Silver is proving its worth as more than just a hedge against inflation, with the precious metal set to be in much higher demand over the next few decades as its importance in a low carbon economy is increasingly realised.

Jessica Fung, head strategist at Switzerland-based Pala Investments, which invests in mining projects tied to decarbonisation, recently told Bloomberg that the energy transition was driving the next “commodity supercycle”.

“It is a decades-long transition, but the time to invest and make money is this decade,” she said. “The time is now.”

BloombergNEF estimates the transition could require as much as $173 trillion in energy supply and infrastructure investment over the next three decades.

And silver is high up on the list of metals that will benefit from this transition.

The Silver Institute predicts the 98 million ounces of silver consumed by solar photovoltaic (PV) panels in 2020 needs to at least double by 2030.  This is likely to have a material impact on silver’s supply/demand balance given, in 2020, global mine production registered its fourth consecutive annual decline, its most significant drop of the last decade, falling by 5.9% to 784.4 million ounces.

Essentially, more countries are installing at least 1GW of new PV capacity, which requires about 16.8 tonnes of silver, according to BloombergNEF.

Meanwhile, auto-related silver demand is tipped to reach 88 million ounces or 2,700 tonnes by 2025.

Silver’s conductivity and corrosion resistance make it essential in almost every electrical connection in an EV. Average vehicle silver loadings are also higher in EVs.

Internal combustion engines (ICE) are estimated to use around 15-28 grams per vehicle, and in hybrid vehicles it’s around 18-34g per vehicle. For EVs it’s higher still – at around 25-50g of silver per vehicle.

So with this rapidly rising demand, there’s no better time for a junior resources company to be preparing to start producing silver.

Banking cash, slashing debt

Manuka Resources (ASX:MKR) is already banking cash and slashing debt through gold production from its Mt Boppy mine in NSW’s Cobar Basin ahead of its pivot to primary silver production from its Wonawinta mine in the same region.

This time last year Manuka had a resource of 38,763oz of gold at Mt Boppy. Over the past 12 months that has grown to 49,900oz even after allowing for the mining of 17,606oz.

Manuka previously flagged it expected to produce 10,000oz more gold than its original forecast at the time of its IPO thanks to increased grades and mining and haulage efficiency gains.

July and August set the stage for a strong September quarter, with Manuka adding $4.6m to its coffers. The company is expecting another exceptionally strong month of gold production in September.

By the time the company finishes mining at Mt Boppy in November, it will have produced roughly 36,000oz of gold and still have around 30,000oz remaining in the resource.

Reclaiming the mantle of Australia’s largest primary silver producer

Manuka expects to be debt free once gold production at Mt Boppy is complete, setting the company up nicely as it transitions to silver production at its Wonawinta mine.

The Wonawinta silver project was previously the largest producer of primary silver in Australia. Manuka plans to resume the production of silver doré in early 2022, following the completion of production at Mt Boppy.

The company will start with production from the 515,000 tonnes of Wonawinta stockpiled ore, which has a high grade of 70 grams per tonne (g/t) and is not included in the resource estimate.

This will be followed by the processing of a further 200,000 tonnes of stockpiles that are also close to the plant.

The added bonus for Manuka is that there is no mining cost associated with the stockpiles because they are already out of the ground and on the ROM pad.

Once all the stockpiles have been processed, Manuka expects to start mining its existing silver resource.

New South Wales is a notoriously hard jurisdiction to permit and build a new mill and Manuka’s Wonawinta mill is shaping up as a key piece of infrastructure with significant regional strategic value given its location in the prolific Cobar Basin. Apart from gold and silver it can be easily expanded and modified to treat base metal ores.

Manuka is also continuing exploration at both Wonawinta and Mt Boppy.


This article was developed in collaboration with Manuka Resources, 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.