PEAK GOLD vs. PEAK SILVER: Must See Chart

If you are a precious metals investor, you need to see this chart.  Matter-a-fact, this is the first time (to my knowledge) in the history of precious metals analysis that the information in this chart has been made public.  One look at this chart and the investor will see the the huge difference between the cost to produce the precious metals.

In addition, the information in this chart will show why the peak of primary gold production will occur before the peak of primary silver production.  However, global silver production will likely peak soon after world gold production.  Thus, individuals understanding the difference, will likely enjoy a rewarding investment strategy most are currently unaware.

As I have mentioned time and time again, ENERGY IS THE KEY to the value of the precious metals.  This goes well above and beyond the percentage of raw energy (oil, natural gas, coal, hydro & nuclear) consumed in the production of an ounce of gold or silver.  Unfortunately, investors do not realize that 90-95% of the value of an ounce of gold or silver is directly related to the amount of energy consumed IN ALL FORMS and IN ALL STAGES in the their production.

Labor is a form of energy.  Upper management pay, is a form of energy (highly skilled energy).  The materials consumed in the gold and silver mining industry get their value from the energy consumed IN ALL FORMS and in ALL STAGES of their production-transportation-distribution.  The mining equipment used in the production of gold and silver also get their value from all the energy consumed in their manufacture (in all forms and stages).

While the market understands that energy is large percentage of the cost to produce gold or silver, they fail to realize LABOR, MATERIALS and EQUIPMENT are all “Energy Derivatives.”  Even though labor, materials and equipment are listed as different itemized costs on the precious metals mining company’s balance sheet, they are all ENERGY COSTS when we break them down to their simplest form.

That being said, let’s look at the huge difference in the consumption of diesel in the primary gold and silver mining industry.  I selected Barrick because they are the largest gold producer in the world and Pan American Silver is one of the largest primary silver mining companies.  While other companies such as Fresnillo located in Mexico produce more silver than Pan American Silver, I was able to obtain diesel consumption data from Pan American Silver more readily as they just released their 2014 Sustainability Report.

If we look at the chart below, we can see just how much more diesel is consumed in the production of gold than silver:

Diesel Consumption Barrck vs Pan American Silver

According to the data from the two companies 2014 Sustainability Reports, Barrick consumed 20.8 gallons of diesel to produce an ounce of gold while Pan American Silver only used 0.2 gallons to yield an ounce of silver.  Basically, it took Barrick 100 times more diesel to produce an ounce of gold in 2014 than it took Pan American Silver to produce an ounce of silver.

That said, let me clarify a few things.  First, these mining companies state their energy consumption figures in various metrics.  For example, Barrick listed their energy consumption in giga joules and Pan American Silver in cubic meters.  So, we have to make some conversions to gallons to make a comparison. 

Secondly, I took all of Barrick’s estimated diesel consumption and divided it by the total amount of gold produced in 2014.  However, I only used Pan American Silver’s five primary silver producing mines to calculate their diesel consumption.  Pan American Silver has two additional mines (Dolores & Manantial Espejo) that produce a great deal of gold.  Thus, these two mines consume a lot of energy, similar to primary gold mines.

Furthermore, the revenue obtained from Pan American Silver’s Dolores and Manantial Espejo Mines was higher in percentage of gold than silver.  So, I omitted these two mines when calculating a more ideal energy consumption metric for the primary silver mining industry.

For those who like to see the actual data, here it is below:

   BARRICK 2014   

Total Diesel Consumed = 129 million gals

Total Gold Production = 6.2 million oz

Diesel consumed per oz of gold = 20.8 gal

    PAN AMERICAN SILVER 2014    

Diesel Consumed by 5 Primary Silver Mines = 3.5 million gals

Total Primary Silver Production (5 mines) = 18.4 million oz

Diesel Consumption per oz of silver = 0.2 gals

Yes, it’s true that Pan American Silver produced 26.1 million oz (Moz) in 2014, but remember, I had to subtract the 7.7 Moz supplied by the Dolores and Manantial Espejo Mines as they were more a primary gold mine with silver by-product (or co-product) credits.

Peak Gold vs Peak Silver:  How Will This Play Out?

The question many investors may ask after reading the information above is… What do these figures mean?  This is a good question.  Why?  Because, I believe it will provide some favorable investment strategies for precious metals investors that aren’t presently understood.

