The Stars Are Aligning for $125–$150-an-Ounce Silver

Written by Luke Burgess
Posted March 8, 2023

The rising popularity of electric vehicles (EVs) has led to an increase in the need for battery metals such as cobalt, lithium, nickel, and copper.

However, obtaining these metals can be a challenge for automakers due to a number of issues ranging from geopolitics to competitive supply chains. In response to those issues, EV manufacturers are going directly to the source.

In recent years, automakers have been forming joint ventures with miners to ensure a dependable supply of battery metals.

For instance, Volkswagen signed a memorandum of understanding with Ganfeng Lithium in 2019 for long-term lithium supplies, while BMW signed a five-year cobalt supply agreement with Glencore, a mining and trading firm, worth $2.3 billion in the following year.

Tesla also secured an agreement with Piedmont Lithium in 2022 to receive 125,000 tonnes of refined lithium ore. More recently, Stellantis — which includes brands such as Chrysler, Dodge, Jeep, Maserati, Peugeot, and Ram — announced a $155 million investment in a copper company owned by McEwen Mining.

But the automotive industry also needs various precious metals like gold, silver, and platinum group metals.

According to Keith Neumeyer, president and CEO of First Majestic Silver, automotive companies such as Tesla may be looking to acquire silver mines next in an effort to gain control over the supply of essential metals needed for electric vehicles.

The automotive industry is depending more and more on silver to fuel the significant technological innovations integrated into current vehicles. This has created a strong demand for silver, with estimates predicting that the industry will require nearly 90 million ounces of silver each year by 2025.

Neumeyer says this move, coupled with other demand-related factors, is expected to drive the price of silver up to $125 per ounce.

Speaking at the BMO Global Metals, Mining, & Critical Minerals Conference alongside Kitco News' Michelle Makori, Neumeyer said:

[Automobile companies] aren't really aware of the supply-demand fundamentals of the metal. I think as they educate themselves and actually learn the challenges for the silver industry to supply the automotive sector, they will start looking at this industry a lot more aggressively… If I were Elon Musk, I'd be very active in this area.

Neumeyer also notes that silver is crucial for efficient car batteries and solar panels. With an average of 1 kilogram of silver per Tesla vehicle, increasing demand for electrification will drive up silver prices.

"The estimated consumption in the solar panel industry is 160 million ounces of silver this coming year, 2023," Neumeyer claimed. "The electrical automotive sector is estimated to be slightly shy of 100 million ounces of silver.”

Neumeyer predicted that silver may reach $30 per ounce this year, but he expects triple-digit silver in the medium to long term. He also noted that a slowing economy could temporarily dampen the price of silver.

"I think silver is going to be somewhat delayed because of the economy, because it is an industrial metal," he said. "I think we're going to go to triple digits [in the medium to long term], and that has been my prediction for a couple of years now. Getting silver to $125–$150, I think, is reasonable… We're closer to that than we were a couple of years ago. The stars are aligning.”

Until next time,
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Luke Burgess

Luke’s analysis and market research reach hundreds of thousands of investors every day. Through his work with the Outsider Club and Junior Mining Trader, Luke helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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