Ann: A$14 Million Silver Hedge Financing , page-7

BNP Paribas obviously thinks the price of silver is about to go on a tear.

It has agreed to pay $US20.58 an ounce for 680,000 ounces of the white metal to be delivered from December through to June 2012. That compares with a closing price on Friday in New York of $US20.79/oz (although intraday it poked its head above $US21/oz).

The deal is with Jabiru Metals which will bank $14 million upfront under the hedging deal, money it can well use to speed its mine development program. The 680,000oz is 60 per cent of its forecast silver production over the period of the BNP deal, which at least leaves 40 per cent of output exposed to spot prices. But, then, it?s the guy with the money to lend who calls the tune.

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And The Wall Street Journal has been taking an interest in silver, beginning one recent report by saying that what it calls ?the poor man?s gold? was about to shine.

In fact, silver?s gains are outpacing those of gold these days - up 17 per cent in the past four weeks, up 24 per cent this year. So far.

At Friday?s close, an ounce of gold was worth 61 times that of the equivalent measure of silver.

Compare that to the 19th century ratios set by the US and France of gold being fixed at around 15 times the value of silver. In 2007, the ratio was 50:1.

The last big run for silver coincided with the huge surge in gold prices in 1979 and 1980. Silver?s high in 1978 was $US6.31/oz, then it went to $US34.45/oz in 1979 and burst out to soar to $US48.70/oz in 1980, but collapsing (along with gold) the next year, back to $US16.29/oz.

But here?s the thing: even at its maximum in 1980, the silver-gold ratio was 37.4:1. That suggests that, in this bull market for precious metals, silver is still lagging substantially with the concomitant potential for catching up to its historical relationship with the yellow metal.

All investors have to do is wait for the US to start its money printing presses again - the only option that Washington has if it needs a new phase of stimulus.

Then watch the precious metals with all that extra, and increasingly depreciated, paper money flying around.