Is Silver a Compelling Investment in 2025?

• Silver is benefiting from strong industrial demand, especially from solar panels, EVs and electronics, as well as investment demand as a store of value.
• Silver supply has been stagnant despite rising demand, leading to depleting inventories and potential price appreciation.
• The gold-silver ratio of over 85:1 suggests silver is undervalued relative to gold based on historical averages.
• Silver mining stocks provide operational leverage to rising silver prices for investors seeking higher returns.
• Experts are bullish on silver due to its critical role in the energy transition, constrained supply picture, and monetary properties as a hard asset.

Silver is garnering increasing attention from investors in 2024 and 2025 due to a convergence of positive fundamental drivers. The versatile metal is benefiting from record industrial demand, fueled by its critical role in the clean energy transition and electrification trends, as well as resilient investment interest based on its historic role as a monetary asset. However, silver supply has remained stagnant despite surging demand, leading to acute inventory drawdowns and a constructive outlook for prices to appreciate further from current levels around $30/oz. For investors, silver's compelling supply-demand story and strong price momentum may offer an attractive opportunity for diversification and growth.

Silver's Critical Role in Decarbonization

One of the key bullish catalysts for silver is its essential role as an industrial metal that is crucial for decarbonization technologies.

"The electrification of the world is really providing a boon to silver," according to Michael DiRienzo, Chief Executive of the Silver Institute.

In particular, silver is a vital component in solar panels due to its unrivaled electrical conductivity. With global solar installations growing 76% in 2023 and forecast to rise another 34% in 2024, silver consumption in photovoltaics is surging. The Silver Institute reports that demand for silver in solar panels rose 158% from 2019-2023 and expects another 20% increase in 2024.

Solar Panels, EV's & Electronics

Silver is also benefiting from rapid growth in electric vehicles and charging infrastructure. EV's contain up to twice as much silver as internal combustion engine vehicles, and charging points also consume significant amounts of silver. The rollout of 5G telecom networks is another demand driver, as silver is required in semiconductor chips, cabling and related electronics.

Together, these green technology applications are driving silver industrial offtake to record highs. Silver industrial demand is on track to exceed 700M ounces for the first time in 2024 as the world accelerates efforts to reduce carbon emissions and electrify transportation and energy systems. Currently, industrial fabrication accounts for over 55% of total silver demand.

Stagnant Supply Leads to Inventory Destocking

Despite booming demand from industrial users, global silver mine supply has been largely stagnant since 2014, leading to supply deficits that are eroding inventories. The Silver Institute forecasts that global silver supply will decline 1% in 2024, and without major new mine discoveries, production will likely struggle to keep pace with demand.

"The easy high-quality silver deposits on surface have by and large already been exploited," according to Steve Schoffstall, Director of ETF Product Management at Sprott. "Miners now have to go deeper underground into more remote areas, requiring greater infrastructure investment."

Silver prices collapsed over the past decade, leading mining companies to curtail investment in exploration and development due to poor economics. This is now manifesting as stagnant mined supply growth at a time of rapidly escalating industrial demand. Many major silver producing countries such as Peru, China and Mexico reported lower output in 2024.

These supply challenges are leading to significant inventory destocking, evidenced by rapidly declining silver ETF holdings and exchange inventories. Silver inventories on the LBMA and COMEX fell by 50% over 2023-2024 to 321M ounces^[1], the lowest levels since 2010. Without material supply growth, these inventory buffers that have bridged the supply-demand gap may soon be exhausted, forcing the physical market into backwardation and pushing prices higher.

Investment Demand Recovering on Monetary Credentials

In addition to industrial usage, silver benefits from enduring demand by investors as a monetary asset and inflation hedge. Throughout history, silver has served as a medium of exchange and store of value, along with gold. Its value proposition as "poor man's gold" still holds appeal today as an alternative hard currency that offers protection against fiat debasement.

"Just as gold, silver's monetary qualities make it a good portfolio diversifier and a potential safe haven in times of economic upheaval or currency weakness," according to Ryan McIntyre, a portfolio manager at Sprott. "Its lower unit cost and higher volatility also make it a trading vehicle for investors pursuing more tactical gains during monetary inflation regimes."^[2]

After falling in 2023, the Silver Institute forecasts global physical silver investment demand to rebound 16% in 2024 to 352M ounces. Investment demand for silver coins and bars has steadily grown over the past decade as the era of QE and ultra-loose monetary policy stokes fears of currency debasement. High inflation and a looming recession are encouraging investors to boost holdings of the historic inflation hedge.

