Major Production Declines From The Top Two Primary Silver Mining Companies

As the silver price continues to break out of its lows, two of the top primary mining companies are experiencing major production declines in the first half of the year.  Mexico’s Fresnillo PLC and Peru’s Buenaventura’s top primary silver mines saw a significant decrease in production due to either falling ore grades, decreased volumes of processed ore, poor weather, or labor strikes.

The largest silver miner in the world, Fresnillo PLC, just released their 1H 2019 production results, showing declines in all three of their major silver operations. The Fresnillo, Saucito, and San Julian Mines reported a combined 13% decline in silver production during the first half of the year while Buenaventura’s Uchucchacu Mine suffered a 40% decline.

Total silver production from Fresnillo PLC and Buenaventura fell 6.6 million oz (Moz) or 16% 1H (Jan-Jun) 2019 versus  1H 2018:

If the current trend continues, the top two primary silver miners in the world could experience an 8-10% reduction in total mine supply in 2019.  That is a considerable weakening of production right at the very same time the silver price is experiencing some strength in the market.

According to Fresnillo PLC, the company forecasted 2019 silver production to be in the range of 58-61 Moz.  If we include Fresnillo PLC’s Silverstream supply, total silver production for the first half of the year is 27.5 Moz.  Thus, the company is on track to produce 56-57 Moz, the lower end of their forecast.

Buenaventura’s total silver production in 2018 was 26.8 Moz, and they are forecasting a range of 22-25 Moz for 2019.  However, I believe total silver production for Buenaventura in 2019 will likely be at the lower end of the range at 22-23 Moz.

Moreover, the largest primary silver mine in Peru is the Uchucchacu Mine.  Because it’s production has fallen considerably this year, it has impacted the country’s silver output quite negatively. The Peru Ministry of Energy and Mines just released their May 2019 metal production report showing that the country’s silver mine supply is down 10.6 % versus the same period last year:

Furthermore, Mexico’s INEGI reported a 4% decline in the country’s silver production in the first four months of the year.  However, that doesn’t include the loss of silver production due to the shutdown of the Penasquito Mine on April 29th, (which lasted until June 17th).  It will be interesting to see what Mexico’s total silver production will be for the first half of 2019 versus the same period last year.

Lastly, the lower silver price trend over the past five years has put a great deal of pressure on the primary silver mining industry.  While the industry has been able to cut costs and become more efficient in dealing with weaker silver and base metal prices, there’s no wiggle room left for the majority of these companies. Which is why I believe investors should pay close attention to the silver price as it is one of the most undervalued assets in the market.

In the next few days, I will be doing a new article on the Continued Silver Breakout from its “Symmetrical Triangle Formation.” I will be including how the price action has been trading in regards to key technical levels. Also, I plan on putting out a new Youtube video on the Details of the Silver Price Technicals and Fundamentals towards the end of the week.

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DisappearingCulture
Guest
DisappearingCulture

We have established the recent price increase had a lot to do with computer programs [algorithms] buying based on technical indicators, and some individual traders based on the same and/or fundamentals.
“…Production Declines From The Top Two Primary Silver Mining Companies”, declines in production from Mexico and Peru, documented poorer quality ore being processed…all of these things have been covered in your blogs.
Does this or are these making the price go up? I guess those are more in the “fundamentals” category.

Wanderlei Silver
Guest
Wanderlei Silver

I also think the environmental cost will being to be priced in. With polluted water, giant trailing dams that will start collapsing we will see outcries from people in third world countries. I’ve read about Mexican people almost shitting down a big mine because of using too much water and pollution

DisappearingCulture
Guest
DisappearingCulture

I don’t think investors care much about the environment somewhere else in the world; they just want what they are invested in to go up in value.
Or if they care about the environment that is a separate concern.
The way environmental cost will be priced in is when that impacts [decreases] total mine supply [a fundamental]. Right now fundamentals don’t matter much in the pricing [see Steve’s comments above].

Realist
Guest

I am afraid that your idea that environmental concerns will be “addressed” or “priced in” is pure fantasy. No, what most of these people are protesting are bad wages and bad and/or dangerous working conditions. The Western Media outlets insert the environmental “Thang” into the poor people’s protests. Mostly propaganda. For the most part these people, God bless them, just want to EAT and SURVIVE. The vast majority do not care about such abstract concepts like the “Environment”. Besides, they have always had “bad water”. Sure, there is environmental damage. Absolutely, and it’s not right. But that has been going… Read more »

DisappearingCulture
Guest
DisappearingCulture

Realist,
That video makes an impression.
I have friends from Detroit & surrounding areas. They have said to me “you don’t understand…”

Cobah.
Guest
Cobah.

https://www.bnamericas.com/es/noticias/fresnillo-apostara-por-excelentes-minas-mexicanas-pese-a-problemas

Fresnillo plc homologous mine did incurred in an additional operational cost
totalling 135 million (USD).,for the first semester.
The San Julián mine has encounter “problemas de agua” (water problems) for
it operation.,cosenquently reducing the mine production for the first half.

