Dear Bill
Your comments regarding the tightness of the silver market has prompted me to write to you and draw your attention to a little known (in Silver bug circles), but fast-growing and potentially disruptive large-scale application for the use of Silver that I have been following for the past few years.

It is a solar thermal technology (as opposed to solar photovoltaic) known as CONCENTRATED SOLAR POWER or CSP for short. This application consists of using flat Silver-coated mirrors placed over large desert areas to reflect and concentrate the sun’s rays onto a single focal point in order to capture the energy and ultimately drive a turbine to produce electricity on a utility-sized scale. A variation on this theme is to use long curved mirrors to heat a liquid passing through a tube at the focal point of the mirror which is then subsequently used to again drive a turbine. Another variation uses parabolic mirrors to drive Stirling engines.

This is not a pie in the sky technology but an improved version of a simple and old technology that was first used by Archimedes over 2300 years ago to burn down Roman warships attacking his native City of Syracuse in Sicily.

The first application in contemporary times was built about 100 years ago in Egypt, with variations on this theme constructed during the last energy crisis of the 1970’s.

There are already large scale projects operating and under way in various countries such as Abu Dhabi, Algeria, Australia, Chile, Egypt, Israel, Morocco, Spain, the US, and others. In fact the list is growing by the day. California alone has a dozen projects in the Mojave desert. This has attracted large investments from companies like Google, Chevron, Khosla Ventures, Idealab, PG&E, FPL and the ubiquitous Goldman Sachs. Leading companies that are driving this field foreword include Abengoa, Acciona Solar, Ausra, eSolar, Solar Millenium, Schott and others together with the world’s leading glass manufacturers such as Pilkington, PPG Industries, Thermo Fisher Scientific and Corning. So there are big players behind this.

The impact on the consumption of Silver is expected to be significant for the following reasons: the average amount of Silver used in producing these mirrors is about 1 gram per square meter. Each project requires SQUARE MILES of mirrors and each square mile would then need about 80,000 oz of Silver. Ausra’s David Mills calculated that in order to supply the United States’ total electricity needs with this non-polluting, renewable and low-cost electricity source, you would need a square of 92 miles on each side, that is, about 8500 square miles. This would require close to 680 million ounces of Silver. Europe would use similar numbers consisting of a square of 110 kilometers on each side as calculated by TREC’S http://www.trecers.net (Trans-Mediterranean Renewable Energy Cooperation initiative) DESERTEC plan with mirrors installed in the Mediterranean countries and North Africa; but the fast-developing rest of the world including China, India, Africa, South America and Middle East would require multiples of that, translating into Billions of ounces of Silver.

No one expects these numbers to be reached overnight but in as much as the production infrastructure required is already in place and the technology relatively mature, the deployment, being a fairly simple assembly of prefabricated modules and installation exercise, could accelerate form here. That in turn would easily put pressure on existing Silver inventories (and it may have already started) as well as future production in competition with other new or growing industrial uses and investment demand.

There is no substitute to Silver in this application as the cheaper Aluminum mirrors cannot reflect the full spectrum of light that is required for the highest efficiency specifications that Silver can and does deliver.

I guess, then, that there is one safe and smart thing to do in view of the circumstances: Start Hoarding.

Best regards
DFK
P.S. For full disclosure, I own Silver but have no financial interest in any of the companies mentioned above.