Surging Industrial Demand and Constrained Supply Set Stage for Silver Bull Market

• Silver supply is projected to fall short of demand by over 400 million ounces per year, driving prices higher
• Industrial demand for silver, especially in solar panels, is growing rapidly and is unlikely to slow down
• The number of primary silver mines is dwindling, with only 38 projected to be operating in 2028
• Geopolitical risks in key silver-producing countries like Mexico are subsiding, making the environment more favorable for miners
• High-grade, near-production silver projects from companies like Silver Tiger Metals and Outcrop Silver & Gold are well-positioned to benefit from rising prices

Why Investors Should Consider Silver: Supply Crunch Meets Surging Demand

IntroductionSilver prices have surged over the past year, rising above $30 per ounce due to strong industrial and investment demand. For investors seeking exposure to precious metals, silver offers a compelling opportunity. A looming supply deficit, combined with rapid growth in industrial applications and a more favorable mining environment, has set the stage for a sustained rally in silver prices. High-quality silver mining projects from experienced management teams stand to benefit.

The Supply-Demand Imbalance

The key driver behind the bullish outlook for silver is the growing imbalance between supply and demand. Annual silver demand is projected to reach 1.2 billion ounces, while supply is estimated at just 800 million ounces, leaving a deficit of 400 million ounces. Glenn Jessome, CEO of Silver Tiger Metals, puts it bluntly: "That ain't rocket science. Everybody can figure that out."This structural deficit is the result of multiple factors. On the demand side, industrial use of silver is soaring, driven by the growth of the solar panel industry. Silver is a key component in photovoltaic cells, and demand from this sector alone has increased by over 60% to 200 million ounces per year. New technologies like heterojunction cells use even more silver.

Other growing industrial uses include electronics and batteries for electric vehicles. Automotive demand for silver is doubling with the shift to EVs. With so many applications dependent on silver's unique properties as an electrical conductor, this demand appears sticky even at much higher prices.

Dwindling Mine Supply

On the supply side, the number of primary silver mines globally is steadily declining. Only 38 are expected to be operating by 2028, down from 51 currently. Continuing to meet demand will require huge capital investment in exploration and development, but new economic discoveries are exceedingly rare.

Ian Harris, CEO of Outcrop Silver & Gold, emphasizes the inelastic nature of much of the silver supply, produced as a byproduct of base metals mining. "Silver could go to $1,000 an ounce, and it doesn't change the idea of building a copper mine or not," he points out. "That's big for us, because we're high grade, so high recovery."

Geopolitical Backdrop Improving

Much of the world's silver comes from Latin America, where shifting political winds appear to be becoming more favorable for the mining industry. In Mexico, a new pro-business administration is expected to take power following elections in June. According to Jessome, whose company has operated in Mexico for over two decades, "We think it's going to be fine either way. Permits are going to start flying. It will be better for Mexico come June 2nd regarding mining."Colombia, another major silver jurisdiction, recently elected its first left-wing government. However, Harris believes the growing track record of left-leaning leaders in the region implementing pro-mining policies to drive economic growth bodes well for the industry's long-term prospects.

The Investment Thesis for Silver

• Supply deficit of 400+ million ounces per year is likely to persist and possibly worsen as industrial demand grows and mine production falls
• Industrial demand drivers like solar, EVs and electronics are price inelastic and unlikely to slow even if silver prices rise further
• Primary silver mines are scarce and cannot ramp up production quickly to meet the supply shortfall; much of the silver supply is a byproduct of other mining
• Geopolitical headwinds in Latin America are shifting to tailwinds as governments recognize the economic imperative of encouraging mining investment
• High-grade, near-term development projects in safe jurisdictions offer the most direct exposure and upside to rising silver prices
• Look for projects with strong economics at current prices, experienced management teams with track records of developing mines, and potential to expand resources

The fundamentals for higher silver prices are extremely strong, and the past year's rally likely has much further to run. Investors should consider adding exposure to their portfolios, focusing on high-quality development projects poised to benefit most directly from the bull market.

Successful silver investing requires carefully picking the right projects and management teams. Attributes to look for are: high grades and favorable economics at current prices, mines in well-established jurisdictions with a history of production, experienced leadership with a track record of building and operating successful mines, and long-term exploration potential to grow resources over time.