Every investor knows that gold has had a great 2024 – from US$2,062.40 an ounce to US$2,335 an ounce, a rise of 13.2%, and a steady 43.5% climb from the November 2022 lows of US$1,627.30 an ounce. Along the way, gold hit a record nominal (non-inflation-adjusted) price of US$2,433.90 an ounce, in May.
The yellow metal has benefited as investors look to protect their portfolios from geo-political turmoil and resurgent inflation, playing its centuries-old role as a ‘safe haven’ investment.
But what about its often-forgotten sibling, silver?
At US$30.54 an ounce, silver is up 28% in 2024, and 62% above its November 2022 price.
And analysts say silver has further to rise, given that 2024 is a shaping to be a projected fourth year of demand outstripping production.
More than gold, silver has always had a split personality as a partly precious metal, and partly an industrial metal, used in medicine, conductors and electrodes, photography, and water filtration among its many industrial uses. These days, silver is a ‘battery metal’ and a ‘critical mineral,’ as well as a precious metal, with its high conductivity (silver is the metal with the highest electrical and thermal conductivity) giving it an important role in the manufacturing of solar panels, and in electric vehicle (EV) batteries. At present, silver is necessary for nearly all electrical connections in EVs: the automobile industry collectively uses 55 million ounces of it annually.
Yet even with this strong demand picture, in relative terms, silver is still cheap: it currently takes about 80 ounces of silver to buy one ounce of gold, compared with the 20-year average of 68 ounces.
In 2023, silver consumption hit 1.14 billion ounces, but only 820 million ounces was produced. Silver has been in deficit since 2019 and that situation is predicted to persist past 2024.
So, who on the ASX has silver?
- Silver Mines Limited (SVL, 20 cents)
Market capitalisation: $322 million
12-month total return: flat
Three-year total return: –11.7% a year
Analysts’ consensus price target: n/a
Silver Mines Limited is sitting on the wholly owned Bowdens silver project, the largest undeveloped silver deposit in Australia – and one of the largest globally – located about 26 kilometres east of Mudgee in central New South Wales. The current mineral resource estimate (MRE), updated in March, contains 396 million ounces of silver equivalent, with a reserve of 97 million ounces of silver equivalent. The reserve is estimated at 29.9 million tonnes at 69.0 grams per tonne (g/t) silver, 0.44% zinc and 0.32% lead, containing 66.3 million ounces of silver, 130,800 tonnes of zinc and 95,300 tonnes of lead.
SVL is proposing to start with an open cut mine feeding a new processing plant with a conventional milling circuit and differential flotation to produce two concentrates; plant capacity is designed for two million tonnes a year, with an initial mine life of about 16 years. Life-of-mine production is planned at the reserve numbers – that is, approximately 66 million ounces of silver, with 130,000 tonnes of zinc and 95,000 tonnes of lead as by-products.
In April 2023, the Independent Planning Commission of New South Wales (IPC) approved the Bowdens silver project to proceed to development and production subject to conditions of consent. Silver Mines is now working on an optimisation program to update the Bowdens Silver feasibility study, which was completed in 2018. The optimisation program is examining all aspects of the development including ore reserves, mine design, metallurgy, process design and economic and market considerations: the optimisation program is scheduled for completion during 2024.
I like to look at a project’s all-in sustaining cost (AISC) – a figure that incorporates not only the “cash cost” of production but all the costs that allow production to be sustained – and the 2018 feasibility study gave a range of US$12.94—US$13.15 an ounce – well under the current price. That study estimated that the first three years of production could come at an average cash cost of US$9.15 an ounce, underpinning strong cash flow and EBITDA (earnings before interest, tax, depreciation and amortisation). It will be interesting to see the updated cash cost and AISC estimates from the optimisation program, but it is fairly clear that the project would be a money-maker at current and projected silver prices. All up, the company expects to make the financial investment decision (FID) on Bowdens by the end of 2024.
Also, there is plenty of upside potential at the Bowdens project, with more high-grade silver and gold mineralisation contained in the highly prospective Southern Gold Zone and Bundarra Zone.
