Silver signs looking promising despite ordinary 2021 for precious metals

It has been a slow six months for silver, with the precious metal fluctuating between US$24 and US$29 an ounce and currently trading at a slight deficit to the beginning of 2021. But one only needs to zoom out a little to see the picture is more positive than at first glance. Available data dating back to the start of 1975 shows that, throughout its history, silver has only ever traded above US$25 an ounce (not adjusting for inflation) for three periods of time - late 1979/early 1980, late 2010 to early 2013, and, well, now. That should put some perspective on the metal’s performance this year - down 1.4% (gold has taken a slightly bigger hit, down 6.2% at the time of writing). Silver demand predicted to rise The Silver Institute earlier this year forecast global demand for silver to rise 11% this year, reaching just north of one billion ounces. Further, it forecast industrial demand to rise by 9% to a four-year-high 510 million ounces, led by the electrical and electronics sector. It has also predicted huge rises in silver demand from the automotive, printing and flexible electronics sectors. Goldman Sachs global commodities COO Sarah Kiernan said earlier this year the demand was also driven by investor interest in physical assets. “People like precious metals and if you’re worried about inflation or currency debasement, silver is a store of value, and it’s a much smaller market than gold, about one-sixth of the size, so there’s been a spillover from gold.” Silver and solar panels But it is green technology that is driving a lot of the excitement - about 10% of the demand for silver worldwide comes from solar panels. “Silver has true use in the ESG (environmental, social and governance) sector, particularly in solar panels,” Kiernan said. “Both the Biden administration and the Chinese over the next few years have pretty aggressive growth targets for solar power, which will only lift it more.” In interviews earlier this year, Goldman Sachs commodities chief Jeffrey Currie said silver’s status as a key component in solar panels made it a better investment than gold, and that it could benefit from more green energy spending down the line. Could silver price rise further? Experts seem to think so. The Silver Institute said the outlook for the silver price in 2021 “remains exceptionally encouraging”, forecasting the annual average price to rise by 46% to a seven-year high of US$30 an ounce. Goldman Sachs analysts predicted prices could rise as high as $33 an ounce as US President Joe Biden moves forward with renewable energy. Aussie hopefuls There’s no shortage of ASX-listed stocks with exposure to silver. Silver Mines Ltd (ASX:SVL), which is developing silver deposits in New South Wales and hopes to become Australia’s pre-eminent pure silver company, is focused on the development stage Bowdens Project. In May the company substantially expanded drilling activity at the project off the back of a recent successful drilling program that identified new silver feeder veins. Just last week, PNX Metals (ASX:PNX) released a pre-feasibility study that supported long-term gold, silver, zinc project development at its Fountain Head gold and Hayes Creek gold-silver-zinc projects. In order to form the PFS, PNX Metals has relied on static commodity prices, locked in at US$1,733 per ounce of gold, US$25 per ounce of silver and US$1.31 per pound of zinc. PNX has ultimately determined an 8% pre-tax net present value (NPV) equal to A$171 million, while the 8% post-tax NPV is estimated at A$127 million. Valor Resources Ltd (ASX:VAL) (FRA:LFY) recently expanded its landholding around its existing mining concessions following the recently completed initial technical review of the Picha Project, where initial assays delivered strong high‐grade copper-silver results. PolarX Ltd (ASX:PXX) (FRA:PX0) did similar, expanding its landholding at its Humboldt Range Gold-Silver Project in Nevada, US, following impressive recent drilling results, including bonanza-grade silver. Kingston Resources Ltd (ASX:KSN) in early June delivered strong gold and silver results from a resource drilling program at Kulumalia deposit south of the main Umuna ore body at its flagship 3.6-million-ounce Misima Gold Project in PNG. Reverse circulation drilling by Rumble Resources Ltd (ASX:RTR) (FRA:20Z) has returned new high-grade results pointing to a large-scale zinc-lead-silver system at its Earaheedy Project in Western Australia. Twenty Seven Co Ltd (ASX:TSC) (FRA:U9V) recently declared a maiden inferred mineral resource estimate at Mt Dimer Gold-Silver Project in Western Australia of 722,000 tonnes at 2.10 g/t gold for 48,545 ounces of gold and 3.84 g/t silver for 89,011 ounces of silver. - Daniel Paproth