Silver Price is Expected to Catch Up With Growing Demand and
- FN Media Group Presents Microsmallcap.com Market Commentary
NEW YORK, June 3, 2020 /PRNewswire/ -- The silver price per ounce is continuing its march towards $18. Silver demand is continuing to rise, fueled by new applications like 5G infrastructure, electric vehicles (EVs), smart electronics and solar energy panels as well as renewed investor interest. At the same time, the global silver supply fell for the fourth consecutive year in 2019 and will be strained further due to COVID-19 related mining closures. Luckily, silver producers such as Endeavour Silver Corp. (NYSE:EXK) (TSX:EDR), Hecla Mining (NYSE:HL), Coeur Mining, Inc. (NYSE:CDE) and First Majestic Silver Corp. (NYSE:AG) (TSX:FR) have begun reopening their operations in the world's largest silver-producing country.
With the world turning more and more toward green energy sources and new technology applications, the demand for silver is growing along with it. Silver also experienced a 12% increase in investment demand in 2019, which is expected to continue as retail and institutional investors focus their attention on silver's long-term investment. The impending supply squeeze is creating a favorable environment for silver producers, particularly the world's purest silver producer First Majestic Silver Corp. (NYSE:AG) (TSX:FR).
Although First Majestic Silver Corp. (AG) (FR.TO) faced temporary COVID-19 closures at its operations in Mexico alongside its peers, the company still managed to increase its production and strengthen its balance sheet in the first quarter. In Q1, the company reported a total production of 6.2 million equivalent ounces of silver, which consisted of 3.2 million ounces of silver and 32,202 ounces of gold, a 106% increase from Q1 2019 and 9% above guidance despite temporary suspensions.
First Majestic Silver Corp. (AG) (FR.TO) also announced that it has decided to postpone the sale of 292,000 ounces of silver and 700 ounces of gold, roughly $5.3 million worth until the price of silver improves. The company currently holds 1,045,342 ounces of silver and 1,459 ounces of gold in inventory as it patiently waits for the price of silver to rebound.
5G Infrastructure, EVs and Solar Panels Fuel Silver Demand
Industrial applications already make up more than half of global silver demand and are expected to increase by 3% in 2020. According to the Silver Institute, demand from the electrical and electronics sector should account for the majority of the gains. Silver use in 5G-infrastructure and upcoming intelligent electronics is also likely to fuel demand gains.
By 2050, solar panels and wind turbines are estimated to require three times more silver than what is currently being used today. Meanwhile, the amount of silver used by the auto industry alone will reach an estimated 70 million ounces by 2030, which is significantly higher than the 45 million ounces in 2017.
At the same time, investment in physical silver, in the form of silver bullion coins and bars, is expected to climb for a third consecutive year, once again putting the spotlight on pure silver producers like First Majestic Silver Corp. (AG) (FR.TO), which has been deemed the purest silver producer in the world since 2011.
Mexico Silver Mines Resume Operations
After being closed for nearly two months due to COVID-19, mining operations in Mexico are starting to reopen. On May 13, the Mexican Government officially confirmed that mining is now deemed essential and stated that mining operations in areas with little to no cases could reopen May 18.
First Majestic Silver Corp. (AG) (FR.TO) has already begun to implement restart procedures across each of its mine sites, while maintaining strict sanitary controls and supporting local communities. The company expects full production rates to be reached in early July.
Endeavour Silver Corp. (NYSE:EXK) (TSX:EDR) also announced that it is restarting mining operations at its three high-grade, underground silver-gold mines in Mexico. The company said its mines and plants are currently ramping up activities to achieve normal operations, while exploration crews are expected to restart mapping, sampling and drilling programs in June.
Coeur Mining, Inc. (NYSE:CDE) has also begun taking steps to restart active mining, processing and exploration activities at its Palmarejo gold-silver complex in Mexico and not a moment too soon. Although Coeur's three US-based mines remained in operation, the drop in production from Palmarejo is expected to have a significant impact on the company's Q2 2020 results. In April, the company said a 30-day shutdown would reduce cash flow from the Palmarejo mine by around $10 million.
Meanwhile, Hecla Mining (NYSE:HL) was hit with a double whammy and was forced to shutter operations at its Mexico-based mine San Sebastian as well as at its Casa Berardi mine in Quebec, Canada. The company has since resumed operations in Quebec and should resume operations in Mexico soon. Luckily, the closure at San Sebastian is not expected to have a material impact on full-year production if the mine restarts operations in the second quarter due to a planned partial year of production.
To learn more about First Majestic Silver Corp. (NYSE:AG) (TSX:FR), click here for more information.
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