US-based industry association The Silver Institute is backing a more supportive view of silver this year — and that could provide a big fillip for companies like PNX Metals (ASX:PNX).
PNX’s flagship Hayes Creek project contains over 16 million ounces of silver with the potential of more to come – an updated Mineral Resource Estimate is due soon.
According to the pre-feasibility study (PFS) completed on Hayes Creek in July 2017, silver will account for 30 percent of the project’s projected revenue.
The Silver Institute recently reported that while 2018 was a muted year for the precious metal, 2019 could be the year it gets more support.
Based on preliminary numbers, there was a 0.3 percent increase in supply last year compared with a 3 percent drop in demand.
But there were signs that the demand side could pick up dramatically this year.
Signs of pricing strength
The Silver Institute said there was a 12 percent increase for demand for American Eagle coins (a key silver product used as a gauge of silver’s value) in January compared to the same period last year
It also pointed to broader themes as holding promise for silver’s prospects.
For example, it said silver demand for industrial fabrication, which makes up about 60 percent of global demand, could be up this year.
“This is on the back of continued demand from the automotive sector, which uses an increasing amount of [silver in] applications such as safety features, window defogging and infotainment systems, and for electric and hybrid vehicles.”
The Silver Institute also forecast growth in photovoltaic production, increased demand from India, and growth in silver-backed exchange traded products.
The increase on the demand side is also met with weakness from the production side, with silver mine production forecast to dip 2 percent.
All in all, the Silver Institute is forecasting a 7 percent increase in the value of silver as investors look for safe-havens from equity volatility.
The additional pricing support for silver could be coming at just the right time for companies such as PNX, which is working its way through a a definitive feasibility study (DFS) and obtaining the necessary Government and Environmental approvals for its Hayes Creek zinc-gold-silver project in the Northern Territory.
Silver boost coming at the right time for PNX
In addition to 16.2 million ounces of contained silver the project resources also host considerable gold (240,000 ounces), and zinc (177,000t).
The project is slated to produce 1.4 million ounces of silver annually over a 6.5 year mine life — along with 14,700 ounces of gold and 18,300 tonnes of zinc per year.
The revenue percentages are likely to change come the completion of the Hayes Creek DFS, but silver will remain an important contributor to the project economics and any uplift in price will be welcomed by PNX.
The company has been undertaking an aggressive exploration program and has identified several high-value gold deposits which it intends to advance, on its ground near Hayes Creek in the NT’s Pine Creek region as it seeks to extend the life of the project beyond 10 years.
Bankers are more comfortable funding mining projects that can support production over a longer time period.
Results from the exploration program will be factored into the DFS, which is expected to be completed during 2019.
This content is produced by Star Investing in commercial partnership with PNX Metals. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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