Big tech companies may buy silver miners soon says Keith Neumeyer
Becoming more vertically integrated throughout the entire supply chain would be logical, and it’s only a matter of time before these tech companies begin acquiring miners of strategic metals, according to Keith Neumeyer, CEO of First Majestic Silver.
“We’ve seen Elon Musk invest in nickel and also lithium. I wouldn’t be surprised to see the technology sector start buying up miners. Why not own the entire supply chain? If you are producing iPads, you’re at the mercy of the miners. In a constrained environment where the metals are not there, you need to own a mine to close the supply chain,” Neumeyer told Michelle Makori, editor-in-chief of Kitco News at the BMO Global Metals and Mining Conference.
Additionally, Neumeyer noted that conglomerates are only going to get bigger.
“In sci-fi movies, there’s always one or two conglomerates that run the planet. We’re not that far away from that. How many trillion-dollar companies do we have today? 10 years ago we had zero. Today, I think we’re at about five. These companies are getting bigger and bigger, and they’re wiping out the competition. So, what does that mean 10, 20, 30 years from now? These big conglomerates are going to own more and more of the supply chain. For them to move down and start buying up the miners…for me, as the CEO of First Majestic, I want to own the whole supply chain. I want to own the refinery, I want to own the smelter, I want to own the mint, because that way, my margins increase. Why wouldn’t the Apples of the world not want to do the same thing?” he said.
Importantly, silver is considered a strategic metal, along with lithium and nickel, Neumeyer noted.
As of the end of fiscal year 2021, Apple Inc. has total assets of $351 billion. The top ten gold mining companies combined, as of March 2, 2022, have a total market capitalization of $171 billion, meaning that just Apple alone has assets equal to twice the total equity value of the top ten gold mining companies, combined.
On silver, Neumeyer said that fundamentals for the metal remain attractive, especially given the increased demand from renewable energy initiatives, as well as the emergence of electric vehicles.
U.S. President Biden has set a target for 100% of the nation’s energy to come from renewables by 2035, and a net-zero carbon economy by 2050, and metals like silver would play a big part in this transition.
Neumeyer said that it would be difficult for these targets to be met on time.
“It’s not practical. Quite honestly, I don’t think we’ll ever get off oil and gas. We’ll use less of it, no doubt about that, but it will take time,” he said. “The [EV] industry is just starting. How many years is it going to take for all of us to have electric vehicles? It’ll be at least 20 years before we replace the above-ground fleet. There’s 1.4 billion cars sitting on the surface of the Earth right now. The auto industry is producing 95 million a year. At that rate, [it will take] 15 years, and that’s assuming every car produced from today forward is electric, which is not going to happen,” he said.
Even with “greenification” targets that are difficult to meet, silver, being a critical industrial metal, will still be in a deficit in the coming years, Neumeyer noted.
The Silver Institute has estimated that 1.112 billion ounces of physical silver will be in demand in 2022, the highest on record.
“I’ve heard numbers as high as 1.4 billion [ounces] for 2022. Whatever the number is, it’s more than we’re producing, so these ounces are coming from somewhere. There’s a limited amount of silver sitting on the surface…once that’s gone, there’s no place to get the silver. One thing has to happen, silver prices have to go up,” he said.
Neumeyer still maintains his long-term outlook for silver to reach triple digits “within [his] lifetime”, but for 2022, he sees the price to reach $30 an ounce.
Silver has several industrial properties, including batteries, solar panels, and even missiles. There is an estimated 500 ounces of silver in each Tomahawk cruise missile, for example.
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