Manuka Resources has joined the exclusive club of primary silver producers in Australia after the initial processing of ore stockpiles totalling 515,000t kicked off this week at the Wonawinta Silver Project in New South Wales.

The move marks a significant milestone for the company, and for Australia more broadly, with South32’s Cannington Mine being the only other primary silver producer in the country.

Since purchasing the plant, Manuka (ASX:MKR) executive chairman Dennis Karp said it has taken the company a little over five years to return Wonawinta to the production of silver, with recent efforts having focused on resolving metallurgical issues encountered by previous owners.

“We have invested further into the plant, have completed all the major capital upgrades, and wet commissioning is now underway,” he said.

“Manuka is now well positioned to secure improved recoveries and production efficiencies well in excess of what previously was achieved.”


A stand-out from the rest

The company will be producing around five tonnes of silver per month from the processing of stockpiles with room to increase production further in the event MKR decides to begin mining the Wonawinta deposits.

With a silver resource recording 50.94Moz, excluding the stockpile, Karp said a silver reserve is in the works and targeted for release around mid-2022.

“That will provide clear guidance to the market about our Wonawinta mining plans for late 2022 onwards,” he said.

As it stands, Karp explained the plan is to produce physical silver metal ingots in ‘dore’ form which is unrefined silver of around 90-95% purity, further differentiating themselves from their peers.

Manuka Resources
Pic: Wonawinta Silver Project

“The majority of other ASX listed silver companies are explorers or emerging producers and are still a number of years away from getting into production,” he said.

“There are certain ASX listed companies who do produce silver, but that is in a concentrate form (as opposed to metal) alongside other commodities such as lead or zinc.

“If you want direct silver exposure as an investor, the choice will become quite simple.”


Market outlook

While pricing of silver has lagged since highs of USD$50/oz silver back in April 2011, the price finally broke above US$20 in July 2020 and has been above that level ever since.

“This makes for an AUD/silver price of >A$33/oz silver, which is good for Manuka,” Karp said.

“We remain very optimistic on the longer-term fundamentals for silver – annual gold production is around 150 million ounces per year and all used for jewellery and investment purposes.

“But annual silver production is around 1 billion ounces per year and around 50% is for industrial application while the balance 50% is for jewellery and investment, it is also forecast to be in deficit this year.”

In pure quantity terms, Karp explained around seven times the volume of silver is produced as that of gold.

“When discounted for industrial application, around 3.4 – 4 times the volume of silver in ounces is retained for investment and jewellery as that of gold and it remains an ongoing puzzle to silver bulls why the gold silver ratio in price terms is around 77 times (i.e. 1 ounce of gold = the same value as 77 ounces of silver).

“There are a number of primary gold producers (this means that gold production is their primary source of income) but very much fewer primary silver producers with silver normally siting alongside other metals/base metals contained in the same ore body.

“This makes increasing silver production when required, far more complicated as the fundamental business case for expansion will be determined by the sum of returns from the basket of metals contained in the orebody, not just silver.”


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