SILVER

INTRODUCTION
Silver (Ag) - is a metallic chemical element and a soft, white, lustrous transition metal. It has the highest electrical conductivity of any element and the highest thermal conductivity of any metal. Silver is very ductile and malleable with a

Silver is found in native form, as an alloy with gold, and in ores. The principal sources of silver are the ores of copper, copper-nickel, lead, and lead-zinc obtained from Peru, Mexico, China, Australia, Chile, Poland and Serbia. Peru and Mexico have been mining silver since 1546 and are still major world producers. Top silver-producing mines are Proao / Fresnillo (Mexico), Cannington (Queensland, Australia), Dukat (Russia), Uchucchacua (Peru) and Greens Creek mine (Alaska). The metal is primarily produced through electrolytic copper

is at least 99.9% pure, and purities greater than 99.999% are available. In 2008, Peru was the worlds top producer of silver, closely followed by Mexico.

PRIMARY APPLICATIONS
together represent more than 95 percent of annual silver consumption. Traditional uses Coins Silver has been used as a medium of exchange thus interchangeably used with term money. Until late 19th century, most nations were on a silver standard with silver coins forming the main circulating currency. Although gold was also used in coinage, its higher value was not practical for everyday payments. Today, Mexico is the only country currently using silver, albeit in small amounts, in its circulating coins Silver-based photography is based on light in light intensity form negative images which can then be processed into paper pictures by using silver-imbedded paper. Because of the growth of digital photography, the use of silver-based imaging by consumers has been

Silverware & table settings Silver jewelry for its brilliant luster and of its ease of fabrication is make silver ideal for jewelry also cross over into silverware. uses & Bearings - Many batteries - rechargeable and disposable - are manufactured with silver alloys as the cathode. Steel ball bearings electroplated with silver have greater fatigue strength and load carrying capacity than any other type. Brazing and Soldering - Silver facilitates the joining of materials - called brazing when done at temperatures above 600 degrees Celsius and soldering when below - and produces naturally smooth, leak-tight and corrosionresistant joints. televisions, microwave ovens, computer keyboards, conventional switches, printed circuit boards etc.

INTERNATIONAL SCENARIO
GLOBAL PRODUCTION
Global mine production rose by almost 4% in2009, its seventh straight annual increase to reach a record high of 709.6 Million ounces (Moz). Output was driven higher by strong production increases in several Latin American countries as mining projects, many of which are primary silver producers, came to fruition, and by higher output in Asia, principally from China and Turkey. Rank 1 2 3 4 5 6 7 8 9 10 Country Peru Mexico China Australia Bolivia Russia Chile USA Poland Kazakhstan Production (2009) (millions of ounces) 123.9 104.7 89.1 52.6 42.6 42.2 41.8 39.8 39.2 21.7 Rank 11 12 13 14 15 16 17 18 19 20 Country Canada Argentina Turkey Sweden Morocco Indonesia India Guatemala Iran South Africa Production (2009) (millions of ounces) 19.6 17.1 14.0 8.7 8.3 7.7 7.3 4.2 3.5 2.6

GLOBAL SILVER MINE PRODUCTION

Sr. No. 1 2 3 4 5 6 7 Year 2003 2004 2005 2006 2007 2008 2009 Global Mine Production (Moz) 600.6 621.1 643.8 647.4 670.6 680.9 709.6

Factors - Supply
Silver mine production rose by 4% to 709.6 Moz in 2009. Rise was mainly from primary silver mines and as a byproduct of gold mining. Regionally, the strongest growth stemmed from Latin America, where silver output increased by 8 percent, with the most visible gains recorded in Argentina and Bolivia. Peru was the worlds largest silver producing country in 2009, followed by Mexico, China, Australia and Bolivia. All of these countries saw increases last year except for Australia, where output from the lead/zinc sector declined markedly. World silver mine production is expected to rise by 3% y-o-y in 2010, lifted by strong output from gold by-product mines. Scrap supply forecast to rise by 11% in 2010, despite ongoing declines from the photographic sector. This is relatively price inelastic, as are the other two main sources of scrap recycling industrial scrap and jewelry scrap. Net silver supply from above-ground stocks dropped by 86 percent to 20.2 Moz in 2009, driven mostly by the surge in net investment, higher de-hedging, lower government sales and a drop in scrap supply. With respect to scrap supply, 2009 saw a 6 percent decrease over 2008s represented the third consecutive year of losses in the scrap category. Government sales set to rise in 2010. Global primary silver supply recorded a 7 percent increase to account for 30 percent of total mine production in 2009. Overall supply expected to rise by 5% in 2010. to a 13-year low of 165.7 Moz. This

SUPPLY FROM ABOVE GROUND STOCKS

2009 (ACTUAL)

1%

19%

80%

Mine Production Scrap Government Sales

(Million Ounces) Bullion Implied Net Disinvestment Net Producer Hedging Net Government Sales Sub Total Bullion Old Silver Scrap TOTAL

