BREAKING NEWS: Mexico’s Silver Production Declined Over Past Two Years

In a surprising update, the world largest silver producer actually experienced a decline in silver mine supply over the past two years.  This is quite remarkable as several analysts and official sources reported or perceived that Mexico continued to shown an increase in silver production.  I wrote about this in my precious article, Biggest Silver Supply Losers for 2015.

In that article, I showed how the World Metal Statistics reported a growth in Mexican silver production (Jan-Aug) this year, while the official data from Mexico’s INEGI published a decline.  I contacted the folks at World Metals Statistics, and they replied by saying they were looking at different figures and didn’t realize Mexico’s INEGI had updated their data.  Since that article, the World Metals Statistics revised their figures and now show a decline in Mexican silver production (Jan-Aug).

While World Metals Statistics and the GFMS Team at Thomson Reuters show an estimated decline in Mexican silver production in 2015, they will have to revise their data lower for 2014 as well.  Why?  Because Mexican silver production has been falling for the past two years. 

I decided to write this article in response to Smaulgld’s newest pieced called, Primary Silver Miners Report Increased Production… No Peak Silver In Mexico:

Peak silver doesn’t seem to be coming to Mexico, the world’s largest silver mining country. Primary silver miners with operations in Mexico and the U.S. are reporting increases in silver mining production and some cases, record production.

The folks at Smaulgld then published data from several primary silver mining companies showing increased or record Q3 production compared to the same quarter last year.  While some of these mines did show an increase in Q3 production, their overall production for the year was lower.

For example, Pan American silver did show a rise in Q3 silver production of 7% compared to Q3 2014, however their total production (Q1-Q3) is actually down a little from 19.37 million oz (Moz) in 2014 versus 19.33 Moz during the first nine months in 2015.  Furthermore, one of the companies Smaulgld used in their example, Silver Standard, is not even located in North America.  Silver Standard’s Pirquitas Mine is operating in Argentina.

Now, I am not trying to NIT-PICK here, just trying to provide the public with the correct facts and data.  Smaugld also stated in the title of their article, their was No Peak Silver In Mexico.  Well, if we look at the facts provided by Mexico’s INEGI, silver production in the country has fallen from a peak in 2013:

Mexico-Silver-Production-2000-2015

According to Mexico’ s Instituto Nacional de Estadística y Geografía (INEGI), Mexico’s silver production peaked in 2013 at 5,821 metric tons (mt), fell to 5,765 mt in 2014 and is estimated to decline to 5,634 mt in 2015.  Even though some primary silver mining companies are showing increases in 2015, some are suffering losses.  This low price is impacting the higher cost marginal mines in Mexico.

To provide actual proof of Mexico’s declining silver production, here is the spreadsheet downloaded directly from the Mexican Government INEGI website:

Mexico-INEGI-OCT-2015-Silver-Production

The spreadsheet starts in 1986, so I just highlighted the last three years.  The silver production figures are shown in kilograms.  The totals for the year are highlighted in yellow.  What the data tells us is this… Mexican silver production continues to decline even though some primary silver miners are experiencing growth.

If we convert these metric ton silver production figures to troy oz, this is the result:

Mexico Silver Production 2013-2015 est:

2013 = 187 .1 Moz

2014 = 185.3 Moz

2015 = 181.1 Moz Est

If Mexico estimated silver production falls to 181 Moz in 2015, it will be down 6 Moz, or 3% from its peak in 2013.

Has Mexico Peaked In Silver Production??

Now, this is the ultimate question.  Has the world’s largest silver producing country peaked?  Maybe, maybe not… it depends.  There are several new Mexican mines slated to come online to bring on more silver production in the next several years.  Fresnillo LLC, the world’s largest primary silver mining company in Mexico is forecasting to increase production to 60-65 Moz by 2018, up from 44-45 Mo in 2015.

