Silver takes on golden glow as supply deficit and M&A point to further price rises

The silver bulls are out and about. They’re pumped that the metal is showing signs of a breakout that could sling prices higher.

The metal had been languishing while gold went on its merry rise to record levels, leaving the silver bulls to wonder when their turn would come.

It makes sense that silver is only on the move now. Like gold, silver has a monetary value that comes into its own when everyone is on the lookout for a haven.

The world’s central banks have been soaking up gold as faith in other traditional reserve assets like the US treasuries and the dollar have come under the pump. Central banks don’t buy silver.

That’s why silver was left behind, initially at least. Silver’s other problem compared with gold is that it is also an industrial metal.

So while gold has been responding to fears of economic turmoil brought on by the tariff war, silver has had to struggle against perceptions that its industrial demand could suffer from an economic slowdown.

But here we are with silver’s monetary appeal finally overcoming fears it could be hit by economic concerns.

The metal has recently moved to 13-year highs and was last quoted at $US36.35/oz. That compares with last (calendar) year’s average of $US28/oz and silver’s starting point for 2025 of $US29/oz.

Bank of America and others are now forecasting $US40/oz silver (and $US4,000/oz gold!) for late 2025/early 2026. Again like others, it reckons the brake on silver from industrial demand concerns has been overdone.

As a result, attention swings over to silver’s haven qualities, setting the scene for a catch-up with the gold price.

What is not at issue is silver’s on-going mine supply deficit.

According to an industry survey commissioned by the Washington-based Silver Institute, global silver demand in 2024 exceeded supply (1.16 billion ounces) for the fourth consecutive year.

The resulting structural market deficit of 148.9 million ounces in 2024 took the combined deficit for 2021-2024 to 678Moz, equivalent to about 10 months of global mine supply.

Prepared by the London-based precious metals consultancy Metals Focus, the survey found the green economy and the rise of artificial intelligence powered up industrial demand for silver to a record 680.5 Moz.

“Demand continued to benefit from structural gains linked to the green economy, including investment in grid infrastructure, vehicle electrification, and photovoltaic applications,” Metals Focus said. “Demand was further boosted by end-uses related to artificial intelligence, which drove growth in consumer electronics shipments.”

However, silver demand could face challenges in 2025 from technology shifts reducing silver loadings in the PV segment, and the broader economy.

“The impact of US tariffs will be a key risk to silver demand this year. An extended period of elevated tariffs, or a further escalation of global trade wars, could lead to significant supply chain disruptions and sharply lower global GDP growth,” it said.

“These will weigh on industrial, jewellery, and silverware demand, though physical investment could benefit from rising safe-haven purchases.’’ The latter point is what has given silver its recent push.

The price rise has been seized upon by the silver bulls who argue that the metal is poised for a major breakout and that if the long-term 60:1 gold-to-silver ratio is any guide – it is currently 91 - silver prices have a lot of juice in the tank to run higher still.

Silver M & A:

There is a long history of stepped up merger and acquisition activity preceding a breakout in metal prices to the upside.

And as it is, the recent step-up in silver prices has coincided with a step-up in M & A activity in the silver space, mainly in the North American market.

ASX and London-listed Adriatic Metals (ASX:ADT) is the local example, with its market cap taking off to $1.5 billion in response to last month’s revelation that it was in takeover talks with Canada’s $C3.37 billion Dundee Precious Metals.

The potential takeover comes as Adriatic continues to ramp up annual production at its silver- heavy Vares precious and base metals project in Serbia to a world-scale 20 million ounces of silver equivalent.

There has been no update on Dundee’s intention since the May 21 revelation but under the UK Takeover code it is obliged to put up or shut up by 5:00 PM (London time) on June 17.

Last October there was the $US2.1 billion takeover of Toronto-listed MAG Silver Corp by New York-listed Pan American, and more recently New York-listed Coeur Mining bid an agreed $US1.7 billion for Toronto-listed SilverCrest Metals.

Throw the potential bid for Adriatic into the mix and it makes for close to $A7.5 billion in silver corporate activity.

There is no reason to think that the M & A step-up won’t be extended to ASX silver plays which compared with their North American peers, stand as being seriously undervalued, with or without their recent share price kicks in response to silver’s price spurt.

Andean Silver (ASX:ASL):

Silver’s push through what was seen by some as the psychologically important barrier of $US35 an ounce – and expectations by the silver bulls that prices can whip higher still – has put a rocket under ASX-listed silver stocks.

Gains by familiar names in the past month have included Andean (ASL) 25%, Investigator (IVR) 59%, Silver Mines (SVL) 31% and Sun Silver (SS1) 23%.

But the leveraged response to the silver price rise only restores share prices to levels prevailing before the broad market sell-off in April in response to the now subsiding trade war between the US and China.

Andean recently introduced some exploration pep into its market rating by defining a new 1.2km mineralised vein system at its Cerro Bayo silver-gold project in southern Chile.

Rock chip results were impressive (up to 30,202g/t silver equivalent) but it will take drilling in coming months to confirm the potential of the new vein system to add substantially to Cerro Bayo’s existing 111 million ounce silver-equivalent resource.

Andean last traded at $1.12 for a market cap of $178 million (undiluted). Chief executive Tim Laneyrie said the company was “building an exceptional pipeline of drilling targets with the potential to drive substantial resource growth”.

“These newly identified high grade silver and gold veins, together with our existing geophysical targets, give us amazing exploration visibility and the project’s upside is immense,” he said.

“We currently have three rigs drilling, focused on extending the current known resources which will be the baseline of future restart studies.”

Canaccord in a May 29 note had a $3.05 price target on the stock, suggesting the company could well be swept up in the wave of silver M & A activity.

“The appetite for quality silver/gold assets is high, and with Andean’s growing resource base (scale and confidence), its significant infrastructure endowment and rapidly evolving greenfield/discovery story, we believe the company screens well for attracting corporate interest,” Canaccord said.

SCP has a $3.10 share price target on the stock, saying that while the exploration update was not as material as drill results would have been, it strongly reinforced the company’s upside thesis of balancing resource growth with plans for a potential mine restart.

“With M&A heating up in the silver space, and limited primary silver projects of scale, on infrastructure, with permits, we think Andean’s growing 111Moz AgEq mineral resource estimate, proven metallurgy (was a mine before) and existing 0.5Mtpa plant should warrant a premium,” SCP said.