Silver hits new high as Rare Earths heat up

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Two breaking news items today...

In rare earths and... silver.

Silver hit an ALL TIME HIGH yesterday and closed the week above US$50/oz a couple of hours ago.

The silver spot price is trading above US$50/oz for the first time ever... even going above $51/oz a couple of times.

(more on this in a second)

But first - over the last 36 hours we saw China intervene in the rare earth markets AGAIN, having “dramatically expanded its rare earths export controls”.

“The world's largest rare earths producer also added dozens of pieces of refining technology to its control list and announced rules that will require compliance from foreign rare earth producers who use Chinese materials.”

(Source)

Rare earth elements are critical for modern technologies, including electronics, medicine and military applications like F35 fighter jets, Tomahawk missiles and the advanced magnets needed for motion in AI robots...

The US is suddenly scrambling for domestic rare earths supply, because China dominates global production and processing and has started withholding supply from the USA for leverage in various geopolitical spats and trade negotiations...

China controls over 90% of the global rare earths refining market and we think that news yesterday created even more urgency in the whole US critical minerals macro thematic.

A few hours ago - Trump responded with threats of increased tariffs and the USA’s own export controls on critical products they supply to China:

(Source)

Just check out this Truth Social post from US President Donald Trump:

(Source)

Based on the events of the last 36 hours it seems like there is still a lot to play out in the broader US critical metals story...

Rare earths is in the spotlight for the moment, but we think this will further focus the USA’s attention and capital on developing their own domestic supply chains of all critical metals as quickly as possible.

Which is good for our existing US critical minerals stocks - LKY (antimony and rare earths in California, USA) and RML (gold, antimony and tungsten in Idaho, USA).

Two days ago, we also added Power Minerals (ASX:PNN) to our Portfolio, who just acquired a USA based rare earths project.

(two days before China announced the “dramatic” rare earth export controls - got lucky on that one)

PNN actually has TWO rare earths projects:

• One in California, USA going for heavy rare earths (the more scarce, more valuable suite of rare earths), and
• One in Brazil (going after a big carbonatite hosted rare earth discovery - similar to one of our other Investments SGQ).

This week’s “increased rare earths export controls” news out of China signals an escalation where the US may respond by ramping up capital allocation to secure their own domestic rare earths supply and processing tech.

We are backing PNN to hopefully make a discovery on either of its rare earths projects - anything big on that US project in the current “rare earths” climate would be welcomed by the market.

Especially with the heavy rare earths upside - which the USA’s only fully integrated rare earth/magnet producer A$20BN MP Materials might need soon...

MP Materials produces mainly light rare earths, magnet production requires light and heavy rare earths (like what PNN will be drilling for):

(Source)

(MP Materials was up 15% on Friday after the new China export controls new broke)

Check out our initiation note where we list the 10 reasons why we Invested in PNN: Our New Investment: Power Minerals Ltd (ASX: PNN)

Our other rare earths Investment is St George Mining (ASX:SGQ), which is developing a rare earths and niobium asset in Brazil.

We have been Invested in SGQ since August 2024. Our Initial Entry Price was 2.5c.

On Thursday the company went into a trading halt for a capital raise, and according to the AFR it was going for a $40M raise at 10c.

SGQ is now one of our biggest Investments, and we are looking forward to seeing Monday’s news on SGQ’s funding round, which should give them a strong cash runway to keep progressing its rare earths asset in Brazil.

Back to regular programming - silver...

We can’t do a weekend note without talking about silver right now, especially after what happened yesterday.

The silver spot price just traded above US$50 - for the first time EVER.

It even went above US$51 a few times, and closed the week above US$50.

Silver officially hit an ALL TIME HIGH on Friday morning.

(Source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

A couple of months ago we shared a video of technical analyst Michael Oliver when he said silver was about to rip when it did the “triple top” at US$36 - he was sure right on that one...

Here he is talking about the silver moving into unchartered territory (new all time highs) over the last two trading sessions... and what might happen next:

(watch the video)

In the last 2 days Silver briefly hit as high as US $51.235 per ounce.

IF the “generational cup and handle” theory is correct, THEN the silver price COULD move higher pretty quickly.

Whether you believe in technical charting or not - a LOT of people do, and they could start buying if silver convincingly completes the formation - we’ll probably know next week.

(it’s a big “IF” of course - we are not charting experts and the silver price can always trend downwards)

Now we wait to see what happens next...

(high fives all around, or cabbage being thrown at us)

For those who read all our Saturday emails, you will know what we mean by that.

