CHILE, WORLD’S FOURTH LARGEST SILVER PRODUCER: Mine Supply Down 20%

Silver mine supply from the world’s fourth-largest silver producer fell significantly at the beginning of 2018.  According to Chile’s Ministry of Mines, domestic silver production in January declined 20% versus the same month last year.  Chile’s silver production has been falling considerably since its recent peak in 2014.

In just three years, Chile’s domestic silver mine supply fell 10 million oz (Moz) from 50.1 Moz in 2014 to 40.4 Moz last year.  Interestingly, Chile’s silver production is down 20% since 2014 while the country’s copper mine supply is only down 5%.  Because most of Chile’s silver supply comes as a by-product of copper mining, it’s surprising to see such a significant decline in their silver production.

If we look at three of the top four silver producers in the world, Mexico’s silver mine supply in January increased 7% while Peru declined 6%:

According to the official data, Mexico’ silver production increased 29 metric tons (mt), Peru fell 20 mt and Chile dropped by nearly 21 mt.  Thus, overall silver mine supply from these top three producers fell 13 mt in January versus the same month last year.  Even though Mexico will likely experience an increase in silver mine supply in 2018, declining production from other leading countries may curtail overall world supply.

If we look at total silver production from these three countries, the peak took place in 2015 at 373 million oz:

In just two years, the combined silver output from Mexico, Peru, and Chile is down 21 Moz.  Now, what’s even more interesting is the growing disparity in production figures released by the official governments and those collected by Thomson Reuters GFMS and published in the World Silver Surveys.

For example, the official government sources report that the combined silver production in 2016 from Mexico, Peru, and Chile was 362.3 Moz versus 378 Moz published in the World Silver Survey:

As we can see, the World Silver Survey stated a total of nearly 16 Moz more in silver production than what was reported by the data from three official governments.  When I look at the previous mine supply data published in the World Silver Survey, it was very close to the same figures reported by the official government data.  However, over the past few years, the World Silver Survey’s silver production figures for several countries were higher than the data put out by the government sources.

Now, there isn’t an advantage for these governments to understate production.  We must remember, these governments receive royalties payments and taxes from domestic mine production.  So, for whatever reason, that data in the World Silver Survey shows an additional 16 Moz versus what these governments are reporting.  If the government sources are more accurate, then World Silver Survey’s total of 886 Moz published for 2016, is more like 870 Moz.

Now, this is quite interesting because the preliminary mine supply figures published in the Nov 2017 Silver Interim Report, shows world silver production of 886 Moz in 2016 will decline to 870 Moz in 2017.  According to the data from the 2017 Interim Report, the decline in world silver production was due to significant decreases coming from Chile, Australia and Guatemala.  Well, if world silver production was actually closer to 870 Moz in 2016, and we include the declines from those three countries than the forecasted global total for 2017 should be approximately 850 Moz.

Lastly, even though we may see an increase in silver production from Mexico, overall global mine supply will likely start to decline more rapidly over the next several years.  Why?  A stock market meltdown will destroy demand for base metals and the silver supply as a by-product of copper, lead and zinc production.

A falling mine supply of silver when investors around the world wake up to the tremendous STORE OF WEALTH properties of the poor man’s gold should do wonders for its value in the future.

NEW UPDATE:  April 1st

There seems to be some confusion in the comment section as to the correct sources to use in determining Mexico’s silver production figures.  While there are official sources reporting lower amounts, I have corresponded with the folks at Mexico’s INEGI and have received what is to be the more relevant figure of 465 metric tons for January, not the reported 289 mt by a few mainstream news sources.

Furthermore, if we multiply the 289 mt by 12 months, it would equal 3,468 mt or 111 million oz (Moz).  Now, if Peru’s Ministry of Energy & Mines reports its domestic silver production at 140 Moz, then does it make sense that Mexico is producing nearly 30 Moz less than Peru??

As I have stated, Fresnillo has brought on several new projects and is now producing nearly 60 Moz of silver or 1,866 mt a year itself.  Also, Fresnillo plans to increase silver production to 65 Moz in 2018 and 72 Moz by 2020.  There are countless other primary silver mines producing silver as well as a lot of by-product silver coming from the base metal mining industry in Mexico.  So, I stand by the 174 Moz figure for Mexico in 2016.

