4%
0% 3%
-5%
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
-10% 2%
-15%
1%
-20%
-25% 0%
years
World Silver Demand World GDP ex US

25. Silver Usage 2010
6%
8%
19%
55%
12%
Industrial Applications Coins & Metals Jewelry
Photography Silverware

26. Supply
Silver limited; demand unlimited
Total Supply 2010
4%
6%
20%
70%
Mine Production Scrap Hedging Government Sales

28.  Primary Sources-
1. Pure Silver Mining
2. Copper Mining
3. Zinc-Lead Mining
4. Gold Mining
 Pure silver mines contribute only 28% of the total supply
while the majority of the silver (59%) is mined as a by
product of polymetallic mining (lead, zinc and copper). 11%
comes from gold mines and the balance is from other
sources like producer hedging, etc.
 Mining production : Grown from 542 moz in 1998 to 681 moz
in 2008 ,a CAGR of 2.3%.

29. Silver Production-2010
1.00%
11%
30%
22%
36%
Primary Lead/zinc Copper Gold Other

30. 25
Metal Mining Growth
20
15
10
growth %
5
0
2004 2005 2006 2007 2008 2009 2010
-5
-10
-15
Primary Lead/zinc Copper Gold

31.  Silver scrap recycling has shown flat to negative growth since 1998. D
 Digital photography is killing photo films. The recycling from
photography has been averaging 80 moz (or 50%) of total scrap supply
of 184 moz over the last 10 years.
We FORECAST that post
2013, the total old silver
scrap sales will fall to 100
moz of his source, with
incremental availability
ranging from 10 – 30 moz at
the outside.

32. Above Ground sources – Providing
Sanity to the unbalances
 Over ground silver reserves of 14 boz is a source of
potential supply. But, only 11 boz (comprising of silver
jewelry, silver ware, sculpted silver and artwork) can be
counted upon.
Of this 11 billion, we ESTIMATE that 45% (4.95 boz) is
owned by Indians. We do not expect more than 10 moz
sales per annum from India (which represents 15% of total
India holdings and that too over a period of 10 years).
 We ESTIMATE that balance 55% (6.05 boz) of overhead
reserves has a run rate of approximately 120 moz p.a.
considering current pricing of silver.
We estimate that this could go up by another 40% if prices
were to appreciate considerably. Since silver scrap already
constitutes 100 -110 moz from this source, the
incremental availability varies between 15-65 moz
and depends very highly on the market price of
silver.

34. Summing up we forecast that cumulatively the over ground
reserves of silver can add only between 25 - 65 moz per
annum incrementally.
The seemingly endless supply of 14 boz is but a giant
mirage in the desert.

35. Supply Trends

36. Factors affecting Supply
Top 20 Silver Producing Countries in 2010
(millions of ounces) 1. Geographic Spread
1 Mexico 128.6 18%
2 Peru 116.1 16%
3 China 99.2 14%  Political stability and
4 Australia 59.9 8% government interventions
5 Chile 41 6% remain the key concerns.
6 Bolivia 41 6%
7 United States 38.6 5%
8 Poland 37.7 5%  World government stocks
9 Russia 36.8 5% are almost depleted. The US
10 Argentina 20.6 3% government reserves are
11 Canada 18 3% near zero.
12 Kazakhstan 17.6 2%
13 Turkey 12.3 2%
14 Morocco 9.7 1% Silver is a vital constituent
15 India 9.7 1% of modern warfare and
16 Sweden 9.2 1% industrialization, which
17 Indonesia 6.9 1% would force countries to buy
18 Guatemala 6.3 1% in bulk leading to skewed
19 Iran 3.4 0% demand and higher prices.
20 South Africa 2.8 0%
Total 715.4 100%

37. World's Leading Primary Silver Mines in 2010
(millions of ounces)
Rank Mine/Country Operating Company Prod.
1 Cannington, Australia BHP Billiton 38.6 22%
2 Fresnillo, Mexico Fresnillo plc. 35.91 21%
3 Gümüsköy, Turkey Eti Gümüş A.Ş. 11.46 7%
4 Dukat, Russia JSC Polymetal 11.1 6%
5 Pallancata, Peru Hochschild Mining / International Minerals 10.14 6%
6 Uchucchacua, Peru Compañia de Minas Buenaventura 9.27 5%
7 Arcata, Peru Hochschild Mining 8.1 5%
8 Greens Creek, U.S. Hecla Mining 7.21 4%
9 Imiter, Morocco Société Métallurgique d'Imiter 7.2 4%
10 San Bartolomé, Bolivia Coeur d'Alene Mines 6.71 4%
11 Alamo Dorado, Mexico Pan American Silver Corp. 6.68 4%
12 Pirquitas, Argentina Silver Standard 6.3 4%
13 Palmarejo, Mexico Coeur d'Alene Mines 5.89 3%
14 San José, Argentina Hochschild Mining / Minera Andes 5.32 3%
15 Ying, China Silvercorp Metals 4.32 2%
Total 174.21 100%

