Silver – Industry Finds Another Use

Last week we looked at Silver as an industrial metal, but just barely touched the surface of the varied uses it has.

One item of particular interest that has just come to my attention is an application that silver has in conjunction with tin and copper: solder. It was approximately six years ago now that the European Union banned the use of lead in solder, which has historically been a blend of tin and lead in a 63%/37% ratio. The ban was put in place because the profligate use of lead, without a corresponding safe disposal strategy, was leading to contaminated soils and groundwater at disposal sites, not to mention lead exposure in the workplace.

Industry replaced the lead by upping the percentage of tin to 96% and adding 3.5% silver and 0.5% copper, by weight. Some brands of solder might also contain trace quantities of manganese or zinc. The rationale to this formulae is that silver is the best conductor of all the metals and copper is the second best (9% less conductive than silver), while lead is 14th on the list. To give you a better perspective on this, platinum is 84% less conductive than copper and it ranks 12th on the conductivity list. This explains why such a low percentage of silver and copper is required to offset the elimination of lead from the mix.

Prices for silver and tin began moving up from the date of the EU decision, as the increasing demand stemming from the new regulation could not be met from supply. The compound average growth rate for silver production from 2001 to 2010 was approximately 2%, while for tin it was about 1%. Since that time silver has moved from US$7.32 per oz. in 2005 to US$11.55 in 2006 and to US$35.12 in 2011 and as high as US$37.00 in 2012.

Considering that since 2008 the junior exploration industry worldwide has been cut back significantly due to the recession, and that most new discoveries are made by junior exploration companies, supply is unlikely to increase in any significant way in the foreseeable future. Junior exploration companies have had difficulties in raising exploration funds for many years now and 2012 has not seen a notable improvement in that circumstance.

Couple the exploration financing challenge with the fact that the ‘easy to find’ mineral deposits have already been exploited and you soon realize that if exploration does not ramp up in the very near future, metal prices in general should rise, and silver in particular is likely to rise significantly.

The importance to a drilling company of this increased demand for silver is significant, as there will be no new silver mines without a substantial amount of drilling. And increasingly, this drilling is higher margin work as the discoveries become ever more difficult to find and define.

Kevin Hull, IR