Even though 2013 was a great year for physical precious metal demand due to manipulated lower paper prices, the top silver mining companies suffered a decline in overall production compared to 2012. Of the top six companies, the largest four stated declines, while the two smaller producers increased mine supply slightly.
The largest silver producer in the world, KGHM Polska Miedz saw its mine supply fall the most by 3.7 million oz (9%), from 41 mil oz in 2012 to 37.3 mil oz in 2013. Furthermore, BHP Billiton’s silver production fell from 39 mil oz in 2012 to 37.5 mil oz in 2013, while Fresnillo’s production declined from 36.9 mil oz in 2013 to 34.5 mil oz in 2013.
The chart below shows the change in production year-over-year from the top silver mining companies:
Production grew from the two smallest companies in the group. Polymetal increased its silver production (+0.7 mil oz) from 26.5 mil oz in 2012 to 27.2 mil oz in 2013 and Pan American Silver added nearly a million oz.
Overall silver production from the group in 2013 declined 6.2 million oz (3%), from 199 mil oz in 2012 to 192.8 mil oz in 2013.
Top 6 Silver Production Figures
KGHM = (2012/ 41 mil oz) (2013/ 37.5 mil oz)
BHP Billiton = (2012/ 39 mil oz) (2013/ 37.5 mil oz)
Fresnillo = (2012/ 36.9 mil oz) (2013/ 34.5 mil oz)
GoldCorp = (2012/ 30.5 mil oz)(2013/ 30.3 mil oz)
Polymetal = (2012/ 26.5 mil oz) (2013/ 27.2 mil oz)
Pan American (2012/ 25.1 mil oz) (2013/ 26 mil oz)
Smaller Primary Silver Miners Production Increased In 2013
As the larger silver mining companies struggled with maintaining production in 2013, the smaller seven primary miners actually increased their total mine supply 6 million oz.
Looking at the chart below, we can see that the majority of growth in silver production came from First Majestic, Hecla and Endeavour Silver. Each company added 2.3 million oz of production over the year before.
Silver production from Coeur fell 1 million oz, Silver Standard dropped 400,000 oz and SilverCrop declined 300,000 oz. Overall production from the group increased 6 million oz from 54.3 mil oz in 2012 to 60.3 mil oz in 2013.
7 Primary Silver Miners Production
Coeur = (2012/ 18 mil oz) (2013/ 17 mil oz)
First Majestic = (2012/ 8.3 mil oz) (2013/ 10.6 mil oz)
Hecla = (2012/ 6.4 mil oz) (2013/ 8.9 mil oz)
Silver Standard = (2012/8.6 mil oz) (2013/ 8.2 mil oz)
Fortuna = (2012/ 4.0 mil oz) (2013/ 4.6 mil oz)
SilverCorp = (2012/ 4.5 mil oz) (2013/ 4.2 mil oz)
(Note: Pan American Silver is classified as a primary silver producer, but it was included in the top 6 category along with Fresnillo — another primary silver miner)
What a difference between these two groups. The largest 6 companies silver production declined 3% year-over-year, while the 7 primary silver miners increased 11%. Even with the large increase coming from the primary silver miners, total production from these two groups declined slightly in 2013:
Total Production From Both Groups
Top 6 Companies = (2012/ 199 mil oz) (2013/ 192.8 mil oz)
7 Primary Miners = (2012/ 54.3 mil oz) (2013/ 60.3 mil oz)
2012 Grand Total = 253.3 mil oz
2013 Grand Total = 253.1 mil oz
Thomson Reuters GFMS released a Silver Market Update (Nov, 2013) for the Silver Institute including estimated mine supply for 2013. GFMS forecasts world silver production to increase 27 million oz to a new record of 814 million oz in 2013.
The 2014 World Silver Survey will be out in April and it will be interesting to see if global silver production actually increased 27 million oz in 2013. According to the data provided above, the two silver mining groups combined silver production was flat in 2013 compared to 2012.
Furthermore, I took a look at some of the other large silver producers and found that their production was either flat or declined slightly.
Buenaventura = (2012/ 17.3 mil oz) (2013/ 16.3 mil oz)
Hochschild Mining = (2012/ 13.6 mil oz) (2013/ 13.6 mil oz)
Southern Copper = (2012/ 13.6 mil oz) (2013/ 13.5 mil oz)
World silver production will continue to increase for the next several years, however I believe we will see a peak and decline in production soon afterwards.
Forecasting future silver production will become increasingly difficult as the world enters into a future in which it experiences a decline in global oil production. That being said, peak silver will more than likely occur first in the base metal by-product industry.
By-product silver production accounted for 72% of the total global mine supply in 2013 (according to the 2013 World Silver Survey). Here is the breakdown:
2012 World Silver Production Breakdown:
Primary = 28%
Lead & Zinc = 39%
Copper = 20%
Gold = 13%
The market does not realize that when Global Oil Production declines, so will the demand for base metals. Energy is the driver of the economy. So, with less energy, means less growth…. and less growth equals less demand.
So if there is less demand for base metals and other commodities in the future… then why would gold and silver benefit? It comes down to my premise that as the world’s oil supply contracts…. so will the value of most paper and physical assets.
This will force investors to flee increasingly worthless paper assets (and many physical ones) for safe havens such as gold and silver.
I will be covering this in great detail in my upcoming report… THE U.S. & GLOBAL COLLAPSE REPORT.
I truly believe the majority of investors are not prepared for the changes coming.
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