“$30 silver is a good place to be. The market has only been at that level three times in the history of silver. We have an interesting decade ahead of us as mines are tougher to find and permit, particularly as the politicians are not letting us develop the mines to supply the metals they say we need,” said First Majestic Silver chief executive Keith Neumeyer.
Silver is benefiting from the rapidly increasing demand from the solar voltaic market, where it is used in the production of solar panels. This market is one of the fastest growing segments of the renewable energy industry, and according to data from The Silver Institute, it consumed 190Moz of silver in 2023, with an annual average growth rate of 17% over the past five years.
“Solar panel design is changing to improve efficiency, and these technologies use more silver. It takes 400,000oz of silver to produce 1GW of solar cells. The amount of silver used has increased by 40% since 2012 and solar is forecast to account for 33% of US energy generation by 2050,” said Phillip Baker, former chief executive of Hecla Mining and out-going chair of The Silver Institute.
The rise in demand from solar applications has contributed to the silver market’s deficit since 2021. Mine production is about 850Mozpa, and the deficit was 264Moz in 2022, 184Moz in 2023, and 250Moz this year.
With industry consuming silver at a record pace, by 2050, it is estimated that 85% of the world supply will be consumed in solar panels alone. “There is not enough silver out there to supply this demand,” said Neumeyer.
Baker said The Silver Institute estimates that there are some 5Boz of reported and unreported above ground silver inventories, of which 1.7Boz are in reported inventories. However, much of that is unavailable for industrial use as it sits in exchange traded funds (ETFs) inventories. The Silver Institute is working to quantify and qualify the silver sitting in unreported inventories. With the market in deficit, a key question is at what price do people let go of that inventory?
“When silver makes its run, its price moves dramatically higher because investors don’t want to release their silver,” said Baker.
For investors, this is good news, said event host Rick Rule.
“The primary motivation in a precious metals bull market is fear. Gold moves first, but silver moves faster and further than gold when the leadership passes from gold to silver. When the generalist investor is attracted to the precious metals narrative, particularly the equities narrative, there isn’t enough ability in the sector to absorb that interest, and so share prices can fly very high. Silver has an incredible upside when it moves. You are rewarded infrequently, but when you are rewarded, you are rewarded extravagantly,” he said.
“A lot of people are waking up to the fact that silver is dramatically underpriced relative to gold. It is about to break its 13-year support to the upside, and speculators will have a field day on silver,” said author Grant Williams.
“With the growth in demand from solar panels, electrification and EVs in general, the demand side for silver is very good. Inventories are very low and there are no huge stockpiles as there are for gold. Supply of silver does not respond to changes in the prices of silver, which is why the price move and volatility of silver prices is so extreme,” said Adrian Day of Adrian Day Asset Management.
Most silver production comes from zinc, lead and copper mines, which means the supply side is inelastic. Base metal producers will not increase production because of moves higher in the silver price. For Neumeyer, with the market in deficit, this should see the price rise much higher than it has.
Vizsla Silver aims to publish a preliminary economic assessment later this quarter for its Panuco project in Sinaloa, Mexico from where it just published an infill drilling assay of 7m grading 2398gpt silver equivalent from the Copala vein. The company will potentially be a 10Mozpa silver producer, making it one of the largest primary silver producers, although chief executive Michael Konnert said this won’t impact the silver market. “I don’t see how the supply deficit will close. We will be a top 10 silver producer, but it won’t make a dent in the deficit,” he said.
First Majestic Silver has begun minting its own silver coins and bars from a facility it built in Las Vegas, Nevada. In addition to allowing the company to increase its margins by cutting out middlemen, Neumeyer said it will also help reduce the amount of paper silver traded in the market, which, in his view, suppresses the price of silver.
“The COMEX silver paper market trades 230 times the physical silver market annually. 900Moz a day trade in the paper market. Banks are allowed to have unlimited sales in the paper market which is why the silver price is not higher. If we can sell our 10Moz of annual silver project through our mint we take 2.3Boz of paper silver out of the market. If all producers did this we could do something about the paper market,” he said.
Baker contends that silver producers have limited ability to do this because the base metal miners who account for most of the silver supply sell their silver in their base metals concentrates. They therefore, do not have refined refined metal to sell.