While these new mines may bring on new silver supply, it may not add to Mexico’s total production?  Why, because Fresnillo LLC newest Saucito Mine (brought online in 2009), silver production is offsetting the declines in its flagship Fresnillo Mine.  The Fresnillo Mine produced 38 Moz of silver in 2009, but will fall to 15-16 Moz in 2015.  So, even though the newer Saucito Mine may produce 21 Moz in 2015, the Fresnillo Mine silver production has fallen 22 Moz since 2009.  Basically, the new mine offset the decline in the other.

NOTE:  Fresnillo LLC has several silver and gold mines  It’s old flagship Fresnllo Mine is just one of them.

I believe this will continue to take place as older and more high-cost marginal mines suffer production declines.  That being said, I don’t think Mexican silver production has peaked… but that depends on several factors going forward.  I will discuss these in future articles.

Lastly, the folks at Smaulgld need to look at more data before making assumptions that may or may not be true.  As for 2015, Mexican silver production continues to decline from its peak in 2013, even though some primary silver miners are experiencing some growth.

Global peak silver production is coming (or is here).  However, that all depends on what happens in 2016 and its impact on the base metal mining industry.  The base metal mining industry (zinc-lead & copper) supplies 58% of world silver supply.

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36 Comments on "BREAKING NEWS: Mexico’s Silver Production Declined Over Past Two Years"

  1. Steve,

    Interesting article and highlights the depth of your knowledge of the mines and the miners.

    I am sure I am not alone in wishing you would write a paid report with recommendations or exposes of silver miner stocks – the good, the bad and the ugly, maybe delineated by continent or country.

    Thanks,

    SteveW

    • Steve,

      Not being a stock guy and a complete neophyte when it comes to mining stocks especially, it does seem that the time may be coming to put together a small portfolio of silver mining stocks.

      However, the mining sector totally puzzles me. For example “Hecla: 2015 Silver-Equivalent Output Highest In Company’s 125-Year History” Great headline and Hecla purportedly has one of the lowest AISC but Hecla is trading at $1.69 down 79% over the last 5 years.

      So whats the real story

      Is the answer really just to stick to the physical?

      Thanks,

      SteveW

      • Steve,
        One of the biggest problems with holding shares in mining companies over the last few years is all the NEW shares the companies have been selling in order to help keep their companies afloat over these difficult times. So even if a mining company is positive or breaking even for the year, they may sell new shares anyway for various reasons thus diluting the value of their older shares held by people who bought into the company because they did their homework & invested in a pretty good mining company. Unless you are a MAJOR shareholder/voter in a company, your stocks could collapse in value by this one mechanism alone anyways!

        • Thanks for this post.

        • FrankO,

          This is true. That is why I published this article. However, the only reason in my book to own some mining shares in the future is when it is impossible to acquire physical metals. That being said, I am not a big fan of gold mining shares, rather the primary silver miners are a better bet to me. And there aren’t many of them.

          I don’t see a problem parking a small amount of ones funds into a few silver mining shares in the future to ride the stock price as physical silver becomes impossible to acquire. One should have a good holding of physical metals before putting some money in the primary silver miners.

          I still look at it as a gamble… but with money an individual could easily stand to lose.

          steve

          • And what FrankO states…

            “One of the biggest problems with holding shares in mining companies over the last few years is all the NEW shares the companies have been selling in order to help keep their companies afloat over these difficult times”.

            …would be a major concern of mine. Who regulates or better yet enforces regulations on how much stock dilution is possible by a [mining] company?

        • I have been caught up in this FrankO. I thought I was doing well when I first bought, then my stocks dropped 50%.. LOL. Not only that some months later they dropped another 50%. I hold some physical gold and silver (more of the latter) and feel I have no choice other than to wait this whole thing out. The whole western monetary system is stuffed and it is broke and it is criminal. The bureaucrats in charge should be in gaol. It is not a case of earning anymore it is a case of preserving what you already have.

          • GB;

            You got that right!

            Royal Bank of Scotlands’ New Years Resolution;

            “KEEP CALM SELL EVERYTHING”

            “It is about preservation of capital, not return on capital.”

