Top Silver Supply Figures & Forecasts Are Incorrect

I am a bit surprised at the forecasts and data coming out by the leading agencies and institutions on silver mine supply.  According to my research, the USGS understated U.S. silver mine supply while Thomson Reuters GFMS over-estimated global silver production for 2013.

Let’s take a look at U.S. silver production first.  If we look at the table below recently released by the USGS, domestic mine supply fell compared to the same period last year.

USGS Nov 2013 Silver Production

Total production for 2012 was 1060 metric tons (mt).  If we subtract out December’s production (101 mt) we would get a total of 959 mt for Jan-Nov 2012…. 3 metric tons more than the same period this year.  Furthermore, if production for December is 84 mt, then total production for 2013 will be 20 mt less at 1040 mt (2012 = 1060 mt).

These figures are according to the USGS data.  However, if we go by figures released by the public companies in their quarterly and annual reports, we see a much different picture.  Here are the production figures for the top 7 silver mines in the United States:

Top U.S. Silver Mine Production 2012 & 2013 NEW

(*Red Dog estimated production)

Hecla’s Greens Creek mine in Alaska increased production from 6.3 million oz in 2012 to 7.4 million in 2013.  The second largest supply of silver in the U.S. comes from the world’s largest Zinc producer called the Red Dog mine in Alaska.  Teck who runs the Red Dog mine doesn’t release silver production figures, so both the USGS and GFMS need to estimate production.

Because zinc and lead production at Red Dog increased 4-6% in 2013, I estimate silver production at 6.1 million oz (conservative, it could be higher).  Also, even with the huge landslide at Rio Tinto’s Kennecott Copper mine last year, silver production increased from 2 million oz in 2012 to 2.8 million oz in 2013.

I realize production growth from Kennecott in 2013 may not seem realistic, especially to the conspiracy theorists, but copper and gold production also increased at the mine.  The folks at Kennecott just did a great job working around a complete mess.

Production from Coeur’s Rochester mine in Nevada remained flat y.o.y., but U.S. Silver’s Galena mine suffered a decline of 150,000 oz.

Hecla’s Lucky Friday mine came back online in 2013 adding 1.4 million oz, while Revett Minerals shut down their Troy mine in Montana at the end of 2012, removing 1 million oz from the total domestic mine supply.

So, the net change in production from all these mines was an increase of 2.4 million oz.  If we subtract Rochester’s production from the group, because it’s in Nevada, the total increase of silver production from the category labeled “The Other States”, was still an increase of 2.4 million oz.

Converting 2.4 million oz into metric tons, we get nearly 75 mt.  So, how did U.S. production decline (according to the USGS) if the top U.S. Silver mines show a net increase of 75 mt? 

If we look at the USGS chart above, the losses originate from the “Other States” group.  Currently the Jan-Nov total is 726 mt.  If we add an estimated 61 mt for December, total production from the other states would reach 787, or 18 metric tons less than the 805 mt figure in 2012.

You will notice that Nevada’s silver production will be nearly the same as it was in 2012 (250 mt), when we add a forecasted 19+ mt for December.  Again, how did the USGS report a decline in U.S. silver production from the “Other States” when the company data shows a growth of 75 metric?

The only area where silver production could fall in the U.S. would be from by-product copper production coming mainly from Arizona.  However, copper production in the U.S. is up 5% compared to last year.  I doubt by-product silver production from copper mines declined in 2013.

I believe U.S. Silver production in 2013 was actually higher by 2-3 million oz.

GFMS Forecasts For 2013 Global Silver Production Are Incorrect

This brings me to the Silver Market Update put out by GFMS in Nov, 2013.  GFMS estimates silver production to increase 27 million in 2013.   Here is a slide from their presentation:

GFMS Mine Winners & Losers 2013

In this chart GFMS shows the biggest winners and losers.  They report that the U.S. adding about 6 million oz, Mexico 4 million, and the Dominican Republic a little more than 3 mil oz.  Furthermore, there was an increase coming from Tahoe’s Escobal mine in Guatemala, starting commercial production Q4 2013.

Escobal will become a big player with forecasted silver production in 2014 of 18-20 million oz.  Unfortunately for Tahoe Resources, the locals are not too happy with their Escobal mine.  There have been murders and killings on both sides of the protest.