One of the things I try to do on my site is to show how energy will impact the precious metals, the miners and the overall economy going forward.  However, when I post an energy article, it goes over like a FART IN CHURCH.  My energy articles receive a tenth of the readership compared to some of my more popular precious metal articles.  And this is quite a shame, because ENERGY IS THE KEY to understanding how the world collapses or evolves going forward.

As I stated in a recent article, U.S. Shale oil production already peaked earlier this year.  ITS A DONE DEAL.  So, for all the folks who continue to believe the CRAPOLA put out by the U.S. Govt or MSM that the U.S. is still on track to be energy independent…. WAKE UP, it’s a big lie.

Bakken Peak

Eagle Ford Peaked

With the peak of U.S. Shale oil production already in the rear-view mirror, I believe we will see the peak of global oil production very soon.  Thus, the world will have LESS and LESS oil in the future each year to run the system… and this includes the mining industry. 

If we consider that it takes the primary gold mining industry (on average) 100 times more diesel to produce an ounce of gold than the primary silver mining industry, peak oil will impact the gold mining industry a great deal more than the primary silver mining industry.  Which is why I believe we will see a peak of primary gold production before primary silver production.

However, that doesn’t mean global silver production will peak many years after primary gold production.  Why?  Because 70% of global silver mine supply comes as a by-product of base metal and the gold mining industries.  As global oil production peaks and declines, it will also cause World GDP to fall.  Falling Global GDP means less economic activity… thus less demand for base metals.

We will see less available diesel for the base metal mining industry, or less demand for the metals.  Either way, global peak silver production will be a result of the peak of base metal mining, not primary silver mining.  Matter-a-fact, I actually see growth in the primary silver mining industry for several years after peak oil due to two factors:

1) The relatively small amount of diesel consumed in producing primary silver

2) The skyrocketing price of silver (due to the collapse of fiat money and paper assets) and its positive impact on the primary silver mining industry.

While most analysts continue to push resource stocks as wise investments, there are very few worth owning.  For example, the folks at Stansberry & Associates have been cheerleaders for the U.S. energy industry, and in many cases… the shale energy companies.  I have said from the beginning, Shale Oil & Gas Companies (for the most part) are dogs and will continue to be dogs.  I just read in a recent Stansberry Portfolio Update the following:

….we are closing the XXX (can’t provide energy stock name) position and will no longer cover the stock. We will record a loss of 153% on margin (31% on capital at risk) in our official portfolio.

I don’t want to seem brazen here, but if some of their investors read my articles on energy FOR FREE instead of paying Stansberry & Associations an ARM & LEG for their investment advice, they wouldn’t have lost 153% of their money investing in one hell of a lousy shale energy company stock.

Now, don’t get me wrong, I am not singling out Stansberry & Associates… as we in the precious metal community deserve some blame for underestimating how long the Fed and Central Banks could prop up the markets and drive the paper price of gold and silver much lower.  However, owning most resource stocks that will only go lower in value is different from owning physical precious metals that will only go higher in the future.

Precious metals investors haven’t lost value in their physical gold and silver holdings, unless they are unwise and sell them now.  This is much different from investing into worthless resource stocks that will only continue to lose value going forward.

Okay, if you follow my drift on why primary gold miners will peak before primary silver miners, the Primary Silver Mining Industry may offer a much better investment strategy in a peak oil environment.  Of course, there are no guarantees, but I do see the primary silver mining industry growing for a while, even after the world peaks in global oil production. 

I believe silver will become one of the most sought after physical assets to own in the future as the majority of paper and physical assets lose value.  This will make the primary silver miners’ margins-profits quite handsome… as well as their stock price.  However, if you are going to invest in the primary silver mining “producers” (not explorers), do so with money you can lose.  Make sure you have your nest egg of gold and silver bullion first before you invest some throw-away money in the primary silver miners.

The reasoning here is… if the primary silver mining stock you purchased is either nationalized or shut down for whatever reason in the future, you only gambled money you didn’t need.  This not only allows one to sleep better at night, but it also is a smart way to invest one’s capital.

If you want to get a better understanding of how ENERGY impacts the primary silver mining industry, I would suggest you read the information in my recently released THE SILVER CHART REPORT.  It gives a good background on falling ore grades and yields in the primary silver mining industry as well as how the price of oil impacted the value of silver over the past 100+ years.

PLEASE NOTE:  This report is not just made up of charts.  Each chart has a page of explanation. 

