How silver mining companies can build long-term competitiveness

As supply pressures intensify with growing demand, silver mining companies are focusing on boosting production with sustainability at the core.

In brief:

• Price momentum has incentivized silver mining companies to expand production and pursue M&A opportunities.
• Sustainability and responsible mining practices are at the forefront of strategic initiatives.
• Implementation of innovative extraction processes and digitalization will help mining companies unlock long-term value. 

Silver, which finds applications across industrials and jewelry making as well as being a popular investment commodity, is experiencing a structural market deficit for the fourth consecutive year. In 2024, global demand for silver is estimated to be up ~2% to 1,219Moz, driven by increased industrial usage, particularly in photovoltaic (solar) cells, and a rise in safe haven buying amid geopolitical tensions.¹

However, supply remains limited due to high dependency on by-product supply from other commodities, lower ore grades and decline in exploration activities. Consequently, silver prices have escalated, with 2024 price averaging 44% higher than the last decade, and the uptrend is expected to continue in 2025.² Existing operations are expanding, and M&A activities are on the rise; however, declining ore grades and high operating costs continue to pose challenges.

Sustainability imperatives remain at the forefront with mining companies prioritizing environmental stewardship by concentrating on renewable sources of energy and alternative fuels to decarbonize operations. The adoption of advanced technologies across the entire silver mining value chain will drive cost reduction and improve operational effectiveness.

Now: Exploration budgets remain low amid funding challenges, while there is a slight uptick in production

Overall, exploration activities remained subdued in 2024, as macroeconomic headwinds and geopolitical tensions led to fluctuations in the metal prices, and mining companies dependent on the capital markets to fund exploration encountered a tougher financing environment.

Combined exploration budget for gold, copper and zinc-lead is estimated to be down by 4.3% year over year (y-o-y) in 2024 to US$9.1b, mainly due to decline of 6.8% and 14.5% in gold and zinc exploration budgets, respectively. Moreover, primary silver exploration budget is estimated to be down by 12.4% y-o-y to US$497m, with Latin America (LatAm) budget down by 9.6% to US$304.2m and the US budget down by 4.6% to US$73.2m.³

However, silver production improved slightly, up 1% y-o-y to 837Moz led by higher mill throughput and ramp-up of operations that were temporarily halted in 2023.⁴ For instance, in 3Q2024 there was a 59% quarter over quarter increase in silver production at Pan American Silver’s La Colorada operation after the upgrade of ventilation system.⁵ Regionally, growth in production was driven by Mexico, Chile and the US, offsetting lower output from Peru, Argentina and China.

Clean energy technologies are driving the demand for silver

Industrial consumption is estimated to rise by 7% to 702Moz in 2024, with growth led by gains from green technologies, particularly photovoltaic (solar) cells, which constitute ~20% of the total silver demand.⁶ Demand is anticipated to increase further as the photovoltaic industry transitions to producing high-efficiency cells, which require 30% to 120% more silver.⁷

Silver also plays a vital role in electric vehicles (EVs), as silver’s exceptional conductivity makes it essential for electrical contacts throughout a vehicle’s electronics system. The silver market is poised to experience a significant surge in demand from the EV industry, with projections that the stock of EVs (across all modes except for two/three-wheelers) will grow by fivefold globally to 250 million by 2030 compared to 2023.⁸

The demand for silver jewelry has also shown signs of recovery and is estimated to rise by 5% in 2024, with India as a major growth contributor. However, physical investment is estimated to fall by 15% to 243Moz due to losses in the US where coin and bar sales declined drastically.⁹

Momentum of M&A activities continued as prices soared to record highs

With silver prices soaring to record highs in 2024 and the rate of new discoveries on the decline, mining companies are looking for M&A opportunities. In 2024, the value of global M&A activities within silver/lead/zinc increased by ~380% to US$3.9b in 2024 compared to US$0.8b in 2023, with top five deals accounting for ~90% of the total value.¹⁰

In LatAm, nearshoring has emerged as a transformative strategy for M&A, offering mining companies significant advantages in operational efficiency and access to key markets, such as the US and Canada. For instance, First Majestic Silver has acquired Gatos Silver deposits for US$970m to expand its operations in Mexico.¹¹

Regulatory uncertainty and persistent high costs in Latin America continue to pose challenge

