Silver Service: Aussie silver demand is soaring – can production follow?

• Australia has emerged as the world’s fourth-largest physical silver market
• But local production has been declining for several years
• Can high prices and renewed interest spur local investment?

Australia is not known as a major silver producer, but with interest in silver investment rising, there are a bunch of hopefuls planning to change that.

Almost all of Australia’s silver is produced alongside zinc from mines including South32’s (ASX:S32) Cannington, Glencore’s McArthur River, MMG’s Dugald River and Rosebery, and Perilya and Broken Hill Mines’ (ASX:BHM) respective Broken Hill operations.

Australian silver production was roughly 1000 tonnes last year, the lowest this century.

At the same time, investment interest in silver in Australia has surged in the past five years.

According to a new report by Metals Focus, commissioned by the Silver Institute, Australia is now the world’s fourth-largest physical silver market, overtaking China and Canada since 2020.

In 2019, Australian silver coin and bar demand was just under 3.5 million ounces before surging to a record high of 19.6Moz in 2022.

While demand eased last year, it was still double pre-pandemic averages and is expected to rise 11% this year.

Metals Focus attributed the rising popularity of silver investing to superannuation accounts and the favourable tax structure applicable to physical silver investment products as the main reasons for Australia’s market growth.

“Silver’s relative popularity compared to gold among Australian retail investors is among the highest in the world,” the report said.

“Although gold is often the starting point for investors looking to invest in precious metals, relative allocations to silver are larger than what we see elsewhere.

“To give some perspective, in weight terms, the annual volume of silver retail investment has averaged 15x that of physical gold investment since 2010 and has jumped to 20x since 2020 compared to the global average of 6x (since 2010 and 7x since 2020).”

Can local production keep up?

Polymetals Resources (ASX:POL) recently produced first silver and zinc concentrates from the redeveloped Endeavor mine near Cobar within 12 months of acquiring the operation.

The mine completed its first full month of production in July, with the first shipment expected this month.

Also in Cobar, Manuka Resources (ASX:MKR) is working towards bringing its Wonawinta silver mine back into production by early next year.

The company has defined an 11.2Moz reserve and a 10-year mine plan.

Silver Mines (ASX:SVL) holds Australia’s largest undeveloped silver deposit, Bowdens in New South Wales, which has a resource of 71.7Moz of silver.

While the project experienced a permitting delay, SVL recently submitted documents for the redetermination of the project’s development application, a step managing director Jo Battershill described as “pivotal”.

While already in production, BHM has started drilling at the high-grade Pinnacles resource, with a view to eventually process ore through its nearby Rasp plant.

Pinnacles has a resource of 6 million tonnes at 4.7% zinc, 3.3% lead and 132 grams per tonne silver and an exploration target of 6-15Mt at 2-4% zinc, 3-6% lead and 40-125g/t silver.

In Western Australia, Boab Metals (ASX:BML) is working towards a final investment decision on its Sorby Hills lead-silver project in the current half after lowering capital costs by acquiring the old DeGrussa processing plant from Sandfire Resources.

Sorby Hills has a resource of 47.3Mt containing 1.5Mt of lead at 3.1% and 53Moz of silver at 35g/t.

At an earlier stage but still on the development path, Legacy Minerals Holdings (ASX:LGM) this week kicked off a metallurgical study at its Mt Carrington gold-silver project in northern NSW.

The work will feed into a stage two scoping study, which will be completed by the end of the year.

Advanced exploration plays

While not yet at study or development stage, there are a number of advanced explorers with the potential to head down that path in the near future.

On Tuesday, West Coast Silver (ASX:WCE) announced it was planning to ramp up exploration in the phase two program at its Elizabeth Hill project in the Pilbara after drilling results reported last month included 13m at 1615g/t silver from 62m, including 2m at 10,049g/t silver.

WCE executive chairman Bruce Garlick told Stockhead last week the company still had assays for a further six holes to come in from phase one, but the results returned to date had reinforced the potential for an open pit development scenario.

Elizabeth Hill historically produced 1.2Moz of silver at a head grade of 2194g/t, or 70.5 ounces per tonne, but closed due to low silver prices.

Rapid Critical Metals (ASX:RCM) has cemented its status as a major silver player with the initial acquisition in May of the Conrad and Webbs silver projects in NSW and followed it up this week with the consolidation of the region via the acquisition of the Webbs Consol project from Lode Resources.

The combined project hosts a resource of roughly 67Moz AgEq at a grade of around 400g/t AgEq, which RCM says makes it Australia’s highest-grade silver explorer.

“It’s one of those transformational acquisitions where we’ve locked up this entire silver belt and we’re looking forward to progressing it to where we can get to that magical 100Moz silver number, where you can start to look to become a mine,” RCM executive director Byron Miles told Stockhead this week.

A 2000m drilling program with two rigs got underway at Webbs last week.

Earlier this week, shares in Iltani Resources (ASX:ILT) surged on the highest-grade results to date from its Orient silver-indium project in North Queensland, which included 0.46m at 1267.9g/t silver equivalent.

In late July, Iltani reported an initial resource of 21.6Mt at 100.5g/t AgEq for 18.7Moz contained silver for the Orient West deposit and expects to report an initial resource for the Orient East deposit by early October.

At Stockhead, we tell it like it is. While Broken Hill Mines, West Coast Silver, Rapid Critical Metals and Legacy Minerals are Stockhead advertisers, they did not sponsor this article.