Digitalization and electrification unlock long-term value for miners
As silver demand grows alongside global advancements in green initiatives, technological developments are expected to fuel the efficiency of mining operations. Innovation is required to allow already-known, lower-grade, complex ores to be mined both economically and in a manner that is environmentally sustainable.
Digitalization has the potential to unlock greater long-term value in mining operations through improved efficiency, decision-making and safety of operations. Miners are increasingly collaborating with mining equipment, technology and services (METS) companies to develop integrated solutions by addressing challenges from construction to capital spending. For instance, Fresnillo has signed contracts for each mining unit to implement fiber connection at distantly located operational sites.15
Electrification can enable a shift to green energy consumption as miners seek to reduce costs, increase energy efficiency and maintain licenses to operate. By 2028, the market value of EVs in global mining operations is expected to reach US$9b.16 The continued focus of stakeholders to reduce emission levels is pushing miners toward electrification. In line, miners are adopting cleaner energy sources in fleets and embedding renewable technology to power mine site operations. In addition to reducing greenhouse gas (GHG) emissions, electrification is critical in improving safety levels for employees, as it eliminates the noise, vibration, excess heat and exhaust gases, making for better working conditions at the mine sites.
Disruptions in the base metals industry impact silver output
Silver supply is highly dependent on base metals operations, as 73% of silver is derived from projects where it is a by-product of mining zinc-lead, copper and gold. The share of by-product production is expected to further increase, as declining silver ore grades increases pressure on miners to maintain profitability.
Disruption in production of base commodities can significantly impact the competitiveness of silver. For instance, tax changes and local community protests in Peru impacted production from major copper mines in the region. The Chilean government is also considering a modified version of a 2021 bill to impose a 1% sales tax for copper companies producing less than 200 kilotonnes per annum (ktpa) and up to 3% for companies with output exceeding 200ktpa. The companies producing under 50ktpa are exempted from this tax. This is likely to impact the new project pipeline over the coming years.16 Freshwater usage is another major concern for mines in Chile and Peru. Gold exploration activities are expected to be on the rise with high cash flows; however, illegal mining activities in LatAm and African regions continue to impact profitability of miners.