With supply unlikely to keep up with the soaring demand for silver – especially for solar panels – the ASX is about to get a rare pure-play stock.
Silver has been one of the year’s success stories, as awareness about its use in solar energy generation starts to percolate into investor consciousness and ASX hopeful Sun Silver is keen to be one of the few pure play silver companies to benefit from this attention.
An “overwhelming” demand from investors has led the company to close its $13 million IPO early and move up its expected listing on the ASX from June 5 to mid-May.
It’s timing couldn’t be better, given silver’s success.
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The precious and industrial metal has slightly outpaced its better-known compatriot gold to date this year with some forecasting that silver could rise above $US31/oz in the second half of this year.
ANZ senior commodity strategist Damien Hynes said investment demand for both precious metals could pick up amid heightened geopolitical tensions and prospects of an easing monetary cycle, adding that slower silver mine production growth and strong industrial demand could keep the market in deficit.
Sun Silver executive director Gerard O’Donovan agreed, telling Stockhead that the company had opted to focus on silver as it found the global thematic around its industrial uses – particularly driven through the manufacture of solar panels – compelling.
“There has been a global shift towards achieving lower emissions and it has propelled significant investment in photovoltaic technology and the IEA (International Energy Agency) estimated that there will be $275 trillion in capital investment in that sphere between 2021 and 2050,” he said.
“We looked at the silver deficit that has been in place for the last four years and Bank of America forecasts this can increase up to 125 per cent by 2030.”
Silver key for solar
The whys are simple.
The International Energy Agency has said that solar PV will be dominant form of renewable energy by 2027 while Wood Mackenzie has forecast at the end of 2023 that more than 3TW (terawatts) direct current of solar PV capacity will be built in the next 10 years.
This will require a great many solar panels and silver makes up about 23 per cent of the material cost of a solar PV (photovoltaic) panel, so it is no surprise that silver consumption for this technology has grown some 330 per cent over the last 10 years – from 48Moz and 160Moz.
“It really demonstrates that there is significant demand for solar coming into the future. And if you look where solar comes from or solar PV manufacturing comes from, China dominates the supply chain and provides over 90 per cent of the PV supply chain,” O’Donovan said.
He pointed out that the US was planning on banning solar PV imports from certain provinces of China due to ESG concerns as well as putting a 25 per cent tariff on solar imports from June this year.
This is coupled with an ambitious goal for solar to provide 30 per cent of all electricity in the US by 2030 and 45 per cent by 2050.
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“We looked at that and basically the facts spoke for themselves. They demonstrate that the silver demand within industrial use – particularly solar – will continue to grow,” O’Donovan said.
“Silver is a prime component of PV panel manufacturing, so more silver will logically be needed and we felt that Maverick Springs (Sun Silver’s project) – being located in the US, Nevada (ranked No.1 mining jurisdiction globally by the Fraser Institute in 2022 with a globally significant resource) – would be a great asset to bring to IPO, giving investors the opportunity to invest in an essentially pure play silver company on the ASX.”
Right project at the right time
Sun Silver has reason to be confident about its flagship Maverick Springs project in Elko County, Nevada.
The project hosts a JORC-compliant inferred resource of 292Moz of silver equivalent at an average grade of 72.4g/t within the Carlin trend – a deep penetrating fault that O’Donovan says is known for Permian host rocks that are great for mining and processing.
The immediate region is also known to have a number of operating gold and silver mines including Coeur’s Rochester mine.
Nevada is also globally renown as a top tier mining jurisdiction.
“Jurisdictional risk is low in that region and it is located close to good infrastructure and then there’s huge exploration potential,” O’Donovan said.
“To bring an asset to market that has a large resource is one thing, but to be able to plan for exploration and target additional ounces through expansion drilling because it is open along strike and at depth, and through resource classification upgrades, which will be achieved by infill drilling targeting mineralisation closer to surface through angled drilling is another.”
He added that the resource was calculated on silver prices of $US21.50/oz and gold prices of $US1850/oz (Maverick Springs also has a small gold component).
“Prices have changed since then and potential exists to expand current mineralisation,” O’Donovan said. “Significant mineralised areas currently sit outside the whittle pit shell and have not been included in the resource estimate but may be included in the future with higher commodity prices.”
“In parallel to that, we will be looking at silver processing, evaluating downstream opportunities, which include silver paste and solar generation.”
Solar manufacturers within the US will need to rapidly build-out infrastructure in order to meet the US’s aggressive targets and they will need corresponding amounts of silver to do so.
“If they are to hit those 2050 targets of 45 per cent of electrical power coming from solar, it will basically consume 98 per cent of world silver reserves,” O’Donovan added.
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Road ahead
Sun Silver closed its IPO early after it was oversubscribed and raised the maximum $13 million from its initial public offering, which opened on April 18, of 65 million shares at 20c each.
Proceeds from the IPO will be used to complete infill and resource expansion drilling as well as expand on previously completed metallurgical test work and carry out new test work.
“Our primary focus currently is exploration, expanding the asset and upgrading resource classification,” O’Donovan said.
“We want to get a good handle on ounces in the ground and we have allocated money to studies, which we will complete at a certain point, but first up, we want to optimise the existing resource – which can be done at a desktop level.
“We want to expand the resource, which currently stretches 2.4km long and 1.2km wide, and we want to upgrade the resource classification.
“We also plan to carry out metallurgical test work at an appropriate point when we have a good cross section of samples from the asset, that will inform us of the next steps.
“We want to add value to shareholders through the asset itself because it hasn’t been worked on for nearly 15 years apart from limited amounts of work.
“The vast proportion of our funds is on exploration, we understand that’s where the best value for our spend is.”
This content first appeared on stockhead.com.au
At Stockhead we tell it like it is. While Sun Silver is a Stockhead advertiser, it did not sponsor this article.
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Originally published as Sun’s shining on this pure-play silver company as ASX entry looms