Future Silver Supply Will Be More Vulnerable Than Other Metals

There has been a lot of discussion on the remaining global supply of certain precious metals on the alternative media.  I continue to read articles that state there are only ten years worth of silver remaining.  Unfortunately, many of these figures are inaccurate.  So, I thought I would provide an update based on recent USGS – United States Geological Survey data and information.

For example, some analysts continue to say there are only ten years worth of silver reserves remaining.  This was true back in 2009, before the USGS updated their figures.  Unfortunately, the USGS had not updated their silver reserve figures for quite some time and the higher silver price (including higher prices for metals associated with by-product silver production) was as an additional factor that led to much higher silver reserve estimates in follow years.

Here is a table from the USGS Silver Commodity Mineral Survey in 2009:

If we take the estimated silver reserves (2009) of 270,000 metric tons (mt) and divide by the annual production of 20,900 mt in 2008, that would equal 12.9 years worth of remaining reserves.  Again, this is where many in the precious metals community state that there are only ten years (close enough) worth of silver remaining.

However, the USGS started revising their silver reserve figures in the following years and also replaced the “NA” information in the table above with actual reserves.  Basically, the low silver price in the early 2000’s did not motivate governments to revise their silver reserves.  But, as the price of silver started to skyrocket after 2009, well then, it was time to put some REAL VALUE to these silver reserves.

Here is the most recent table by the USGS, of global silver reserves:

According to the USGS, total global silver reserves are now 570,000 mt.  Thus, if we divide 2015 production of 27,300 mt, we end up with 20 years worth of global silver reserves remaining… at current rates of annual production.   You will notice, that Chile now has silver reserves of 77,000 mt for 2015.  However, the USGS had a “NA” next to Chile’s silver reserves in its 2009 Silver Commodity Summary.

Furthermore, the top three countries (Peru, Australia & Poland) account for 51% of the total world silver reserves at 290,000 mt.

That being said, here is a chart showing the years remaining of the top global precious and base metals:

According to the USGS, copper has the largest amount of reserves remaining at 38 years compared to silver (20 years), gold (19 years), lead (19 years) and zinc (15 years).  Of the five metals shown in the chart above, silver has the second highest amount of reserves, based on years worth of supply remaining.

Interestingly, zinc has the least amount of metal reserves, at only 15 years of supply.  Regardless, these official estimates are based upon business as usual continuing in the global economy for the next 30-40 years.  While these reserve estimates provide an “official gauge” as to how many years worth of supply of each metal is remaining, I doubt they will last that long.

This will be due to the peak and decline of global oil production as well as the continued collapse of net energy from oil supplied to the market.  That being said, silver reserves will likely fall the most as 70% of silver production comes as a by-product of base metal and gold production.

Once the global oil industry disintegrates under the weight of falling prices as costs continue to rise, the decline of base metal and gold production will impact silver the greatest.  Not only will silver reserves plummet to a greater degree versus the other metal reserves, so will its annual production rate.

These two factors will make the future supply of silver more vulnerable than most other metals… even gold.  More on this in future articles.

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23 Comments on "Future Silver Supply Will Be More Vulnerable Than Other Metals"

  1. Steve,

    While I trust your analysis, I have as much trust in the companies and the USGS reserve figures as I do in their all in costs of production – which is absolutely none.

    So, when silver again becomes monetized, which should correspond in time to the collapse of fiat, silver will no longer be the “by product” but be the primary product objective (except in gold mines). The collapse of fiat will disproportionately increase the relative value of silver (and gold) and the lengths and costs miners will go to to extract them.

    Won’t this lead to a major increases in their production as long as oil keeps flowing at all and in spite of it’s low net energy value?

    SteveW

    • SteveW,

      Yes, I agree. The official silver reserve figures have to be taken with a grain of salt. However, there is some method to their madness in producing these figures.

      As for your question about a rapidly rising silver price and its impact on silver production, I see it differently. Over the millennium, the majority of silver came as a by-product of base metal mining. Even during the ancient Greek and Roman times. These ancient cultures used a lot of lead, to their dismay as it poisoned them slowly. However, a by-product of lead production was silver. Thus, silver was used as money.

      Please check out the photos and description of ancient lead & silver mining in Greece: http://www.persee.fr/doc/arsci_0399-1237_1981_sup_1_1_1151

      If you go down to the pages that show the composition of the ORES & SLAGS, you will see that the higher concentration of silver, the higher lead. SLAGS are the remains after processing ancient ore.

      So, even in ancient times, most of silver production was a by-product of other base metals.

      SteveW, even if the price of silver surges, I don’t see a rise in production because any rise in primary will be offset by larger declines in base metal.

      steve

    • These #may be on the high side, to keep silver an gold’s price down,, they can count all the silver that will never be recovered

  2. Rumpel Silverman | January 27, 2017 at 10:33 am | Reply

    While all that may appear true at first glance, I did not see anything related to the waning supply of In-Ground silver verses recycle and or secondary supply from other metals mining. So, even with a 570 thousand metric tons in supposed world reserve, it will disappear sooner than expected because it will not be replenished except by smaller and smaller inputs from yearly mining.

    In other words, this article comes off as propaganda Hit-Piece to manipulate the silver market to the down side by making it look like future supply will not be a problem and that we’ll have all we want for many years to come, thus assuring the market that they don’t need to hoard Silver causing the price to rise creating havoc in the manufacturing markets which use silver in their productions.

    I believe this whole conversation around Silver needs a bit more analysis, taking into account all aspects that affect the price of Silver.