This is by no means a small matter by a few disenfranchised locals:

Tens of Thousands Oppose Tahoe Resource’s Escobal Project in Guatemala

(Guatemala City/Ottawa) Contrary to Tahoe Resources’ recent claims, tens of thousands of people oppose its Escobal project in southeastern Guatemala. Repression and violence have been the outcome of company and government efforts to install the project without social support. A recent high-court decision in Guatemala reinforces the legitimacy and importance of local decision-making processes.

More than half of the communities in the municipality of San Rafael las Flores, where the Escobal project is located, have declared opposition to the mine. In five neighbouring municipalities, in the departments of Santa Rosa and Jalapa, a majority have voted against the mine in municipal referenda, in which tens of thousands of people participated. The most recent vote took place on November 10th in the municipality of Jalapa, department of Jalapa. Over 23,000 people participated with 98.3% voting against mining and 1.7% in favour.

This is a perfect example of what Jim Sinclair states “As the wrong way to go about starting up a mining project in a foreign country.”  Jim believes you must have the support of the locals, or the project will be doomed for failure.

And it didn’t help Tahoe Resources PR one bit when their contracted head of security, Alberto Rotondo gave direct orders to assassinate members of the community of San Rafael Las Flores.

Tahoe Resources executive in Guatemala orders killing of protestors

“The preliminary investigations found that Rotondo gave the order to attack the community, he also ordered the crime scene to be cleaned up and change the police report.”

The information reveals Rotondo making several statements: “God dam dogs, they do not understand that the mine generates jobs”. “We must eliminate these animals’ pieces of shit”. “We can not allow people to establish resistance, another Puya no”. “Kill house sons of Bitches”

Rotondo was apprehended at the airport La Aurora, when he trying to flee the country. Wire tapping of conversations between him and his son reveal that he planned to leave Guatemala for a while, because “I ordered to kill some of these sons of Bitches.”

I’ve known about the problems with the Escobal mine for quite some time, but it just seemed like a good time to share this news with my readers.

Getting back to the subject at hand, GFMS shows that Poland will suffer the biggest decline at 6 million oz.  I looked at KGHM Polska Miedz’s Q4 2013 report and they show a decline of 4 million oz… so GFMS was close on this call.

Here are the figures from the data I collected:

MEXICO (2012= 170 mil oz) (2013 = 169.5 mil oz)…. FLAT

PERU (2012 = 112 mil oz) (2013 = 118 mil oz) … UP 8 mil oz

AUSTRALIA  (2012 = 57 mil oz)(2013 = 54 mil oz)… DOWN 3 mil oz

POLAND (2012 = 41 million oz)(2013 = 37 mil oz)…  DOWN 4 mil oz

U.S. (2012 = 32.6 mil oz)(2013 = 35 mil oz)… UP 2.5 mil oz

CANADA (2012 = 21.3 mill oz)(2013 = 20.3 mil oz) DOWN 1 mil oz

The net change in production from these top countries is an increase of 2.5 million oz.  I believe GFMS overstated the U.S. and Mexico’s production while over-estimating the decline in Poland.  I did not include Russia, China, Bolivia or Chile in the top group because I don’t have estimates on their production for 2013.

Mexico April 2013 Production

Early in 2013, Mexico’s silver production was down 10%, however several mines ramped up production during the second half of the year bringing overall production to the same level as 2012.  This table comes from Mexico’s INEGI website showing April 2013 production figures down 10%.  Silver is Plata in Spanish.

If we assume that production grew moderately in China and slightly in Russia, Bolivia and Chile, I don’t see production increasing 27 million oz in 2013, forecasted by GFMS.  I estimate global silver production growth in 2013 will be closer to 15-18 million oz.

Thus, total production for 2013 will likely be a little more than 800 million oz.  GFMS 2013 World Silver Survey reported production in 2012 at 787 million oz.  Adding 15-18 million oz to that figure we would get 802-805 million oz.

I do realize GFMS had partial data when they released their silver production forecast in Nov, 2013.  However, I’m surprised that they listed the U.S. as the largest winner over Peru.  It will be interesting to see what GFMS reports as their total silver production in 2013 when they release the 2014 World Silver Survey in May.

Global Silver Production May Increase 30+ Million Oz In 2014

We may see an increase of 30+ million oz of silver production in 2014.  This will come from increased production from Tahoe Resources Escobal mine (18-20 mil oz), ramp up of several mines in Mexico, and Peruvian miner Volcan adding two new projects at 6 million oz.