Here is a new table I put together from various Silver Mining Companies and Mines in Mexico:

Even though news releases stating that a number of mines in Mexico closed down since 2016, I would imagine they were small mines.  The medium to larger mines, which produce 90+% of primary silver production, mostly stated increases in 2017 over 2016.  Even if many small mines did shut down, we can see that the net increase of 14.5 Moz in 2017 versus 2016 could offset a lot of mine closures.  Again, these figures do not include silver production from base metal mining, which is significant.

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30 Comments on "CHILE, WORLD’S FOURTH LARGEST SILVER PRODUCER: Mine Supply Down 20%"

  1. “A falling mine supply of silver when investors around the world wake up to the tremendous STORE OF WEALTH properties of the poor man’s gold should do wonders for its value in the future.”

    Ahh, did you see that? Value, not ‘price’. The future is bright.

    • EVERYONE,

      Please check my new update and new table in the article above;

      You will see that most companies increased silver production in 2017 versus 2016.

      steve

    • Spanky Bernanke | April 7, 2018 at 7:09 am |

      Aaahh, but price is far more important. And, no supplier is going to increase production of a non-reproducing commodity of 8.4% if the PRICE is not increasing dramatically. THAT REALLY IS ILLOGICAL. Fresnillo would need to significantly ramp up spending, either through retained earnings, bond issuance, equity sale, or merger, to get THAT type of increased output. For such a LT investment, this mine operator WOULD NEED TO BE ABSOLUTELY CERTAIN that the PRICE will pay back the costs plus interest. I’m thinking governments lie quite often, but so does everyone else. For Christ’s Sake, Larry Kudlow is our top Administrative Economic Adviser. Steady accumulation of a finite commodity DOES seem quite prudent in a world that CBers don’t have to worry about the costs of printing currency….yet

  2. Steve, Do you do all of the research on your own or do you have a staff, because that’s a lot of time spent reading all of those reports and corporate annual reports to sift through?

  3. Doesn’t matter. JP Morgan can acquire unlimited amounts of silver to cover their paper shorts, simply by creating money out of thin air and buying it up. They first shorted paper silver so the dollar price would fall, and then they bought up all the physical. So as silver supply declines, most of it ends up in the hands of the banks, and a few banks at that.

    So not only will the dealers run short on silver, but the banks will then have enough silver to either sell into the market, or start another paper game.

    It’s over guys, it’s finished. Silver is done. It will never again reach the dollar highs of 2011. And if the system collapses, most people won’t even want silver. They’ll want some land, food, etc.

    • Even a caveman discovered that besides a cave and some mamut meat he needed something else to facilitated exchange maybe some mamut meat for some bear fur, fish, etc… the picture got more complicated and the caveman invented money. But you can´t because your iq is well below that of a caveman. Good luck exchanging your land for food. hope you discober a good way to take it to the food store.

  4. It does matter if the physical supply decreases. A bird in the hand is worth two in the bush or should we say an infinite amount of paper can not represent true physical silver when little physical silver is in supply. When the system collapses then the real things have great value and the paper liabilities are worthless. Gold and silver are real and paper and electronic bits are imaginary and only vehicles of promises or we can say debts. Banks have IOUs and will be broke from the run on the bank. JP Morgan will have to sell their physical gold and silver to cover their debts and the promised assets of account holders. All banks are broke. They call their debts assets priced at today’s value but the real value after the collapse will be greatly less which bankrupts them. What was the value of Toys R Us bonds as time passed and they became bankrupt? The true value of debt is actually zero since it is all trust in value to be paid. Who is dolph working for… government liars?

  5. “Interestingly, Chile’s silver production is down 20% since 2014 while the country’s copper mine supply is only down 5%. Because most of Chile’s silver supply comes as a by-product of copper mining, it’s surprising to see such a significant decline in their silver production.”