  3. Diogenes Shrugged | January 27, 2017 at 1:28 pm | Reply

    The second chart came from here (page 153):
    https://minerals.usgs.gov/minerals/pubs/commodity/silver/mcs-2016-silve.pdf

    The term “reserves” is a bit slippery. As silver prices rise, the “reserve base” increasingly reports to “reserves” (page 4):
    https://minerals.usgs.gov/minerals/pubs/mcs/2016/mcsapp2016.pdf

    We’re hitching our wagons to the ostensible demise of petroleum hydrocarbon production here, not to the exhaustion of silver reserves. Which brings to mind something Mark Twain wrote:
    “The report of my illness grew out of his illness, the report of my death was an exaggeration.”
    http://www.twainquotes.com/Death.html

    Similarly, if you’re hitching your wagon to the demise of the dollar, I suspect you’ll be on death watch for a very, very long time to come. The dollar will be the last fiat currency to fail. Again, see the Mark Twain quote.

    An ounce of silver purchased 1.5 liters of good tequila a few years ago. Now I pay two ounces for that same bottle of tequila. Fortunately for me, I stockpiled more tequila back then than silver. If the silver price doesn’t explode upward as promised, I’ll sell you a bottle of tequila — for three ounces. (Note: Trump is about to make tequila more expensive.)

  4. Interesting piece on zh, global trade, oil and currencies. For those who missed it.

    http://www.zerohedge.com/news/2017-01-27/whats-behind-collapse-global-exports

  5. Are you taking into account the increased use of silver in your production numbers? With electric vehicles, batteries, alternative energy, more smart devices, robots, and antibiotics being less effective. The use of silver should just keep rapidly increasing.

  6. SilverBullRider | January 28, 2017 at 12:45 am | Reply

    Silver as a product of base-metal production cannot necessarily be used to predict future production. The key is price. Supressed silver prices is what leads to “silver as a by-product” as the main mode of production. If a true silver market becomes reality (physical pricing, not manipulated paper prices) then silver will be mined due to the true valuation in place. For example, say 95% of the mine produces base metals (by weight) but may only represent 10%-30% of your revenue. 70%-90% of your revenue could come from the silver ore in this example, even if it’s only 5% of the mined ore by weight, it could still be 90% of the mine’s profits.
    .

    • The problem is the high output.70% comes from the basic miner.The total output is to high.Simply said there was no significant reduction from the miner companys.Silver price is preisunelastisch(german word).Means.”The industry must pay each price”.

      I told it years before.Instead of shrinking the supply they produce to much.It was the greed from the big primär miner producer which leads to the big debts.Today there is no way back .They must produce more and more because of the big debts and to avoid a breakdown.

      25000 tons yearly production.Take away 30% and the silver price go to the moon.

      • Addition:

        Basis miner mills must normally run.They are producing night and day.You cannot swittch off a mill.At that it’s difficult to minimize the output because of the high fix costs.

  7. SilverBullRider | January 28, 2017 at 12:52 am | Reply

    And Steve, you completely seem to be locked in the past, with oil as the only source of energy. What if there is a replacement that is far more abundant and cheap and clean? You have no faith in man’s ability to discover the secrets of the universe to assist in the possibility of our continuation as a species. I just don’t believe burning oil is the end of the road.

  8. No one’s factoring in the infinite number of silver bullets required to neutralize colluding
    corporate/government fascist vampires.

  9. The notion of metal reserves is a tricky one. 38 years of copper reserves does not mean that there will not be any copper production in 100 years. As a matter of fact, copper production could be higher in 100 year than it is today without contradicting the 38 reserve life of copper. Similarly, there will be silver mining in 100 even if USGS says the remaining life of silver reserves is 20 years. To understand that fully one would have to carefully study the definition of “reserves”. It is not what we think it is.

  10. Reserves are a function of price and costs. Low silver prices that currently exist have led to lower reserves. If silver is really need for solar the price will have to up due to this demand. However, if oil becomes much less available, the mining costs will explode. I’m sure one could do a similar analysis that the hill group did for oil on key metals. If the energy cost embedded in the metals like silver is larger or similar to the price then mining will not happen. Since ore grades are declining, and energy costs rising, I think many mines will have to close eventually.

    In the long run, the metals themselves will outperform the miners. I think farmland, water, food, guns, etc will outperform metals. Depending on the circumstances I could see cash even outperforming.

    To prep for a future that Steve has alerted to us requires balance, flexibility, brains and luck.

    Cash, gold, silver, mining stocks for now, real estate, stock piled supplies. Avoid fine art, bonds, most stocks,

  11. Reserves are a dream of billions of people caught in the trap of makebelieve.

    Silver, gold or a can of fish.

  12. There are known reserves and there are unknown reserves. These are reserves which may be discovered in the future. The mining cost depends on the technology employed. Again, there are present day technologies and there are future technologies, yet to be invented. To sum up, everything is in a state of flux. Nothing is permanent.

    • Robert,

      Pardon my French, but if you understand the Dire Energy situation going forward, that has to be one of the most stupidest things you have written.

      I gather you believe in INFINITE growth on a FINITE planet… aye?

      steve

  13. As Silver is a by-product of Zinc and Lead and these metalls are depleted in 15-19 years, a big sorce for Ag will fade away sooner than the Ag-reserves.
    There still will be Ag-mining, but than price must rise to make sense, espacialy when energy costs will increase too.

  14. I agree in both Silver going much higher and reserves depleting but price will extend any resource or it’s replacement as it always has …

    .fuel tech wise we could see Coal converted into fuels with better tech ..fuel cells …nuclear power growth for electrics etc ..

    ..I do see Silver around current Gold prices within the next decade and is why I purchase Silver bullion as my family savings with spare cash >>

    But as too lifespan as Silver heads higher lower grades will become more economic and same with energy as prices rise so will new tech ….

    we of course will see the widening gap between Rich and poor where only the wealthy can afford to own there own transport etc where 80-90% of the populations will move via electric buses /trains etc

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