Some may see this as a bearish indicator for the price of silver.  I don’t.  Again, I look at the price and value of silver on a long-term basis.  Even if the world produced 900 million oz of silver… at $25 this would be $22.5 billion.  That amount is peanuts compared to the liquidity being thrown around by Fed and Central Banks.

Furthermore, the world still hasn’t realized that the supposed wealth held in paper assets are in fact LIABILITIES.  Paper assets derive their value from a growing economy.  Unfortunately, the world is peaking in global oil production irregardless of the Great Shale Energy Hype.  As global oil production declines on top of falling net oil exports, the value of most paper assets will implode.

Final Word On Peak Silver

A few years ago, I wrote two articles on Peak Silver.  I stated that global silver production would decline shortly after global oil production peaked.  I still hold to that forecast.  In the article, I said there was a chance if the global economy did not rebound in 2009, then 2008 could be the year global silver production peaks.

I based this forecast from what took place during the 1930’s depression.  The chart below shows how U.S. & global silver production declined during the depths of the depression.

Depression Era Silver Production

Due to the tens of $trillions of liquidity the Fed and Central Banks threw into the financial markets, the 2009 Global Depression was averted.  This allowed BAU- Business As Usual to continue in the world and mining sector.

If the financial system collapsed along with the broader markets, I truly believe global silver production would have fallen considerably in the years following 2009.  Furthermore, easy money and low-interest rates allowed the world to extract and consume expensive low EROI oil that it really could not afford.

The end of this decade will be nothing like the beginning.  The Financial Industry will come under the weight of peak oil.  Paper assets will lose value and investors will be forced to move into physical assets to protect their wealth.

Gold and Silver will offer a WAY OUT to the PAPER PONZI SCHEME.  Unfortunately, only a few will see the light before it’s too late.

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22 Comments on "Top Silver Supply Figures & Forecasts Are Incorrect"

  1. The silver supply from China is usually from zinc and lead production. However, China has been mining lead and zinc very aggressively since 2009. I’m not sure how long China can keep this pace. If China’s zinc and lead production goes down, the silver supply from this country will also be affected.

  2. Steve, what do you mean by “Furthermore, easy money and low-interest rates allowed the world to extract and consume expensive low EROI oil that it really could not afford.”
    How does easy money allow the world to produce expensive low EROI oil? Can you elaborate a bit? Many thanks.

    • Adolf,

      By the FED backstopping the Global Financial Markets with Tens of $trillions of currency swaps since 2009 including MBS and Treasury purchases, two things have occurred:

      1) Interest Rates were set artificially low
      2) The Global Financial System & Economy continued to survive when it should have collapsed

      Artificially low interest rates continue to keep the Shale Gas Industry Alive. The overwhelming majority of Shale Gas companies such as Chesapeake are saddled with debt. Chesapeake has holds $23 billion in debt. The only way they can afford financing their debt is by low interest rates… courtesy of the Fed. When rates ultimately rise… so will the likelihood of bankruptcy in these shale gas companies

      Furthermore, the Shale Gas Industry only has two options to keep its shareholders happy, increasing production or adding reserves… two things that are becoming increasingly difficult. If production or reserve growth goes the other way (which is the likely future trend), then we will have Bear Stearns & Lehman Brothers taking place in the Shale Gas Industry.

      The Oil Majors are getting out of Shale Energy, because there is no real profit to be made.

      The only reason Shale Oil is being extracted (Bakken & Eagle Ford) is due to the higher price and not the technology. The technology was designed in the 1950’s, but the higher price made it economical to produce.

      The huge increase in debt and derivatives since 2005 and especially after 2007, was to offset in a large part Peak Oil and the Falling EROI. We don’t have a sustainable economy in the United States. So, the printing of digits, derivatives and increased debt allowed Americans to purchase expensive energy that they would not have been able to afford if we had something resembling a free market.

      steve

      • Interest rates are low so that government debt can be rolled over. The IMF shills don’t have a big finale, they just pray that this zero-interest thing work. And so far it does.

        However, since no sane person or corporation would actually buy the rolled-over gov. debt, central banks are resorting to creating the credit which is then used to buy said debt.

        This has nothing to do with personal or corporate debt. Personal and corporate loans are falling, the velocity of real money is falling, nobody is buying anything unless it is absolutely necessary. This is also the reason why commodity prices are lower today than they were a few years ago when everyone was afraid of retail price inflation.

        The only real problem today is geopolitical. Russia and China are no longer willing to be under the boot of the US global military powers. So, they are doing everything in their might to transform the dollar reserve system into something else, something that will probably include gold as well. However, they must be nimble unless they want the US to strike up a WW3 ending in a Cold War 2.0.