If you haven’t checked out THE SILVER CHART REPORT, there’s a great deal of information on the Silver Industry & Market not found in any single publication on the internet.  There is one chart in this report (Chart #19) that I can guarantee that 99.9% of precious metal investors haven’t seen before.  

SIlver Chart Cover Graphic 3D shadowMost analysts focus on a certain area or sector of the silver market. However, the information in this report illuminates a holistic view of many sectors of the silver industry, capturing the relationships that connect many parts of the market.

One of the important aspects of my work is to look at many industries and markets from a bird’s-eye view.  From this perspective, we can see how industries and markets impact each other to a much larger degree than by just focusing on individual sectors.

 CLICK HERE:   For The Silver Chart Report

I use this bird’s-eye approach when I create my easy to understand charts.  The Silver Chart Report is a collection of my top silver charts from articles published over the past six years, and includes in-depth, never-before-seen charts and content that indicate that silver is on the rise. There are 48 charts in the report, broken down in five sections.

NOTE Anyone who purchased but did not receive the report, please use the contact page to contact me. 

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44 Comments on "PEAK GOLD vs. PEAK SILVER: Must See Chart"

  1. It may happen in 20 years. I need a shorter perspective.

    • eva,

      You need a shorter perspective? LOL. Good one. Believe me you, you won’t have to wait 20 years. However, don’t take my word on it. I just tell folks to stay alive for the next 5 years. We should see it begin in EARNEST by 2020.

      steve

      • Diesel alone is the wrong metric for measuring silver production. There is a lot of manual steps involved! Watch this…
        http://youtu.be/h0n5NPMcd6U

        • Ed,

          While there are many steps in measuring silver production, WITHOUT DIESEL, no silver is mined. This is the point I am trying to get across. It doesn’t matter how many other steps there are involved in mining silver. Without diesel… haul trucks moving ore don’t move.

          steve

  2. Your energy articles are great. I’d say they’re usually too short for me 🙂 I finish reading them willing for more haha

    • I agree! I wish there were more energy articles.

    • Bonifaci,

      You are one of the few. I am glad you enjoy the energy articles. I plan on putting out a report on ENERGY & THE PRECIOUS METALS. It will include data on the EROI- Energy Returned On Invested. What few understand is that the high EROI of oil back in the 1930’s (100/1) allowed the Gold-Silver Ratio to increase significantly as we had thousands of energy slaves in each barrel of oil.

      However, the falling EROI will put more stress on the system, forcing the Gold-Silver Ratio to narrow.

      steve

      • bill tanner | July 30, 2015 at 8:23 pm |

        I read estimates on current gold-silver ratio at 73-1 and “will not hold up much longer.” And that a 5-1 ratio is more realistic. How or who are we to believe?
        Please give us your expectations on this ratio both current and at the 5 years out (2020).
        This would be of great value to this 70 year old. And thank you for all your hard work and caring enough about the little folks like us. I ask that God will watch over and protect you from the Rothschild family, illuminati, banking cartels, and our own U.S. government.

        • You will see 100/1 rather than 10/1 in the next few years.

          • Highly unlikely we will see either.

            The most highly manipulated period of time for gold is now, going back in time towards less manipulated. In the last ten years it hasn’t been 100 to 1 [if it ever has], and silver is more manipulated than gold. When manipulation ends the ratio will move much closer than 70+ to 1.

        • A G to S ratio of 5 to 1 isn’t realistic. S is coming out of the ground approximately 9 to 1 currently. We’ve just seen how much more diesel it takes to mine a comparable quantity of gold.
          Left to open market forces [not the case in well over 100 years] no one can know what the ratio would be. Particularly in an energy starved world that is very different from now, and who knows what form[s] of currency we will have.
          Silver may surprise because it is needed industrially. And not just for industries that produce items that decrease in recession or deflation. It is essential for sanitation and electronics essential to almost every manufactured item that functions.

        • John Galt III | July 31, 2015 at 2:47 pm |

          I would argue that silver is not a monetary metal anymore. Doesn’t mean it won’ t make you money but hear me out.

          Silver is mined, used up and new stuff is mined and used up. In that sense silver is a commodity.

          Gold is unique in the commodity and metals markets. It is mined, bought and never disappears except in a shipwreck or someone who forgot where they buried it.