Crayfish
Guest
Crayfish

The other day Keith Neumeyer said that new electric cars use about 1 Kilo of silver. He indicated that some countries want to switch to electric cars by 2025 and that all nations would “like to” switch by 2030. If my understanding is correct…1 Kilo is 32 oz of silver. Multiply that by the current yearly average car sales of about 79 million cars and that comes to 2.528 billion ounces. NOW…something I did has to be messed up and wrong because there is only about 850 mil oz of silver mined each year. My main point in this posting… Read more »

DisappearingCulture
Guest
DisappearingCulture

Industry wanting the price of silver and other elements essential to what the produce as cheap as possible is and has been one of the forces holding down the price.
But if the price gets to the point mainstream financial media starts pointing out “silver has gone to $20 in this amount of time”, or there is more than a correction in the equities markets and INVESTORS rush in, there is NOTHING governments or central banks can do to stop the price from going up at some point [short of passing draconian laws that many will ignore].

SkeptiSchism
Guest
SkeptiSchism

You don’t think they can find a substitute for silver in electric vehicles? You also must not read this website frequently because peak energy is going to turn the entire pricing structure upside down anyway.

Governments can only suppress the price of materials via the debt/derivatives markets. Peak energy will eliminate the ability of governments to issue infinite leverage.

Wake up, it’s going to be a new world.

dale
Guest
dale

There’s plenty of substitutes for silver. Depending on the application, platinum, palladium, rhodium, and gold work just as well.

Realist
Guest

dale: No, there are not really any substitutes for silver. Why do you think it is used?

You must be new here!

About my land development in Florida….

Texas Road Runner
Guest
Texas Road Runner

Uh Dale, About the substitutions for silver?
Silver- $16.44 oz.
Gold- $1425.00 oz.
Platinum- $852.00 oz.
Palladium- $1536.00 oz
Rhodium- $3460.00 oz.
What school did you go to, where you come to the conclusion that these other metals could be economically used in place of silver?

dale
Guest
dale

Man, no room for levity. But thanks for making my point. While there are, in fact, substitutes for silver, depending on the application – there zero substitutes that are economically feasible at today’s criminally low prices.

Cobah.
Guest
Cobah.

Interesting presentation.
https://www.youtube.com/watch?v=TRcx-btcle4&t=2754s

The Shrinkage of the vehicle fleet by 70% or a 55 million production reduction by the year 2030 and totality of the replacements AES (autonomous electric vehicles).
The silver consumption will be astronomical in the near future and a much higher price reevaluation will be required.

EP
Guest
EP

Most of the people today haven’t watched The Jetson’s or The Flintstones and don’t see the irony and possible forward looking nature of their comedy.

John M
Guest
John M

Ok this isn’t even back of the envelope, but I’m just wondering if production keeps dropping and consumption remains stable or increases, when does existing inventories deplete enough to start the warning bells. I know we here have heard the bells for years, but is there any way this insanity (low priced silver) can go on for 5 or 10 years?

Dawid Venter
Guest

I am very pleased to see your progress on technical analysis. As mere mortals we will never know all the little inside details, but good technical analysis will give one much more insight into what is happening. The charts always show when the insiders start to make their moves before the masses. Keep up the good work Steve.

Doc Rich
Guest
Doc Rich

Steve,
Just wondering if you know how much above ground surplus silver supply is available for industrial, jewelry, and for investments? Thanks in advance

Doc Rich
Guest
Doc Rich

Thanks for the info Steve

Barry
Guest
Barry

I added more to my physical silver holdings and have been long SI on the futures market again since 14.50. I was long a few months ago but cashed in profit because the market could not break a long standing wedge which is now broken. I am not a silver bug. I have been mostly short silver for 10 years but over the last year I have been biting off longs on the futures. Believe me or not the charts are saying this silver cycle will start at fifty bucks and go on from there. So there could be good… Read more »

DisappearingCulture
Guest
DisappearingCulture

You are an experienced trader in at least one aspect of the market while many just have some physical holdings,and most of the public have none, and don’t know what silver is and it’s essential role in industry, or it’s monetary history.
What about from here to fifty?

Wanderlei Silver
Guest
Wanderlei Silver

Out of the 850 million oz mined globally each year how much is consumed by industry? I assume all of this silver used cannot be recovered unless prices go up significantly. Is there a chart on how much has been burned each year and in total?

DisappearingCulture
Guest
DisappearingCulture

I’ve heard over 60% is used by industry, and most is not recoverable. A lot is deep in landfills or washed out to sea.