Precious metals analysts are optimistic that 2024 could be a stellar year for silver

By Peter Kennedy

Demand for the white metal is forecast to reach 1.2 billion ounce this year, a move that would rank as the second highest level on record, the Silver Institute said in a recent report.

“We think silver will have a terrific year, especially in terms of demand,” said Michael DiRienzo executive director of the Silver Institute during a recent interview. He expects silver prices to reach US$30 an ounce this year, the highest level in 10 years. On February 7, 2024, spot silver was trading at US$22.26 an ounce.

Canada produces silver as a by-product of other mining activities, namely copper, zinc, nickel, lead and gold primary mines. In 2022, Canada ranked as the world’s 13th largest silver producer. Canada is also the USA’s second largest source of silver, providing 21% of that country’s silver imports.

Stronger industrial offtake has been identified as the key driver of rising global demand, which is expected to outstrip supply by about 42 million ounces this year, according to the Silver Institute.

Silver has been identified as the best electrical conductor, the best metallic thermal conductor, and the best reflective material. These qualities make silver an essential and irreplaceable component for many industrial and technological applications, including solar energy, nuclear energy and electric vehicle production.

Approximately 10% of the global silver supply is currently being used for building photovoltaic panels for solar power generation, while another 30% is being used in other electrical applications such as electrical componentry for electric vehicles. As a result, future demand is expected to be driven in part by the electrification of the global transportation industry.

Silver is also a key component in the buildout of 5G networks, the next major evolution in communication technology, as well as having medical and sanitary applications because of its anti-bacterial properties.

For many of these reasons, senior mining industry representatives have sent a letter to the Canadian government calling for silver to be designated as a critical mineral, primarily because the metal is required for this country’s national transition to a sustainable low-carbon and digital economy.

However, while silver has long been known as the “poor man’s gold,” it is worth noting that like gold, silver is affected by some of the same economic and geopolitical factors that impact the price of the yellow metal.

As both gold and silver have an inverse relationship with interest rates, the Silver Institute believes that silver could outperform gold this year, especially if, as expected, the U.S. Federal Reserve moves to lower interest rates. This shift in monetary policy could significantly impact the silver mining industry in a positive way, particularly companies like New Pacific Metals Corp.

New Pacific Metals Corp. [NUAG-TSX, NEWP-NYSE], is working to develop advanced silver projects in Bolivia, a country with a rich mining history and geological endowment that is highly comparable with other Latin American countries, including Chile and Peru.

Within the next two years, the company is hoping to secure environmental permits for its key Silver Sand and Carangas projects, a move that will be closely watched by the company’s two largest shareholders Silvercorp Metals Inc.  [SVM-TSX] and Pan American Silver Corp. [PAAS-TSX]. Silvercorp and Pan American own 28.8% and 9.7% of the company respectively. New Pacific founder Dr. Rui Feng is Chairman and CEO of Silvercorp.

In an interview, New Pacific CEO Andrew Williams said he expects 2024 to be a pivotal year for New Pacific as the company gears up to release a pre-feasibility study at the flagship Silver Sand project. That should enable the company to declare mineral reserves for the first time in its history.

The aim is to de-risk the project by solidifying the economic value of the discovery as New Pacific works to secure the environmental permits.

Silver Sand is a pure silver project, covering 3.17 square kilometres. It has been a venue for 136,000 metres of diamond drilling from 2017 to 2022. A preliminary economic assessment released in January 2023, demonstrates that Silver Sand can be developed into one of the world’s largest silver mines with long life and robust economics. The PEA is based on a measured and indicated resource of 54.4 million tonnes of grade 116 g/t silver or 201.8 million ounces of silver.

In May 2023, the Silver Sand project obtained its environmental categorization as a proposed open pit operation from Bolivia’s Ministry of Environment and Water, a move that formally kick- started the Environmental Impact Assessment process.

Annual production is forecast at 15 million ounces of silver annually in years one through four, with a life of mine average of 12 million ounces annually.

Meanwhile, in September 2023, the company released an inaugural mineral resource estimate for the Carangas silver-gold-polymetallic deposit. Total indicated resources stand at 203.5 million ounces of silver, 1.58 million ounces of gold, 1.4 million pounds of lead, 2.6 million pounds of zinc and 112.6 million pounds of copper. Collectively that amounts to 559.8 million ounces of silver equivalent (AgEq).

On top of that is an inferred resource of 109.8 million ounces of AgEq.

Carangas is a much larger and lower grade deposit than Silver Sand. “It is our view that we are getting little or no value for Carangas,’’ Williams said. He is hoping that will change when the company releases a preliminary economic assessment for Carangas, likely by the middle of 2024.

A third Bolivian project known as Silverstrike is located on a 45 square kilometre land package, 140 kilometres southwest of La Paz. Exploration activity there has been paused to allow New Pacific to focus on Silver Sand and Carangas.

Silver Sand, the Carangas both display the company’s ability to grow shareholder value through careful project identification, intelligent acquisition, extensive geological study and well executed drill programs.

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY.