A Silver Mining Stocks List as Resources Become More Valuable

Silver Mining Stocks List

The disappearance of mining and natural resources is something that people living in the 21st century will have to accept. Resources that seem unlimited could become exhausted, either because of actual depletion or because environmental regulations will simply make the resources too costly to extract. Silver is one of these resources. Thus, a silver mining stocks list (see further below) could prove to be useful.

Mansoor Barati, a precious and rare metals specialist at the University of Toronto, worries that known stocks of silver could be depleted around 2029, at the current rate of production. Even if professor Barati’s estimates err on the pessimistic side, his research still raises concerns. Silver resources are on the mineralogical equivalent of life support.  (Source: “Silver: The Harsh Realities behind Diminishing Supplies,” BBC, April 18, 2012.)

Clearly, nobody can pinpoint the depletion date with precision, thus the dates for silver’s depletion cannot be estimated accurately. Yet, the fact that so many geologists concur, based on known resources and production amounts, suggests that the scarcity of silver is more a probability than a possibility.

Mexico and Peru continue to be far and ahead the world’s top silver producers but, overall production has fallen. Canadian companies often own the top silver miners in Mexico, yet Canadian production has been falling steadily.

Silver Demand Is Rising

Although silver prices depend on several factors, industrial demand accounts for more than 50 percent of the entire market. Most of the remaining silver demand comes from jewelry, investment coins, and exchange-traded funds (ETFs). Silver prices have moved up some 200% since 2000, as the below chart suggests. An ounce of silver would cost you over $16.00/oz. in May 2017. The silver price surged in the commodities boom of 2010–2012 and dropped again. Still, silver has performed better than other resources, remaining above the price range preceding the surge that began in 2010.

Silver demand is heading in one direction only: demand will soon outweigh supply. The U.S. Geological Survey estimates that silver depletion could occur as early as 2021.

Apart from the threat of scarcity, which boosts prices, silver has many applications. Demand for silver is growing. China has many mineral resources and less restrictive mining regulations. But, as much as it is a top producer, China is also a major importer. Since 2010, China has been the largest importer of silver, increasing its annual imports fourfold. Similarly, demand for silver remains strong in the United States as well.

As mentioned above, the top silver producers are Mexico and Peru, but the country with the highest amount of known reserves is Poland. It may contain as much as 20% of the world’s total supply. Having the most resources and being the biggest producer don’t always go hand-in-hand. Restrictions and environmental concerns, as well as grades and other geological considerations, sometimes make mining projects inefficient. Thus, reserves remain unexploited.

The other reason silver prices have fallen is that mining costs have dropped as miners have strived for efficiency. Lower production costs tend to benefit miners, but hurt resource investors. They benefit investors in silver mining companies, however. As silver becomes scarcer, production techniques will need to be more sophisticated to improve profitability. The silver mining companies to invest in will likely be the ones to dominate the sector in the final decades (or decade) of silver mining.

The Best Silver Mining Stocks

It’s not easy to make a list of the best silver mining stocks. Many are junior mining stocks, although there are still established companies on the list. Some of the companies aren’t strictly silver miners, like BHP Billiton, but their operations still account for a significant amount of silver production.

Some of these are silver mining stocks that pay dividends. For example, Fresnillo Plc (LON:FRES) pays its shareholders biannual (twice-per-year) dividends based on earnings. Fresnillo’s 2016 performance amounted to a dividend yield of 1.9%. But, more significantly, it was 457.41% higher than the previous year. Tahoe Resources Inc (NYSE:TAHO), Hecla Mining Company (NYSE:HL), and Pan American Silver Corp. (NASDAQ:PAAS) also pay dividends.

Silver Supplies Becoming More Limited

The total supply of silver on Earth is estimated to be between 270,000 and 510,000 tons, according to sources. Yet consumption can only increase, due to the number of new applications for the metal. This is especially the case for so-called clean energy resources. Perhaps the demand for silver will drive future space exploration.

Known reserves are mostly in Poland, Australia, Mexico and Peru (13%). The top four producing countries are Mexico, Peru, China, and Australia, together accounting for more than half of the world’s silver production.

