Silver Mining Stocks May Be Safer Than ETFs Right Now

Courtesy of Warner Bros.

The Dune sci-fi films and books take place in a universe where a single, desolate and hostile planet, called Arrakis, controls the production of the Spice Melange, a powder that grants its users mind expansion powers and enhanced space travel mental navigation properties that are essential for interplanetary transport.  Wars, espionage, and intrigue all become part of the plots, since control of the spice confers power over the entire market, and thus, the universe.

An analogy has often been made between Arrakis and the real world OPEC, which still controls a sizable amount of the world’s oil. A similar analogy has also been made with DeBeers, which controlled the diamond market until its monopoly was broken in the early 2000s.

Due to developments and long-entrenched manipulative practices in the futures market that are now fracturing, silver miners may soon find themselves in a similar scenario as with OPEC, and mining stocks may well have the biggest upside potential in the precious metals industry.

A Perfect Storm Long in DevelopmentJHVEPhoto / iStock Editorial via Getty Images

For many decades, the CFTC, COMEX , and LBMA have supplied the paper futures market the means to artificially suppress silver prices regardless of actual supply and demand.

The triggering event was the October occurrence of unprecedented deep backwardation in the silver market, setting a new record high - a $2.88 gap with the spot market price exceeding that of the futures market. Spurred on by the artificially suppressed price of silver in the futures markets controlled by the COMEX, CFTC and LBMA, a huge influx of physical silver buying from India caught the LBMA unprepared, and with insufficient supply. Silver spot price premiums soared; the turbulence in the markets spread globally like a virus, with major bank buy/sell spreads so out of sync that successful trading arbitrage was possible.

LBMA has a history of overstating its silver inventory, with 2021’s overstating holdings by 3,300 MT its most egregious example to date. However, that is only part of the story. Silver is a vital component in the manufacture of many commercial products, with smartphones, flat screen TVs, batteries, EVs, and solar panels being just a few of the more ubiquitous ones. Add in hoarding from China, Russia, Saudi Arabia, China, and the larger buyer of silver, India, and it’s no surprise that production has been annually running at a deficit against demand since 2020.

The Backlash From Short-Sighted Policies and PracticesEloi_Omella / E+ via Getty Images

A global surge in solar panel demand, particularly in China and Saudi Arabia, has contributed to the shortage in physical silver, which is a critical component of solar panel design.

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While considerable attention has been paid to rare-earth materials needed for manufacturing many new products and devices, silver - which is both a precious metal store of wealth as well as a commercial commodity, has been taken for granted by industries and governments for centuries. The demand surge in flat-panel screens and solar panels has historically built low silver prices into their respective production budgets, thanks to the futures markets capping silver prices regardless of production supply. As a result, the bubble has been growing bigger and bigger for decades. The October backwardation may be the first crack in a dam ready to burst. The aftermath is already showing signs that the supply issue is not going away and only about to grow larger.

With backwardation, physical demands, i.e. physical silver buyers and industrials, are supplanting leveraged traders. The paper futures traders are increasingly losing ground, and genuine supply and demand voices are getting stronger. Unless short sellers cover open positions soon, their scramble to buy silver as its price escalates will just be adding kerosene onto a short squeeze bonfire. They won’t be able to borrow silver and will have to buy physical metal or buy back futures contracts - both of which will only send prices higher.

The ETF market is already feeling the heat. Kotak Silver ETF, UTI Mutual Fund, and SBI Mutual Fund all announced the halt of new subscriptions in mid October to their silver ETFs due to the sudden escalation of silver prices and scarcity of physical product, making acquisition of additional silver bullion nearly impossible. Although Goldman Sachs and some other banks have stated that they believe the current squeeze is temporary, since the US and China will likely help bail out LBMA with enough silver to stabilize the ship, these remediations are merely band-aids. The larger issues, i.e., supply and demand, artificially low prices from futures, which is now proving to be a damaged vehicle, and geopolitical unrest that historically triggers a turn towards precious metals as a safe haven, are still unaddressed.

Why Mining Stocks May Be Safer Than ETFsRHJPhtotos / Shutterstock.com

Silver mines may be in the catbird seat if production continues to lag behind demand.

Unlike gold mining, which is a primary target ore, silver ore is often mined as a by-product resulting from mining larger deposits of copper, zinc, and lead. Specialized silver mining is relatively rare, although that is changing. Therefore, any nation that curtails mining of copper, zinc, nickel, or other minerals may lead to a net reduction in silver production. Silver mining operations in the following countries are carrying the bulk load of production responsibilities in 2025, going into 2026, but are still expected to run a deficit against global demand.