          An Olympic size swimming pool is 50 long x 25 wide x 3 meters deep. All the gold ever mined will fill just over two of these. 160,000 to 170,000 tons is what I see as the total mined or 5 trillion ounces. That gold can back money at a price Silver can not. 26 000 tons mine a year, used up for the most part and having to be mined again.

          Gold is a certainty to rise when we have the world’s upcoming currency reset and the end of the reserve currency for the dollar. Silver may tag along, but the correct bet in the long run is gold. The world has tried bi-metallic standards and they don’t work.

          So the gold/silver ratio to me is not interesting at all as I prefer a sure thing: gold vs. a possible thing; silver.

          I own some silver, but my big money is in gold.

  3. Hi Steve,

    Do you think it’s a good idea to buy major silver miners now (assuming one has their main position in physical), or after the next major market correction?

    Thanks.

    • Walter,

      Good question. Unfortunately, I don’t have a crystal ball. However, I would say the price of silver is heading closer to a LOW and the broader stock markets have most likely hit their highs. Thus, the silver miners are probably reaching a bottom, even though they could trade lower.

      Best advice anyone can provide is to AVERAGE IN on your buying and don’t try to GET IN AT THE BOTTOM. That being said, we probably have time before the great silver stampede takes place.

      Lastly, better to purchase the PRODUCERS and not the EXPLORERS. I am not saying some explorers are not worth looking at, but I don’t see the majority of these companies becoming commercially viable mines in a peak oil environment. Common sense tells me primary silver mining companies with PROVEN RESERVES are much better bet than a penny stock explorer that has a 5-10% chance of becoming a mine.

      IMPORTANT REMINDER: I am not a professional financial advisor. You must make your own decisions on what and when to buy stocks. I like to SLEEP GOOD AT NIGHT. Which is precisely why I don’t like to give out that sort of advice, even if I was legally able to.

      That being said…. ADDITIONAL NOTE: The Commercial Net Short position in silver is now also reaching a low. This means the bullion banks such as JP Morgan are positioned for a MOVE HIGHER than a MOVE LOWER in the price of silver. Thus, a possible $2-$3+ short-term move in the price of silver will also mean the silver mining stocks will pop. We don’t know if the Commercial Net Short silver position will continue to go a bit lower, but it if someone like to play (gamble) on the miners with a bit of FIAT MONEY, this might be a good short term trade.

      HOWEVER, that is YOUR CALL IN THE END.

      steve

      • Steve: great article. Many good PM analysts have been slow to acknowledge the risk with miners of expropriation/nationalization. I dumped all my mining stocks in 2011 (at a good profit) after I realized that the Rule of Law had been abrogated and the Bill of Rights destroyed, both never again seeing the light of day until the grand reset. Stocks are still paper with oodles of counterparty risk. I easily see the time (coming soon) that all paper assets become relatively worthless, while physical assets still retain value.

      • Thank you for your thoughts Steve, great work as usual and I got your awesome Silver Report and recommend it to everyone!

    • Walter, when energy shortage kicks in, and undermines thw whole iou trillion paper markets in a way that will push the paper price of metals to the ‘moon’; paper trading will be halted. Not only Facebook, but Apple too. And Chevron, GM, trannies, and yes, your favourite junior miner will blow up in your face.

      Pocket change in mining stocks. But that’s just me.

  4. Steve, I appreciate reading all of your work. Some say precious metals are the go-to assets for now until they appreciate to a point, while stocks and real estate fall. Do you foresee a time in which it will be appropriate to move pm holdings into other asset classes, or will peak oil wreck other asset classes in perpetuity? Also, do you ever get into price predictions beyond saying metals will be some of the best performers going forward? Thanks for your insight!

    • Jason,

      I think the latter is more likely, “or will peak oil wreck other asset classes in perpetuity?” We must remember, oil drives the world economies, while electricity powers it. No amount of Solar or Wind will offset the declines coming from peak oil. Also, the notion that we will switch to NatGas to power the interstate commercial trucking fleet is pure nonsense. Why? We will likely see peak U.S. NatGas production shortly.

      I have spent a great deal of time trying to figure out what assets will be winners or at least hold up while everything else takes an ENEMA.. and I can’t find many. Some real estate close to rural farm property or in small down-towns may actually do well, but most will be horrible SUNK CAPITAL never to be sold. This is why I am amazed at the stupidity of the Wealthy to continue to purchase real estate.