    Ore grades/composition would not change to such a large degree (on aggregate) so this can only mean one thing: somebody is falsifying the numbers and the silver is being sold off the books. I have suspected for quite some time that the US government has been covertly building up a hidden gold and silver reserve, and this is a good piece of info which backs up that notion. I think it is unlikely that a foreign (Chinese, Russian, etc) government or agent is interfering in these western companies and their book-keeping, hence the US government is the logical conclusion. I also think they have many different sources of hidden silver buying, and it allows them to covertly build up a significant stash. Time will reveal all.

    • The principal of epithermal (near surface) deposition of silver is likely what’s going on. As the copper mines deepen, the silver content diminishes.
      This isn’t Idaho; it’s a typical silver geology zone. I’m surprised to have not read this point anywhere in the story or the thread.

  6. Do you have any idea how hard it is to dig a mile deep to mine silver? What if nobody invested in silver mining… would there be a supply shortage? Maybe banks like JP morgan would invest in silver mining and strong arm the mining company to stay open at a loss. Honestly if you really think how google is cracking down on alternative news, did you ever take a minute to think why? Who owns most of Google/Facebook stock now? Could it be the deep state owns the media and trying to keep control. If you owned the media it is easy to own the public. Will the truth prevail when the extremely wealthy 1 percent want to stay in power? Will we all be enslaved when sites like SRSrocco just do not show in google search anymore?

    • in a deflationary situation demand falls, silver demand also falls. Mines probably will close.

      • A deflationary situation would last 4 months then CBs have to print, print and print some more. Also they will start engines of their helicopters. A Ponzi needs constant inflow, otherwise the pyramid colapses and it is not safe for the 1%.

  7. Muhammad Aidid | April 1, 2018 at 5:29 am |

    To quote hillary:
    What difference does it makes? Silver still down .. demand from industries down .. demand from coinage down .. demand for bullion down .. demand from slv down .. s&p up .. dow jones up .. nasdaq up .. oil up .. base metals up ..
    As for chile , it’s only january , there are 11 more months to consider .. u re too desperate .. still i appreciate your work …

    • Are you talking demand from solar industry down? provide some links, all I hear is that projects are mushrooming all over the world, some real big ones.

    • Bruce Gregory Bell | April 2, 2018 at 3:42 pm |

      That is not what is being reported by reputable institutional buyers and sellers. Gold is scarce but extra silver is nearly nonexistent. All available supplies are presold, claimed.

      Other analysts report falling silver production. When a resource becomes scarce it becomes valuable. Why do you think the banksters are shorting and also taking delivery? It’s not because it’s devalued but desirable.

      The Silver institute has not been taken as Gospel for many years. Yes, the SUA and Pilgrim Society do claim it is viable but who do you think created the Institute?

      TPTB keep us in the dark while they work against us. The world only finds the truth after the fact.

  8. I don’t think investors in the US understand ‘Store of wealth’, or they have a distorted understanding of it. If a holding isn’t generating a profit, and a nice one at that, it is a worthless holding, including gold and silver. Most of the world (the common world population) AND all of history see the rarest material objects as a store of wealth, meaning power, status and prestige. As economic markets shift or even out- toward the East, values of true wealth in markets will change.

  9. Schadenfreude | April 1, 2018 at 6:28 am |

    There is some commotion in reference to silver production from the mainstream news organizations.(January 2018 silver production).

    https://www.forbes.com.mx/produccion-de-plata-y-cobre-en-mexico-retrocede-en-enero/
    https://mx.reuters.com/article/topNews/idMXL1N1KK01M

  10. Schadenfreude | April 1, 2018 at 6:33 am |

    The United States, silver production down 15% from the previous year.

    https://minerals.usgs.gov/minerals/pubs/commodity/silver/mis-201712-silve.pdf

    Barely enough for the production of domestic silver coins

  11. My Spanish may need some work. However, according to this preliminary report from Mexico’s mining institute silver was up 2.8% from 2016 to 2017.
    http://www.beta.inegi.org.mx/contenidos/saladeprensa/notasinformativas/2018/ind_miner/ind_miner2018_02.pdf

    However, silver mining was down 17% from 2015 thru 2016.
    http://www.siam.economia.gob.mx/es/siam/ep_2016

    My point is that Steve’s graph on Mexico’s silver production seems to be a bit more positive then the data In the links I’ve shared. By the way…shout out to Shadenfreude for the links.

