Silver Companies to Watch: Booming Demand & Tight Supply Could Propel Prices Even Higher

• Silver prices have rallied strongly in 2024, breaking above $30/oz for the first time since 2012 amid rising industrial demand, Fed rate cuts, and safe-haven buying.
• Mine supply remains constrained as output is forecast to decrease in 2024; the silver market is expected to see a substantial deficit this year.
• Industrial demand, especially from solar power, is a major driver with silver consumption in photovoltaics more than doubling in the past five years.
• Inflation concerns and geopolitical tensions are boosting safe-haven demand for silver and gold; a weaker U.S. dollar as rates are cut provides further tailwinds.
• Many analysts see strong potential for further silver price gains with forecasts ranging from the mid-$30s to as high as $50/oz in the coming years

Silver has captured the attention of investors in 2024 as the precious metal has delivered stellar returns, rising over 40% year-to-date and breaking above the key $30 per ounce level for the first time in over a decade. A combination of robust industrial demand, a second straight year of substantial supply deficits, declining inventories, and renewed safe-haven buying on the back of inflation concerns and geopolitical tensions have underpinned silver's strong advance. With many analysts forecasting the potential for further significant gains, let's take a closer look at the bull case for silver.

Silver Price Rally

After ending 2023 at $23.76 an ounce, silver prices embarked on a strong upward trajectory in 2024, reaching a high of $32.33 on May 20 - a level not seen since 2012. The white metal rose over 48% from the start of the year to its October 21 peak of $34.20, outperforming gold which was up a still impressive 24% over the same period.

Silver's sharp advance has been driven by a myriad of factors including rising inflation expectations, a weakening U.S. dollar, and safe-haven demand amid escalating tensions in the Middle East. Crucially, silver is benefiting from a very positive supply/demand backdrop with the market facing deepening deficits as industrial offtake surges while mine supply remains constrained.

Supply Struggles to Keep Pace with Demand

On the supply side, mined silver output has been largely stagnant for several years. According to the Silver Institute, global mine production fell by 1% to 830.5 million ounces in 2023 due primarily to lower output from major producers such as Peru and China as well as pandemic-related disruptions in countries like Mexico.

Looking ahead, the Institute expects world silver mine supply to decrease by a further 1% to 823.5 million ounces in 2024^[2]. While some new projects and expansions are slated to come online, these increases are forecast to be more than offset by declines in Peru, the world's second largest silver producing country.

Even more importantly, total silver demand is projected to considerably outstrip supply again in 2024, leading to a forecast deficit of 215.3 million ounces^[3]. If realized, this would mark the second largest annual shortfall in over two decades.

Industrial Demand Firing on All Cylinders

The biggest contributor to growth in silver demand by far has been industrial offtake, which hit a new all-time high of 654.4 million ounces in 2023^[2], surpassing the previous record set in 2022. Industrial applications now account for well over 55% of total silver consumption.

Demand from the solar power sector in particular has been "white hot". According to the Silver Institute, as of 2024, the PV industry's silver consumption has more than doubled in just the last five years to an expected 232 million ounces^[3], up 20% from the previous year. India's rapid buildup of solar capacity has made it one of the largest sources of silver demand growth.

The ongoing rollout of 5G technology along with rising uptake of electric vehicles is also lifting silver offtake. Even with a potential economic slowdown on the horizon, many analysts believe industrial demand for silver will remain robust.

Peter Krauth, editor of Silver Stock Investor, spoke to this point, telling the INN: "Either the price came down because they sold a lot of paper that they can't back up, or maybe there's another explanation. But if that is correct, to me $50 seems like a floor whenever a free market comes back."

While industrial usage has been the largest source of demand growth, investment demand for physical silver also remains strong. Retail investors in particular have been keen buyers with sales of silver bars and coins rising to 245.3 million ounces in 2023.

Concerns about high inflation, which has proven more persistent than central banks initially expected, have stoked demand for silver given its traditional role as an inflation hedge alongside gold. A Reuters poll in October showed that 90% of analysts expected the white metal to outperform gold in 2024.

Silver Companies Filling In the Demand

Endeavour Silver

Endeavour Silver aligns well with the silver investment thesis presented in the article. The company is nearing a pivotal moment as it prepares to bring its high-grade, low-cost Terronera silver project online in Mexico. Terronera has the potential to double Endeavour's production and significantly boost cash flows, which would allow the company to rapidly pay down project debt and fund its next leg of growth at the Pitarrilla project. With additional exploration upside at both Terronera and Pitarrilla, a constructive outlook for silver prices driven by rising industrial demand and investor interest, and an attractive valuation, Endeavour Silver appears well-positioned to deliver value for investors.