      As U.S. infrastructure continues to rot, we will resemble the collapse of the Roman Empire. The Roman Empire once had wonderful roads stretching to all corners of their empire. However, many years after the collapse of the empire, many had to travel by sea as the roads fell into disrepair and were taken over by thieves and muggers.

      Now, that may be some time down the road, but it will happen. In any event, the best thing to own are STORES OF ECONOMIC ENERGY and not ENERGY IOUS (most paper assets) or ENERGY DRAINS (most physical assets). I see a time when an individual holding precious metals can purchase a relatively new car or truck for 25-50 silver coins. Cars will be so cheap when the COLLAPSE arrives.

      steve

      • A relatively new car or truck would be what? $15,000 ? 20,000? 30,000? At $20,000 (today dollars I’m talking about) 50 ounces mean $400 per ounce (or $800 per ounce if it was 25 ounces). So the question is: What stage of the collapse are you talking about? Initial stages? Or once the collapse has finished?

        Thanks

  5. Or … they could “bootstrap” their energy situation by investing some of that silver into solar energy facilities to run operations, and/or sell the electricity to offset diesel costs.

    • Chaplain Dave,

      While that is an interesting solution, Solar doesn’t scale or work in the way diesel liquid fuel does. Solar or battery technology just can’t run these huge Earth Moving Machines. This is the problem with Solar and Wind. They just can’t scale economically to the level we need them.

      If they did, we would have transitioned to Solar or Wind sooner. Unfortunately, HIGH TECH costs a lot of energy. Solar and Wind are nothing more than Oil-Gas-Coal Derivatives.

      steve

  6. Steve,

    One of your best ever posts. Focusing on critical issues, with a concise conclusion.

    Thank you.

    SteveW

  7. “My energy articles receive a tenth of the readership compared to some of my more popular precious metal articles. And this is quite a shame, because ENERGY IS THE KEY to understanding how the world collapses or evolves going forward.”

    I do like the energy articles and have learned a lot due to your research. However, you are unique in discussing the concepts surrounding EROI and this is the only site I see that gives it any attention. Gold & silver are topics most know of, but clearly don’t appreciate or understand at all. It still hasn’t sunk in my head completely, but I’m getting there. Many have heard about the idea of peak oil and being energy independent, but in the context of EROI it just doesn’t get discussed.

    I agree this a crucial topic and a message that bears repeating. My guess is that this matter is not in the interest of MSM or anywhere else to discuss since it reveals how fragile the whole financial system is. Just like suppression of PM’s helps support investment in the fiat system so folks won’t rush to the exits and buy real money that history shows will preserve their wealth. This article confirms those points and as we get closer to the reality of our global mess more will wake up and provide extra “eyeballs” for this informative site.

  8. Some of your best work, here, and thank you. I like the (car for twenty or so coins) I’ve been thinking along these lines. Imagine sliding a guy a monster box for his second home on a beach somewhere he no longer wants,needs or can handle anymore. But then I thought, much like Golum of the rings, it’s precious. So i think silver will be the medium for trade and purchases, but no one will want to part with their ace in the hole, their gold. Believing it to be the ultimate safe guard, the get out of this mess card, what would a guy be willing to get off it for. 20 head of cattle, 40 acres of crops, 10,000 gallons of fuel, what would be enough? I don’t know, but I think we will all find out sooner than later.

  9. Steve, thanks for all your work. I am writing to mention that I believe it is useful to consider the ratio of the value of the fuel consumed in production and the value of the metal. Using $15/oz for silver and $1100/oz for gold, and $3.50 per gallon for diesel, using your energy intensity or embodiment numbers I get 6.62% and 4.67% for gold and silver, respectively. Your data demonstrates (quite obviously) that gold production is more diesel intensive (consumption wise) than silver but without including the price of each commodity, it’s not clear how relevant the difference is. The next step is to compare the two ratios (percentages). The ratio between the two is 1.42. So, in terms of value of the asset (gold or silver) gold is 1.42 times energy intensive than silver. In real physical terms it’s of course well over that (104 times). Put another way, we need to consider the fact that while more diesel is necessary to produce gold, the value of the gold produced is also higher.

    The reason I am bringing this up is that I think it is important to understand that in terms of the value of the metals, the energy used is somewhat irrelevant. I know this contradicts one of your primary tenets – consideration of pm value as an embodiment of energy – but the bottom line is that the value of the energy involved is only a fraction of the value of the metal. You could DOUBLE the fuel cost and you’d still be at relatively low numbers.

