Silver set for its day in the sun courtesy of solar panel boom

Hi-ho silver!

The silver market has just as many super bulls on the metal’s outlook as does gold, maybe more.

Peter Krauth is a self-declared super bull. That is clear from the American silver analyst’s authorship of a book on the subject that goes by the title of “The Great Silver Bull.’’

The crew from Resources Rising Stars recently had Krauth on a podcast that is still out there. He unashamedly called silver to peak at $US300/oz - more than the six times the (nominal) historic peaks of $US50/oz in 1980 and 2011.

“I am talking about some kind of mania phase when it would ultimately peak,” Krauth said.

Whether mania arrives remains to be seen. But like all super bull calls, Krauth certainly makes a case for higher silver prices, as do less bullish forecasters that reckon a push through $US30/oz in the near-term is plausible.

That’s a long way short of a $US300/oz mania price, but at least there seems to be agreement on the general direction. For reference, silver is currently trading at $US26.75/oz, up from its CY2023 average of $US23.35/oz.

Krauth noted that the silver market has been in structural supply deficit for the last three years. If it is in structural deficit, why is the price not running hard? He says that’s due to the draw down on secondary inventories held by the major futures exchanges, the ETFs, and by individuals.

Krauth said that the secondary inventory drawdown has been keeping a lid on prices but as a supply source, they could be exhausted within 12-24 months which, presumably, is when silver is off to the races.

There is also what Krauth called an 800lb gorilla in the silver market that explains the inventory drawdown – the surging demand from solar panels. “It is now the largest single industrial use application, nearly tripling over the last 10 years,” Krauth said.

As it is, the industry group, the Silver Institute, reckons industrial demand for silver will grow by 9% in 2024 to another record high, driven by end-use in the green economy.

Most of the world’s silver comes from by-product production at silver mines. And that is reflected in the precious few ASX-listed stocks in the sector.

But there are a couple of new arrivals.

MITRE MINING CORP (ASX:MMC):

One of them, Mitre Mining Corp (ASX:MMC), was mentioned here on March 28 when it was trading at 38c.

It has since raced off to 56.5c, not because silver is about to take off, but because of the growth story at its Cerro Bayo silver-gold project in the Aysen region of southern Chile.

Part of the Steve Parsons-led stable that took Bellevue (ASX:BGL) from a junior to the $2 billion gold producer it is today, and now angling for a repeat performance at Newfoundland copper-gold focussed FireFly Metals (ASX:FFM), Mitre’s recent price run is all the more remarkable because it has just pulled in $10.5 million from a placement at 45c a share.

The reason for the raising is simple enough. It is going after “extensive” high-grade mineralisation sitting outside the March inferred and indicated resource estimate of 50 million ounces of silver equivalent.

The company, led by former Northern Star operative Tim Laneyrie, said the placement proceeds will fund infill drilling in the new areas with the aim of “driving rapid and substantial resource growth” by bringing in a second and possibly a third drilling rig.

Rapid and substantial resource growth is what the market likes to see regardless of the metal involved. The company has guided to a proposed resource update early in the third quarter.

The current resource estimate of 50Moz silver equivalent is itself double the level since the project was picked up for $4 million in cash and shares in December.

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.

In typical Parsons style, the previously under-capitalised Cerro Bayo is not going to be rushed back into production. Testing the exploration upside and establishing a robust mining reserve comes first.

SUN SILVER:

Another addition to the silver stocks on the ASX is Sun Silver, with the name giving a big hint on the importance its backers give to the growing role of the solar panel boom on silver’s demand outlook.

It is coming to the market through a $13 million IPO (65 shares at 20c). The IPO has gone down a treat.

The $10-$13m offer was scheduled to close on May 17 with a listing date of June 5. But due to “overwhelming” demand the offer closed on April 26, with the targeted listing date brought forward to mid-May 2024 with a proposed ASX code of SS1.

At the IPO price, the market cap would be $25 million, which stacks up on the light side of things compared with the other silver offerings already on the ASX.

Sun Silver is not making a case for mania silver prices in the lead up to its float, but it does make a case for growing investor interest in the metal.

It says the growing interest is underpinned by growing demand for the metal from industrial and high-tech applications, particularly the solar industry.

“Solar energy capacity in the US alone is forecast to increase by 125GW per year to 2030, and the USA has set a target for solar energy to provide 30 per cent of all electricity in the United States by 2030 and 45% by 2050,” Sun Silver said.

“The estimated amount of silver required to achieve this target by 2050 represents as much as 98% of the current known global silver reserves,’’ it added.

It is a feature of its forward plans that it intends to assess the feasibility of getting involved in silver paste production for solar panels.