Demand for silver continues to grow and could hit a record in 2022. According to a report by the Silver Institute, global demand for silver is expected to reach 1.1 billion ounces this year, up 5% from 2021.

Analysts from Bank of America said that demand from the solar power sector and the growing importance of the automotive sector will be two critical factors driving silver prices over the next three years. The bank forecasts silver prices ending 2022 at around $32.50 an ounce as the market sees supply falling and industrial demand rising. In addition, geographic tensions and an inflationary environment are favorable for precious metals.

Higher silver prices will benefit silver mining companies. Among those, Silvercorp Metals Inc. (TSX:SVM)(NYSE:SVM) looks like a top pick.

High Profitability for China’s Largest Silver Producer

Since starting production in 2006, Silvercorp has become the largest primary silver producer in China. Its projects include Ying Mine, LM Mine, TLP Mine, HPG Mine in Ying Mining District, and BYP Gold-Lead-Zinc Mine.

The company enjoys high profitability and returns due to the efficient jurisdiction and low cost in which it operates as well as the exceptionally high-grade nature of its Ying deposit.

Silvercorp has grown its operations organically. The company had US$260 million in cash on its balance sheet as of December 31, 2021. Third-quarter earnings came in at US$0.07 per share, up from US$0.05 a year earlier. The silver miner currently pays a semi-annual dividend of US$0.0125 per share, for a yield of 0.8%. 

On the production side, Silvercorp expects fiscal 2023 to be its best year with around 7.6 million ounces of silver, and AISC is expected to reach US$141.6-143.5 per tonne. The company is the lowest cost producer among industry peers.

Silvercorp is one of the best-run silver mining companies in the world and its balance sheet reflects that. Rising silver prices should significantly boost its earnings as well. After dipping nearly 20% year-to-date, the silver stock looks cheap at the moment.