By Andrew Topf
Silver is having a terrific year so far, with elevated monetary and industrial demand providing a strong market outlook.
Demand for silver has exceeded supply for three consecutive years, and the pattern of deficits is likely to continue in 2024 and beyond.
The resulting climb in silver prices is having positive effects on silver equities.
Silvercorp Metals (TSX/NYSE:SVM) achieved record earnings in its first quarter, marking a significant milestone for the Vancouver-based silver miner. SVM’s first quarter of fiscal 2025 ended on June 30, 2024.
The company reported revenues of approximately $72 million in Q1, a 20% increase over the same quarter last year (Q1 2024).
Silvercorp has three mining areas in China: the Ying Mining District, the Gaocheng (GC) Mine and the Baiyupu (BYP) Mine. The latter produced gold, zinc and lead from 2006-14 but is currently closed.
Its flagship Ying operation consists of seven underground mines and two processing plants, with a combined 2,500 tonnes per day (tpd) capacity. Ying produces gold dore and silver-lead and zinc concentrates that are sold to smelters within Henan Province.
Silvercorp mined 341,927 tonnes of ore in Q1 2025, a 13% increase over the first quarter of 2024. The amount of ore milled was up by 4%.
If inventory stockpiles of 59,293 tonnes had been processed, the company says its metal production would have reached its full-year guidance. The stockpiled ore is expected to be processed by November 2024, when a new 1,500 tpd mill is operational.
Mill constraints and lower head grades at the Ying Mining District meant higher zinc production but lower output of gold, silver, silver-equivalent and lead. Zinc production increased 17% to 2.5 million pounds, gold production fell 26% to 1,146 ounces, silver output declined 2% to 1.6Moz, and 8% less lead was produced, at 14.1Mlbs.
At the GC Mine, metal production decreased mainly due to lower head grades, and 2% less ore mined compared to the year-ago quarter. Silver production was down 21% to 145,000 oz. Lead and zinc output declined 37% and 16% respectively.
Total silver production of 1.7Moz decreased 4% from Q1 2024. Quarterly lead and zinc production was down a respective 12% and 6%.
To summarize, in Q1 2025 Silvercorp achieved a 13% increase in the amount of ore mined, and a 4% bump in milled ore, but metal production at the Ying Mining District and the GC Mine was mostly down. Output of gold, silver, silver-equivalent (gold + silver) and lead at both mines fell in Q1. Zinc production fell at GC but rose at Ying.
Despite lower metal output, Silvercorp attained record revenues of $72 million during the quarter. Higher silver prices undoubtedly played a role in this achievement.
Year to date, silver prices have risen 19.9%, as of July 25. Gold prices are up 16.2%. Precious metals have benefited from the expectation that the Federal Reserve will cut interest rates once, and possibly twice, before year’s end.
Gold is moving higher primarily due to central bank purchases, as several countries diversify their foreign exchange reserves away from the U.S. dollar. Safe-haven demand and physical buying in Asia are other demand drivers.
India has been gobbling up silver, and silver-backed exchange-traded funds (ETFs) are thriving, providing price supports for the white metal.
Silver is also in the fourth year of a global supply deficit.
According to The Silver Institute’s World Silver Survey 2024, silver demand in 2023 exceeded supply for the third year in a row. Although the deficit fell by 30% year on year, it was still one of the largest on record at 184.3Moz.
Global mine production fell by 1% to 830.5Moz, owing to a strike at Newmont’s Penasquito Mine in Mexico, lower ore grades in Argentina, and the closure of Pan American Silver’s Manantial Espejo Mine.
Primary silver production slipped to 235.2Moz last year.
Silver recycling inched up by 1% to a 10-year high of 178.6Moz.
Total silver supply in 2023 reached 1.010 billion ounces, 4.7Moz less than 2022.
Like 2022, the industrial sector was the primary driver of volumes. While silver demand was off by 7% to 1.195Boz in 2023, it was still 9% higher than the next highest yearly total.
According to the survey, offtake from the industrial sector achieved a record high last year, rising 11% to 654.4Moz, mainly due to gains in the solar power industry.
In an April commentary, The Silver Institute said the use of silver in industrial applications exceeded 2022’s record high, coming in at 654.4Moz. Demand from the electronics sector grew 20% to 445.1Moz, while silver in photovoltaics ran to 193.5Moz – the latter a massive 64% increase over 2022’s 118.1Moz.
The institute forecasts silver demand this year to grow by 2%, led by an anticipated 9% increase in industrial fabrication and a 20% gain in the PV market.
Silver’s market deficit is expected to grow by 17% in 2024 as supply stagnates and industrial demand posts another record. Beyond 2024 deficits should continue, depleting inventories.
Silver’s strong performance has been reflected in significant returns for shareholders of Silvercorp Metals. Year to date, the stock is up 49.5% to $5.06 per share, as of July 26. SVM reached a 52-week high of $5.72 on May 28 and has a current market capitalization of $898.7 million.
With market fundamentals in silver’s favor, a further price increase is likely, bolstering the investment case for Silvercorp.
This is third-party content provided by Silvercorp Metals Inc. (NYSE-A:SVM; TSX:SVM). Please see full disclaimer here.
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