Silver's Low Valuation and Price Momentum

Investors are also becoming increasingly attentive to silver's historically low valuation relative to gold. The current gold-silver ratio stands at 87:1, meaning one ounce of gold is worth 87 ounces of silver. This ratio is well above the long-term average around 70:1, implying that silver is undervalued and has room to catch up to gold. If silver were to reclaim its historic ratio, prices would need to nearly double from current levels around $30.

This undervaluation, coupled with silver's 30% price gain in 2024, is attracting widespread investor interest. Low valuations combined with positive momentum is often cited as an ideal setup for further price appreciation.  

"Since silver is a far smaller market than gold, even minor shifts in investment flows can have an outsized impact on prices," - Maria Smirnova, a precious metals expert at Sprott^[1]

At the end of 2024, the entire investable silver market was worth about $75 billion, a fraction of gold's $3.6 trillion and copper's $600 billion^[1]. This relatively small market size makes silver prices extremely responsive to changes in monetary and investment demand.

The Appeal of Silver Mining Equities

For investors seeking leveraged exposure to rising silver prices, mining equities may offer an attractive vehicle. Silver mining stocks provide operational leverage to the silver price, meaning their earnings and cash flows tend to outperform the metal during bull market cycles. The converse is also true, in that mining equities can underperform if silver prices fall.

"Historically, silver mining equities have had a beta to silver prices of 1.5-2.0x, making them a higher octane option for investors with a bullish outlook," according to Steve Schoffstall. "They allow investors to participate in the silver story while also offering company-specific catalysts such as successful exploration or development milestones."^[2]

The silver mining industry has undergone significant consolidation and rationalization since prices peaked in 2011. The remaining producers have stronger balance sheets, more disciplined management teams, and are generating record margins and cash flows at current silver prices. This may make them resilient investment options compared to past cycles.

However, Schoffstall cautions that investors must be selective, as not all silver miners are created equal.

"We believe in focusing on 'pure play' producers who generate the majority of their revenue from silver, rather than diversified miners where silver is a byproduct credit. The pure play miners tend to provide the most torque to the silver price."^[2]

Silver Companies to Watch

Vizsla Silver

Vizsla Silver had a transformative year in 2024, significantly advancing its flagship Panuco silver-gold project in Mexico. The company released an updated resource estimate featuring 155.8 Moz indicated AgEq and 169.6 Moz inferred AgEq, underscoring Panuco's scale and high-grade potential. A preliminary economic assessment outlined an after-tax NPV of $1.1B and IRR of 86% based on 15.2 Moz AgEq annual production.

Vizsla began a bulk sample program and conducted over 65,000m of drilling aimed at expanding resources. Corporate milestones included graduating to the TSX, closing a $65M financing, publishing its inaugural ESG report, acquiring the La Garra-Metates district, and strengthening its leadership team.

GR Silver Mining

GR Silver is taking a two-pronged approach to capitalize on a potential mining resurgence in Mexico under new pro-mining leadership. Its Plomosas silver project has a past-producing mine that GR Silver aims to monetize through a partnership, coupled with the San Marcial area which hosts 134 Moz AgEq resources across indicated and inferred categories. First pass drilling at San Marcial returned up to 3,260 g/t Ag, suggesting significant exploration upside. The company completed a financial turnaround, eliminating a $28M working capital deficit, and is now positioned to resume exploration drilling. GR Silver is also pursuing industry consolidation opportunities, aiming to achieve the benefits of scale.

Dolly Varden Silver

Dolly Varden owns one of the largest undeveloped high-grade silver and gold projects in British Columbia's Golden Triangle. The company recently completed 31,800m of drilling focused on expanding resources at the high-grade Wolf and Homestake Silver deposits. Exploration also tested several regional targets that previously returned high-grade hits, such as 977 g/t Ag over 5m at Moose and 206 g/t Ag over 23m at Chance.

Dolly Varden currently hosts 35 Moz of indicated silver and 166 koz of indicated gold resources, with another 29 Moz silver and 817 koz gold in the inferred category. With $34M cash, the company is well funded to continue aggressive drilling to expand resources and make new high-grade discoveries on its 15km long property, with the aim of eventually advancing one of Canada's most prospective silver-gold projects into production.

