Off the piste in Kalgoorlie, silver proves a gold medal winner with investors

The post Diggers & Dealers commentary has focussed on how gold once again dominated proceedings.

No surprise in that given the lithium and nickel stars of recent years kind of looked embarrassed they had shown up at all at the gabfest beneath Kalgoorlie’s big blue sky.

But it has got to be said that silver - the poor man’s gold – also garnered its fair share of attention, not at the conference centre, but at an off-piste affair hosted by Resources Rising Stars over at the Hannans Club.

More than 100 conference delegates travelled over to the club by shank’s pony or a Spartan rickshaw trike to sample some Penfolds and to take in what the two new silver plays on the ASX – Sun Silver (SS1) and Andean Silver (ASL) - had to say.

Silver has retreated from the $US32/oz levels of May but at $28/oz it remains well ahead of its low of $US20.95/oz in the opening months of the year and its CY2023 average of $US23/oz. It has risen because it shares many attributes with gold.

But it hasn’t performed as strongly as gold, with the gold: silver ratio back out to 88. Use a ratio of 60 like most silver bugs like to fashion where the silver should be, and it would be more than $US40/oz, which would be nice indeed for the growing ASX silver sector.

But all that is really by the by judging by the Sun Silver and Andean presentations at the Hannans Club. The 100-plus who rocked up heard about the fast-evolving new age industrial uses of silver, most notably in solar panels where its extreme conductivity reigns supreme.

It is an important theme for the ASX silver sector too because recent share price falls have outpaced silver’s retreat from $32/oz at a time when the supply/demand balance in the market is swinging wildly to the benefit of producers/developers, and explorers, the latter from a market sentiment point of view.

Sun:

It was kind of fitting that Sun Silver boss Gerard O’Donovan, originally from County Cork in Ireland, was speaking at the Hannans Club all these years after a County Clare man, Paddy Hannan, first hit gold at Kalgoorlie.

O’Donovan noted that the silver market had been in structural supply deficit for the last three years (184 million oz short in 2023) and that because of the rapid growth in demand from solar panels, all of the known silver reserves/resources in the world could be gobbled up by 2050.

It is an outlook he his keen to hitch Sun Silver’s wagon to by investigating an opportunity to build a silver paste plant in the US, with both the former Trump and the current Biden administration using tariffs to choke off supplies from China.

It is an interesting downstream opportunity to the main event, Sun Silver’s advanced Maverick Springs silver-gold project in Nevada, brought to the market in the company’s May 15 IPO at 20c a share.

The stock has come back for its highs when silver was running hot but remains double the IPO price at 40.5c a share for a $51 million market cap.

Maverick Springs hosts an inferred resource of 125.4Mt grading 43.5g/t silver and 0.34g/t Au for 175.7Moz of contained silver and 1.37Moz of contained gold, or 292Moz of contained silver equivalent all up.

“But it doesn’t stop there,” O’Donovan said. “We have got massive resource growth potential we are currently working on. It’s a beast and it is only going to get bigger.”

To that end, recent extensional drilling has confirmed a high-grade zone (assays pending) outside of the resource to the north-west.

Andean:

Andean Silver boss Tim Laneyrie also revved up the Hannans Club crowd on silver being the next growth “commodity”.

“What people don't usually know is that we consume about 1.2 billion ounces of silver per annum, but we only mine 1 billion,” he said.

He said the 200 million ounce deficit was basically being covered by stocks out of the vaults of the LME, COMEX, and Shanghai.

“(But) there's only five years of vault stocks remaining in the world before we have that deficit actually come to market, and that assumes solar (demand) stays flat,” Laneyrie said.

“So in the next five years, you can see probably a dramatic increase of silver price to meet that deficit. And if you go by Sprott, it'll be somewhere around $US100/oz an ounce, which will be excellent.”

Andean’s newbie status as a silver play comes from its February acquisition of the Cerro Bayo silver-gold project in the Aysen region of southern Chile.

Since the acquisition, the resource has doubled to 5Mt at a grade of 311g/t for 50Moz of contained silver-equivalent. Like Sun Silver, it is not the end of the story.

Laneyrie said a resource update would be out by the end of September, and there would another one in the December quarter.

As previously mentioned here, the project is a former producer of 45Moz of silver and 650,000oz of gold over 15 years before it was put on care and maintenance in October 2022.

The former owner sunk an estimated $150 million into the project which comes with its own onsite assay lab, a 500,000tpa treatment plant, power generators, and a tailings dam and more.

While the treatment plant has been kept warm, the growth in the resource is likely to lead to its right sizing.

Andean (formerly Mitre) is from the Steve Parsons, Ray Shorrocks, and others camp which followed a similar success pathway at Bellevue (BGL) and more recently FireFly (FFM). It’s all about finding an unloved asset with genuine geological upside and hitting it with the drill bit to create serious value.

The company is on that pathway now. It last traded at 66c for a $75 million market cap after having raised funds at 20c when it picked up the project.

Vintage/Galilee:

Talking about Shorrocks, he is no J.R. Ewing of the Australian oil and gas sector. But as executive chairman of a little thing called Galilee (GLL) he does know what makes for a sensible consolidation of juniors in the space.

Same goes for industry veteran Reg Nelson, chairman of another little thing called Vintage Energy (VEN).

The pair have agreed to merge through a scheme of arrangement, with Galilee to receive 2 shares in Vintage for every 1 Galilee, valuing Galilee at 2c a share.

Both Shorrocks and Nelson will continue on as directors of the merged company while others will go to keep Vintage at a four-person board.

The merger brings together the Eastern States gas production interests of Vintage with the big unconventional gas resource position of Galilee, plus the $2.5m Galilee is raising as part of the marriage.

The enlarged group will be better able to compete for investor attention. There should be plenty of that too given Eastern State gas prices. Anyone would think the stuff is being imported from the Middle East. 

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