        In other words, should the dollar reset agenda fail, you can forget about high gold prices. Should it succeed, then the gold bugs will have a win. Simple as that. You can forget the rest because it is non-consequential in the grand scheme of things.

        • “…should the dollar reset agenda fail, you can forget about high gold prices. ”

          So elaborate, what kind of system do you envision in this case since its mathematically impossible for the current monetary system to continue more than another debt cycle or so.

          • The closest thing I can think of is a total police state with extraordinarily high taxation of everyone but the most well-connected, no individual freedoms only privileges, heavily armed police on every street corner, a heavily censored internet, etc… The closest parallel would be the McCarthy era for the West or the 1950s political processes for the East.

            At this point there are two alternatives and nobody really knows which one will play out. Everyone except for the biggest warmongers in DC could probably live without the US being the sole military superpower. But the warmongers are the ones who have their fingers on the button. So it is a delicate situation.

            The people at the top are really not that interested in the price of gold, not even in China. They are interested in not losing the value of their dollar investments, their gold buying is a hedging strategy which has nothing to do with the price of gold in your neighborhood store.

            They are hedging exactly because of the maths you mention but these things usually take decades to play out. Just because the king dollar premise is mathematically not workable it doesn’t mean it cannot live on for 20-30 more years.

  3. Steve,

    I recently came across a communication by an amateur silver bug stating a super-majority of the world’s entire silver resources have already been mined. As a [former] geologist I find it sad when someone states that 98% of the world’s entire silver has already been mined [not counting what is under the oceans of course].

    Does anyone have any credible estimate of how much of the world’s “original supply” has been mined already? Sure the low-hanging fruit of primary shallow silver has been picked.

  4. For crying out loud, how long are we going to hear these absolutely preposterous and rudimentary forecasts for silver and gold? O lord, how long? How long?

    Jesus, the silver trade is dead. Totally dead. Get it yet? In the bible, silver becomes so worthless that people are throwing it into the streets……

    Look, all the idiotic silver bugs are just that: idiots. Really really dumb idiots. Any time you see a price target, throw that and the analysis away. Right away. Because silver bulls are retards. No good analyst worth his salt would ever put out price targets like “silver at 50 by year end.”

    Imagine if Buffett said he though Berkshire would be selling at 300,000 by year end? What a tool he’d be right? He never says such idiotic stuff.

    so throw Sprott, Turk, Maloney, etc. in the trash can. They are fools. Plain and simple. And ask yourself this: who benefits no matter what the prices do? Oh……that is right:

    Maloney still gets his absurb mark-ups.
    Sprott still gets his ridiculous management fees.
    And Turk sill gets his.

    These guys are nothing more than conflicted money making dirt bags. That is all anyone in this space seems to be.

    So sad. Pathetic. Dirtbags.

    Buy a railroad company if you want a hard asset. It’ll still be producing massive amounts of cash in 10, 20 or 100 years from now. Oh…..and sure, the cash becomes worthless. Then they will be generating massive amounts of silver or gold or dirt or whatever. But one thing will be certain: a railroad will outperform gold and silver over time no matter what happens.

    Same is true of 100s of productive businesses. Gold and silver are for fear-mongering people hating suckers. It’s really just that simple.

    • You make a good point [one]:

      “Any time you see a price target, throw that and the analysis away. Right away. No good analyst worth his salt would ever put out price targets like “silver at 50 by year end.”

      I thing the rest of what you say is wrong and/or worthless.

    • Jack (or whoever you are), please continue to do what you do!

      I’m sure you’re well aware that the majority of people in this country are total morons and are easily manipulated, like puppets on a string. The majority of people are not trained to think for themselves and just follow the herd mentality.

      But not me, Sir!

      Sir, the people like you are the ones that allow me to acquire god’s money at these ridiculous price levels!

      Keep up the good work!

  5. I just don’t get it. We have currently a silver price that is supposedly at or below mining cost and we have an increase in mine supply. That doesn’t make any sense to me unless mining cost is not nearly as high for most miners. If silver supply is growing at these price levels what do you suggest will happen if the price goes back to 50 US$ the oz? So that makes me go hmmm…

    • “I just don’t get it. We have currently a silver price that is supposedly at or below mining cost and we have an increase in mine supply”.

      Not below cost for a long time or the operation[s] shut down.