LatAm continues to face regulatory changes, impacting long-term investment plans for mining companies. The new Mexican government has announced plans to review the ban on open pit mining and approvals of permits. However, a 9.2% projected budget reduction to Mexican Geological Service (SGM) in 2025 brings new uncertainties to future supply as SGM plays a key role in exploration of new mineral deposits and the reactivation of existing ones.¹² The government has also proposed an increase in royalty hikes in 2024, which could potentially halt ~US$6.9b investments in next two years.¹³

Moreover, in 2024 mining costs in LatAm region increased, with 84% rise in Peru and 58% in Mexico compared to 2019 levels, while in the US costs were up 16%, compared to global mining costs of US$14.04/oz, which were up by 38%. The increase was mainly led by a rise in labor costs, which have increased by 38% in the last five years.¹⁴

Next step for mining companies to steer transition

Companies to focus on environmental stewardship to achieve sustainable operations

As governments, investors and consumers demand greater transparency and action on emission reduction, mining companies are actively looking for ways to decarbonize operations. Several mining companies have started deploying renewable energy sources such as solar and wind along with energy storage systems. Pan American Silver has achieved over 230,000 GJ reduction in energy use in 2023 due to waste haulage optimization and commissioning an energy-efficient ore pass, and an 85,000 T CO2eq reduction in GHG emissions due to securing of renewable electricity supply and energy efficiency projects.¹⁵

Mining companies are also considering other decarbonization pathways such as using electric arc furnaces, alternative fuels and buying green power purchase agreements (PPAs) to reduce emissions. For instance, First Majestic Silver is looking to replace diesel generators used for on-site backup power at its San Dimas mine with liquified natural gas (LNG), which will reduce carbon emission by up to 25%.¹⁶

With rise in silver demand, recycling will gain further momentum

Silver supply from mines continues to be dominant source, accounting for 82% of the total supply; however, supply from recycling has grown over the recent years with an estimated rise of 9% to 179Moz in 2024 compared to 2020, driven by rise in industrial and silverware scrap.¹⁷ In line, mining companies are looking for revenue opportunities by developing recycling capabilities. For instance, Comstock Inc., which initially started its business in precious metal mining, is now shifting its focus toward solar panel recycling and plans to open its first photovoltaic recycling facility in Nevada with the processing capacity of up to 100kt of solar panels annually.¹⁸

Long term, recycling initiatives are expected to grow further as supply remains tight, and exploration budgets are expected to increase gradually amid a tight funding scenario.

Mining companies are accelerating the adoption of responsible mining practices

Sustainable mining practices are becoming essential within the sector as the need for responsible resource extraction grows. These practices focus on minimizing environmental impact, addressing social and community challenges and ensuring long-term viability of the sector. Seven of the top 10 silver mining companies by revenue are members of the Silver Institute’s responsible mining practices.^19,20

Responsible mining guidance by The Silver Institute

The Silver Institute²¹

Additionally, to avoid the problem of multiple overlapping standards and to have unified responsible mining standards, the Consolidated Mining Standard Initiative (CMSI) aims to combine the focus areas of four well-established standards: the Copper Mark, the Mining Association of Canada’s Towards Sustainable Mining (TSM), the World Gold Council’s Responsible Gold Mining Principles and the International Council on Mining and Metals’ Mining Principles. With several mining companies involved in the initiative’s sector advisory group and silver being a by-product commodity (lead‑zinc (31%), copper (27%) and gold (14%) mining) for these companies, the implementation of this unified standard will enhance the transparency and credibility of associated silver mined as well.

What will drive business resilience beyond?

Adoption of innovative extraction techniques to boost productivity and enhance safety

Mining companies are proactively exploring and implementing new extraction methods to improve operational efficiency. For instance, Hecla Mining has implemented the Underhand Closed Bench (UCB) method, which uses advanced drilling and blasting techniques, at its Lucky Friday operation. UCB has improved control of fault-slip seismic events, enhancing safety and producing more silver in seven months than the mine would have in one year.²²

Integrating digital technologies and innovation to create sustained value for mining companies

The rising demand for silver has led mining companies to invest in digital technologies and geophysical techniques to accelerate exploration time and de-risk investment. For instance, Aya Gold & Silver has successfully completed the exploration program at its Zgounder silver mine and the Boumadine Project in Morocco, with the use of high-resolution spectral imagery and geophysics technology.²³

Mining companies are also optimizing the use to autonomous vehicles. For instance, Newmont has deployed Sandvik’s DS422i rig at its underground Cerro Negro gold-silver mine to reinforce gallery walls with surgical precision, using a mixture of water, cement and additives automatically.²⁴