Sun’s shining on this pure play silver company seeking admission to the ASX

Industrial demand for silver – especially for solar panel manufacturing – is expected to drive demand growth
Existing supply will be unable to meet this increase in demand
US moving to put tariffs on imported solar PV panels
Sun Silver’s Maverick Springs project is ideally placed to meet silver demand growth in the US

Silver is one of the success stories of 2024, as awareness about its use in solar panels starts to percolate into investor consciousness and ASX hopeful Sun Silver is keen to be one of the few pure play silver companies to benefit from this attention.

The precious and industrial metal has slightly outpaced its better known compatriot to date this year with some forecasting that silver could rise above US$31/oz in the second half of this year.

ANZ senior commodity strategist Damien Hynes says investment demand for both precious metals could pick up amid heightened geopolitical tensions and prospects of an easing monetary cycle, adding that slower silver mine production growth and strong industrial demand could keep the market in deficit.

Sun Silver executive director Gerard O’Donovan agrees, telling Stockhead that the company had opted to focus on silver as it found the global thematic around its industrial uses – particularly driven through the manufacture of solar panels – compelling.

“There has been a global shift towards achieving lower emissions and it has propelled significant investment in photovoltaic technology and the IEA (International Energy Agency) estimated that there will be $275 trillion in capital investment in that sphere between 2021 and 2050,” he said.

“We looked at the silver deficit that has been in place for the last four years and Bank of America forecasts this can increase up to 125% by 2030.”

Silver key for solar

The whys are simple.

The International Energy Agency has said that solar PV will be dominant form of renewable energy by 2027 while Wood Mackenzie has forecast at the end of 2023 that over 3 terawatts direct current of solar PV capacity will be built in the next 10 years.

No matter how you look at it, this will require a lot of solar panels and when you consider that silver makes up about 23% of the material cost of a solar PV panel, it is not hard to see why silver consumption for solar alone has grown some 330% over the last 10 years from 48Moz and 160Moz.

“It really demonstrates that there is significant demand for solar coming into the future. And if you look where solar comes from or solar PV manufacturing comes from, China dominates the supply chain and provides over 90% of the PV supply chain,” O’Donovan said.

He pointed out that the US is planning on banning solar PV imports from certain provinces of China due to ESG concerns as well as putting a 25% tariff on solar imports from June this year.

This is coupled with an ambitious goal for solar to provide 30% of all electricity in the US by 2030 and 45% by 2050.

“We looked at that and basically the facts spoke for themselves. They demonstrate that the silver demand within industrial use – particularly solar – will continue to grow,” he added.

“Silver is a prime component of PV panel manufacturing, so more silver will logically be needed and we felt that Maverick Springs – being located in the US, Nevada, ranked number 1 mining jurisdiction globally by the Fraser Institute in 2022 with a globally significant resource – would be a great asset to bring to IPO, giving investors the opportunity to invest in a essentially pure play silver company on the ASX.”

The Maverick Springs silver-gold project. Pic: Sun Silver

The right project at the right time

Sun Silver has reason to be confident about its flagship Maverick Springs project in Elko County, Nevada.

The project hosts a JORC-compliant inferred resource of 292Moz of silver equivalent at an average grade of 72.4g/t within the Carlin trend – a deep penetrating fault that O’Donovan says is known for Permian host rocks that are great for mining and processing.

The immediate region is also known to have a number of operating gold and silver mines including Coeur’s Rochester mine.

Nevada is also well known around the world as a top tier mining jurisdiction.

“Jurisdictional risk is low in that region and it is located close to good infrastructure and then there’s huge exploration potential,” O’Donovan said.

“To bring an asset to market that has a large resource is one thing, but to be able to plan for exploration and target additional ounces through expansion drilling because it is open along strike and at depth, and through resource classification upgrades, which will be achieved by infill drilling targeting mineralisation closer to surface through angled drilling is another.”

He added that the resource was calculated on silver prices of US$21.50/oz and gold prices of US$1850/oz.

“Prices have changed since then and potential exists to expand current mineralisation”
Significant mineralised areas currently sit outside the whittle pit shell and have not been included in the resource estimate but may be included in the future with higher commodity prices.”

“In parallel to that, we will be looking at silver processing, evaluating downstream opportunities, which include silver paste and solar generation.”

Maverick Springs model showing mineralisation outside Whittle Pit. Pic: Sun Silver

Solar manufacturers within the US will need to rapidly build-out infrastructure in order to meet the US’ aggressive targets and they will need corresponding amounts of silver to do so.

“If they are to hit those 2050 targets of 45% of electrical power coming from solar, it will basically consume 98% of world silver reserves,” O’Donovan added.

Road ahead

Sun Silver closed its IPO early after it was oversubscribed and raised the maximum $13m from its initial public offering of 65 million shares priced at 20c each that opened on 18 April.

Proceeds from the IPO will be used to complete infill and resource expansion drilling as well as expand on previously completed metallurgical test work and carry out new test work.

“Our primary focus currently is exploration, expanding the asset and upgrading resource classification,” O’Donovan said.

“We want to get a good handle on ounces in the ground and we have allocated money to studies, which we will complete at a certain point, but first up, we want to optimise the existing resource – which can be done at a desktop level.

“We want to expand the resource, which currently stretches 2.4km long and 1.2km wide, and we want to upgrade the resource classification.

“We also plan to carry out metallurgical test work at an appropriate point when we have a good cross section of samples from the asset, that will inform us of the next steps.

“We want to add value to shareholders through the asset itself because it hasn’t been worked on for nearly 15 years apart from limited amounts of work.

“The vast proportion of our funds is on exploration, we understand that’s where the best value for our spend is.”

At Stockhead we tell it like it is. While Sun Silver is a Stockhead advertiser, it did not sponsor this article.