            SteveW

  2. Great report in this finite real world compared to the imaginary infinite paper supply and demand world.

  3. I wonder how much production goes under the radar in tax avoidance/manipulation supply feeders? Or individual mine site theft. Dare say gold is more vulnerable to this.

    But the increased use of diesel per ounce is telling in these studies, with declining ore grades.

  4. For the year 2015 Hecla produces 11,585,477 oz. silver . For the year of 2104 Hecla produced 11,090,506 oz.

    .So what one needs to ask oneself at determining how well Hecla performed for 2015 is to ask which year did they earn more money? For the rest of the pathetic report..

    .http://investors.hecla-mining.com/phoenix.zhtml?c=63202&p=RssLanding&cat=news&id=2128443

    • jsauai ,

      That pathetic report is why I have never invested in mining stocks.

      Lots of data but no information. Written by professional obfuscators.

      If you look up Hecla on the kitco markets site it shows earnings of -.02 per share but a profit margin of 17.19%

      So what gives? Does all the money go to Hecla Mining Pfd B which is actually down only 1.81% over five years.

      SteveW

  5. It wouldn’t matter if production fell to 1 lb. There STILL would be no report of a “shortage.”

    • Lore…thinking if ya -read- events right, you see the report.
      My latest line of thought is:
      It’s 2016 and the US mint is up and running again after something like a 5 week lil break for Christmas Vacation (aka —another wild attempt to source more physical Silver.)
      After setting records for annual sales the last 3 years and a huge first week to start 2016—I am confident, and predict that 2016 will NOT be a record year for ASE sales.
      Always concerned about availability…I fully expect the US Mint to play the allocation card, (read: Ain’t got none) as quickly as end of Feb/first of March.
      I’ll go on to say/predict that the mint won’t sell even 15 million ASE in 2016 and “allocations” will go on throughout 2016 and be long in duration; lol expecting little or no change in spot price…..but premiums will be a whole ‘nother story…equaling or exceeding the spot price by end of summer.

  6. The question is why the Silver production in Mexico fell. I don’t think it fell because there is less Silver. It’s much more likely a demand issue in the base metals. As most mines are mining silver as a byproduct of mining base metals, there is less silver being mined as a result. That trend is not only to be expected for mexican miners but everywhere else too.

    • Max Meister,

      Did you read the article??? Did you read where I showed how Fresnillo’s Mine experienced a loss of 22 Moz of silver production since 2009 due to falling ore grades?? Even though Fresnillo LLC (the company) added their newer Saucito mine that will produce 21 Moz in 2015, it only offset the declines coming out of the Fresnillo Mine. This has nothing to do with base metal mining demand, rather its the aging of the mine.

      This is happening throughout the Mexican silver mining industry. Furthermore, higher-cost marginal mines are likely shutting down. While some of the decline in Mexican silver production is tied to some base metal mines, it’s only a percentage of it.

      steve

  7. Steve,

    I would suggest that unless people finally wake up to the Intent, Purpose (yet massively distorted into myth-information propaganda) and Price Suppressing results behind FDR’s Executive Order 6102 regarding Gold (used in Lawful Money COIN) and LBJ’s subsequent continuation of that Intent (to further benefit the counterfeiting Banksters’ fiat Currency) via the Coinage Act of 1965
    http://www.presidency.ucsb.edu/ws/index.php?pid=26907
    by removing Silver content from the People’s (Lawful Money) Coin of the Realm,
    the gravity of what is presently happening to PM stocks worldwide,
    will not be fully grasped until the Banksters have ultimately swooped in with their worthless FRN IOUs created out of thin air, and bought up all remaining stockpiles and sources of Hard, Honest Money, and handed the Bill for such, to the very victims which they just succeeded in ripping off.

    Stealing the world can be fun
    It doesn’t require a gun
    Just hire some guy
    To print to the sky
    Then buy all the assets and run!
    ~ @TheLimerickKing

    Cheers,
    S. Rex

    • Spartacus Rex,

      I agree with you, but have to clarify what really happened in 1965 when LBJ signed a law removing silver from circulation. There was more reason than just to continue demonetizing gold or silver. It had to do with the massive market shortages of silver in the late 1950’s and early 1960’s. This was due to the huge increase in industrial silver demand.

