M&A heats up in small silver sector, highlighting Silver Mines’ pure play status

• M&A activity in the small silver space is heating up as supply gets squeezed
• Latest deal by major Pan American Silver highlights renewed focus on inorganic growth
• Silver Mines’ Bowdens one of the largest undeveloped projects globally and most leveraged to the silver price

Special Report: A forecast bull run on the grey metal is driving keen focus on pure play miners and developers, including Australia’s ‘sleeping giant’ Silver Mines and its Bowdens project.

We’ve been seeing it in gold and now it’s starting to happen in the smaller silver sector – mergers and acquisitions fuelled by a renewed focus on growth and boosted balance sheets thanks to higher prices and forecasts of more to come.

It’s also another sign of investors’ increasing appetite for beefed up leverage to gold’s typically lagging cousin – as seen by the launch this year of the first ETF with a pure-play silver, Sprott’s Silver Miners & Physical Silver ETF (NASDAQ: SLVR).

Peter Krauth, a former portfolio adviser and contributor to leading US and Canadian financial websites, expects M&A activity in the silver space to heat up as companies search out synergies in the face of a “perfect storm” for price appreciation.

Silver is now in its fifth year of deficit – a forecast 117Moz in 2025 – as demand rises while supply takes years to unleash because most is a by-product of other commodities.

Knauth made his prediction of consolidation in the sector ahead of last week’s news that Pan American Silver will acquire competitor and fellow NYSE lister MAG Silver.

MAG is one of the world’s few listed primary silver producers and the US$2.1 billion deal, which values MAG at a premium to its trading price at announcement, demonstrates the strategic value Pan American places on MAG’s 44% stake in the Juanicipio silver mine.

The JV partner in Juanicipio, London-listed Fresnillo was quick to sell most of its shares in MAG, but ensured it continues to hold the majority stake in the Mexican mine and remains the operator.

The Juanicipio asset is considered one of the world’s premier silver mines with high grades, low production costs and potential to be a generational asset.

The MAG deal follows a spate of others in the Americas including Silver47 Exploration and Summa Silver; First Majestic Silver’s purchase of Gatos Silver; Coeur Mining’s acquisition of Silvercrest; and Endeavour Silver takeover of Minera Kolpa.

Meanwhile London and Australian listed silver producer Adriatic Metals (ASX:ADT) has confirmed reports that it’s in potentially A$1.45 billion takeover talks with Toronto-listed Dundee Precious Metals.

Australia’s sleeping silver giant

Analysts believe there’s likely to be more M&A action as companies seek out pure play silver assets and, as the squeeze continues, that will include a sharp focus on developers.

High on the watchlist for investors eyeing strong primary silver growth potential is Silver Mines’ Bowdens project.

Bowdens is the largest undeveloped silver asset in Australia and one of the largest in the world, with high grades, compelling economics and scope to be a generational mine.

The project in the well-serviced Central West of NSW has a current JORC-compliant reserve of 71.7 million ounces of silver and ample resource growth potential.

Importantly, thanks to a revenue profile that’s 86% silver-weighted, Silver Mines (ASX:SVL) 100 per cent owned Bowdens is also one of the most leveraged silver plays globally.

Silver Mines is laser focused on progressing the permitting process for the $331 million development that’s forecast to produce 4.2 million ounces of silver annually, at an average grade of 83g/t over an initial 16.5-year mine life.

All-in sustaining costs are expected to remain below an attractive US$23/oz for the first 10 years, as outlined in an optimisation study released in December 2024.

The pure silver squeeze

As SVL steps up the progress at Bowdens, Sprott’s silver ETF is highlighting just how difficult it is for equity investors to find genuine silver leverage.

The ’s SLVR has an allocation of about 18% to physical silver and 82% to pure play equities, with the fund defining ‘pure play’ as companies with at least 50% of their revenue or assets tied to mining silver.

But the firm says even the world’s top silver producers don’t meet the threshold for this ETF.

“That makes it difficult for investors to get their hands on pure play silver equities,” Sprott director of ETF product management Steve Schoffstall said.

For those looking to capitalise on the rush for silver exposure, Krauth recommends both established producers and promising junior explorers.

Australian precious metals expert Nicole Adshead-Bell said interest would start to trickle down into developers as mining companies in general shifted their focus to increasing production and expanding operations.

Head of Cupel Advisory, Dr Adshead-Bell added that many developers are undervalued on a relative basis.

In the Main Zone

While pursuing its clearer pathway to development consent, Silver Mines also has the drills spinning in Bowdens Main Zone.

The 2000m geometallurgical campaign will generate metallurgical samples covering the first decade of production, which are essential for concentrate marketing and other development initiatives including finalising engineering design and mine planning.

The current drilling is also testing beyond the optimised pit shell in an area interpreted to contain high-grade mineralisation. Given historic intercepts including 3m at 286g/t silver with associated base metals, the company believes there’s strong potential to extend Bowdens’ already significant resource base.

 

This article was developed in collaboration with Silver Mines, a Stockhead advertiser at the time of publishing.

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

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}