Globe says Fortuna Silver cut to "sector performer"

2014-03-19 07:40 ET - In the News

The Globe and Mail reports in its Wednesday, March 19, edition that CIBC World Markets analyst Leon Esterhuizen downgraded Fortuna Silver Mines ($4.26) to "sector performer" from "sector outperformer" with an unchanged price target of $5. The Globe's Darcy Keith and Jody White write in the Eye On Equities column that Mr. Esterhuizen says he is uncomfortable with the strong rally in silver stocks this year, given that they have far outpaced the rise in the price of the precious metal at a time when there are mixed signals about the strength of investment demand for the commodity. While the silver price is up 10 per cent so far this year, silver equities have surged between 25 per cent and 60 per cent, notes Mr. Esterhuizen. Some of this may be explained by the underperformance of the silver price relative to gold and the belief that silver's leveraged relationship will push the metal price higher in the not-too-distant future. The gold/silver ratio is 65 times, above the 12-year average of 60 times, suggesting silver may be undervalued relative to gold. But Mr. Esterhuizen thinks fundamentals for silver may not be painting such an optimistic picture. He says investment demand is providing mixed signals.