      If it wasn’t for the U.S. Treasury stockpile of silver which they supplemented into the market during these years, there would have been serious trouble. I discuss this in more detail in my upcoming THE SILVER MARKET REPORT.

      The U.S. and world was running out of available silver to supply the new INDUSTRIAL MONSTER, so they had to remove it from official coinage. While I don’t agree with the policy… I can understand why they did it. Again, I explain this in detail in the upcoming report.

      Unfortunately, the conspiracy theory that JFK was going to reissue Silver Certificates was also incorrect. JKF was not killed because he was supposedly going to make silver money again, he was killed because he was overstepping his control of the Military Industrial Complex and their black op buddies in the Mafia.

      steve

      • lastmanstanding | January 13, 2016 at 9:44 am | Reply

        Finally, some one else telling people what I have been telling people for 5 years. Anything (as they have proven) will work for currency…if there is faith in it.

        Without silver, technology or high technology is a NON STARTER. Nothing that plugs in, is powered by batteries or oil/fuel works without it.

        They realized to enslave the world and profit from it they needed the shiny to advance the control…and faith in THEIR system.

        I hear the bs occasionally where someone states that they found something else that works in place of silver. Not a chance..ever. In fact, (and I’ll try not to get all religious on any of you non-believers) God said, “I’ve given you everything you need.”

        So we got/found silver to make the connection that has revolutionized the world in good ways and some really bad ways, but those choices were made by “humans”…and I use that term really loosely.

        Resources are not being used wisely…they will not last infinitely, nor is current growth infinite.

        Folks, that is how the planet works.

      • I’m no expert on history but I think JFK was opposed to the Vietnam War…or at least massive buildup…which was of course hugely profitable for the military-industrial complex.

        • lastmanstanding | January 14, 2016 at 7:38 am | Reply

          JFK absolutely opposed the Vietnam War. Eisenhower in his fair well address warned, “beware of the Military Industrial Complex.”

          The early 60’s were an incredible time of awakening for high technology and who do you think was going to take advantage of it?

          Space race- need silver, Massive arms build up/sales-need silver, computer science beginning-need silver, new industry tv, appliances, housing/commercial growth-need silver, auto industry advances-need silver…must I continue?

          Who buys all this shit? Everyone. Why? because everyone has been taught to one up the next and people are freaking lazy.

          Why do I even waste my breath?

  8. Good job Steve! By the way do you let these guys at Smaulgld have time to put a book in their pants before you start spanking them

  9. In keeping with miners Steve, as a side note for purchasing:

    Carl Icahn purchased 88 million shares of Freeport McMoRan (FCX) on August 27, 2015 at $9.00 USD on average. As of this morning January 13, 2016 FCX just printed $3.72 USD which puts him half a billion in the hole!

    Maybe a little more “bleeding” to take place in the mining sector before testing the water?

    • lastmanstanding | January 13, 2016 at 9:57 am | Reply

      I bet Icahn is a close bud of the fed and big banks…Probably got a freebie from Jamie D/ jpm to purchase those shares. To show the general public that money is being “lent out” or circulating.

      Money never to be paid back or even worried about…only until/if it rockets to the upside.

      Hell, it’s just printed, or decimals on a screen or wtf it is. Really of no consequence of a loss to these guys. Only upside.

      Frankly brother, I don’t know shit…I just think it is that easy and simple for them.

  10. Als Long as the miner stocks not move up, you must not think Gold or Silver will break out.

  11. When the oil continues to fall russian will have big Problems.The debtholder from US-Bonds maybe throw at a least action all the bonds to market.A gigantic meltdown will happen.

    If china will do that –> game over.

    Nobody can predict what happens first.

  12. http://www.neopresse.com/finanzsystem/fed-offizieller-gesteht-die-fed-hat-die-aktienmaerkte-manipuliert-crash-ist-sicher/#comments

    Official FED-member admits that the FED had manipulated the stock market.And now?
    Nobody cares about.