Defiance Silver Corp

Defiance Silver made strong progress in 2024 advancing its assets in top silver mining jurisdictions. At its Zacatecas project, Defiance plans to publish an updated technical report, continue exploration drilling, and work towards a maiden resource estimate after securing 100% ownership of San Acacio. Drilling highlights included 33.8m at 217 g/t AgEq. At the Lucita project, Defiance will follow up on a new discovery that returned over 3 kg/t Ag. At its Tepal copper-gold project, the focus is on drilling high-grade zones and evaluating the top exploration targets. With an updated resource estimate of over 700 Moz AgEq across all projects, a strong treasury, and drill-ready targets, Defiance provides investors exposure to significant discovery and resource growth potential.

Santacruz Silver

Santacruz had a transformative Q3 2024, producing a record 4.6 million silver equivalent ounces following the acquisition of the Bolivar and Porco mines in Bolivia. Revenues grew 21% year-over-year to $78.2 million, with net income of $4.1 million. The amended Glencore agreement provides financial flexibility by eliminating all acquired royalties and deferring most payments until late 2025. Santacruz now operates four mines in Bolivia and Mexico, with the Bolivar, Porco, Caballo Blanco and Zimapan operations all contributing to strong consolidated production results. The company's focus on responsible mining is evidenced by over $1.8 million in community investments year-to-date. With $18.2 million in cash and additional liquidity sources, Santacruz is well funded to optimize its expanded operating portfolio and advance the earlier-stage Soracaya project in Bolivia.

Silvercorp Metals

Silvercorp delivered strong Q3 2024 results, producing 4.6 million silver equivalent ounces at low cash costs of $7.74/oz and all-in sustaining costs of $11.66/oz, generating $15.8 million in EBITDA. The company continues to optimize its China operations, aiming to grow production from 8 million AgEq oz in fiscal 2025 to 10 million AgEq oz by fiscal 2027. A key growth catalyst is the newly acquired El Domo copper-gold project in Ecuador, which is fully financed and scheduled for production in 2026, poised to increase revenues by over 50%. Silvercorp's 27.4% interest in New Pacific Metals provides additional upside exposure to two large-scale silver development projects. With $210 million in cash, no debt, and a track record of profitability and returns to shareholders, Silvercorp is well positioned to fund organic and acquisitive growth.

Endeavour Silver

Endeavour reported Q3 2024 production of 1.6 million silver equivalent ounces, impacted by a ball mill failure at the Guanacevi mine in August. However, construction of the Terronera project, Endeavour's largest and lowest cost mine, reached 77% completion and remains on track for initial production in Q4 2024. Once at full capacity, Terronera is expected to nearly double Endeavour's production to 15-16 million AgEq oz annually at low costs. Additionally, the Pitarrilla acquisition enhances Endeavour's long-term growth pipeline with one of the world's largest undeveloped silver projects. A $5 million drill program is underway to expand and upgrade resources at Pitarrilla. With the Guanacevi and Bolanitos mines generating cash flow, over $55 million cash, and the potential for Parral to become a core asset, Endeavour offers production growth and resource upside.

The Investment Thesis for Silver

• Surging industrial demand for silver in green technologies like solar, EV's and 5G is propelling consumption to record highs
• Stagnant global silver supply is leading to acute inventory drawdowns, providing fundamental support for higher prices
• Silver appears undervalued relative to gold based on the current 87:1 gold-silver ratio, well above the historic norm near 70:1
• Investment demand for silver as an inflation hedge and currency alternative is rebounding as economic risks and monetary debasement escalate
• Silver mining equities offer operational leverage to rising prices and company-specific catalysts for investors seeking amplified returns
• The relatively small size of the investable silver market makes prices highly responsive to changes in demand and investor appetite

In conclusion, silver has emerged as a compelling investment story in 2024-2025, supported by strong industrial and monetary demand drivers, coupled with an increasingly constructive supply picture. Its critical role in the clean energy transition is propelling offtake to record levels at a time when global mine supply remains stagnant, leading to acute inventory drawdowns that should support higher prices. Silver's historically low valuation versus gold, its positive price momentum, and its enduring appeal as a monetary inflation hedge make it an attractive option for investors seeking diversification and growth. Mining equities offer a leveraged play for those with a bullish outlook. As central banks contend with elevated inflation and economic weakness, silver may offer an increasingly valuable portfolio hedge to weather oncoming financial storms.

_References:

1. _{Smirnova, M. (January 2025). Sprott. Silver's Impressive Strength in 2024}
2. _{Sprott Insights (November 2024). Real Assets in Focus: Gold, Silver, Copper and Uranium}
3. _{Insights.com (January 2025). Silver Prices Edge Higher Amid Dollar Weakness and Positive Industrial Demand Outlook}
4. _{The Silver Institute (January 2024). Press Releases. Global Silver Demand Forecasted To Rise To 1.2 Billion Ounces In 2024}