      You haven’t gotten a key distinction:

      The cost of mining/refining is much lower in Mexico Peru, etc. where they have low labor costs, less or no unions to contend with, and very little over-the-top costs of compliance with
      excessive government regulations. The include but are not limited to EPA. OSHA, and Obamacare.

      When silver goes to $50 per ounce chances are likely the energy to mine & refine will be much higher also.

  6. Greetings from Germany

    Correct Jack.How long we listen to this story?Always we hear the ground is found.
    The ralley starts next week.If somebody make silverinvestment in 2008 he loose money.
    Éven when stocks are falling, EM doesn’t go up.In ukraine a war stands at the door.The save haven
    silver and Gold is falling again.What must happen that silver and Gold go up?The 3 worldwar?

    • My recommendation would be for you to go to an equities of other investment vehicle of your choice where you can join the fan base; learn and contribute there.

      Criticisms based on abject ignorance or bias accomplish nothing for the commenter or those who are trying to learn or contribute here.

      In case the last detractor-commentators have missed it this is not an author who makes future price predictions like “$50 by years’ end”

  7. EVERYONE,

    The problem today in a nutshell is that the Fiat Monetary Authorities have to keep the fake money system alive at all costs. The precious metal community doesn’t realize just how bad things will become if we did have a collapse of the fiat monetary system. We could head into a new DARK AGE.

    So, to keep everyone focused on the Dollar, gold and silver have to be trashed. It’s that simple. In order to kill INVESTMENT DEMAND… price had to be clobbered. Knocking too low however, brings in more savvy buyers, but the public only buys when prices go up.

    Again, to keep the public out of the gold and silver market, the Financial Institutions put out bearish commentary and the Central Banks print money and control the price of the precious metals.

    Unfortunately for the Central Banks… a Ponzi Scheme can’t last forever… and forever is almost here.

    steve

  8. “The precious metal community doesn’t realize just how bad things will become if we did have a collapse of the fiat monetary system”.

    If the precious metals community doesn’t realize how bad things can become imagine the oblivious general public’s surprise. Not everyone but most.

    *They think, and I actually heard a so-called energy expert on a nationally syndicated talk show say, there was enough fossil fuels for a thousand years.

    *They think the dollar is unassailable.

    *They think the stock markets will keep going up ad infinitum, with insignificant corrections.

    *They think there is nothing wrong with printing currency or digitally creating currency.

    *They don’t know anything about historical lasting value money [it isn’t unbacked currency].

    *They don’t know The Federal Reserve is not a branch of the U.S. government.

    The profound ignorance list goes on and on.

  9. Forever isn’t almost here. There is so much runway for the FIAT DOLLAR that it is going to make even you cry in a bunch of years.

    You are right about the monkey-hammering of gold and silver. They do it in broad daylight because what they do is legal under the ESF act of 1934. Therefore, they are NEVER going to let gold and silver shine again…..

    Oh, and guess what. When and if they can’t control the comex price guess what happens next? Oh, that is right. An executive order barring any physical or paper purchases. Only selling will be allowed. Trust me on this one.

    You are doomed holding silver and gold. Best to put your capital to use in the things people will NEED and WANT over time than worthless people hating metals.

    Forever is a long way off.

    • Jack,

      You are doomed NOT holding some gold or silver. You have some information but a remarkable lack of understanding.

      The CAN’T stop gold and silver from shining again.

    • Jack, you guys said the same thing about the london gold pool. You said the same thing when gold was $400 and silver was $5. The people that exchanged fed notes for the elements back then were smart. This time will be no different. The whole “system” depends on a steady flow of gold and silver. I’m sure you’re familiar with backwardation.

      You don’t “buy” gold and silver to “make” money!

      “Only jews in ’39 Vienna buy gold” Charlie Munger (Buffet’s right hand man)

      You gotta hide your wealth, buddy!

  10. i think they are trying to extricate themselves out of the huge short positions.

    the recent surge of OIs of comex silver futures is probably their manuvering to shuffle their shorts and longs.

  11. steve always highlights “kill investment demand”.

    i guess steve sells reports to wall street clients too.

    not my business.

    i remember the first report put out by steve ,also highlights “kill investment demand”.

    so they did!

    • Judejin,

      First off, I didn’t know “Jin” was gold in Chinese. Glad that is apart of your screen name. Secondly, even though I have written reports for other clients, I can assure you… Wall Street isn’t one of them. I would never write or submit anything to what I label as the DARK SIDE.

      steve

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