Silver prices rose once again on Wednesday, peaking above $17.20 per ounce – an 11-month high for the mineral affectionately dubbed the “poor man’s gold.”
The grey metal has been on a steady rise since dropping below $14 per ounce in December 2015, and is up more than 23% since the start of the year, outperforming its rivals in the precious metals markets. Indeed, the gold/silver ratio finished trading on Wednesday just above 73, having exceeded 83 early last month.
No-one benefits from this trend more than Mexico, a country that boasts a proud and unique relationship with silver and still sets the benchmark in terms of production, contributing 18% of the total share (as of 2014).
Mexico’s love affair with silver began more than 500 years ago when ambitious Aztec pioneers, thirsty for shiny necklaces and glittering ornaments, set about greedily extracting the valuable mineral from the rich earth beneath the Sierra Madre Occidental mountains.
The mountains, whose striking range of topography and dramatic peaks above ground rival the wealth of minerals hidden below, hug the country’s western Pacific coast from the northern Arizona border down to the golden beaches of Jalisco, forming the area known as the Silver Belt.
Upon arrival, the Spanish conquistadores brought new technology and industrial might, eventually setting up Spain’s first silver mine in North America in Taxco, Guerrero. Today the town, whose colonial history is perfectly preserved in its cobbled streets and winding alleys, is a popular weekend getaway for Mexico City residents attracted by its booming silver jewelry trade.
Although Taxco’s silver deposits have long dried up, the mineral remains vital to Mexico’s economy and, since the industry was opened to foreign investment in the 1990s, its potential has attracted a plethora foreign mining companies.
First Majestic Silver, a Canadian enterprise, is the second largest producer in Mexico with six silver producing mines throughout the country, and if the recent acquisition of the Santa Elena mine in Sonora is anything to go by, it has no plans to stop its expansion in Mexico any time soon.
“The acquisition of the Santa Elena silver mine has certainly bolstered our growth, as it is a five million ounce producer … Currently, we are mining on three stopes in order to reach the underground production of 1,500 tonnes per day,” First Majestic Silver President and CEO Keith Neumeyer recently said in an interview with Mexico Mining Review.
They are not the only ones to benefit from Mexico’s vast reserves. Silver Wheaton, Pan American Silver, and Starcore International Mines are just some of the leading foreign enterprises operating silver mines in Mexico. Moreover, there are now dozens of junior exploration companies working hard to find the next big silver deposit in an effort to boost supply, which is currently lagging far behind global demand.
So the increasing value of silver is clearly benefiting Mexico and those working within the country’s mining sector, but what has driven the price up and how long will it last?
The upturn in fortunes can be attributed to a number of factors. To begin with, more than 50% of global silver demand comes from industry, as the metal has considerably more industrial applications than its more glamorous big brother, gold. The recent stabilization of China’s economic data has given investors confidence that demand for the grey metal will increase – and that demand will surely be boosted if the US and European economies make the gains that are expected of them in the next 18 months.
Much of the industrial need for silver comes from the electronics and automotive industries, due to its excellent electrical conductivity, but it also plays a vital role in the renewable energy sector, as silver is a key component in the crystalline silicon photovoltaic (PV) cells used to make solar panels.
Coeur Mining President and CEO Mitchell Krebs, speaking at last week’s 11th International Mining Conference in Chihuahua, was keen to hammer this point home.
“Solar panels account for 20-30%, or 75 million ounces, of global silver demand,” he said, and as the world steps up its search for new sustainable energy technology following the December 2015 Paris Agreement, silver’s best times could yet be to come.
Of course, optimism should be tempered. There is still a long way to go to come close to the $48.58 per ounce high reached in 2011, and no guarantees can be made about long-term global economic stability. But given the doom and gloom surrounding the commodities sector over the past 12 months, silver mining executives in Mexico and around the world could be forgiven for opening a bottle of champagne or two when the latest figures are put on their desk on Thursday.