38. 2. Stagnant Prices
 Prices of Silver kept lower by way of Government
pumping silver coins in the market.
40
35
30
25
20
15
10
5
0
1945
1951
1957
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
1942
1948
1954
1960
Average Silver Price World Silver Price

39. 3. Mining Issues
 Mining: Subject to under investment for over 20
years.
 M&A curtailed the money available for new exploration
effecting the availability of “specialized” manpower and
modern machinery for cost efficient mining.
 Economies of scale may not work in favor of Silver
miners, till the prices rise, as the volume of silver being
mined and sold is reasonably less as compared to other
base metals.
 60-70% of Silver comes from Base metal mines
 A threat of Silver hoarding by miners to artificially increase the
prices.
 With rising power costs, labor issues and lower ore grades the
mining business is only going to get difficult going ahead.
 Further large minors have been indulging in
“forward sales” and arranging finances against
the same. This could lead to further shrinkage of
supply in an already deficit scenario.

40. 4. Inventory Levels
• Silver ETFs, a double
edged sword.
Silver Stock held with Comex and CBT
160 40
140 35
120 30
• Plummeting Scrap
sales create supply
million oZ
100 25
shortage.
$/oz
80 20
60 15
40 10
20 5
0 0
Stock held with comex and CBT Silver price

41. 5. Silverware
 A potential but secondary source of supply.
 Cumulative demand for silverware since 1998 is
around 900 Moz.

42. Silver Valuation
 History
 Silver always valued in relation to gold.
 Volume ratio of 15:1.

43.  Demonetization of silver in 1873 led to its value loose favor.
 During 1900 - 1942, silver prices remained abysmally low, not only in
absolute terms, but also relative to gold.
Gold silver price ratio kept climbing before it peaked at close to 100.
During this period the ratio ranged between 20-100 with an average
value of 50.3.
Total Supply 2010
4%
6%
20%
70%
Mine Production Scrap Hedging Government Sales

44.  Post World War II Reconstruction increased
its demand.
 Silver scaled to an all time peak of $ 50 and
gold silver price ratio touched its historical
value of 20.

45.  Current Scenario
 Since 1980, silver prices went bearish.
 Gold silver price ratio remained in 31-97 range.
 Of the 14 boz (22.11 boz estimated in 1942) silver, only
about 25 – 65 moz is available (incremental year on
year) at the current suppressed prices.
 Discouraged investor demand and Encouraged industrial
depletion.

46. Valuing future silver
 Current mining production (625-675 moz) cannot satisfy
demand.
 Silver mining reserves are only good for another 10 -12
years.
 Valuing silver by the centuries old yardstick of gold silver
price ratio, we believe the theoretical fair value of this
ratio should be inverse the gold silver volume ratio
available over ground.
 Assuming a linear rate of decay, the gold silver price ratio
of the above ground reserves shows that the ratio
reaches equality at 2025.
 Further the increased investment demand is a source of
negative demand.

48.  True curve will change due to -
 Supply constraints from mining (as the
production profile follows the production tails
of the Gaussian distribution) lowering the
availability of above ground reserves.
 The existing above ground reserves are
fractional and an erratic source, hence the
“adjusted” curve shows lower apparent silver
reserves. Further we believe that
conservatively more than 40% of these
reserves will not be available for
consumption.

49. Key drivers for re rating of the price of Silver
 Entry of momentum players.
 Silver users adjust their low inventory base.
 Only 15 days of supplies
We ESTIMATE that the current fabrication inventories run at 17
moz. Cumulatively the industry will have to purchase between
112.5 to 225 moz as they adjust their inventory levels from the
present 15 days to 90 -120 days (varying between 12.5% to 25%
of total annual industry demand).
 New demand initiatives to spur industrial demand for
silver.

51.  Silver de hedging will accelerate and mining
slow downs will be the order of the day.
 Silver investment as an Inflation hedge and safe
haven from the specter of the falling dollar and
economic doom has already started.
 World wide rebuilding of silver stock piles of
central banks, governments building up
strategic reserves, hoarding by speculators and
private individuals also to keep prices high.
 The second leg of the commodity bull market
has begun.

52. Commodity Bull markets of the past two
centuries have rallied on an average 15-40
years. The present bull market started in 2002
and hence has a long way to go. In our
opinion this commodity Bull Run has
legs to run beyond 40 years.
The increasing global population, development
of the BRIC nations and other Asian countries
and the peaking of global production in most of
the commodities will ensure that the price rise
will be astronomical and will sustain for long.

53. the time to buy silver is now