Rumors have been circulating for some time showing that Tesla (NASDAQ:TSLA) and SpaceX are desperate for silver. For example, Elon Musk announced in May 2022 that Tesla would be interested in the mining industry if producing its own stock would accelerate the energy transition.
Musk also briefly flirted with Glencore (OTC:GLNCY) for a 10-20% stake in the Swiss mining company. Confirming the multibillionaire's interest, Musk has started following "Wall Street Silver" on Twitter, an online community that played a major role during the 2021 silversqueeze.
Houston, We Have a Problem
EVs, solar panels, our electricity network, servers and more. Everything that encompasses the energy transition contains a common metal; namely silver, which is one of the best thermal conductors. Silver is therefore a crucial metal that should enable the energy transition. We are now at a turning point, where companies active in this 'clean energy' sector seem to be taking matters into their own hands, because there is insufficient available physical silver, which hinders production. Not only silver, but also lithium, nickel and cobalt are becoming scarcer by the day.
Silver is also an important raw material for Tesla's energy supply. Tesla's factory halls use, among other things, solar panels in which silver is an important part of conducting electricity by capturing the sun's rays. If you say Tesla, you say silver.
Now not only Tesla is burdened by this problem, almost all companies that have to initiate the energy transition are desperately looking for external solutions to overcome the silver shortage quickly. Those who have sufficient supply at their disposal can produce faster than their competition and thus produce at a lower manufacturing price, thereby gaining market share within the sector.
The Elon Musk Effect
The richest man on earth with a fortune of 340 billion, until recently, has seen his wealth shrink by more than 60% in a year, because the share of Tesla has fallen sharply in value (-69.20 1Y). Despite this, Musk still has a net worth of $137 billion, so buying a silver mine shouldn't be a problem for the controversial tech tycoon.
If Musk is serious about Tesla's continuity, he will have to secure his silver supply, the need of which will explode as demand for the electric vehicle fleet grows. The Tesla boss has no choice but to go straight to the source.
The announcement of Musk's acquisition of a silver mine would push silver prices up, with the same force as lithium recently.
Investing in Silver Means Benefiting From the Energy Transition
While the movement towards an electrified future is already gaining momentum, it will be much slower than some of the optimistic projections in the current market. Hundreds of millions more silver ounces would need to be produced to keep up with the expected linear magnitude of the industry's growth. The impact of solar growth on silver as a result of the green revolution is significant.
“Solar energy went from almost no use of silver to about 120 million oz 25 years ago. per year, and it will continue to grow,” claims the Energy Agency (IEA). For example, solar energy will continue to grow exponentially. Even if the market succeeds in recycling significantly more silver from discarded panels, there will still be a shortage.
Recycling will slow the growth rate of new silver the industry needs, but it will not slow the growth rate of the total silver used in the industry. While silver is in EV electronics, there are other limitations to the green revolution. Like that our world doesn't have enough clean energy to power the vehicles. Our electricity networks are also not stable enough and there is not enough silver, lithium, nickel, cobalt and manganese.
I recently discussed with an experienced mining investor about the fact that there is not enough capital in the mining industry. And it is precisely the mining industry that has to extract these increasingly scarce metals from the earth's crust.
For example, in recent months we have seen a huge increase in share issues from miners to ensure that there is enough money in cash. The interest element is very important here, because there are now many companies that are financed with leverage, ie variable loans. This is currently a problem given the still high interest rates and this is detrimental to mining. This could cause the shortage to increase further.
The 120 million oz. silver used in solar energy today accounts for only 2% of our electricity grid that is powered by solar energy. Several governments around the world will soon mandate 10% or even 20% of wind and solar energy. Let's assume that the use of silver in solar energy increases fivefold over a period of time. That means solar energy would use half a billion ounces. For the record, total demand is currently one billion ounces.