Matt Watson: Silver Mine Supply Needs to Double, What’s in Store for Prices?
Industrial demand for silver is increasing, and according to Matt Watson, mine supply will need to rise substantially in the near future in order to meet this growing need.
Watson, who is the founder of Precious Metals Commodity Management, said the electric vehicle, solar photovoltaic and electronics industries, among others, will all require increasing quantities of the white metal.
“The outlook for industrial demand is growing, there’s just no doubt about it,” he told the Investing News Network.
“It’s like so many other minerals. We’re going to blow through our global known reserves in no time at all — by the mid-2030s, 2040s. There’s only about 55 years of known reserves and inferred resources remaining in silver.”
Watson believes silver mine supply will need to double by the mid-2040s, but noted that silver companies are facing a slew of obstacles when it comes to meeting impending demand — those include, low prices, low grades and regulatory challenges related to exploration, development and mining.
“One of the dichotomies that’s going on here is this clean energy transition that’s going to help accelerate the demand for (metals like silver). And yet it’s that same community of clean energy advocates that really has a ‘not in my backyard’ mentality when it comes to mining,” said Watson. “If we’re really wanting to engage in this clean energy transition, it’s a metals-based transition … we’re going to need more of everything.”
With silver facing a supply crunch, what’s the price outlook for the precious metal? Watson noted that since 2000 it’s had an average compound annual growth rate (CAGR) of 8.3 percent, and he sees that continuing.
“Now, as (silver) starts pushing, like I said, into the mid-2030s and becomes more of an industrial-based metal, then I think you see the likelihood of that 8 percent growing to a 10 to 12 percent type of CAGR,” he said, adding that he expects a slow, methodical climb and not an overnight jump to US$40 or US$50 per ounce.
“So that would put us between US$25 and US$27.25 by the end of the year if you were to hold to that course. I still hold to that, I think that’s about the right window where silver will end up by the end of 2022. And (it will) continue to see growth beyond that,” Watson concluded.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.