Here are 3 ways the green transition has supercharged silver demand, and who’s in the hot seat
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As investors assess opportunities in the wake of COP26 and its commitments to rapidly scale up clean technology, “poor man’s gold” is set for an extreme green makeover in three key areas.
The World Bank has forecast that by 2050 silver consumption in energy technologies could reach more than 50% more than current total demand (forecast at 1,033 million ounces in 2021) – putting a tight squeeze on supplies for traditional bars to stash and coins to stack. More than 95% of this increase is due to an expansion of solar power generation.
Photovoltaic (PV) cells, which are the building blocks of solar panels, already account for approximately 100 million ounces of silver a year, about 10% of total demand, according to Silver Institute and Nasdaq research. This figure’s up from 55 million ounces in 2012.
Manufacturers have made efforts to reduce costs through innovations that require less silver. However due to it being the most efficient electricity-conducting metal, while not being able to catch fire easily and relatively light to put on roofs, these thrifting efforts are currently constrained.
They’re also likely to be offset by the forecast further upsurge in solar panel production, which is being encouraged by incentives from major governments including those in Australia and the US.
While there’s a lot of buzz around lithium, nickel and cobalt, silver’s super conductivity makes it increasingly important as car makers accelerate their production of EVs.
The automotive industry currently uses about 61 million ounces of silver per annum across vehicles’ electronics systems, according to research published by the Silver Institute this year. However that figure is set to ramp up to 88 million by 2030, when the International Energy Agency forecasts there could be 230 million electric vehicles on roads worldwide.
The ramp-up in silver consumption is due to battery electric vehicles (BEVs) using 25-50 grams of the metal in each vehicle. That’s up from 15 to 28 grams per internal combustion engine (ICE) light vehicle (depending on make and model), and 18-34 grams per light hybrid vehicle, based on Silver Institute research.
Also requiring a large amount of silver are charging points and charging stations, which in the US just received a US$7.5 billion boost thanks to President Biden’s recently signed infrastructure bill.
All this means that EV-generated silver demand could grow to more 105 million ounces, or upward of 10% of total silver demand globally.
While vital for global connectivity modern economies now rely on, 5G technology, including the Internet of Things (IoT), also offers many opportunities to increase energy efficiency and reduce waste of resources such as water.
Integrated circuits (ICs)/chips, smartphones, IoT and other devices essential to 5G are expected to more than triple annual silver demand from 7.5 million ounces today to 23 million ounces by 2030.
Meanwhile advances towards 6G are already well underway and this next generation of wireless could lead to even greater demand for silver.
Silver mine production has been falling since 2016. While is it forecast to be up 8% in 2021, at 1,056.3 million ounces, that comes after last year’s mine shutdowns due to COVID-19 – and the pandemic-related 8% uptick in physical investment.
Even with the projects now under development, analysis by Sprott forecasts that supply will not keep up with the growing demand.
Given the silver supply outlook remains stable, there’s potential for a significant deficit in the silver market in the years to come, with implications for prices and investment demand.
Pure play silver miners are a rare find on the ASX, with the metal usually a secondary product at Australian projects.
The largest silver development project in Australia and one of the largest globally is owned by Silver Mines (ASX:SVL).
The Bowdens project in central New South Wales, comprising 2,007sqkm of titles, has a current JORC-compliant resource base of 275 million ounces silver equivalent (Ag Eq).
Bowdens is well advanced, with production expected in 2023-24. It has received positive responses from regulators and stakeholders, and is now awaiting final approval from the NSW Government.
Manuka Resources (ASX:MKR) this week announced another month of strong gold sales and profitability from its Mt Boppy operation in the prolific Cobar Basin of NSW.
After four months of excellent cashflow generation, Manuka will make a further principal repayment of US$1 million against its existing debt ahead of schedule. This will leave MKR debt free when it starts producing 2 million ounces of silver per annum from its 52 million ounces silver resource in Q2 CY 2022.
Additionally, Manuka is processing its own gold ore through the company’s recently modernised 850,000 tonne of metal per annum on site processing plant.
As well as copper and gold projects, Investigator Resources (ASX:IVR) owns the Paris silver project, which has a total mineral resource estimated 18.8Mt @ 88 grams per tonne (g/t) silver.
Anything over about 50g/t is generally considered high-grade when it comes to silver.
Alicanto (ASX:AQI) last month announced a “world class” intersection following a drilling program at its Sala silver-lead-zinc project in Sweden. Historically one of the world’s highest grade silver mines, Alicanto’s drill hits there included 87m at 40g/t silver and 5.3% zinc, as well as an intersection of 6812g/t silver.
Alicanto is also preparing to release a maiden inferred resource estimate next quarter.
Also in Europe is Adriatic Metals (ASX:ADT), advancing the Vares polymetallic project in Bosnia and Herzegovina after releasing its DFS in August followed by its Environmental & Social Impact Assessment last month.
Phase-two metallurgical test work has shown the project can produce concentrate grading 25.1 per cent copper and containing significant quantities of payable silver (9,550g/t) and gold (20.9g/t).
Mithril Resources (ASX:MTH) is drilling in the historic gold and silver producing district of Copalquin, Durango, Mexico.
Mithril hit a 6.8m intersection grading 841g/t silver and 74g/t gold from just 35.2m in June. This included a higher-grade zone of 2.1m at 2,554g/t silver and 235g/t gold from 37.9m.
Large cap silver miners include South32 (ASX:S32), which mines silver at its Cannington site in Queensland, producing at a rate of 3 million ounces a year.
Sister company BHP (ASX:BHP) has some silver production from its Olympic Dam mine in South Australia that is better known for its uranium-copper output.
At Stockhead, we tell it like it is. While Manuka Resources, Silver Mines and Alicanto are Stockhead advertisers, they did not sponsor this article.