Silver Investing in Australia

How much silver does Australia produce?

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. Nevertheless, silver is on the rise in Australia, with new silver mines opening, production potential booming and the precious metal's valuation reaching new heights.

This may be surprising news, especially since 2020 was an erratic year for silver. Global silver-mining production plunged by 5.9 percent in 2020 — its biggest drop in over 10 years —⁠ following four years of steady decline.

Output from primary silver mines plummeted by 11.9 percent year-over-year, while silver by-product suffered a more modest drop, with production from gold and lead-⁠zinc mines falling by 5.7 percent and 7.4 percent, respectively. Note that silver is largely produced as a by-product of other metal-mining processes, with 72 percent of silver production taking place at non-silver mines.

This production downturn was the result of COVID-19 restrictions that forced mines to suspend operations temporarily. Silver mine closures hit certain places harder than others, with extended closures in top silver-producing countries such as Peru, Mexico, Argentina and Bolivia causing major production drops.

Australia, however, was an exception to this rule, with production increasing by 3 percent. The reason for Australia's success is that it remained relatively untouched by COVID-19 restrictions. While other countries were forced to shut down production facilities, Australia was able to avoid these closures, continuing — and even upgrading — regular operations.

Australia is now the fourth largest silver producer globally, with an annual output of 42.9 million ounces in 2021. While the output of silver-mining giants such as Mexico and Peru (196.7 million and 107.9 million ounces produced in 2021, respectively) continues to far exceed that of Australia, global demand for silver is on the rise, hitting 822 million ounces annually and making room for a new silver-mining powerhouse.

How can Australians invest in silver?

There are many ways to invest in silver, including physical silver, stocks, exchange-traded funds (ETFs), mutual funds, options and futures. Choosing which investment route to take is all about balancing risk and reward.

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 is a bar or round of solid silver with at least 99.9 percent purity. Rounds come in two forms, coins and medallions. Official silver coins are currency produced by a government mint, while silver medallions resemble coins, but lack monetary value.

The price of physical silver rises and falls alongside the metal's market value. Physical silver is a relatively safe investment, since its value can't be affected by third-party interference or bad business practices (risks characteristic of mining stocks). However, 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 18 percent in 2022, boosted by silver's status as a safe asset and market bullishness on gold. In Australia, coins and medals fabrication increased by 16 percent year-over-year, making physical silver a smart choice for any risk-averse investor.

Of course, low risk often means low reward. If you're looking for a bigger payday, consider investing in silver-mining stocks instead. After all, when silver's market price goes up, mining stocks can potentially spike far higher than that of the physical metal. The disadvantage is that mining stocks are always risky — even when the silver market is strong, a mining endeavour can fail to pan out.

ETFs offer investors the best of both worlds. ETFs are a basket of varied equities, including physical metals and shares in mining companies. Much like individual stocks, they are liable to rise or fall in price according to the market, though they tend to be less risky than stocks.

In 2020, ETF investments were at an all-time-high, though Australia only has one silver ETF that includes the physical precious metal. Stocks are a much more common means of investing in silver in Australia. The country boasts over a dozen silver-mining companies, including South32 and Silver Mines, as well as Newcrest Mining (ASX:NCM,TSX:NCM,OTC Pink:NCMGF), Golden Deeps (ASX:GED) and Investigator Resources (ASX:IVR).