The highly prospective ‘Southern Gold Zone’ is in the south of the licence area and at depth, within the Bowdens deposit. Mineralisation within that zone is currently estimated 19 million tonnes at 0.31 g/t gold for 190,000 ounces of gold. The Bundarra zone is an extensive zone of continuous mineralisation below the Bowdens deposit – Bundarra remains open at depth to the west, southwest and south. SVL has been studying potential underground mining scenarios beneath the open-pit development, but this has been placed on hold in the short term to focus on the prioritised feasibility study. The maiden mineral resource for Bowdens Silver Underground project stands at 42.9 million ounces silver equivalent.
- Adriatic Metals plc (ADT, $4.40)
Market capitalisation: $1.4 billion
12-month total return: 38.8%
Three-year total return: 20.9% a year
Analysts’ consensus price target: $5.11 (Stock Doctor/Refinitiv, six analysts)
Adriatic Metals is probably the most investment-friendly ASX silver prospect right now. Adriatic is a precious and base metals miner that is developing its flagship Vareš mining project, located near Vareš, a historic mining town in the eastern European nation of Bosnia and Herzegovina. Adriatic also owns the Raska zinc deposit in Serbia.
Adriatic’s mining efforts at Vareš are focused on the world-class, high-grade Rupice underground deposit, which has estimated probable reserves of 105 million ounces of silver, 789,000 ounces of gold, 913,000 tonnes of zinc, 581,000 tonnes of lead, 88,000 tonnes of copper and 39,000 tonnes of antimony – enough for an initial mine-life of 18 years (Vareš also contains the Veovaca open-pit deposit). Adriatic Metals expects to dig about 800,000 tonnes of polymetallic ore per year from the mine, producing about 65,000 tonnes of lead-silver concentrate and 90,000 tonnes of zinc concentrate.
The mine produced its first silver-lead-zinc concentrate at a recently constructed processing plant in late February of this year. Adriatic went from the exploration phase to first concentrate production in less than seven years, after investing $250 million to bring Vares back to life.
On an AISC basis, Vareš will run on the smell of an oily rag: The company forecasts an AISC of US$7.30 an ounce of silver equivalent, and being such a low-cost operation, it is expected to generate more than US$1 billion of free cash flow in the first five years of production. That is a very lucrative operation.
Now that the processing plant is in operation, the ramp-up to its stated nameplate capacity of 800,000 tonnes a year is scheduled to be complete in the fourth quarter of 2024.
Adriatic has gained almost 42% in the past year, as construction at Vares was completed and the plant produced its first concentrate in February. But analysts think it has further to go.
- Investigator Resources (IVR, 5.6 cents)
Market capitalisation: $89 million
12-month total return: 9.8%
Three-year total return: –14.9% a year
Analysts’ consensus price target: n/a
Investigator Resources owns the Paris silver project, located on South Australia’s Eyre Peninsula. In a July 2023 mineral resource estimate, Investigator increased Paris’ indicated and inferred resources to 24 million tonnes at grades of 73 g/t silver and 0.41% lead, giving 57 million ounces of silver and 99,000 tonnes of lead. On those numbers, Investigator describes Paris as Australia’s highest-grade primary silver project.
A November 2021 pre-feasibility study for the project shows it could operate as a high-grade, near-surface, open-pit mine with a life of five to seven years. Investigator is now working on a definitive feasibility study, with lead, which was not considered in the 2021 pre-feasibility study, now considered to have significant potential to add value to the project.
On the current resource, Paris is expected to have an initial project life of seven years, at a low AISC of A$17.45 an ounce of silver.
Paris also hosts the Apollo silver deposit, which is five kilometres from the main zone. The company’s drilling at Apollo has revealed high grades, including an intercept grading 1,262 g/t silver over 8 metres (and that included a 3-metre chunk grading an astonishing 3,167 g/t silver) in August 2022. The obvious implication is that Apollo could hold very substantial silver-lead-zinc mineralisation.
