The great precious metal bake-off, is it time for silver to rise?
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Silver has often being described as the poor cousin of its far more popular precious metal stablemate, gold.
And little wonder too, gold has traditionally acted as the hedge against economic uncertainty and has steadily risen in recent years while silver – always a volatile commodity – has languished until very recently.
It also doesn’t help that while gold has always been considered more of an investment commodity, silver’s role is rather more nebulous given its many applications in varied industries.
Indeed, silver is prized for its antimicrobial properties, for electrical connections and more recently in solar panels.
So are silver prices set to rise? Sources are divided. Goldman Sachs paints a considerably less bullish picture, forecasting that silver could push up to $US18 ($26) per ounce in 2020 from the current level of just under $US17 per ounce.
Others like First Majestic Silver chief executive officer Keith Neumeyer believe that silver could run up to $US130 per ounce at some point.
Minelife’s Gavin Wendt told Stockhead that one of things people tended to talk about was the gold to silver ratio.
“Right at the present time, for one ounce of gold, you can buy just under 88 ounces of silver,” he said.
“The interesting part of that ratio is that looking at things historically, this is almost the highest this particular ratio has been. We have to go back to 1991 to find a period when the gold to silver ratio (at 1 to 100) is higher than it is now.
“What this tells us is that we have seen an increasing demand in investor appetite for gold, but over the same period, it has not been mirrored by a similar increase in investor demand for silver.”
However, he noted that there was every chance that silver was likely to play catch-up.
“Investors want to leap into a safe haven, do it with gold and the price runs,” he said. “It performs very strong, and then we get to the point where people start scratching their heads and say, ‘let’s look at silver, silver is lagging behind’.
“I think a realistic range that companies would love to have for silver that could be sustainable is $US20-$US30 per ounce.
“If they could have that kind of pricing, you would see a lot more investment in the sector, investor interest and money being raised.”
So who are some of the companies with exposure to silver?
Wendt points to Silver Mines (ASX:SVL) as a key example, noting that it has one of the world’s largest silver deposits in New South Wales with a very large 275-million-ounce resource.
“It has attracted overseas investments, Sprott Group from North America is one of the major shareholders and that is a tremendous vote of confidence,” he said.
“The fact that he (Eric Sprott) has bought into Silver Mines is a very significant development for the company in terms of how he views the fortunes of the company. And most importantly, he thinks the project can be developed.”
Investors certainly seem to share this view. While shares have fallen from this year’s highs of 15.5c, they are still more than double their price a year ago at 8.9c.
Investigator Resources (ASX:IVR) also found some legs this year with shares hitting a high of 3.7c before tumbling to the current 1.9c, which is still a 35 per cent gain on its share price a year ago.
The company’s Paris high-grade silver deposit near Kimba, South Australia, has a resource of 9.3 million tonnes at 139 grams per tonne (g/t) silver and 0.6 per cent lead, or 42 million ounces of silver and 55,000 tonnes of lead, that is amenable to simple open pit mining.
Managing director Andrew McIlwain previously told Stockhead that the company would need a sustained silver price somewhere around the $US19.20-per-ounce mark to start Paris development.
The company is currently carrying out a review of the project to identify potential to define additional mineralisation or improve the grade in order to augment the project’s viability.
Over in Bosnia & Herzegovina, Adriatic Metals (ASX:ADT) has a significant silver endowment at its Rupice polymetallic project.
In addition to zinc and lead, the project has a current resource of 55 million ounces of silver.
This appears to have every likelihood of increasing further given that ongoing drilling continues to intersect significant grades of zinc, lead, silver, copper and barite.
Shares in ADT have been on a tear in the past year, rising more than 150 per cent to $1.625.
PNX Metals (ASX:PNX) continues to progress its tenement package in the Northern Territory, particularly the Hayes Creek zinc-gold-silver project that is currently undergoing a definitive feasibility study.
Besides gold and silver, Hayes Creek also hosts 16.2 million ounces of silver within the Mt Bonnie and Iron Blow volcanogenic massive sulphide deposits.