Investing in Silver Bullion in Australia

Australian silver market

Some shrewd investors are looking to Australia for their silver picks. A country whose silver mines continued to flourish even when most of the world was in a precious metal slump, Australia has emerged from the COVID-19 pandemic as a major player in the global silver market.

When you think of mining in Australia, you may not think of silver, especially since the country is a top global producer of several other metals, including gold and iron ore. Yet silver mining has a rich history in Australia, and Australian mining and metals giant BHP (ASX:BHP,NYSE:BHP,LSE:BLT) started out as a silver operation in the 1920s.

Today, silver is back on the rise in Australia. Several important new silver mines have recently been opened and the potential for further exploration and production is even higher in the wake of the recent price surge of the precious metal over the last two years.

Australia is now tied with Poland and Russia as the fifth largest silver producer globally as of the end of 2021. Mines in Australia churned out 1,300 tonnes of silver in 2021, a slight drop from 1,340 tonnes in 2020.

Those looking at the Australian silver market have options. There are plenty of big players with interests in Australian silver, and many smaller players for investors to consider researching too.

Most silver comes from mines dedicated to other metals ― Glencore's (LSE:GLEN,OTC Pink:GLCNF) Mount Isa in Queensland produces mainly copper, zinc and lead, but silver is separated by the company's integrated processing streams. Glencore also operates the McArthur mine in the Northern Territory, which is primarily zinc. Between its copper and zinc assets, Glencore produced 7,404,000 ounces of silver in Australia in 2020 ― over 200 tonnes.

Elsewhere, BHP produces a lot of silver as well at the Olympic Dam operation in South Australia. Perhaps best known for the production of uranium and copper, it also yields significant silver resources to the tune of 984,000 ounces in 2020, or almost 28 tonnes.

South32 (ASX:S32,OTC Pink:SHTLF) runs Queensland's Cannington mine, which produces more silver than any other in the country. The company claims it is one of the world’s largest and lowest-cost silver producers.

Meanwhile, global demand for silver is on the rise and is expected to reach 1.11 billion ounces in 2022, an increase of nearly 100 million ounces compared to last year's record figure of 1.03 billion ounces.

All this bodes well for the price of silver in 2022 as both industrial demand and consumer demand ― in particular from India, where COVID-19 limited silver purchases in 2021 ― are expected to rise this year.

Investing in silver bullion in Australia

Investing in physical silver is the most straightforward option: you simply buy a tangible piece of the precious metal in the form of bullion, official coins or medallions. Bullion comes in the form of bars or solid silver coins with at least 99.9 percent purity. Official silver coins are currency produced by a government mint, while silver medallions resemble coins, but lack monetary value.

The price of physical silver will rise and fall alongside the metal's spot market value. Physical silver is a relatively safe investment, although if you plan to trade often, the added costs of buying, selling and storing physical silver may make the investment not worth your while.

Investments in physical silver rose by 8 percent last year, boosted by silver's status as a safe asset and market bullishness on gold. In Australia, coins and medals fabrication increased by 35 percent year-over-year.

Silver bullion bars

Minted silver bars are available for purchase in various sizes. The 1,000 ounce silver bar is the industry standard for trading, but will normally oblige an investor to pay for storage fees at a reputable bullion dealer. For investors wishing to buy silver in large quantities, cast and minted bars are the best option.

Many investors, however, will prefer to buy bullion in smaller quantities ranging from 1 ounce to 100 ounces. While some individuals may choose to store these bars in home safes, it is recommended that silver bars be kept in safety deposit boxes in banks or with the secure storage facilities provided by bullion dealers such as the Royal Australian Mint, Perth Mint, Sydney Mint and Melbourne Mint.

Silver coins

Purchasing silver coins offers the advantage of being able to buy silver bullion in smaller quantities anywhere from 1/10th of an oz to 1 oz, thereby making it easier to accumulate physical silver over time. Many minted silver coins comes with various design features that add to the cost of the coin above spot price.

Be wary of premiums

As mentioned above, purchasing special coins will cost extra compared to a basic silver ounce coin. Additionally, accumulating small amounts over time will cost more than buying the same amount in silver bars all at once.