    You are absolutely correct (in my opinion) about peak oil being upon us and peak ng shortly to follow. But as you know, this doesn’t translate into the end of oil or gas. It just translates into the end of cheap oil (derivatives) and natural gas. This translates into shifts in HOW those fuels are used. For example, $20/gallon gasoline will not mean the end of the use of chain saws for cutting firewood (I am in Oregon, so this is close at hand) but it will mean the end of using my ’89 Suburban for pleasure trips. Likewise, increases in the cost of diesel will simply cut into the profit of the producers in the long run. Note I am assuming that the long run includes a producers’ surplus, clearly not the case for silver at this point (as your work has shown since the paper price is below the cost of production and thus there is no producers’ surplus for silver at this time.

    What I think it comes down to is that the primary long term drivers of the price of precious metals will be demand, and scarcity of the raw resource. If the demand at specific prices is not there, it doesn’t matter what it costs to produce the metal or whether it is abundant or not. If demand exists at some specific price, scarcity and cost of production then matter.

    I know this is a bit sloppy – it’s been a long day. I am just trying to make the point that in my opinion what ultimately matters in all of this is the demand for the metals themselves and then their scarcity.

    This is why I hold silver rather than gold. As anyone reading this knows, its uses are multitudinous and there isn’t all that much left (USGS estimates about 530,000 tons left http://minerals.usgs.gov/minerals/pubs/commodity/silver/mcs-2015-silve.pdf) At their estimates of current production that’s about 20 years’ worth.

    Again thanks for the work. Feel free to poke holes in my discussion. I may have missed something, and like I said, it’s been a long day….

  10. p.s. I was using the term producers’ surplus in the orthodox economical sense: “the amount that producers benefit by selling at a market price that is higher than the least that they would be willing to sell for; this is roughly equal to profit (since producers are not normally willing to sell at a loss, and are normally indifferent to selling at a breakeven price).”

  11. The whole premise of this argument lies on the higher oil prices. The issue predicting the future is a tricky business. Kyle Bass has been talking about a Japanese crash for 2 years, John Mauldin Even more. Malthus speculated a food crisis in the 1700s. Meaning, that one important variable, the price of energy will determine the price of silver, in the next decade. Beyond that supply and demand, will also play a role.

    What I have been trying to figure out is a correct way to hedge the silver trade. So if the assumption is that energy prices will skyrocket or energy sources will not be avialble, then reverse it and see what other instruments will go up in prices, this could give against a non performing silver price.

    I am mulling on some potential ideas, but looking forward to some of yours!

    Might be of interest :

    http://www.wsj.com/articles/why-peak-oil-predictions-haven-t-come-true-1411937788
    http://www.wsj.com/articles/fossil-fuels-will-save-the-world-really-1426282420

  12. I thought everybody calculated energy in there price estimate for everything ! All comeback to energy, in the mining business it is more important that’s why the gold miners had less profit then expected after gold price gone up 5 or 6 times since year 2000. In the gold mining it is even more important because you will pay energy price for hauling waste rock. Like you said labour is also energy and in middle of 2000 the labour energy was not easy available and the price of that energy rise too if you could find it, and if you did find it the quality of that energy was low and did not produce as expected.
    Why not more people think this way or why they are less interested bets me.

  13. monte rosa | July 31, 2015 at 5:14 am |

    “However, if you are going to invest in the primary silver mining “producers” (not explorers), do so with money you can lose”

    well….. we try to squeeze something off financial world for the purpose we not rich and we chase to be one at some stage, so usually we risking money we rather don’t want to lose, we survivie without but last thing is loosing this money any way, am i right?

  14. Silvrwillwin | July 31, 2015 at 5:14 am |

    Steve,

    Your research and approach regarding where we’ve come from to where we’re going is admirable. There is no one out there that I know of who has focused on this as in the manner that you have . In short order your work should deliver an important insight for many to have a better focus as opposed to the talking heads which are just reaching for repetitive theories or belching out angry words in order to try and prove their points.

    2010 feels like yesterday…2020 will come pretty quick. Especially with so many things going on in the economic spheres.

    When I used the examples of out houses and fishing poles in your last subject blog I wasn’t kidding ! If we as a world do in fact run out of the number one driver to carry out mechanical precision then these two very basics along with many more will once again become a mainstay in many a peoples lives.

    Thank you for your keen insight which will help to make meaningful proactive decisions and actions become reality in this readers life.

