How Mudgee project can help plug global silver gap

Global silver demand is forecast to jump 16% from 2021 to a record high this year of 1.21 Boz in a report released, fittingly, around the same time as COP27 concluded with a call to accelerate the clean energy transition.

However on the supply side, mined production of the multi-purpose metal is forecast to rise by only 1% to 830 Moz.

That leaves the market in a multi-decade high deficit of 194 Moz, which is also four times the level seen in 2021.

The historic high comes thanks to new peaks in the key areas of industrial demand, physical investment, jewellery and silverware – basically everything but old-school photography and volatility-vulnerable exchange traded products.

The report was presented by British research firm Metals Focus Managing Director Philip Newman and Director of Mine Supply Adam Webb at this month’s Silver Institute’s Interim Silver Market Review.

Green infrastructure and silver platters

Making up nearly half the record total is industrial demand, which is set to expand 5% to 539 Moz in 2022, up from 511 Moz last year, thanks to the switch to electric power and 5G.

“Developments such as ongoing vehicle electrification, growing adoption of 5G technologies and government commitments to green infrastructure will have industrial demand overcome macro-economic headwinds and weaker consumer electronics demand,” the report said.

Physical investment is set to leap by 18% to 329 Moz, a record surpassing even 2020’s Covid-induced run on coins and bars.

“Support has come from investor fears of high inflation, the Russia-Ukraine war, recessionary concerns, mistrust in government, and buying on price dips,” the report said.

Exchange-traded products (ETPs), however, are on track for fall. The report authors attribute this partly to silver’s higher volatility than gold, which has made it more vulnerable to profit-taking. This has followed price rallies of more than 21% in the past two months on expectations about the pace of the US Federal Reserve’s interest rate rises.

Meanwhile anyone who’s been seeing news out of India will know that there’s been a strong rebound in demand from what will next year become the world’s most populous nation.

Silver jewellery and silverware demand is forecast to surge by 29% and 72% respectively to 235 Moz and 73 Moz this year. Reflecting silver’s cultural importance in the sub-continent, this strong uptick is driven in part by inventory replenishment ahead of India’s festive and wedding season.

Mudgee project’s global potential

Set to help fill the gap in this global mix of demand pressures is NSW based Silver Mines (ASX:SVL). With a Mineral Resource of 318 million ounces silver equivalent its Bowdens project is the largest undeveloped silver deposit in Australia and one of the largest in the world – and it’s still growing.

Adding to the buzz around Bowdens, ongoing drilling has indicated the pit has even more scope for greater tonnages of higher-grade mineralisation within the current Ore Reserve in addition to extensions to mineralisation outside the planned open-cut pit.

Managing Director Anthony McClure is just back from presenting the latest news about the project near Mudgee at the invitation-only Precious Metals Conference in Zurich.

He says the open pit operation would have an initial mine life of 16.5 years initially producing about 6 million ounces of silver per year plus zinc and lead as by-products.

Directly below this is a Maiden Mineral Resource Estimate of 42.9 million ounces silver equivalent, which will be used as part of a Scoping Study for potential underground mining scenarios.

That includes 56% of tonnes already in the Measured and Indicated categories, as drilling continues to unearth bonanza grade silver, plus gold, zinc and lead.

Indications of the solid underground potential include intercepts of 4.6 metres @ 460 g/t silver equivalent from 411m with a whopping 1,769 g/t silver equivalent intercept from 414m deep.

Then just a week after the release of the Maiden Mineral Resource SVL announced its widest and highest grade gold so far, with the intercept including 32.6m at 1.37g/t gold, 31g/t silver and 0.38% zinc (2.09 g/t gold equivalent) from just 92.4m. While valuable in itself, gold is also associated with a silver-rich electrum (a naturally occurring alloy of gold and silver), as well as zinc.

Since those results the company identified through seismic data the “Bowdens Caldera” which has defined potential system extensions both close to Bowdens and regionally across the company’s tenure package in central west NSW.

With this expanding knowledge in hand Silver Mines is continuing to explore the extent of the silver and gold zone at Bowdens diamond drilling continuing.

“From what we’re continuing to see underground, and given that it’s all open, I feel confident in saying that this ore body will still be producing silver and providing local jobs in 50 years. It’s that sort of ore body that’s going to continue to deliver. We don’t know the full extent of it yet, but we know that it’s vast.”

This article was developed in collaboration with Silver Mines, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.