Mexico Silver Production Down a Stunning 10%

Mexico Silver Production Jan-May

The largest silver producing country in the world has seen its production decline substantially in the first five months of the year.  Mexico was forecasted to increase its silver production this year, however if present trends continue, total output could fall nearly 10% in 2013.

If we take a look at the last two latest reports coming from Mexico’s INEGI, we can see that the majority of the declines have come from Zacatecas  — the richest silver region in the country.

Mexico April 2013

(Plata = silver & oro = gold: figures shown in kilograms)

In April, overall silver production in Mexico was down 10.3% y.o.y, whereas output from Zacatecas fell 21.6%.  Even though the drop in production in May was not as severe as in April, total silver production declined 9.1%.

Mexico May 2013 Production

Total silver production in Mexico from Jan-May was 2,062 tonnes down from 2,288 tonnes in 2012 — a difference of 226 tonnes or 9.7%.  Again, the majority of the declines in silver production came from the state of Zacatecas in Mexico where Fresnillo and Goldcorp’s Penasquito mines are located.

These two mines accounted for 50 million oz of silver production in 2012.  According to their 2013 half-year reports, silver production at Fresnillo was down 2.2 million ounces and Penasquito declined 2.5 million oz compared to the same period last year.  Thus, approximately 55% of the total decline in Mexico’s silver production so far this year has come from these two mines.

The reason attributed to the drop in silver production at Fresnillo and Penasquito was due to falling ore grades, however Penasquito had additional problems with water availability in treating its ore.

The Reliability of Silver Statistics

Part of the problem in obtaining data in the mining industry are the discrepancies in reported figures from the different official sources.  The main sources are the World Silver Survey by GFMS Thomson Reuters and the Silver Yearbook by the CPM Group (Jeff Christian’s organization)

According to the 2013 World Silver Survey, Mexico’s total silver production was 162.2 million oz., whereas CPM Group’s 2013 Silver Yearbook came in at 136.6 million oz.  How could there be such a huge difference between these two sources?

Well, I have corresponding with some of the folks who put together the World Silver Survey and I believe their figures are more credible than the CPM Group. The production figures from the World Silver Survey come directly from many of the different countries official government sources.

For instance, Canada’s Dept. of Natural Resources stated that total silver production in 2012 was 666.2 tonnes which translates to 21.4 million oz — nearly the same total in the 2013 World Silver Survey.  Furthermore, Mexico’s INEGI data for 2011 stated that Mexico produced 4777 tonnes of silver which is 156.3 million oz… the same figure shown in the World Silver Survey:

2013 World Silver Production

So, if silver production from Mexico continues to decline at its present trend, overall global production in 2013 may be lower than in 2012.  It is estimated that China’s total silver production is forecasted to increase 5% this year, however this may not be enough to offset the declines coming out of Mexico.

Lastly, if silver prices remain below $20, it is highly likely that more primary silver miners will be forced to put their high cost mines on care & maintenance until prices recover.  U.S. Silver already announced they were cutting a third of their staff and Alexco Resources is planning to put their only commercially producing mine (Bellekeno) on care and maintenance in the winter, hoping prices will recover in 2014.

If more companies elect to shut down their marginal mines until prices recover, we could see overall silver production to decline even further in 2013-2014.

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brendan
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brendan

Over 70% of our silver was imported last year. 51% came from Mexico and 21% or so came from Canada. A 20% decline in domestic production from Bingham and the price decline will make sourcing from Canada and Mexico more important. Unfortunately Canada doesn’t have anymore silver and Mexico may be jumping the peak cliff?

Supply shock is coming!

Nys Parkie
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Nys Parkie

One aspect..at 19.00 something an OZ, costs are too high to mine. Not saying that is the only reason but could weigh heavily on manpower hiring, costs assco. with mining, shipping and refining.

judejin
Guest
judejin

a lot of copper refineries in china are cuttng capacity. given silver is very often a byproduct, i’d say china’s output is down too.
i don’t have exact figures though.

Tas
Guest

Steve

Recently heard, but could not confirm, that USA production of silver in April is up 6% year over year. How can this be given the collapse of that huge mine in Utah? Have you seen these numbers?

Tas

luiscarlos
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luiscarlos
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judejin
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judejin

i just read somewhere chinese silver refiners cut production by 10% too because of volatile silver price. they can’t make money refining so they cut back on importing silver/zinc/lead ores.

luiscarlos
Guest

Steve.

Maybe I’m beign paranoid…

The simulteneous Kennecott mine and silvet price collapse of april 2013

is not reflected in the data and I call into question the silver production numbers

for April and especially the month of MAY.

I’m not saying the data is falsified.,but something doesn’t smell right.

luiscarlos

OutLookingIn
Guest
OutLookingIn

Nice to see some flesh (proof) on the bones (stats) of a physical silver shortage.
Nicely done Steve.

Further to your last post on GDP & oil consumption, this article in bloomberg seems to back your take on the dimishing demand for petroleum products.

http://www.bloomberg,com/news/2013-08-02/chevron-profit-declines-as-crude-prices-fall-with-output.html

Joe
Guest
Joe

Interesting, I just bought a 1kg silver bar before I read this article.

luiscarlos
Guest

SEA sales for the month of May was 3,458,500 ounces and total U.S. silver production was only

2,902,642 ounces,leaves a deficit of 555,858 ounces.

For the month July,( “the summer doldrums”) SAE sales was a staggering

4,406,500 ounces.

http://www.usmint.gov/about_the_mint/index.cfm?action=PreciousMetals&type=bullion