2008 -48.2 -11.6 27.6 -32.1 176.0 143.9

2009 -136.9 -22.3 13.7 -145.5 165.7 20.2

WORLD SILVER SUPPLY (IN MILLION OUNCES)

SUPPLY Mine Production Net Government Sales Old Silver Scrap Producer Hedging Implied Net Disinvestment TOTAL SUPPLY 2000 591.0 60.3 180.7 87.1 919.1 2001 606.2 63.0 182.7 18.9 870.9 2002 593.9 59.2 187.5 12.6 853.1 2003 596.6 88.7 183.9 869.3 2004 613.0 61.9 183.7 9.6 868.2 2005 636.8 65.9 186.0 27.6 916.3 2006 640.9 78.2 188.0 907.2 2007 664.4 42.5 181.8 888.7 2008 684.7 27.6 176.0 888.3 2009 709.6 13.7 165.7 889.0

FACTORS-DEMAND
Sources of Silver Supply

Primary Gold
3% 0% 18% 9%

20%

22%

Pb/Zn Copper Other

28%

Govt sales (net) Old Scrap

Total fabrication demand was lower by 11.9% in 2009 primarily due to global Total fabrication demand forecast to be around 10% higher y-o-y in 2010.

crises.

Fabrication demand totaled 729.8 Moz and industrial demand posted 352.2 Moz in consumption. Industrial is expected to recover b y 18% in 2010.

inventory cuts in the industrial supply pipeline, combined with a protracted decline in end-user orders, for example from a far weaker automotive industry, were the primary reason for lower industrial demand last year. Photographic demand continues to contract, mainly due to ongoing substitution by digital technology. Implied net silver investment increased by a staggering 184 percent to 136.9 Moz last year, recording its highest level in the past 20 years. While overall jewelry demand dipped slightly by only 1.1 percent in 2009 to 156.6 Moz, India and China posted Silverware demand reversed the trend of the last decade rising by a respectable 4.6 percent to 59.5 Moz, largely due to a surge in Indian fabrication. Jewelry & Silverware demand combined will decline marginally y-o-y in 2010. Coin demand will continue to rise.

2009 (ACTUAL)
9% 9% 41% 14% 3%

Industrial Jewelry & Silverware Investment Coins Photograph De Hedging

24%

WORLD SILVER DEMAND (IN MILLION OUNCES)

DEMAND Fabrication Industrials Applications Photography Jewelry Silverware Coins & Medals Total Fabrication Producer De-Hedging Implied Net Investment TOTAL DEMAND 374.2 218.3 170.6 96.4 32.1 891.7 27.4 919.1 335.6 213.1 174.3 106.1 30.5 859.4 11.4 870.9 340.1 204.3 168.9 83.5 31.6 828.3 24.8 853.1 350.8 192.9 179.2 83.9 35.7 842.4 20.9 6.0 869.3 367.6 178.8 174.8 67.2 42.4 830.8 37.4 868.2 407.0 160.3 173.8 67.5 40.0 848.7 67.6 916.3 427.0 142.4 166.3 61.0 39.8 836.4 6.8 64.0 907.2 456.1 124.8 163.5 58.4 39.7 842.5 24.2 22.0 888.7 443.4 104.9 158.3 56.9 65.2 828.6 11.6 48.2 888.3 352.2 82.9 156.6 59.5 78.7 729.8 22.3 136.9 889.0
5

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Investment Summary
investment demand has seen the same support from events driving gold investment, namely: US dollar commodities as an asset class. price has acted as an with silver also regarded as an industrial metal recovery and fast growth in countries such as China. from economic

greater volatility and trading range than gold makes it attractive to certain investors Small market size value of total supply forecast at less than $19bn in 2010 compared to $170bn for gold means silver price is very highly World Trading Markets is predominantly traded on the London Bullion market Association (LBMA) and COMEX in New York. is the global hub of over-the-counter (OTC) trading in silver and is the main physical market. A bidding process is the US based futures and options exchange that operates as a Designated Contract Market (DCM) for the CME group, and is a primary platform for Silver as well as Aluminium, Copper & Gold derivatives.

Silver Statistics
2007 London Prices (US$/Oz) Daily Fix Parity (London) Prices India (Rupee/Oz) COMEX - Futures Contracts Stocks (Moz) Vol (million contracts) OI ('000 contracts) 129.2 7.6 120.9 134.1 8.3 124.1 117.6 7.8 105.1 108.6 12.5 129.6 97.3 11.8 134.5 107.8 13.3 142.6 105.8 1.3 136.9 102.9 1.4 123.4 553.86 646.87 714.88 929.09 884.36 1198.71 1346.28 1308.67 13.39 15.02 14.65 20.16 18.96 26.43 29.35 28.4 2008 2009 2010 3Q2010 4Q2010 Dec-10 Jan-11

CFTF (Futures only data) NON COMMERCIAL Net Positions Other Indicators Gold/Silver Ratio 52.3 60.89 65.07 60.9 62.2 49.4 47 46.6 30,780 33672 30407 36412 38875 34351 32119 28226

