With Silver Facing a Sixth Straight Supply Deficit, One Miner Is Racing to Double Capacity

Important Disclosures:

1. Sierra Madre Gold and Silver Ltd. is a billboard sponsor of Streetwise Reports. The company pays a monthly sponsorship fee of US$3,000–US$6,000 for banner advertising and an enhanced company profile page. Streetwise Reports’ editorial content is fully independent and is not influenced by sponsorship. 
2. As of the date of this article, officers, contractors, shareholders, and/or employees of Streetwise Reports LLC (including members of their household) own securities of Sierra Madre Gold and Silver Ltd.
3. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

For additional disclosures, please click here.

1. Ownership and Share Structure Information

The information listed above was updated on the date this article was published and was compiled from information from the company and various other data providers.

The global silver market continued to face supply constraints in 2026, with demand outpacing production for a sixth consecutive year and above-ground inventories helping to bridge the gap. Despite those underlying pressures, silver prices experienced significant volatility following a record-setting rally early in the year.

According to the Silver Institute's World Silver Survey 2026, the market was projected to record a 46.3-million-ounce deficit in 2026, compared with a 40.3-million-ounce shortfall in 2025. Since 2021, cumulative deficits have required approximately 762 million ounces to be drawn from existing inventories. Global mine production was expected to remain relatively flat, limiting the industry's ability to replenish those stocks.

Industrial applications remained a major source of silver demand. An April 2026 analysis titled Silver Demand by Sector: Industry, Jewelry & Investment, citing data from the Silver Institute, Metals Focus, and World Gold Council, reported that industrial and technology applications accounted for approximately 61% of total silver demand in 2025, up from 53% a decade earlier.

The analysis identified solar photovoltaics, electric vehicles, and electrical infrastructure as important drivers of consumption. Solar panels alone accounted for approximately 29% of industrial silver demand in 2024, compared with 11% in 2014. Industrial demand reached a record 680.5 million ounces in 2024, marking its fourth consecutive annual high.

Supply growth faced additional constraints because approximately 70% to 80% of silver was produced as a byproduct of mining for other metals. As the analysis explained, this relationship limited silver production's ability to respond directly to rising prices.

Silver Prices Retreat as J.P. Morgan Weighs Market Outlook

Silver's price performance reflected changing expectations for interest rates and industrial consumption. According to Trading Economics, silver traded at approximately US$60.30 per ounce on October 13, 2026, remaining nearly unchanged on the day but declining 4.71% over the preceding month. The metal was still 17.20% higher year over year.

Trading Economics reported that silver remained under pressure as the U.S. dollar climbed to an 18-month high ahead of key inflation reports. Investors awaited U.S. consumer and producer price data that could influence the Federal Reserve's next interest rate decision. Markets assigned approximately an 80% probability that the Fed would hold rates steady in October, while pricing in nearly an 88% chance of a rate increase in December.

In its silver price outlook, J.P. Morgan Global Research forecast that silver would average approximately US$70 per ounce in 2026 before declining to approximately US$63 in the fourth quarter. The bank also projected an annual average of US$64 in 2027.

Gregory Shearer, head of Base and Precious Metals Strategy at J.P. Morgan, described how the unwinding of earlier physical market tightness had changed silver's trading dynamics.

"The significant unwind of physical tightness off an elevated valuation base for silver sets up a backdrop where, on days when gold slips, silver has a much more outsized tumble — a reversal of last year," Shearer said.

Shearer also identified weakening demand from China's photovoltaic industry, softer Indian imports, and technological improvements that reduced silver consumption in solar manufacturing as factors influencing the market.

"Altogether, we see the potential for solar demand for silver to fall by around 30% this year, a roughly 60 million ounce reduction year over year," he said.

Interest rates represented another important consideration. Shearer explained that higher borrowing costs increased the opportunity cost of holding non-yielding precious metals, potentially encouraging investors to favor interest-bearing assets.

Despite the recent correction, the combination of persistent supply deficits, substantial industrial consumption, and limited mine production growth continued to shape the silver market's outlook. The direction of interest rates, industrial demand, and new mine supply remained important factors for the remainder of 2026 and into 2027.

