Could it be a case of Hi-ho, Silver! Away! in 2022?

A bunch of ASX juniors who have been working on silver development projects are hoping it is, after the metal’s strong performance in 2021 on rising industrial and investment demand.

Silver averaged $US25 an ounce in 2021, a 19% improvement of the 2020 average of $US21 an ounce.

The price is now back at $US23.31 an ounce, or $32.67 in Aussie dollars. Generally speaking, a price of more than $A30 is enough incentive to get cracking on bringing a silver-dominant mine into production.

But the developments would be all that much easier to finance if silver moved higher still. A couple of extra bucks on the price would also fire up investor interest in the junior silver space, one with lots of projects but no production at present.

The just released 2022 outlook report from the Silver Institute in Washington would have warmed the hearts of the silver developers, certainly from a demand perspective.

The industry group said the outlook for silver demand is “exceptionally promising,” with demand forecast to rise by 8% to a record of 1.11 billion ounces, causing a small supply deficit in the process.

“The increase will be driven by record silver industrial fabrication, which is forecast to improve by 5% as silver’s use expands in both traditional and critical green (solar panels, EVs, 5G) technologies.’’

Meanwhile, physical silver investment demand (silver bar and bullion coin purchases) is projected to climb 13% to a 7-year high. Silver’s use in jewellery and silverware was forecast to rise by 11% and 21% respectively.

But will the strong demand outlook translate into higher prices? The poor man’s gold, as silver is often called, faces the same challenges as gold does once the US starts raising interest rates to tame inflation, the friend of precious metals.

“Macroeconomic and geopolitical conditions will generally support precious metals prices in the first half of this year. However, once the pace of US policy rate hikes becomes more evident, the price outlook becomes more challenging,’’ the institute said.

”Overall, the 2022 annual average silver price is forecast to be $US24.80, one per cent lower than 2021’s average price of $US25.14. Even so, it will still represent a historically high annual average,’’ the institute said.

Like all standing forecasts on base and precious metals, all bets are off should Russia invade Ukraine. Russia is a big producer of all of the key metals and its removal from global supply chains would be telling.

Silver mining playbook

Garimpeiro has had a look around the ASX and come up with three silver developers looking to get into production. His interest is driven by silver’s strong demand outlook, and the safe haven/currency attributes it shares with gold in a world on edge over Ukraine.

SILVER MINES (ASX:SVL): Trading at 20c for a market cap of $258 million. The company is in the final stages of securing government approvals for its Bowdens silver-zinc-lead project near Mudgee in central NSW.

The development projects ranks as one of the biggest globally with a resource base of 275 million ounces of silver equivalent. The initial 2 million-tonne-a-year mining and processing operation would produce 6 million ounces of silver equivalent annually in its early years at a cash cost of $US9.15/oz.

It’s one to watch as the approvals process concludes, and as the on-going exploration upside at the project is chased down.

INVESTIGATOR (ASX:IVR): Trading at 5.8c for a market cap of $77 million. The company released a pre-feasibility study for its 100% owned Paris silver project in South Australia in November.

Among other things, the study highlighted the powerful earnings leverage the 53 million ounce deposit would have to a rise in silver prices.

Using a $A34.30 an ounce price assumption, net pre-tax cashflow over a mine life of five years comes in at $335 million. At a $A38 an ounce it becomes $442 million over a seven-year mine life.

THOMSON RESOURCES (ASX:TMZ): Trading at 6.9c for a market cap of $40 million. The company has been busy pulling together a bunch of silver deposits (along with gold and base metals) in the New England fold belt straddling NSW and Queensland.

It is in process of recalculating modern-day resource estimates for the deposits in support of its plan to develop a central processing plant. The first of the resource estimates is close at hand and metallurgical testwork at one the key deposits recently returned excellent results, de-risking the project.