Industrial Appetite Reshaping the Market
Solar panels devour silver. Photovoltaic installations now consume roughly 20% of yearly global supply. Each panel needs about 20 grams for conductive paste that captures and transmits electricity. As renewable energy accelerates, solar will consume over 160 million ounces yearly by 2027-up from approximately 140 million in 2024.
This demand can't vanish easily. Scientists keep working on reduction techniques, but alternatives can't match silver's conductivity, thermal performance, and reliability combination. Panel makers face simple choices: use silver or accept worse efficiency. Government mandates and corporate net-zero pledges driving installations worldwide lock this demand in for years.
Electric vehicles need roughly twice the silver of conventional cars, concentrated in electrical systems, battery management, and charging infrastructure. EV sales should hit 17 million units in 2025-about 20% of global auto sales - climbing toward 40% market share by 2030.
Charging infrastructure layers on extra consumption. Each DC fast-charger requires substantial silver in electrical components, switches, and contacts. Governments and private operators deploying hundreds of thousands of charging points globally create incremental demand absent five years ago.
The 5G rollout represents a third structural catalyst. 5G networks demand far greater antenna density than predecessor generations, each small cell consuming silver in radiofrequency components and circuit boards. Industry estimates suggest 5G infrastructure will require an additional 15-20 million ounces yearly at peak deployment.
Supply Stuck in Neutral
Industrial appetite surges while silver supply confronts constraints just becoming apparent to mainstream investors.
Primary mine output stayed essentially unchanged since 2016, hovering around 240-260 million ounces yearly despite silver prices more than doubling from 2020 lows. Unlike gold, where approximately 75% of mined volume originates from primary gold operations, merely 30% of silver production comes from primary silver mines. The remaining 70% emerges as by-product from copper, lead, zinc, and gold mining.
Silver output can't readily respond to price signals because production depends predominantly on base metal and gold operation economics rather than silver prices themselves. For base metal and gold miners extracting silver as by-product, silver enhances profitability but seldom drives investment choices. Copper mines evaluating expansion consider copper pricing—silver revenue delivers welcome margin enhancement but typically doesn't warrant additional capital.
Average silver deposit grades dropped roughly 30% across the past two decades, forcing miners to process substantially more ore producing identical silver quantities. New mine development lead times exceed five years, while most mining capital currently flows toward battery metals, copper, and gold rather than silver.
Recycling can't bridge gaps either. Roughly 170-180 million ounces get recovered yearly, but recycling rates plateaued. More critically, silver consumed in solar panels effectively disappears—photovoltaic installations carry 25-30 year lifespans, meaning today's consumed silver won't reappear until the 2050s.
Gold-Silver Ratio Signals Value
One of silver's most persuasive arguments emerges from the gold-silver ratio. With gold near $3,890 and silver near $33, the ratio sits at approximately 118:1. That's substantial premium to the long-term historical average of 60-70:1.
Should the ratio normalize toward 80:1—still above historical norms but below current extremes—silver would need reaching approximately $48.60, representing 47% gains. Movement toward the historical average of 65:1 would imply silver near $60, or 82% above current pricing.
This doesn't guarantee outperformance—markets can maintain ratios elevated for protracted periods. However, it establishes frameworks for comprehending silver's relative value and suggests meaningful reversion potential exists.
Where to Find ASX Silver Exposure
ASX lacks large-scale pure-play primary silver miners. Silver exposure arrives through gold miners with meaningful by-product output, base metal miners extracting silver as secondary product, and diversified miners holding silver-rich assets.
Northern Star Resources (ASX:NST) extracts substantial silver as by-product across operations, particularly from Alaska's Pogo mine and Australian sites. Northern Star producing over 1.6 million gold ounces yearly means even modest silver by-product ratios translate to millions of silver ounces.
Evolution Mining (ASX:EVN) produces silver across its portfolio, with operations including Queensland's Mt Rawdon and New South Wales' Cowal extracting gold-silver ores. The company's strategy acquiring operating mines with by-product credits resulted in portfolios where silver provides meaningful revenue diversification beyond gold.
Newmont Corporation (ASX:NEM) following its November 2023 Newcrest merger became the world's largest gold producer with major Australian assets including Cadia. Cadia's copper-gold ore contains silver mineralization generating substantial by-product revenue. Current prices mean this contributes hundreds of millions yearly to cash flow.
South32 (ASX:S32) operates Queensland's Cannington mine, historically among Australia's largest silver-lead-zinc operations. While Cannington entered later life stages with declining output, it remains a significant silver producer. The mine extracted approximately 8.6 million silver ounces in FY2024. Cannington economics improve dramatically as silver prices rise.
The Dividend Advantage
An often-missed aspect of ASX precious metals miners involves their capacity generating substantial dividends during elevated commodity pricing. Evolution Mining demonstrated commitment to distributions, paying dividends consistently while maintaining balance sheet strength, with potential for supplemental payments during exceptional commodity environments.
South32's franked dividend approach makes it particularly attractive to Australian income investors, maintaining frameworks targeting 40% of underlying earnings as distributions. Cannington's silver revenue surging with higher prices flows through to potential dividend increases.
Newmont offers ASX investors access to dividend policy targeting 40-60% of net cash flow after sustaining capital. Recent prices show the stock offering dividend yields exceeding 3%, with potential for increases if precious metals remain elevated.
Markets Mispricing Silver Value
Despite silver's surge to multi-year peaks, many ASX miners with silver exposure trade at valuations failing to reflect the metal's structural tailwinds. Markets often fail properly valuing by-product credits, particularly for metals that aren't companies' primary focus.
Consider hypothetical gold miners producing 500,000 gold ounces and 2 million silver ounces yearly. At $2,000 gold and $22 silver, silver contributes $44 million. At current prices of approximately $3,890 gold and $33 silver, silver now contributes $66 million-a 50% increase in absolute dollars. Yet many investors focus predominantly on gold price sensitivity and overlook silver margin expansion.
Many ASX precious metals producers trade at enterprise value-to-EBITDA multiples of 4-6x, compared to historical averages of 6-8x during previous commodity bull markets. This discount persists despite record operating margins, suggesting markets haven't fully priced in sustainability of elevated precious metals pricing.
Understanding the Risks
Silver exhibits significantly higher volatility than gold, with price movements exceeding 5-10% in single days during market stress. While structural growth in solar, EVs, and technology appears robust, these sectors remain sensitive to economic conditions. Rising Australian dollar reduces AUD-denominated silver pricing even if USD prices remain stable, impacting Australian producer profitability. Production misses and operational challenges can trigger sharp corrections even during strong silver environments.
The Bottom Line
Industrial consumption creating inelastic demand of 200+ million ounces yearly can't be readily replaced through recycling or substitution. Primary silver extraction flat since 2016 means pricing must rise substantially further triggering meaningful supply increases. The historical gold-silver ratio implies substantial reversion potential if relationships normalize.
For Australian investors, silver's 14-year peak signals a structural shift in precious metals markets only beginning reflection in mining equity valuations. Companies with silver exposure offer leveraged returns to metal increasingly recognized as critical to energy transition while trading at attractive valuations relative to historical norms.
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