This article is a sponsored feature from Mining.com.au partner Unico Silver Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.
Silver has performed well in 2024, but it definitely hasn’t realised its full potential, according to those that know the industry well.
Gold and silver have gained roughly the same since the start of 2024, with both up almost 30%.
Gavin Wendt, resource analyst and founder of MineLife, tells Mining.com.au that the five-year performance of gold and silver is also similar, with gold up around 78% and silver up about 76%.
“This tells me that the same factors that have been driving gold are also impacting silver – i.e. investor safe haven demand and diversification away from the US dollar,” he explains.
While both precious metals have been largely in alignment, silver significantly outperformed its more favoured cousin and at one point this year was up 50%.
The consensus also appears to be that there is plenty more road for silver to travel.
Wendt says silver prices seem to be back on an even keel following a 10% drop in the aftermath of Donald Trump’s US election win.
“Prices appear to have stabilised and after a period of consolidation are likely to head higher into 2025 on the back of further US interest rate cuts,” he notes.
Todd Williams, Managing Director of Unico Silver (ASX:USL), believes the best is yet to come for silver despite a good performance in 2024.
“Given that silver has a dual function as a monetary and industrial metal, the perfect macroeconomic conditions tend to be at the intersection of loose monetary policy and strong fiscal stimulus, with the latter required for strong silver demand for industrial applications, such as solar panel fabrication and installation,” he tells Mining.com.au.
“Since 2011, both sides of that equation (monetary and fiscal) have been suboptimal or asynchronous, which is why the metal has performed well within narrow windows.
“Essentially, the catalyst for significantly higher silver must be a global recession, followed by lower rates and coordinated stimulation of the global economy.
“This is the backdrop that sent silver rocketing to US$50 ($77) per ounce in 2011. I share the view of many commentators that triple digit silver is something that should happen in this coming cycle.”
Unico started out as E2 Metals and was initially focused on making a major gold discovery in Argentina, that is until it made a “blind” discovery that returned up to 2,541 grams per tonne silver and caught the attention of Canadian billionaire investor Eric Sprott.
“We felt that those types of silver intercepts were unseen on the ASX, and at that moment realised the opportunity to position the company as a pure play silver explorer/developer on the ASX,” Williams explains.
However, shortly after the company made the Malvina discovery in Santa Cruz, the US Federal Reserve kicked off one of the most aggressive rate hike cycles, and precious metals prices and equities took a beating.
Unico adapted and turned this to its advantage.
“Given the evaporation of risk capital for exploration and falling asset values, the focus shifted from exploration to consolidation – E2 Metals was renamed to Unico Silver – and in the following two years we closed five transactions, bringing together over 160 million ounces of silver equivalent resources, cementing our position as a leading silver company on the ASX,” Williams says.
What initially attracted Unico to Santa Cruz in Argentina was the prospect of making a major gold discovery like Andean Resources’ Cerro Negro discovery which was acquired by Goldcorp (now part of Newmont) in 2010 for C$3.4 billion ($3.7 billion).
Santa Cruz: Overlooked but mineral rich
Unlike most precious metal districts in Latin America, Santa Cruz was overlooked by the Spanish conquistadors and has no history of artisanal mining, even though mineralisation outcrops at many projects.
Mining operations began at AngloGold Ashanti’s (NYSE:AU) Cerro Vanguardia mine in 1998 and was followed by a flurry of exploration.
This was followed by several new discoveries between 2007 and 2011, which culminated in a cycle of mergers and acquisitions and seven mines being permitted and constructed.
“It is a dynamic but relatively new mining ecosystem,” Williams says.
Santa Cruz is host to majors such as Newmont (NYSE:NEM), AngloGold Ashanti, Pan American Silver (NYSE:PAAS), and smaller mining companies like McEwen Mining (NYSE:MUX), Hochschild Mining (LSE:HOC), and Cerrado Gold (TSX-V:CERT).
Two of the largest pure-play silver resources – Joaquin and Cerro Leon – that were discovered during the 2007 to 2011 exploration cycle are now in Unico’s possession.
Williams says the acquisition of the Joaquin Project, which was completed in October this year, is the final critical piece of Unico’s consolidation strategy which started in November 2022 with the purchase of the Pinguino Project from Austral Gold (ASX:AGD).
“Its relative proximity to our 91-million-ounce silver equivalent Cerro Leon district adds optionality to future development options of both projects, and we believe the value of the consolidated land package far exceeds the sum of the parts,” he tells this news service.
Joaquin is host to a rare pure-play silver resource, with 93% of the economic value attributable to the silver metal, and it also represents the consolidation of the project into a single junior explorer for the first time.
Unico’s goal is to become a +300-million-ounce silver development company.
The explorer has leveraged over 170,000m of historical drilling to define opportunities to expand the current 160-million-ounce resource through low-risk and high-confidence resource extensions, drill testing known veins along strike and at depth.
In October, Unico launched a maiden drilling program at the Cerro Leon Project. The program was upsized to 50,000m following a $22 million placement that attracted strong demand from institutional investors out of North America.
The program will include 25,000m of drilling across both projects – Cerro Leon and Joaquin – and is expected to culminate in a revised resource in the later part of 2025.
Although Unico is exploring in the Americas, the company has no plans to list on a related exchange.
“We think that the ASX is healthy and liquidity and access to capital is superior to the TSX for companies of our market capitalisation,” Williams notes.
“We are seeing two trends that support this, a) increasing participation by North American institutional investors in ASX financings, and b) ASX mineral explorers acquiring assets from lesser funded TSX companies, recapitalising those assets, and advancing them in a meaningful way.
“This trend was established in 2018-2019 by the ASX gold miners and has now trickled down into early stage exploration.”
Write to Angela East at Mining.com.au
Images: Unico Silver & AngloGold Ashanti