The development of Mexican mines has allowed the country to replace Peru as the head of the producing countries, but the largest known reserves are in Poland. It has the same reserves as Australia but, in 2014, it produced only 1,200 metric tons. The main producer is KGHM Polska Miedsz (FRA:KGHA), which could produce much more silver in the years to come. It too is an interesting silver stock, but it trades on the Warsaw and Frankfurt stock exchanges.

Silver has multiple applications. Jewelry is one of them. When silver prices drop, silver jewelry becomes more popular. Silver is also crucial in the manufacturing of electrical equipment, welding materials, electronics, and many alloys. It can be used to make electric fuses, electrodes, capacitors, and control rods for nuclear reactors. Silver is also an essential material to make water treatment tanks, cosmetics, and pharmaceutical applications.

As far as China is concerned, silver has a strategic, if not essential value. China has a notorious pollution problem. It has become so bad that Chinese authorities fear that a major social breakdown could occur over the worsening air quality in major cities like Beijing. China’s rapid and massive industrialization has come at the expense of basic environmental principles.

To resolve this problem, China is planning multi-billion-dollar investments in replacing coal-fired electricity generation plants through nuclear, solar, and wind power. Silver is an essential component in making various components necessary to generate cleaner electricity. This is not a process exclusive to China, of course. The solar panels alone can account for a boost of silver demand.

Silver Is a Key Material for Solar Panels and Clean Energy

The potential demand for solar panels, thanks to the rising popularity of self-sufficient home electricity systems like Tesla Inc‘s (NASDAQ:TSLA) “Powerwall,” should cause a surge of silver demand. Solar panels require silver. Over the next few years, the photovoltaic power generation sector could account for almost a fifth of all silver demand.

The International Energy Agency’s projects some 4,000 gigawatts of solar electricity production by 2050. The available silver supply, and the credible projections of depletion of that supply in the span of a decade, could magnify the effect on silver prices. Well-established mining companies, which can keep producing as efficiently as possible (such as the publicly traded silver mining companies cited above) will have a tremendous advantage.

Simply put, without silver, solar panel manufacturers will need to engineer new ways of making them. Silver is an essential material. For awhile, it seemed that silver had entered a phase of sharp decline. Silver, until a decade ago, was crucial to photographers. But photography’s rapid shift from chemical processing and printing to digital production accounted for a dip in demand.

It’s also worth noting that merely 30% of silver production comes from specially dedicated silver mines. Some 30% of silver is a byproduct of zinc and lead mining. Another 25% often derives from copper mining, and about 12% from gold mining. Then there’s recycling. Given the forthcoming scarcity and depletion of reserves, recycling will become increasingly important for silver production.

Silver recycling is far more efficient than silver mining. A ton of silver ore might contain a few ounces of silver, but a ton of laptops and mobile phones might contain a few kilos of silver and some rare-earth metals to boot.

Like gold, silver performed well for much of last year. It took a bearish turn when the U.S. Federal Reserve Chair Janet Yellen announced that there would be a series of nominal interest rate hikes in 2017. The widespread expectation that the Fed would pursue a tightening of rates and the increasing value of the dollar and equities added their own bearish pressure on silver. Yet this pattern is not certain to continue.

First of all, the rise of interest rates was predicated on higher gross domestic product (GDP), faster job creation, and consumers having more disposable income. GDP growth has actually dropped considerably for the first quarter year-over-year. It was merely 0.7%.

The job creation outlook is unclear, and there are uncertainties about President Donald Trump’s aggressive income tax reform passing both houses of Congress. Meanwhile, the U.S. dollar gained much value against its main rival currency, the euro, because of political turmoil in Europe. In particular, the French election, had it been won by nationalist candidate Marine Le Pen, could have resulted in France pulling out of the European Union (EU) and the euro currency altogether.

The euro would have collapsed and the dollar would have gained. But Marine Le Pen did not win. A pro-euro candidate, Emmanuel Macron, has become president of France. He promises to pursue a very pro-EU line.

All these factors should play in favor of the price of silver and of silver company stocks in 2017.