Keith Neumeyer, the president and CEO of First Majestic Silver, reveals in an interview with Kitco News, how he believes major automotive companies, like Tesla, will soon join the silver mining sphere. If such a transaction occurs, like Tesla purchasing a large mining corporation, silver prices could increase to $125 per ounce. These forecasts combined with the already-real increase in silver demand make for a potentially excellent performance year for silver.
With four decades of financial industry experience and over two decades of experience running First Majestic Silver, Neumeyer understands how both the supply and demand ends operate. He believes that as more automotive manufacturers seek reduced margins on their raw materials, the industry will see more vertical integration and streamlined supply chains. The same may apply to the solar industry.
“They [automobile manufacturers] aren’t really aware of the supply-demand fundamentals of the metal,”
Neumeyer explains. “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.”
Nearly half of silver’s demand comes from the electronics and automotive industries. Both car batteries and solar panels require silver for efficient and maximum operations. As the world embraces more energy-efficient solutions with improved sustainability, vehicle manufacturers must make more green solutions to meet modern demands.
Electric cars, hybrid vehicles, solar-powered homes, and other “green” energy solutions all rely on silver. According to estimates, the average Tesla car uses one kilogram of silver. In 2022, Tesla delivered over 1.3 million vehicles to customers, increasing its production by 47% from the year prior.
According to these statistics, Tesla produced enough cars to require over 45 million ounces of silver just in 2022. As demand soars more than ever with environmental threats only worsening year by year, the silver supply cannot keep up, creating the perfect landscape for a rise in prices.
Researchers predict that the world may lose about 100 million ounces of silver in the next five years alone. The issue lies in production. Silver mines cannot easily create more metal as demand rises because the mining process relies on zinc, gold, and copper outputs.
Silver’s production rates reached a peak in 2016 at 900 million ounces, though it’s only decreased since then. In 2022, the production rate was 843.2 million ounces. As supply rates drop and demand rates skyrocket, investors can expect a solid performance year for silver prices.
“The estimated consumption in the solar panel industry is 160 million ounces of silver this coming year, 2023,” Neumeyer explains. “The electrical automotive sector is estimated to be slightly shy of 100 million ounces of silver… The Silver Institute is projecting an over 200-million-ounce deficit this year.”
A few major car manufacturers have already begun showing interest in investing in raw metal producers. Stellantis NV recently bought a 14% stake in McEwen Copper. General Motors Co. (GM) intends to purchase a $650 million equity stake in Lithium Americas Corp. while joining the bidding competition to buy out Vale SA.
Tesla Inc. announced its consideration of acquiring Sigma Lithium Corp., a sustainability company that produces low-carbon, high-purity lithium concentrates. Given this interest, Neumeyer’s predictions of silver mining purchases on the horizon only make sense.
With all these factors in mind, Neumeyer believes silver may rise to $30 this year, though into the triple digits in the near future. Given the current economic state and the potential of a nearing recession, silver’s primary price boost may be temporarily delayed. Neumeyer expects silver to have its largest successes in the next few years.
“I think silver is going to be somewhat delayed because of the economy because it is an industrial metal,” he explains. “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 to $150, I think, is reasonable… we’re closer to that than we were a couple of years ago. The stars are aligning.”
Like other precious metals, silver yields the strongest potential when held long-term. The current lower prices could display an excellent buying opportunity for investors that want to get in while they’re ahead. If major auto manufacturers invest in silver mines and demand continues rising as Neumeyer predicts, an investment now could provide excellent yields in the long term.
As always, investors should consult their financial advisors before making any portfolio decisions.