- Lode Resources (LDR, 11.5 cents)
Market capitalisation: $17 million
12-month total return: –41%
Three-year total return: n/a (listed July 2021)
Analysts’ consensus price target: n/a
Lode Resources is developing its flagship property, the wholly owned Webbs Consol silver-base metals project, located 16 kilometres southwest of Emmaville, New South Wales, an historical silver mining centre is known for high grade silver-base metal bearing lodes. The Webbs Consol resource was originally discovered in 1890 and was mined until the mid-1950s – although often, the old miners weren’t even interested in the high-grade zinc mineralisation, and it was discarded. Lode knew it had high-grade silver and zinc mineralisation on its hands.
Last year Lode hit record high-grade silver, zinc, lead and copper grades in drilling at Webbs Consol, on one of the key targets at the project, the Tangoa West Lode. The Tangoa West high-grade lode remains open at depth and along strike, implying that further mineralisation is likely to be found.
Then in February, Lode reported a new high-grade silver discovery at Webbs Consol North, that expands the mineralisation footprint of the Webbs Consol project. The company says these first intercepts at Webbs Consol North are not only similar to the rich mineral endowment found in the initial drill intercepts encountered at the Tangoa West Lode, they also “span a considerably larger area potentially representing multiple lodes or a larger mineralised body.”
Lode also wholly owns the Uralla Gold Project in NSW, which was one of the first goldfields discovered in NSW and a significant gold producer in the 1850s. Lode Resources’ Uralla holdings cover more almost the entire historic goldfield.
- Sun Silver (SS1, 57 cents)
Market capitalisation: $71.2 million
12-month total return: n/a
Three-year total return: –14.9% a year
Analysts’ consensus price target: n/a
Floated through an initial public offering in May, at 20 cents a share to raise $13 million, Sun Silver is exploring and developing the Maverick Springs silver project in Nevada, USA, which has an inferred mineral resource of 292 million ounces of silver equivalent, at a grade of 72.4 g/t of silver equivalent, and also contains about 1.37 million ounces of gold. Further drilling should be able to boost this resource.
Sun Silver speaks of Maverick Springs mainly in the context of silver demand from solar panels, which is projected to grow exponentially through to 2050 – solar energy is currently the fastest growing source of silver demand. The company wants to value-add its silver into ‘silver paste,’ which improves the efficiency of solar panels.
Solar energy capacity within the US alone is forecast to increase by 125GW per year to 2030. In the next six years, the US government is aiming for more than six times current solar capacity: the target is for solar energy to provide 30% of all electricity in the US by 2030 and 45% by 2050. The estimated amount of silver required to achieve this target by 2050 represents virtually all of the current known global reserves. If Maverick Springs can be successfully developed, Sun Silver will be a major player in meeting this target – and in helping the US move away from having to rely on China for its ‘clean energy’ requirements.
Global X Physical Silver (EPTMAG, $42.72)
For investors who do not want to invest in a miner, and deal with the vagaries of grades, resources, recovery rates, AISCs and all of the company-specific issues that can be a part of resources investment, there is an easier way to invest in silver, through Global X’s exchange-traded product (ETP) Global X Physical Silver, which trades on the ASX under the code ETPMAG.
ETPMAG simply allows investors to buy a stock on the ASX that gives them exposure to silver – the ETP is backed by physical silver. In a single ASX trade, in which any amount can be invested, ETPMAG gives low-cost access to silver through the stock exchange, avoiding the need for investors to personally store the bullion. Each physical silver ingot is segregated, individually identified and allocated. ETPMAG costs an investor 49 basis points (0.49%) of their investment amount a year, plus the brokerage to buy and sell on the ASX, and it is not currency hedged – meaning that changes in the US$/A$ exchange rate can affect (positively or negatively) the value of your investment.
ETPMAG has done well for investors, on the back of silver’s resurgence from the lows that prevailed for most of the 2010s. According to Stock Doctor, its 12 month performance is 28.52%, while over three years, it has generated 8.28% a year, and over five years, 16.22% a year. It is certainly the most worry-free way to buy and hold silver: the only factors that go into its return are the US$ silver price and the US$/A$ exchange rate.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