  15. Hi, anyone knows the cost of 20.8 gallon of oil at today’s price?

  16. Hi Steve

    Good information again and I have decided to stick with just physical silver although I was originally thinking of buying some producers. I think the physical metal is just a no-brainer with no counter party risks.

    I recently heard Andy Hoffman briefly mention the miners possibly becoming nationalized in the future and I thought that was crazy and now I read in your article about the same concern with the miners in the future.

    Is there an executive order to take over the miners in case of a financial collapse or something? Or is it based on just how governments act when they are desperate in a financial collapse?

  17. I am almost finished reading your paid silver report. It is well written, like your articles. After a while, I had to take a break to digest and think about the contents. So many ideas and perspectives I hadn’t thought about. For instance, I didn’t know much about the specific mines. Know I do, and understand more of the bigger picture.

    Looking forward to more EROI-articles and the upcoming report.

    -Paul
    Norway

  18. 70% of global silver mine supply comes as a by-product of base metal and the gold mining industries. So regardless of diesel output, as precious metals prices and production falls silver as a by-product could start to dry up soon, leading to a much sharper slowdown in silver output. Higher diesel price should also exacerbate the production crunch.

    http://www.kitco.com/news/2015-07-31/Silver-Supply-Crunch-To-Push-Prices-Higher-Capital-Economics.html

  19. One other thing. I saw on Bloomberg that Peru mining was hit hard when the last big El-Nino hit in 97-98.

  20. Steve, do you know why it takes so much more diesel to extract an ounce of gold? Is gold mined at a much deeper below the surface on average? Is it mined in a fundamentally different and much more difficult way? Does it take much more energy to separate gold from mined material than it takes to separate silver?

    And are those two companies representative of gold and silver miners respectively?

  21. Save_America1st | July 31, 2015 at 3:17 pm |

    Steve…just curious what you think or know from any possible research you may have done already…

    But is the whole Gull Island deal that Lindsey Williams talks about a total myth? Or is there actually a decent sized deposit of oil there?

  22. Yes, I heard that FART IN CHURCH, aka, I read the article. Interesting take. As energy production cycle turns, mining companies will feel the heat. Chris Martenson has been banging the barrels on Peak energy for a while now.

  23. Steve,

    Thanks for all your great work.

    I’d like to say that I agree with virtually every point you make. I believe that you would never lead us astray on anything on purpose.

    I believe that this report is based upon the facts as they have been given you, but I just wanted to make one comment. Please don’t take this as a complaint.

    I can follow your analysis and I have been reading your blog for quite some time. But I have a hard time wrapping my head around the idea that it takes 100 times more diesel to produce gold than it does to produce silver. I could believe 20 times, maybe 30, but not 100.

    Maybe I’m missing something here. Of course I have no where near the insight that you do. I just believe that someone gave you some wrong info.

    I don’t recall the exact figures, but doesn’t it still take the digging and processing of about half a ton of rock to produce an ounce of silver? How can one dig and process 1000 lbs. of rock for 1/5 of a gallon of diesel? I can’t see it. Also I can’t believe it would only take 80 cents of diesel to produce $15 worth of silver.

    Maybe I’m wrong, and like I said, maybe I am missing something.

    I recall an article in the past saying that 30% of one silver company’s costs was just diesel.

    The production of gold and silver is not identical, but it just seems to me that it is close enough not to warrant a 100-fold difference in diesel consumption. I know that there are different types of energy inputs, but still I can’t see a difference of this magnitude.

    Perhaps you could do an article on this subject.

    I remain your humble student 🙂

    Rob

  24. Great information…nice analysis….I’ve known that diesel was an important major expense in mining PM’s,
    but I didn’t have any access to thenumbers. Thanks.

    Some folks say copper will hit 1.50 1.25 from here in the coming world market collapse, so I imagine that silver and gold auxillary production as a by-product of Cu will diminish along with cut back in copper mining.

  25. Thank you Steve for crunching the numbers.

    Discounting China, world gold mining peaked in 2000. In traditional gold mining countries like the US, Peru or South Africa, mined volumes have been falling around 10% per year (higher ore grades are gone). I have the impression that mining increases the past decade in countries like China or Russia were not supported by prices, i.e. mining in these countries is, and has been, largely uneconomical. While it is tempting to call a world gold peak in 2015, in fact this is a market that does not operate in the same way markets for other resources work.

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