    • Petedivine,

      I have had a few email exchanges with Schadenfreude. We differ on the Mexico Silver Production figures due to the different reporting sources. I am not going to get into too many details, but I have corresponded with a few Reps at the INEGI as well as GFMS and I can tell you the correct figures are the ones I have stated in my charts.

      The 289 metric ton figure for January is only 9.3 million oz. Fresnillo out of Mexico is producing 50 Moz of silver by itself, and this does not include a hundred mines in the country producing silver. Furthermore, we also have the silver as a by-product of base metal mining, which is significant as well.

      If we assume that Peru is producing 140 million oz a year (stated by the Peru Ministry of Energy & Mines) and if we multiply 289 metric tons figure for Mexico in January by 12 months, that is only 111 Moz for the entire year. I just don’t see Mexico producing 30 Moz less silver than Peru as companies have been adding new projects for the past 5-10 years.

      steve

      • Don Paladin | April 1, 2018 at 12:36 pm |

        I started seeing mom and pop businesses going under and that is the same thing I noticed going into The Great Recession. When, not if, we have another recesion, and it will be a bad one, do you expect PM miners to sell off with the market or get a bid? from old charts it appears they die with the market. My other concern is about crypto, though I have no confidence in the space I know many do, and when people do move to safe havens the crypto space will siphon some of the typical demand which might prevent PM’s from getting the bid as they have in times past during a crisis.

        • DisappearingCulture | April 2, 2018 at 12:30 pm |

          “My other concern is about crypto…….and when people do move to safe havens the crypto space will siphon some of the typical demand which might prevent PM’s from getting the bid….”

          When stocks/equities go down [like over 10%] and stay down, and perhaps continue down, fiat currencies [printed or digital] will move into whatever IS going up in fiat valuations. If Bitcoin is edging upwards as stocks edge down, fiat will move into Bitcoin. If silver or gold is going up when stocks go down, fiat will go into that. Whatever goes up [when stocks go down] will get more fiat moving into it, making it go up even faster.
          Considering G & S are tangible and rare, and priced not far above mining & refining to .999, I bet they will do better than cryptos when fiat seeks a better return on investment.

        • DisappearingCulture | April 2, 2018 at 2:07 pm |

          Don,
          “I started seeing mom and pop businesses going under and that is the same thing I noticed going into The Great Recession.”

          I wish I knew where you were observing this.

      • Don Paladin | April 1, 2018 at 12:39 pm |

        I should have included. I hold stock in several PM miners so am not a basher but wonder if I should look for some near term spike in pps to sell at least a decent percentage of each position if a just around the corner recession will kill their pps as well.

  12. petedivine | April 1, 2018 at 1:27 pm |

    Hello Steve,

    Thanks for addressing the question. Fresnillo sure did have a great year. They’ve brought some impressive properties online. I went to their 2017 preliminary report. I was curious to see how the energy crises in Mexico was affecting their mining operation. Their electricity costs increased by 28.9% and their diesel cost increased by 22.2%. In a separate article it was reported that 169 mines closed in Mexico since 2016. Not every mining company is a world class operation like Fresnillo. My guess is that rising energy costs and low silver prices are having an impact on the overall mining sector. What I don’t know is whether the Mexican government would be sensitive enough to lie about it. Thanks for verifying your information and responding back. We sure do live in interesting times.

    A link to the 169 Mexican mining companies that shutdown since 2016.
    http://www.jornada.unam.mx/2018/03/17/economia/018n1eco

    Link to Fresnillo report
    http://otp.investis.com/clients/uk/fresnillo1/rns/regulatory-story.aspx?cid=191&newsid=982120

    Link to gasoline crises in Mexico
    https://wolfstreet.com/2018/03/12/petro-plunder-rages-in-mexico-costs-surge/

    • Thanks for the facts. I know where we are going, without the cold hard facts, its just chatter i put up. I’ve read enough, and seen enough to know what will happen, but without the fact checkers there’s nothing.

    • Petedivine & Everyone,

      Please check my NEW UPDATE in my article above. I included a new table showing the top silver mining companies and mines 2016 vs 2017.

      steve

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