Silver lining: surging demand powering an upside to a lustrous transition metal

In times of turmoil silver is often regarded as the ‘other’ precious metal that should be riding high amid the wave of tense geopolitical events and challenging economic times.

As stated by the UK’s biggest online bullion dealer BullionByPost, silver represents a safe haven asset, with its price driven by factors including inflationary pressures, insatiable demand for solar energy and various electronic applications, as well as a mining supply deficit to name a few.

However, the current Russia-Ukraine war, COVID-19 pandemic, rising energy prices, and protracted increase in inflation have seemingly failed to influence its stagnant price. Since 2013 the spot price of silver has remained at just under US$26 an ounce.

In its latest World Silver Survey, The Silver Institute reports: Once again, 2022 was a year of sharp contrasts between silver’s fundamentals and institutional investor attitudes towards the metal; while the silver market saw what may well have been the largest deficit on record, professional investors were indifferent or bearish for much of the year.”

Once again, 2022 was a year of sharp contrasts between silver’s fundamentals and institutional investor attitudes towards the metal”

This has left many investors scratching their heads as to why the lustrous and ductile metal has shown no signs of life despite the aforementioned crises.

“There’s actually no incentive to look for [silver] anymore,” says EV Resources (ASX:EVR) Managing Director Hugh Callaghan.

Speaking to, Callaghan, who has worked in the senior executive team at the Escondida copper, gold, and silver mine, helped build a 3,000tpd operating mine in Chile, and facilitated the construction of a silver-zinc-lead mine in Mexico, says it’s difficult to see profitability or an exploration upside with silver at present.

“I think the truth is that at these prices, there’s been no incentive for any exploration [and] no incentive for any development. There are many small material silver mines in Mexico that are parked up. They’re not worth reopening.”

However, as American humourist, journalist, and author Don Marquis once said: “Every cloud has its silver lining but it is sometimes a little difficult to get it to the mint.”

Silver lining

The tide may be changing for silver, which could see explorers return to the market to extract the soft, white, and highly electrical and thermal conductive metal out of the ground.

According to the Silver Institute’s latest 2023 World Silver Survey, the market suffered a record 237.7Moz (7,393t) deficit in 2022, which looks to be maintained in 2023. Limited organic growth, project delays, and disruptions have resulted in a marginal decline in mine production while recycling barely rose.

This deficit is exacerbated by the marginal decrease in global mine silver production, dropping 0.6% year-on-year (YoY) to 822.4Moz in 2022 despite the ‘strong’ growth of 5.8% in 2021 to 822.6Moz, as mining operations recovered from the disruption of the COVID-19 pandemic.

It’s a situation that Investigator Resources (ASX:IVR) MD Andrew McIlwain continues to monitor. He tells that while this data shows that more mines need to be advanced into production, there’s ultimately a dearth of quality silver deposits of scale to be found.

Even in Mexico, which is one of the most well-endowed silver locations in the world, it is getting harder to profitably mine the metal.

McIlwain says: ”The average grade of the Mexican primary silver producers has dropped significantly over the last decade, and grade is king and lower grade doesn’t produce much silver, and obviously is at a higher cost.

There’s a range of geopolitical and community issues that are challenged. Mexico typically mined high-grade, quite labour intensive operations and with an escalating labour cost, those projects start to look or become uneconomic.”

Despite this, the country has about 10 silver mines currently in operation with a further 10 projects in development stage poised to produce silver. This is forecast to drive the mined output in Mexico upwards by 2.4% YoY to 842.1Moz as these projects, as well as others, ramp up and come online.

Peru and China are ranked as the world’s second and third-highest silver producing countries, contributing just over 225.7 troy ounces of silver to the market in 2021.

However, production in Peru has plummeted by 8.5Moz. The Silver Institute reports this decrease in Peruvian silver production can be attributed to suspension of mining at Uchucchacua in Q4 2021 to improve efficiency and profitability amid strike action, in conjunction with social unrest caused by the impeachment of President Pedro Castillo Terrones, who was ousted for attempting to illegally dissolve Congress.

On the other hand, China’s reduction in production is reportedly attributed to lower by-product output from primary lead-zinc mines in the country.

On 24 June, this news service exclusively reported that Investigator Resources will likely seek to fund development of its Paris Silver Project with a 50:50 debt and equity split via a conventional financing deal. McIlwain said at the time the estimated $131 million capex project has a potential 7-year mine life.

McIlwain says the company is progressing with the Definitive Feasibility Study (DFS) at Paris, which is Australia’s highest grade primary silver project with 53 million ounces of silver and 98,000 tonnes of lead. The DFS is due in early 2024.

Golden rule

So, what is it going to take to see a spike in silver in the not too distant future to make these projects elsewhere viable?

Answering this question, McIlwain says silver’s economic future can often be observed in the footsteps left from the current traction of gold, as well as from the latest news within the US.

“If gold goes higher, silver normally follows it”

“I think certainly as the US political and economic scene starts to stabilise, and I have no idea when that is, we’ll see a return to investment in precious metals, certainly people would have thought $2,000 an ounce gold was unheard of or was unachievable a number of years ago. 

