Is Gold Overvalued Or Is Silver Undervalued?

This story features SUN SILVER LIMITED, and other companies. For more info SHARE ANALYSIS: SS1

The New Criterion’s Tim Boreham highlights the gold/silver ratio has blown out, and the ASX has multiple options available for investors seeking exposure to a potential silver catch-up.

By Tim Boreham, Editor, The New Criterion

Is gold overvalued or is silver undervalued?

Valuation-wise, the lingering divergence from the time-honoured nexus between the two precious metals means either could be true. But proponents of the more useful’ silver have good grounds to argue the latter.

In US$ terms gold has surged 22% over the last 12 months and silver is not far behind. 

Over the last century, gold on average has been worth an average 45 times more than silver. The ratio fell to 30 times when silver ran to a record $US50 an ounce in 2011, but now stands at around 78 times.

Silver historians tell us the ratio was 15 times when gravity guru turned Master of The Royal Mint Isaac Newton first fixed the ratio in 1717.

While both metals are stores of value and are used in jewellery, silver has numerous industrial applications, including electronics and in healthcare and food preparation (because of its antibacterial properties).

Silver-focused ASX stocks are thin on the ground, but Sun Silver ((SS1)) has bolstered the ranks.

Amid forecasts of soaring silver demand and febrile supply, Sun Silver listed on May 13 after raising $13m. The timing was auspicious: the shares surged 200% on day one and they are still 150% to the good.

Sun Silver’s flagship is Maverick Springs, a silver (and gold) project in Nevada – known as the Silver State after gold prospectors found vast tracts of the grey metal in the 1850s.

Author Samuel Langhorne Clemens (Mark Twain) joined the prospecting rush in Nevada’s Humboldt County, but his prowess with the quill proved to be better than with the pick and shovel.

Proving his early literary chops, he wrote: “Humboldt County is the richest mineral region upon God’s footstool. Each mountain range is gorged with the precious ores.”

But we digress.

Maverick Springs boasts a compliant resource of 292m tonnes, grading 72.4 grams of silver equivalent and translating to 175m ounces of silver and 37m ounces of gold.

In June, the company announced grades of up to 6216 grams per tonne silver, within a high-grade target zone. The humungous number was derived from desk analysis of historic holes, but the company is gearing up for its maiden drilling campaign.

The company is also eyeing where its next dollar is coming from, by way of an application for a US$60m US government grant to build a silver paste factory. The material is a key component of solar panels and demand for this use alone has soared 330% over the last decade, from 48m ounces to 160m.

If the US is to achieve its stated target of deriving 45% of its power from solar panels by 2050, that would exhaust the world’s known current silver reserves.

Fresh from a $5m capital raising PolarX ((PXX)) is furthering its Star Canyon gold and silver prospect in Nevada’s Humboldt Range, a casino chip’s throw from the operating, 400mo  Rochester silver mine.

A maiden drilling program returned “bonanza” grades (the company’s words) of up to 143.5 g/t silver. 

As for Australia, the biggest producer is Queensland’s Cannington silver-lead mine now owned by South32 ((S32)). But South32 has the silver bug elsewhere, having pressed the button on developing its US$2.2bn Taylor silver, lead and zinc mine in Arizona.

On the development side, the most advanced local project  is Silver Mines ((SVL)) and its flagship Bowdens project near Mudgee.

With around 400mo of silver equivalent, Bowdens is claimed to be Australia’s biggest undeveloped silver resource.

Subject to final investment decision later this year, Silver Mines envisages output of 3.5mo per year over 15 years, from an open-pit operation.

Thomson Resources ((TMZ)) is the latest of a string of owner of two deposits in Texas – not the Lone Star State but the town in southern Queensland.

Recent attempts to sell it to a private company fell through, despite (or because of) the vendor claiming the ground held “trillion of dollars” of silver.

Argent Minerals ((ARD)) is focused on its polymetallic Kempfield project, also in  NSW, which has a compliant resource of 38.9m tonnes containing 127.5mo  of silver equivalent.

Recent attention has focused on high-grade rock sample results at two extension prospects. In June, the company said a second reconnaissance program had delineated “more gossan outcrops and baritic lithologies” previously unknown to the zone.

If that geo-talk sounds too ard, just think of silver assays of up to 87.8g/t with sniffs of copper, lead and zinc.

In a sign of the times, Mitre Mining ((MMC)) has pivoted from a WA lithium focus to silver, having acquired the Cerro Bayo project in Chile for -$5m.

The prospect was mined between 1996 and 2022, producing 45mo of silver and 650,000oz of gold.

Rock chip samples show grades of up to 10,466 g/t of gold equivalent, including more than 6000 g/t of silver and 51 g/t of gold.

A scoping study is due in mid-2025.

Investors following the silver story can catch up with Sun Silver and Mitre Mining at a silver service’ lunch at August’s Diggers & Dealers confab.

In the meantime, we’ll demur on what stock delivers best silver bang for buck. As Mark Twain said, it’s better to keep your mouth closed and be seen for a fool, rather than open it and remove all doubt.

But it’s safe to say that all that glisters is not necessarily gold.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision

Content included in this article is not by association the view of FNArena (see our disclaimer).

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