Mexico: Expected to be #1 in global production, though output will likely see a marginal decline due to mine closures. Peru: The country faces a long-term decline due to mine closures and social unrest. Chile: Projects like Salares Norte are anticipated to boost production Bolivia: Production is projected to increase marginally in 2025. China: Ironically the one major nation that selected silver for its currency foundation over gold for about 300 years, Chinese mining production is primarily driven by base metal and gold operations, with silver a minor focus and mostly a by-product and a much larger net import commodity. United States: Hecla's Keno Hill mine is anticipated to help buoy US silver production. Morocco: Production should increase, thanks to the expansion of Aya Gold and Silver's Zgounder mine.

Most silver ETFs and close end funds have to hold physical silver under their respective charters. The future scarcity  of physical silver bullion will likely impede their abilities to add new subscribers. Any paper gains they realize will thus be predicated on inventory and silver spot prices, not unlike how Strategy stock essentially rises or falls based on the price of Bitcoin.

Mining Stocks To WatchBasius77 / Shutterstock.com

Silver mine stock investments may have a future advantage over silver ETFs, which are usually required to hold bullion that may become scarcer as supplies dwindle.

Mining stocks, on the other hand, will be in the catbird seat. Similar to how OPEC controls oil or how the fictional Arrakis controls the Spice Melange, silver mining stocks will be watched closely and any new silver vein discoveries or output increases will likely spike buying activity in those companies’ stocks. The mines’ output determines supply for refineries, which subsequently process silver into a sufficiently pure form for coinage, electronics, and other uses. In fact, Vipin Raina, India’s largest metals refinery, announced last week that silver demand had been so high that it literally ran out of silver to refine for the first time in its history. Investors seeking exposure in the sector may find the following mining stocks worth researching for consideration.  (Statistics based on market price at the time of this writing.)

Pan American Silver (NYSE: PAAS): Headquartered in Vancouver, B.C., Canada, PAAS is a major silver producer with assets in Argentina, Mexico, Bolivia, and Peru. In September, 2025, it was expanding operations with the completion of the $2.1 billion MAG Silver acquisition , which gave it a large ownership stake in the high-grade Juanicipio Silver Mine. Silver production was reported up over +11% in Q2 2025. Given that the industry P/E ratio is roughly 33, its current 24.6 P/E hints that it is trading at a discount. Coeur Mining (NYSE: CDE): the company controls five mines in North America, focused on gold and silver. Its Rochester facility expansion posted a +80%production increase in Q2 2025. First Majestic Silver (NYSE: AG): Another Canadian based mining company, First Majestic controls four silver and gold mines in Mexico. The company has an aggressive growth strategy, acquiring Gatos Silver in early 2025, and posted a nearly +76% Q2 2025 silver production spike. Fresnillo plc (OTC: FNLPF): Incorporated in the UK and headquartered in Mexico City, Fresnillo is the world's largest primary silver producer. Its LSE stock is part of the FTSE 100 Index. Fresnillo is a partner in the Juanicipio mine, whose sequencing issues led to a short-term Q2 2025 14% decrease in production, and operates several other mines in Mexico. Hecla Mining (NYSE: HL): Based in Coeur d’Alene, Idaho, Hecla was founded in 1891 and is the largest US silver production company, thanks to the 2022 Keno Hill mine obtained when Hecla acquired Alexco Resources. Silvercorp Metals (NYSE: SVM): Although based in Canada, Silvercorp’s operations are primarily in China. This small cap company is China’s largest silver producer, albeit its output comprises only a small fraction of China’s industrial and commercial silver use. Endeavour Silver Corp. (NYSE: EXK): Based in Vancouver, Endeavour Silver has an estimated production of 4.5–5.2 million ounces of silver for 2025.

For a longer term perspective on silver mining:

Vizsla Silver (NYSE: VZLA): An early stage Vancouver headquartered company, Vizsla is  advancing its Panuco silver-gold project in Mexico. In 2025, it released an updated economic assessment showing strong potential of 222 million ounces in its feasibility study. It projects silver production to commence in 2027.

For a silver mining financing perspective:

Wheaton Precious Metals (NYSE: WPM): Unlike traditional miners, Wheaton provides upfront capital to mining companies in exchange for a portion of their future silver and gold production at a fixed price. This model allows Wheaton to benefit from rising silver prices without exposure to the operational risks of mining.

A final thought: if backwardation becomes a more entrenched situation in the future, there is a possibility that hallmarked silver bullion becomes too scarce to obtain reliably on a regular basis.  ETFs may possibly attempt to procure silver ore rights directly from mines in order to obtain additional physical silver in the future. Should this scenario develop, then ETFs that take that plunge would be worth watching.

In Dune, antagonist Baron Vladimir Harkonnen proclaimed, “He who controls the spice controls the universe.” Given how essential silver is to all of the screens used for computers, smartphones, televisions, and a host of other devices from solar panels to Tesla EVs, replacing “the spice” with “the silver” may not be much of a stretch in the real world.

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