It seems to almost be we’ll move through that and we’ll push forward and gold will go higher. If gold goes higher, silver normally follows it.”  

However, McIlwain adds while this tends to be the golden rule, if the past few years have taught the market anything it’s that no one can accurately predict what’s in store.

“If I knew the answer … I wouldn’t be working for a living, I’d be in the Bahamas somewhere, probably owning my own island…there’s no logical structural reason as to why silver hasn’t appreciated.”  

Despite these shortcomings over previous years, as well as a slight decline in silver production for 2022, Australia is a low sovereign risk nation with miners emerging to undertake silver as primary production.

Australia looking to stand amongst silver giants

Australia is mineral-rich in a plethora of commodities and offers the world another source of silver, however the country recorded a fall in production of 9.9% in 2022.

One Australian junior exploration company looking to capitalise on the growing demand for the precious commodity is ASX-listed explorer Polymetals Resources (ASX:POL), with its Endeavor Mine in New South Wales.

Polymetals General Manager of Corporate Development Linden Sproule tells this news service silver still has its place in the market and the company’s portfolio.

“The outlook for silver is strong. The Endeavor Mine contains 44Moz silver in the JORC resource. The project also contains 37.3Moz silver in tailings (non-JORC). The condition-precedent to our acquisition of the Endeavor Mine was renegotiation of the existing 100% Silver Streaming Royalty that was held on the project. 

Our intent is to also build a leach circuit on the back end of the existing mill which should recover an additional 35% of the silver. In the current mine plan Endeavor should produce 28.5Moz over the next decade (which equates to 25-30% of mine revenues).” 

Sproule adds that Australia’s future with silver lies within the production of electronics being created and developed to curb carbon emissions across the globe.

“What I believe is now happening is that the industrial uses of silver are now becoming more economic in electronics with rising costs across other components…therefore the industrial demand for the ‘precious/wealth store’ metal is increasing and the market pool available is only half of the silver produced.”

More than just a piece of jewellery  

Silver is an excellent conductor of heat and electricity, making it a crucial component for the construction of solar panels, which are needed to maintain the globe’s continuous march towards a greener and carbon-free future, a future being fuelled by various commodities, including silver.

It has been estimated by JM Bullion that each solar panel being produced in the name of global electrification contains at least 0.643 troy ounces (20 grams) of silver, while electric vehicles (EVs) are estimated to contain at least 0.5-0.9 troy ounces (15-28 grams).

At these current rates, The Silver Institute predicts consumption in the global automotive sector will approach 90Moz by 2025.

The world’s collective transition towards net zero carbon emissions is leading to higher demand for battery metal commodities such as lithium, cobalt, manganese, and vanadium.

These commodities, in conjunction with other metals such as copper, nickel, and zinc, are in dire need as they play a pivotal role in creating the much needed and sought after EVs and electrified appliances.

Silver demand is just going through the roof”

Silver is another commodity that has not been able to escape this demand, due to its unique properties and flexibility in application, as it offers a wide range of applications ranging from electrical switches to solar panels.

As stated by McIlwain: “Silver demand is just going through the roof.

The Silver Institute estimates that the silver market has seen an 18% rise in demand within the past year, which represents the highest on record it has seen. Specifically, this growth in demand can be attributed to the industrial market, which reported an offtake of 556.5Moz.

This rise has been interpreted to reflect the benefits accruing from the green economy applications, notably the growth in photovoltaics (PV), which also drive the 6% rise for global electronics and electrical demand.

Silver’s use in PV power is the leading current source of green electricity, the institute says. Newly added solar capacity is estimated to have surpassed 130GW for the first time ever. As such, silver’s use in photovoltaics increased to 140.3Moz of silver in 2022.

In solar cells, silver powder is turned into a paste which is then loaded onto a silicon wafer. When light strikes the silicon, electrons are released and the silver carries the electricity for use or it can be stored in batteries for later consumption.

In order to achieve the net zero emissions by 2050 scenario, Australia is reported to need an estimated 9 times the current utility-scale solar and wind generating capacity, as voiced by the Australian Trade and Investment Commission.

Addressing this rise in demand, Callaghan says the silver market is heading for a crossroads.

“Between the dollar, gold and silver, I think it’s definitely headed for an extremely severe demand supply mismatch”

“Between the dollar, gold and silver, I think it’s definitely headed for an extremely severe demand supply mismatch.”

However, the MD adds that while silver is displaying signs it will follow in the footsteps of copper’s 3 million tonnes supply deficit, it is unlikely to be as extreme.

“I don’t think the demand will ever be quite as profound as that for copper…but there’s no doubt it’s heading for a deficit. But it won’t be the same as copper because copper is industrial. It’s used in various carry trades by hedge funds. It will just be manipulated forever and a bloody day.”  

Write to Adam Drought at

Images: Polyetals Ltd, Investigator Resources Ltd, The Silver Institute, & iStock
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Written By Adam Drought
Born and raised in the UK, Adam is a sports fanatic with an interest in Rugby League and UFC/MMA. When not training in Muay Thai and Brazilian Jiu Jitsu, Adam attends Griffith University where he is completing his final year of a Communication & Journalism degree.