Against this backdrop of persistent silver supply deficits, shifting industrial demand, and volatile prices, producers working to increase output have attracted attention. One such company is Sierra Madre Gold and Silver Ltd., which has been expanding processing capacity at its La Guitarra mine in Mexico while advancing exploration and plans for a potential restart at its recently acquired Del Toro silver mine.

Sierra Madre Advances Silver Production Expansion With November Milestone Approaching

Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) continued advancing its silver production growth strategy in Mexico after reporting that processing throughput at its La Guitarra mine reached up to a steady 720 tonnes per day, more than 40% above its previous 500-tonne-per-day capacity. The increase followed modifications to the crushing and milling circuits, while installation of a new 11x12 ball mill positioned the company for its next expansion milestone in November 2026.

The new mill was expected to support the company's Phase 2 target of 1,200 to 1,500 tonnes per day, with Sierra Madre indicating that the milling capacity could be achieved more than eight months ahead of schedule, prior to the broader Phase 2 expansion targeted for Q3 2027.

"We continue to advance our Phase 1 and Phase 2 expansions at Guitarra," Chief Operating Officer and Executive Chairman Greg Liller said. Underground development also accelerated, with approximately 2.6 kilometers of drives completed since June across Guitarra, Nazareno, and Coloso. Work included development of the Los Angeles deposit, dewatering at San Raphael I and II ahead of planned higher-grade production by the end of October, and groundwork for a permitted dry-stack tailings facility with more than 5 million tonnes of potential capacity.

The expansion followed a strengthening of Sierra Madre's financial position. The company completed a CA$57.5 million financing in January 2026, near silver's record highs, and repaid a US$5 million loan from First Majestic Silver Corp. (AG:TSX;  AG:NYSE;  FMV:FSE) in July. According to its second-quarter financial results, Sierra Madre ended June with US$22.2 million in cash and US$25 million in working capital. Its October corporate presentation outlined additional improvements, including a second crushing circuit, increased conveyor capacity, and a permitted 5.8-million-tonne tailings facility.

Third Parties See Growth Potential as Silver Producer Expands Mining Operations

In a September 14 report, Thibaut Lepouttre of Caesars Report wrote, "Sierra Madre is doing all the right things, and the next 18 months will be instrumental for the company to continue to execute." He estimated that production could eventually reach approximately 800,000 ounces of silver and 12,000 ounces of gold, equivalent to roughly 1.5 million silver-equivalent ounces using a 60:1 ratio.

He also noted that the new mill's 900-tonne-per-day capacity and larger crusher appeared designed with additional expansion in mind. "It does feel like the Phase I expansion is being completed with Phase II in mind," he wrote. Lepouttre did not disclose a formal rating or price target.

In an October 16, 2025 commentary titled "Silver's Breakout and Sierra Madre's Perfect Timing," Dominic Frisby of The Flying Frisby identified Sierra Madre as his "favourite silver play" and "largest silver position," highlighting the company's expansion plans amid rising silver prices.

After meeting with CEO Alex Langer, Frisby described the company's outlook as positive, writing, "The company is on a really good trajectory: expanding at just the right time." He also cautioned readers about silver's volatility, noting that while US$100-per-ounce silver was a possibility, the metal remained vulnerable to sharp corrections. His commentary did not disclose a formal rating or price target.

Dominic Frisby of The Flying Frisby identified Sierra Madre as his "favourite silver play" and "largest silver position," highlighting the company's expansion plans amid rising silver prices.

In a September 29 VSA Morning Miner report, VSA Capital analyst Oliver O'Donnell, CFA, reiterated his Buy recommendation and CA$2.70 per share price target for Sierra Madre Gold and Silver Ltd., citing continued progress at La Guitarra. O'Donnell noted that throughput had increased from 672 tonnes per day in August to a consistent 720 tonnes per day, approaching the company's original Phase 1 target of 750 to 800 tonnes per day.

"Whilst the production capacity increases represent a significant milestone, the development work to access higher grade mineralization is also a vital factor in our forecasted production increases," the report stated.

VSA forecast production of 440,000 ounces of silver and 4,400 ounces of gold in 2026, increasing to more than 1.3 million ounces of silver and approximately 12,000 ounces of gold following completion of Phase 2. O'Donnell also highlighted accelerated underground development, access to higher-grade material, and progress on the permitted tailings expansion.

Addressing the company's share price, the report stated, "The share price has eased back to the lower end of the recent trading range, however, and we believe that as development progress translates to stronger earnings performance, this will provide a catalyst for rerating."