  13. Gold and Silver Miner stocks have a pre-running function .Maybe about 6 month.Good night.

    When i look to those Charts.Horror like Freddy Krüger.

  14. My frustration with this chart is that the price of Silver is the same today as it was in 2004/5, yet production is over double. Price clearly has very little if any impact on production. At what price does silver production really start declining? Not $14.

    • Mark,

      In 2004 the average price of a barrel of oil was $37.66. Look familiar?

      The silver by-product miners, which account for about 70% or world silver supply, are already in or soon will be in shut down mode as deflation eliminates demand for their primary products. Copper is below $2/lb. and falling. Oil is at under $32/bbl and expected to fall to the low $20s. However, I believe many of the primary silver miners are still profitable at $14/oz.

      So as the deflationary cycle deepens, the price of oil, silver and most everything else will continue to slide lower. If oil hits $20/bbl silver could see $9/oz.

      At some point in this slide downward, there will come the final straw. Who knows what it might be or where it will come from but by the time it happens nearly all of the silver miners will be in shutdown mode. When the final straw does appear, there will be a massive liquidity crises with cascading debt defaults and currency devaluations. This could take a year or two to fully develop but when it does silver will outshine everything.

      So keep on stacking.

      Buy for cash and stash.

      SteveW

      • Steve W,

        Please try to remember some of data in my previous articles. While the fall in price of oil has impacted the cost to mine silver, do you remember my chart showing the top primary silver miners average yield falling from 13 oz/t in 2005 down to 7.4 oz/t Q1-Q3 2015??? These companies have to move a lot more ore than they did in 2005 to produce the same amount of silver.

        So, even though the price of oil is the same as it was in 2005, the Primary Silver Mining Industry isn’t. Moving nearly double the amount of ore to produce the same silver costs more even at the same price. Furthermore, wages have gone up since 2005 as well as costs of other items. There is still inflation even though oil prices have declined.

        Lastly, while the logical conclusion is that silver could fall below $10 if oil goes below $20 makes sense, we could see massive physical buying which may push premiums up much higher. Thus, the real price of silver is still $12-14.

        steve

        • Steve,

          You are absolutely right, aggregate inflation is over 25% since 2004.

          I remember much of your previously posted data and understand the vast number off variables that have changed, including the rise off the dollar. I was talking about the price of paper silver. If it drops below $13/oz, I believe that it will be nearly impossible to actually acquire any physical for less than than $15/oz which is why I continue to buy, as funds allow, regardless if it is $13.80 or $14.30. I figure, that any further drop in price will be reflected in increased premiums and scarcity.

          This process will continue as the world economies wind down and the currencies migrate to the dollar. When the dollar breaks over 110, I also believe that would be the prime time to start buying silver miners. The dollar will top out under 120 and may seriously crash shortly thereafter.

          This is why I believe that silver stackers need to continue stacking as long as we have the opportunity to buy at cost.

          Thanks for all your hard work.

          SteveW

  15. From the PM_pusher side we heared since years that there is not enough material.
    And now suddenly it needs years to go into the shut down modus.

    I said since years that the output is to high.

  16. Important is to learn from this Investment.It is anything else as an save hafen.It’s an high speculative Investment where you can lose very quick a lot of Money.About Miner stocks we should not talk.

    Go to the candian stockwatch and you can hear how much Money People has lost with this Investment.

  17. MillenniumWright | January 14, 2016 at 11:07 pm | Reply

    Hi Steve,
    This isn’t wholly relevant to this article, but a more general market question.

    While we’ve had our intellectual differences, I still see you as an excellent analyst. As such, I wonder if you can or have put any effort into creating long term charts showing derivative data that puts a finger on the pulse of larger trends, such as comex leverage. What would it look like if we could see a historical chart of how many paper ounces are being traded compared to physical ounces in the vault? How does leverage look throughout the decades? What about taking that graph of oil storage which shows a peak in 1929 and 2015 and charting pm in the vaults next to it?

    Looking forward to seeing your analysis,
    Michael

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