South Africans have a number of options when it comes to investing in silver, with at least three JSE-listed mining companies producing outside SA giving indirect exposure to the industrial and precious metal.
Silver coins also remain an option for those wishing to track the commodity.
The fundamentals for the price from a supply point of view are sound.
In the recently released World Silver Survey 2017, GFMS, which is part of Thomson Reuters, noted mined silver production fell in 2016 for the first time since 2002, dropping 0.6% to 885.8-million ounces.
Mines generating just silver account for 30% of supply, with 35% generated as a by-product from lead and zinc mines.
The supply of scrap silver dropped to 1996 levels of nearly 140-million ounces, dragging overall global silver supply down by 32.6-million ounces to little more than 1-billion ounces. This left the market in its largest deficit in three years of 147.5-million ounces, pushing the silver price up 9.3% in 2016, the first increase since 2011, GFMS said.
The average price in 2016 of $17.14/oz was 28% higher than 2007, it said. The 5.5% increase of the silver price in 2017 has lagged the 9.9% increase in the gold price. But over a 52-week period, silver has far outperformed gold, rising 2.4% against 0.6%. Silver is trading at about $16.96/oz compared with $1,256/oz for gold.
South32, the company spun out of BHP, operates the Cannington mine in Australia, a silver, lead and zinc mine. It is one of the world’s leading sources of silver, generated 21.4-million ounces in 2016, a 5% drop from the previous year. Production is forecast to decline 2% in 2017.
South32 expects silver output from Cannington to fall to 16.6-million ounces in the 2018 financial year because of a redesign of its operations to reduce geotechnical risks.
"An investment decision to potentially extend the life of the Cannington mine will not be required before the end of this decade," the company said.
AngloGold Ashanti and Harmony Gold, with operations in Argentina and Papua New Guinea, are the only two locally listed gold miners that produce the metal in any quantity. AngloGold’s silver production increased to 4.9-million ounces in 2016 from 3.1-million ounces two years ago. It generated $94m in silver revenue in 2016.
Harmony Gold has steadily increased its exposure to silver from its Hidden Valley mine in Papua New Guinea, where it recently bought the 50% stake held by Newcrest Mining.
Harmony's portion of silver output at Hidden Valley increased to 1.3-million ounces in 2016 from 673,032oz in 2011, realising a by-product credit of R333m in 2016 compared with R160m in 2012.
Under Harmony’s new total ownership, the mine will generate up to 3-million ounces of silver a year. Harmony CEO Peter Steenkamp has outlined a $180m investment plan at the mine to unlock 1.4-million ounces of gold and 27-million ounces of silver over seven years, which is regarded sceptically by the investment community. Harmony is steadfast in its message that has resolved the problems bedevilling the mine.
The South African Mint is offering a limited edition 1oz silver Krugerrand, marking the 50th anniversary of the gold coin. The Mint says on its website: "This is the first and only time a Krugerrand is issued in silver." The Mint does issue a range of silver coins along with its gold coin offering.
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