Silver bugs say the precious metal’s time ‘is definitely coming’
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Silver has long sat in the shadow of gold as a kind of poor cousin.
Silver is more abundant than gold and found in higher concentrations, but is still considered a precious metal and trades at a far higher price by weight than base metals like nickel and tin.
After hitting levels of around US$40/oz a decade ago prices spent most of the next 10 years at under half those levels.
Exposure to the commodity is sparse on the ASX, and prices have suffered some hard times, largely missing the boom gold miners enjoyed from 2017 to 2020 before spiking upwards during the pandemic.
But there is a feeling amongst the industry that the cycle could be turning. The Silver Institute earlier this year forecast average prices to rise 33% year on year to US$27.30/oz, and at around US$23.75/oz yesterday, decent assets should be making money.
The quality of one long mothballed silver mine in Sweden, the Sala project, even convinced ASX-listed junior Alicanto Minerals (ASX:AQI) to sell up a long-held gold project in Guyana and turn its attention to high grade silver in Scandinavia.
“In the end, you know, all you can really rely upon is the supply versus demand, and I think that silver’s time is definitely coming, whether it’s going to be in the next six months, or in the next six years, I think that it’s definitely coming,” said Alicanto MD Peter George.
George, a mineral economist by trade, says looking for a good, money-making silver deposit goes back to the same three things as most other commodities: grade, size and the state of the market.
“My background, I’m a mining engineer and a mineral economist by training. So I’m more interested in how you actually make money out of these things out of a project, than perhaps say what’s trendy at the time,” George said.
“As far as Sala is concerned, you know, we’ve got the grade, we believe that we’re heading towards the size, but then there’s the ‘what’s coming down the track’ as far as the silver market itself is concerned.
“And I think that there’s a large discrepancy growing between the supply and demand curve going forward.”
Silver lives in two worlds. It is a precious metal and like gold has a large end market in the jewellery industry and as a physical store of wealth.
But it is also an industrial metal. In particular, it is used in solar photovoltaic panels as a conductor to convert sunlight to electricity.
According to The Silver Institute’s World Silver Survey 2021, released in April this year, industrial demand for silver is forecast to hit 524Moz this year, a record 105Moz of which would come from the solar PV sector.
Total demand for silver is predicted to be 1,033Moz, 15% higher than Covid affected 2020.
Supply is expected to be around 1,056Moz, a slight surplus, with mined supply accounting for 848Moz and the bulk of the rest made up of recycled silver.
George said while it was difficult to know what controls the silver price, that supply-demand equation was likely to get better for producers as industrial demand increases from areas like medicine and Solar PV.
“I guess it’s a 50-50 precious metal and industrial metal,” George said. “Silver somewhat benefits from the same sort of thing (as gold).
“But at the same time, the amount of silver that has to go into EVs, has to go into solar panels, into the medical side of things as we go forward, it’s just going to continue to grow. And I don’t think we have the mines to keep up.”
George jokes that sometimes Australian investors in junior mining companies only want to know if you have a gold mine out the back of Kalgoorlie.
“When you when you actually sit down with investors and brokers, and again, back to the basics of grade and size, and then people walk away with eyes as big as dinner plates,” he says.
Alicanto bought Sala in February this year, just 100km down to the road from its other Scandinavian project, the Greater Falun base metals project.
Mined over a period of almost 500 years up to 1962, it delivered an incredible 200Moz of silver at an average grade of 1244g/t and 35,000 tonnes of lead.
It has until now eluded serious modern explorers for a variety of reasons and historic workings stop at around 290m, depths that these days would be considered relatively shallow.
Some hits from historic exploration have come in at 844g/t of silver (a bonanza grade), with the first round of assays from a 14,000m maiden drilling program by Alicanto striking a best hit of 6.8m at 123g/t silver, 2.3% lead and 1.4% zinc from 589.75m, including almost 1m at 348g/t.
Alicanto plans to have a maiden inferred resource by the first quarter of next year.
“Some of the grades that we’re seeing here, you know, up over 10% zinc and you combine that with the high grade silver up to 200-300 or even the 1000 grams per tonne that we’re seeing plus the lead, this this is a no-brainer as far as I’m concerned,” George said. “It’s now up to us to prove the continuity between the drill holes and get the resource together.”
The high grades of lead and zinc, not a metal in favour when the mine was operating back in the 1800s, mean the prospectivity of the project is even starker in gold equivalent terms.
“So they’ve stopped at those levels, they’ve only mined down to the 290m level, but we actually have some drilling 200m along strike, where we’ve intercepted 844g/t silver, 16.1% lead, and a couple of per cent zinc,” George said.
“if you’re going to do your back calculations, it’s something like over three ounces per tonne gold grade along strike.”
Diversified miner South32 (ASX:S32) owns the Cannington silver-lead-zinc mine near Mt Isa in Queensland, which boasts one of the highest grade declared silver resources in the world, containing 20Mt at 173g/t silver, 5.35% lead and 3.28% zinc.
The company, which also produces manganese, coal, nickel and alumina, produces roughly 6% of the world’s silver through Cannington.
Silver Mines (ASX:SVL) is completing a scoping study and mineral resource assessment on underground mining at the Bowdens silver project in New South Wales, due in the first quarter of 2022.
It is already in the latter stages of the approvals process for an initial open pit development.
Thomson Resources (ASX:TMZ) bought the Webbs and Conrad silver projects in Northern New South Wales from Silver Mines earlier this year.
It has built a large hub of silver, gold and tin assets, declaring a 20.7Moz silver equivalent resource for Conrad and purchasing the Texas and Silver Spur silver projects, from which 3.6Moz of silver have historically been produced.
Investigator Resources (ASX:IVR) meanwhile is aiming to complete a PFS on its Paris silver project in South Australia this quarter, where it recently presented an updated resource of 18.8Mt @ 88g/t silver and 0.52% lead for 53.1Mozs silver and 97.6kt lead.
$5.2 million capped minnow Lode Resources (ASX:LDE) also saw its shares jump 11.1% after announcing it had kicked off a 1500m drilling program at the Webbs Consol silver project, near Thomson’s suite of Lachlan Fold Belt assets.
At Stockhead, we tell it like it is. While Alicanto Minerals and Thomson Resources are Stockhead advertisers, they did not sponsor this article.