For those who missed it, here is what we said last weekend:

Check out that Saturday note in full here.

Here is our current list of silver Investments (in no particular order), click on the link to read our Investment Memo for that Investment:

1. Sun Silver (ASX: SS1) - the biggest pre-production silver asset on the ASX and in the USA. SS1’s current resource estimate sits at 480M ounces silver equivalent. It could also host a giant antimony resource.
   
   
2. Mithril Silver and Gold (ASX: MTH) - 373k ounce gold, 11M ounce silver JORC resource estimate in Mexico. MTH is getting a third rig on site in early 2026. It’s aiming to grow that resource to a ~2.5M to 3M ounce gold equivalent resource estimate over the next 12-14 months.
   
   
3. West Coast Silver (ASX: WCE) - aiming to extend the Elizabeth Hill silver mine. Elizabeth Hill was the highest grade silver mine in Australia when it was last in production in the 1990s. WCE is trying to extend the leftover resources at the mine and hopefully make a repeat discovery on its regional targets.
   
   
4. Rapid Critical Metals (ASX: RCM) - has an estimated 67M ounces of high grade silver equivalent resource (at around 400 g/t AgEq) across three projects in NSW, Australia. RCM just attracted Jupiter Asset Management, Tribeca Investment Partners and billionaire Eric Sprott to its register in a $14M capital raise at 3.5c. RCM wants to drill out its assets to achieve a total JORC resource estimate of over 100M+ ounces silver equivalent.
   
   
5. Advance Metals (ASX: AVM) - has an estimated 100M ounces of silver equivalent foreign resources in Mexico. AVM raised $13M this week and attracted Jupiter Asset Management, Tribeca Investment Partners, Lowell Resources Funds and APAC Resources to its register at 10c.
   
   
6. James Bay Minerals (ASX: JBY) - recently acquired a project with a high grade 17.5M ounce silver (non-JORC) resource estimate AND ~$150M of processing plant and project infrastructure in Texas, USA. We liked the silver silver acquisition so much we anointed JBY as our Next Investors Small Cap Pick of the Year for 2025. Geologically, it sits on Mexico’s famous Sierra Madre belt, which is home to some of the world’s biggest silver producers... We want to see the project get into production ASAP.
   
   
7. Investigator Resources (ASX: IVR) - owns one of Australia’s highest grade undeveloped silver assets. IVR has a 57M ounce silver JORC resource estimate with an average grade of 73g/t. Discovered in 2011 during the last bull run for silver, IVR has spent 14 years drilling out and developing this project to the point where it is now nearing the development stage. IVR recently bought in a new Managing Director, Lachlan Wallace, former CEO of Hillgrove Resources where he led the design, permitting, financing and restart of the Kanamantoo copper mine, also in South Australia... We are backing him to do it again with IVR.
   
   

What happened the last two times silver hit all time highs of around US$50 (in 1980, then in 2011):

The last two highs in the silver price happened in:

• The 1980 silver peak = US$50.35 per ounce
• The 2011 silver peak = US$49.82 per ounce
• The 2025 silver peak (so far...) = US$51.24 per ounce

(Source)

So what happened in 1980 and 2011 and what led to the previous silver runs to US ~$50?

What happened in the 1980’s?

The 1980’s peak was a little bit different to what we are used to seeing in commodity markets.

The silver price reached its first historic peak of $49.45 per ounce on January 18, 1980 (with intraday futures hitting $50.35).

That was a 1,200% increase from the US$3.80 per ounce level at the start of 1976.

What led to that fast and furious rise was the actions of the “Hunt Brothers” (anyone who is mildly interested in silver would have heard of the Texas oil billionaires who attempted to corner the global silver market.

(Source)

By late 1979, the Hunt brothers had claims on ~100M ounces of silver (plus a bunch of futures contracts).

At the peak their position was worth ~US$4.5BN.

They created that “squeeze” higher by settling futures contracts for actual physical silver instead of cash - meaning the people with silver futures positions had to go out into the market and buy silver to settle with the brothers.

They made those purchases with leverage (borrowing) and created a genuine physical silver shortage on ~70% of the world’s privately held silver supply...

The brothers borrowed heavily to finance purchases, using leverage to amplify their buying power.

(At one point they even started chartered Boeing 707s to send their silver to Switzerland for storage).

So the story of the 1980s peak was a debt fueled buying frenzy by two billionaires...

Unfortunately, the debt fueled buying was also what led to the silver price crashing...