Beyond La Guitarra, Sierra Madre advanced plans for the Del Toro silver mine, acquired from First Majestic in June 2026. The property contained three developed underground mines, more than 60 kilometers of underground workings, and a processing facility comprising three mills. Sierra Madre's December 2025 acquisition announcement described the facility's total processing capacity as 3,000 tonnes per day. Sierra Madre outlined a US$12 million exploration program over 24 to 30 months, including 30,000 meters of diamond drilling and approximately 20,400 assays, with drilling expected to begin in mid-2027 and an updated resource report targeted for early 2028.

The company also proposed a separate US$10 million restart program, initially targeting 800 tonnes per day with the potential to double capacity to 1,600 tonnes per day. Production was targeted for mid-2028, positioning the November La Guitarra mill commissioning, East District drilling, and Del Toro development as successive milestones in Sierra Madre's effort to expand its Mexican silver production operations.

Ownership and Share Structure¹

Sierra Madre Gold and Silver Ltd. has a market cap of CA$402.33 million, with 261.25 million shares outstanding. The company's 52-week range is CA$1.01-CA$3.25.

Institutions own 41.4% of shares, while strategic investors, including First Majestic Silver Corp. (AG:TSX; AG:NYSE; FMV:FSE), own 24.7%. Management and founders own 19.2%, and the remaining shares are held by retail.

Frequently Asked Questions About Silver Prices and Sierra Madre Gold and Silver

Why is the silver market facing a supply deficit in 2026?

According to the Silver Institute's World Silver Survey 2026, the global silver market was projected to record a sixth consecutive annual supply deficit of approximately 46.3 million ounces in 2026, compared with 40.3 million ounces in 2025. Cumulative shortfalls since 2021 have required approximately 762 million ounces to be drawn from above-ground inventories. Limited growth in mine production, combined with continued industrial and investment demand, contributed to the imbalance.

What is the silver price forecast for the rest of 2026 and 2027?

J.P. Morgan Global Research forecasts that silver will average approximately US$70 per ounce in 2026, with a fourth-quarter average of US$63 per ounce and a 2027 average near US$64. According to Trading Economics, silver traded at approximately US$60.30 per ounce in its October 13 market update, with the metal's monthly and year-over-year performance calculated using the same price series as the main article.

What is driving industrial demand for silver?

Industrial silver demand was supported by solar panels, electric vehicles, electronics, electrical infrastructure, and data centers. An April 2026 industry analysis reported that industrial and technology applications represented approximately 61% of total silver demand in 2025. Solar photovoltaics accounted for approximately 29% of industrial silver consumption in 2024. However, J.P. Morgan also identified increasing silver efficiency in solar manufacturing as a potential source of weaker demand.

How much silver is Sierra Madre Gold and Silver producing at La Guitarra?

Sierra Madre Gold and Silver Ltd. reported that processing throughput at its La Guitarra silver-gold mine complex in Mexico reached up to a steady 720 tonnes per day in September 2026, more than 40% above its previous 500-tonne-per-day nameplate capacity. This figure represented ore-processing throughput rather than silver ounces produced. The company continued developing additional underground mining areas to supply its expanded processing operation.

When will Sierra Madre expand La Guitarra to 1,500 tonnes per day?

Sierra Madre expected to commission a new 11x12 ball mill in November 2026 as part of its expansion at La Guitarra. The company said the equipment would support its Phase 2 milling-capacity target of 1,200 to 1,500 tonnes per day, potentially more than eight months ahead of the original equipment schedule. Its corporate presentation identified the third quarter of 2027 as the target for completing the broader Phase 2 expansion. Actual production rates remained dependent on commissioning, underground development, and operational performance.

What are Sierra Madre's plans for the Del Toro silver mine in Mexico?

Sierra Madre acquired the past-producing Del Toro silver mine in June 2026 and outlined a US$12 million exploration program that included 30,000 meters of diamond drilling. The company also proposed a separate US$10 million restart program targeting an initial processing rate of 800 tonnes per day, with potential expansion to 1,600 tonnes per day. Exploration was expected to begin in mid-2027, with an updated resource report targeted for early 2028 and potential production beginning in mid-2028. These milestones remained subject to successful exploration, development, and restart activities.