Silver Imports (tonnes) USA UK Japan India Italy Hong Kong China (Exports) 4985 2943 1389 1958 1235 3972 -4500 4676 2809 1909 5048 926 3082 -4043 3775 4638 1200 1259 701 2671 -3554

DOMESTIC SCENARIO
imports its entire Silver requirement. Gujarat & Jharkhand are the three silver producing states. Production ranges from 15 MT to 55MT. demand for silver in India is close to 2500MT - 3200MT comprising 50% demand from Industry, 39% from Jewelry & Silverware, 9% from Coins & 1% each from photography & Net implied investment. of the total demand is met through imports, 18.8% from secondary silver & 2.5% from Hindustan Zinc which is the largest producer of silver in India. is worlds largest importer of Silver. 2009, silver imports were about 1000 MT, lower as compared to 2008 due to high silver prices. is estimated that silver imports will be around 1200 MT in 2010. of the imports close to 50% is from China. SILVER STEP 1 SPOT PRICE ($) (XAG) BANK PREMIUM ($) CONVERSION STEP 2 STEP 3 RUPEE:DOLLAR (EXCHANGE RATE) IMPORT TAXES CONVERTED SILVER PRICES Note: Above rates prices are indicative & subject to change depending on market conditions. = = = = 35.7 0.02 32.15 1148.42 45.15 51851.37 1545 53396.37

Important Links
www.gfms.co.uk www.lbma.org.uk www.nymex.com www.tocom.com.jp www.silverinstitute.org

NCDEX SILVER FUTURES CONTRACT SPECIFICATIONS

Name of Commodity Ticker symbol Trading System Basis Unit of trading Delivery unit Quotation/base value Tick size Quality Quantity variation Delivery center Additional delivery centres Trading Hours Silver SILVER NCDEX Trading System Ex - Ahmedabad inclusive of Custom Duty, exclusive of local sales tax/VAT, and any other charges and levies 30 Kg 30 kg Re. 1 List of approved is available at: +/- 10 per cent at bar level. Ahmedabad (Within a radius of 50 Km from the municipal Limits) None As per directions of the Forward Markets Commission from time to time, currently Mondays through Fridays : 10:00 AM to 11:30 PM Saturdays : 10:00 AM to 02:00 PM On the expiry date, contracts expiring on that day will not be available for trading after 5 PM. The Exchange may vary the above timing with due notice. Tender Date T Tender Period: Tender period would start from one working day other than a Saturday, prior to the last working day of the calendar month prior to the expiry date of the contract. Pay-in and Pay-out: on a T+1 basis. If the tender date is T then, pay-in and pay-out would happen on T + 1 day. If such a T + 1 day happens to be a Saturday, a Sunday or a holiday at the Exchange, clearing banks or any of the Expiry date of the contract: The contract expires on the 3rd of the expiry month. If 3rd happens to be a Saturday or holiday then the contract will expire on the succeeding working day. The settlement of contract would be by a staggered system of Pay-in and Pay-out including the Last Pay- in and Pay-out which would be the Final Settlement of the contract. Upon expiry of the contracts all the outstanding open positions should result in compulsory delivery. The penalty structure for failure to meet delivery obligations will be as per circular no. NCDEX/TRADING086/2008/216 dated September 16, 2008. During the Tender period, if any delivery is tendered by seller, the corresponding buyer having open position and matched as per process put in place by the Exchange, shall be bound to settle by taking delivery on T + 1 day from the delivery centre where the seller has delivered same. Clearing and settlement of contracts will commence with the commencement of Tender Period by compulsory delivery of each open position tendered by the seller on T +1 to the corresponding buyer matched by the process put in place by the Exchange. Upon the expiry of the contract all the outstanding open position should result in compulsory delivery. Trading in a new contract will open on the 1st day of the month in which any contract is due to expire. If the 1st happens to be a holiday, contracts would open on the succeeding working day. As per launch calendar

Tender Period

Due Date/ Expiry Date

Delivery

Closing of contract Opening of contracts No. of active contracts

Price band In case of price movement in International markets which is more than the maximum daily price limit (currently 9%), the same may be further relaxed in steps of 3% with the approval of FMC. Member-wise position limit - Maximum of 300 MT or 15% of market-wide open position whichever is higher For all silver contracts combined together. Client-wise position limit - 60 MT For all Silver contracts combined together. to case basis.

Position limits Quality Allowance (for Delivery) Special margin Additional margin Final Settlement Price Maximum Order Size

Exchange, may be imposed on either the buy or the sell side in respect of all outstanding positions. Removal of such Margins will be at the discretion of the Regulator/Exchange. In addition to the above margins the Regulator/Exchange may impose additional margins on both long and Regulator/Exchange The Final Settlement Price shall be the last spot price of the day as polled by the Exchange on the last trading day of the contract 1500 Kgs.

For further details, please refer to the NCDEX website http://www.ncdex.com/ Contact our Product Managers for any queries/information: Prashant Reddy : 09910995919, Somesh Vaidya : 09819161117