On January 7, 1980, COMEX adopted "Silver Rule 7", placing heavy restrictions on margin purchases.

Margin requirements were increased and the Hunt brothers were forced to start liquidating their positions - in fact they even missed a US$100M margin call at one point.

The price fell over 50% in just four days and by 1982, silver had returned to around $6 per ounce.

(Source)

How about 2011?

This time was something we are more used to seeing in financial markets.

Silver reached its second major peak of $48.70 on April 28, 2011 (with intraday highs of $49.82).

This time around, silver was up ~600% from its 2008 lows of around US$8 per ounce.

The trigger for the big rally this time was simple macroeconomics (as much as macroeconomics can be simple).

The US Federal Reserve went on a quantitative easing binge (printing money and buying financial assets).

Interest rates got cut to zero.

And fears of a currency debasement and inflation meant markets looked for security in gold and silver.

Another factor at play for silver was also silver’s industrial demand in solar panels.

Silver use in solar PV cells jumped from 3 million ounces in 2004 to 50 million ounces in 2010 - Solar sector demand grew 338% between 2008 and 2011.

(Source)

The market started seeing silver as superior to gold because of that industrial demand story on top of it being a precious metal.

The final piece of the puzzle was silver ETFs being created, making it easier for investors to get exposure...

The big run up this cycle was largely retail buying...

Then all of a sudden the US Federal Reserve started to taper off quantitative easing, margin requirements were raised by 5X (this time by the CME) and the silver market was again hit by liquidations.

Then when the liquidations accelerated silver had its biggest three day plunge in 28 years dropping from US$49 per ounce to US$40 in a week.

Again, it was debt fueled buying running the silver price to a peak followed by liquidations that sent it crashing back down again.

(Source)

How does the silver setup differ this time around?

So the last two times had some element of macroeconomic unrest leading to capital flows into safe haven assets like precious metals.

BUT more importantly, they both had an element of massive debt fueled buying.

(first with the Hunt brothers leveraged positions then in 2011s from retail traders buying up big on margin).

Both cycles also went up by multiples from the cycle lows.

The 1980s move was up ~1,200% from the previous 5 year low and the 2011 move up over ~600% from the five year low.

Without saying “this time is different”, here is what we think is different this time (hopefully this doesn’t end up being a curse):

• The silver low for this cycle was ~US$12 per ounce back in 2019. Silver is currently up ~400% from that low, and so we think there is still room for silver to run (before this rally can start being compared to those two previous rallies).
  
  
• Structural deficits in silver are real - the silver market has been in a deficit for over 4 years running now.

(Source)

• Silver demand for use in solar panels is going exponential again.

(Source)

• Decades of underinvestment in exploration means there aren’t that many projects ready to be developed. Production growth is therefore close to non-existent.

(Source)

• Silver is the most conductive metal in the world and as the world moves towards electrification demand for silver could increase further.

(Source)

• Silver also has industrial/military applications - silver is underpinned by industrial demand including in the military... apparently a lot of silver is needed in missiles and other military stuff. The whole world is accelerating stocking up on war gear.

(Source)

• Silver is a precious metal - Rising inflation and fiat currency concerns are driving investors toward safe-haven assets like gold (and silver) to preserve wealth. Geopolitical tensions and global uncertainty (seen the news lately?) are boosting the appeal of assets perceived as stores of value.
  
  
• Silver is still yet to have its big gold like run - usually the two metals are correlated and run in tandem. Gold has hit new all time highs on multiple occasions over the last few years, Silver just cracked into its first all time high on Friday.

• We are yet to see any major debt fueled buying (which was the undoing of the previous two rallies in the silver market.
  
  
• We think the risk of currency debasement, especially for the USD is as high as it has ever been in history right now.

The counter to all of this is that silver is often produced as a byproduct of other mines (copper/zinc/lead etc).

Being a byproduct, these mines could ramp up production and cause supply surpluses irrespective of the silver price (because they just aren't that sensitive to it).

I.e silver trading at $50 or $5 doesn’t matter to them, they will keep producing at the same rate for their primary metals...

At the end of the day, no one really knows what will happen with the silver price.

We think that a lot of the dynamics that caused the last two runs to new all time highs haven’t happened yet, which leads us to think there is upside in the silver price from here.

But - as always - there’s no guarantee, we could be wrong - and you can start getting your cabbages ready...

We’ll see if the silver price keeps rolling next week.

Have a great weekend,

Next Investors