Silver Tiger Metals

Silver Tiger Metals presents a compelling opportunity that fits the article's argument for investing in silver developers. The company's recently released PFS for its El Tigre project in Mexico demonstrates robust economics with low capital intensity, a clear path to near-term production, and potential to generate significant free cash flow. With permits expected in 2025 and a rapid development timeline targeting initial production of 5 million ounces per year by 2026, Silver Tiger is on track to become a mid-tier primary silver producer. The exploration upside to further expand resources, both from the open pit and underground mine areas, provides additional optionality and growth potential.

Vizsla Silver

Vizsla Silver offers investors unique exposure to a high-grade, district-scale silver asset. The recently released PEA for Vizsla's Panuco project outlines the potential for the company to become a top 10 global silver producer with industry leading costs and free cash flow generation. With a resource base of over 300 million ounces and significant exploration upside across the vast Panuco district, the company has a clear pathway to rapidly growing production over time. Vizsla's strong balance sheet and management team with a track record of delivering shareholder value further de-risks the investment proposition.

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SilverCrest Metals' high-grade Las Chispas mine in Mexico is ramping up to produce over 10 million ounces per year at industry-low costs, generating significant free cash flow. SilverCrest's growing cash balance, with over $100M already accumulated and more expected, provides flexibility to invest in further growth.

First Majestic announced a definitive merger agreement to which First Majestic will acquire all of the issued and outstanding common shares of Gatos Silver. Gatos Silver's strong performance at its 70%-owned Cerro Los Gatos mine in Mexico reinforces the case for investing in high-margin silver producers. With throughput above design capacity, declining unit costs, and record operating cash flow and free cash flow generation, Los Gatos JV is delivering robust results and regular cash distributions to partners. The merger will consolidate two world-class silver districts in Mexico, putting the combined company in a strong position to benefit from positive silver market dynamics.

Price Outlook

Silver's strong performance in the year-to-date, combined with expectations for the bull market to continue, has prompted a steady string of upward revisions to analyst price forecasts.

Heading into the fourth quarter, a widely circulated survey of analysts showed an average full-year 2024 silver price target of $31.50 per ounce, an increase of $6 from estimates three months prior. The most bullish predictions called for silver to rise as high as $50 to $60 next year as demand continues to outstrip supply and investors seek alternatives to the U.S. dollar.

"I think silver in the long term --- everything that we've talked about is why it's still to me a good long-term bet." - Chris Marcus, Founder of Arcadia Economics^[4]

"If you can catch silver at the lower levels before it outpaces gold, the profit potential is amazing. I still think gold is your answer for wealth insurance. But if you're looking for profit, I actually skew it toward silver, and now might be a very good time." - Ritch Checkan, President of Asset Strategies International ^[4]

However, some analysts sounded a more cautious note about the possibility of a near-term pullback in prices.

Peter Krauth of Silver Stock Investor said, "I'm still cautious that we will see a price pullback in silver, which will bleed into the equities. For that reason, I'd only be adding on weakness in either the metal or the miners."^[2]

The Investment Thesis for Silver

• The silver market is forecast to see a substantial deficit of 215.3 million ounces in 2024^[2] as the growth in demand continues to handily outpace stagnant mine supply
• Industrial demand has emerged as the key driver led by the solar power sector where silver consumption has doubled in the last five years; India's solar buildout is boosting demand
• Physical investment demand for silver remains strong, especially among retail buyers, as concerns about high inflation stoke interest in precious metals
• With the Fed cutting interest rates for a second straight meeting in November, continued dollar weakness could provide a strong tailwind for silver and gold prices
• Many analysts have boosted their price targets for silver following its recent rally with forecasts ranging from the low $30s to as high as $50+ over the next 12-18 months
• Key downside risks are a further sharp slowdown in global industrial activity and strength in the U.S. dollar; some analysts warn there could be a pullback before the rally resumes

Conclusion for Investors

In summary, the main pillars of the bull case for investing in silver revolve around expectations for a continued supply deficit in 2024, booming industrial demand led by the solar power sector, strong retail investment buying, and growing safe-haven interest amid elevated inflation and geopolitical uncertainty. Many analysts believe that prices have further to run with some seeing the potential for silver to reach $40 or even $50+ per ounce in the next 12-18 months. While a near-term pullback in silver cannot be ruled out after its recent sharp run-up, the white metal's positive fundamental backdrop suggests that any dips could present an attractive long-term buying opportunity for investors.

_References:

1. _{Pistilli, M. (October 2024). Investing News Network. Should You Invest in Silver Bullion?}
2. _{Belder, D. (October 2024). Investing News Network. Silver Price Update: Q3 2024 in Review}
3. _{Pistilli, M. (October 2024). Investing News Network. What Was the Highest Price for Silver?}
4. _{Pistilli, M. (June 2024). Investing News Network. When Will Silver Go Up?}
5. _{McLeod, C. (October 2024). Investing News Network. Gold, Silver Prices Rise as BRICS Nations Meet in Russia}
6. _{McLeod, C. (October 2024). Investing News Network. Lynette Zhang: Gold to US$3,000, Silver to US$50 by End of 2024?}