Two-Thirds Of The Top Primary Silver Miners Suffered Production Declines In 2017

It has been a rough year for many primary silver miners as two-thirds have suffered declines in production.  Also, many high ranking silver producing countries are also experiencing a pronounced reduction in their domestic silver mine supply.  According to the data put out by World Metal Statistics, Chile’s silver production is down 20% in the first eight months of the year, while Australia is down 19%, Mexico declined 2% and Peru lower by 1%.

The Silver Institute will be releasing their 2017 Silver Interim Report shortly which will provide an update on current silver production and forecasts for the remainder of the year.  However, I believe global silver production will take a big hit this year due to several factors including, falling ore grades, mine closures, and strikes at various projects.

For example, Tahoe Resources was forced to shut down its Guatemalan Escobal Mine in July due to a temporary suspension of its operating license by the country’s Supreme Court.  However, even after the Guatemalan Supreme Court reinstated Tahoe Resources Escobal Mine’s license in early September, an ongoing road blockade has hampered the ability of the project to continue mining.  Regardless, Tahoe’s silver production declined a stunning 6.7 million oz Q1-Q3 2017 versus the same period last year.

Now, on the other hand, silver production at Fresnillo’s operations in Mexico jumped by nearly six million oz during the first three-quarters of 2017 primarily due to the start-up of its San Julian Mine phase II expansion and a ramp-up of its phase I:

While the gain in silver production at Fresnillo’s operations helped to offset the significant decline at Tahoe’s Escobal Mine, two-thirds of the top primary silver companies in the group experienced a reduction in mine supply this year.  Hecla’s silver production fell by 3.7 million oz in the first three-quarters this year due to an ongoing strike at its Lucky Friday Mine in Idaho.  Moreover, output at Silver Standard’s Puna operations in Argentina fell by 3.2 million oz due to a 36% decline in ore grade at is open-pit Pirquitas Mine.  Silver Standard’s Pirquitas Mine is one of the few open-pit silver operations in the world.  The overwhelming majority of primary silver mines in the world are underground operations.

Overall, production at these top primary silver miners fell 9 million oz in 2017 compared to the same period last year:

Now, if Tahoe Resources Escobal Mine was not forced to shut down or if Hecla’s Lucky Friday Mine’s strike was resolved, overall production at these top primary silver miners would have likely increased by approximately one million oz this year.  Unfortunately for Tahoe’s Escobal Mine and its investors, it may be quite some time before full production resumes.  As I have mentioned in previous articles about the troubles plaguing the Escobal Mine by the local and indigenous peoples living by the operation, there are two very different opinions on the underlying problems.

While I have stated that the negative issues put forth by the local and indigenous peoples about the Escobal Mine are likely more valid than the pro-western stance taken by the Tahoe Managment or the Mainstream financial media, time will tell how this is resolved.  However, the notion put forth by Tahoe Management that the problems are stemming from “non-locals” who are supposedly radicalizing the locals around the plant, is unfounded when we understand that it is a huge ground-roots movement led by a large percentage of the inhabitants surrounding the mine.

According to the article, Tahoe Resources’ Social Licence in Guatemala Non-Existent, as Uncertainty Plagues Escobal Permits:

Tahoe CEO Ron Clayton is also wrong when he states in a recent press release that community opposition comes from “non-locals”. Lack of social license has dogged Tahoe Resources since the beginning of its project. Since 2011, tens of thousands of residents in eight municipalities around the Escobal mine have voted in municipal plebiscites demonstrating their opposition to the project, or any mining in the area, out of concern for their water supplies, health, and local agriculture. Five municipalities refuse to receive any royalty payments from Tahoe’s mine operations and are now parties to the legal proceedings over discrimination of the Xinka Indigenous population and the Ministry of Energy and Mines’ failure to consult with them.

As the article states, five municipalities refuse to receive any royalty payments from Tahoe’s mine operations and are now supporting legal proceedings.  This does not sound like a small group of non-locals instigating trouble.  Rather, this has been an ongoing issue ever since the Escobal Mine was initially planned, during its construction phase and ever since it produced its first ounce of silver in 2014.

Lastly, it looks like global silver production will take a big hit this year.  We could see world silver mine supply fall by 40-50 million oz in 2017 if the trend continues for the remainder of the year.  One country that I did not report on about silver production was China.  According to the World Metals Statistics, they show Chinese silver production down by a stunning 25% in the first eight months of 2017.  However, I don’t believe the decline is that high.  Even though the World Gold Council stated that Chinese gold production was down 10% so far this year, I doubt their silver production fell 25% this year.

We will have to wait and see what production figures the Silver Insitute will release in their 2017 Silver Interim Report when it’s published in the next few weeks.  Regardless, the world’s economies are being propped up by a massive amount of debt, derivatives and money printing.  When the markets finally crack, global silver production will fall considerably as for demand for base metals will drop like a rock.  We must remember, 58% of world silver production is a by-product of copper, lead and zinc production.  So, when base metal demand falls, so will base metal production.

Thus, as the market and economy continue to disintegrate, global silver supply will fall right at the very same time investment demand surges.

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17 Comments on "Two-Thirds Of The Top Primary Silver Miners Suffered Production Declines In 2017"

  1. Steve – regarding your comment:

    “Thus, as the market and economy continue to disintegrate, global silver supply will fall right at the very same time investment demand surges.”

    What does that window of time look like? I’ve seen some industries take months or even a year or two to go from lower production on a key product to reversing and seeing demand rise dramatically. In my mind silver will temporarily be treated like any other asset in a rapidly falling market and we’ll see lower silver prices followed by a recovery and ramp up. So I am putting aside cash to buy when prices fall. Is this a logical approach?

    • Chris M,

      The timing of the market crash is a tough one. Many have tried, but have been wrong time and time again. However, economic indicators are really starting to roll over. I wouldn’t be surprised if the market crash started to take place in 2018.

      While silver may fall with the overall markets at first, I don’t think it will decline all that much. We must remember, the silver price isn’t much higher above its low of $14, while the Dow Jones is near its high.

      steve

      • For now, the most important indicator for PMs is the price of the dolar, USD/YPY in particular. Until this correlation is broken PMs cannot go substantially up. All arcane analyses are meaningless.

  2. I’d like to the cost of production of those new ounces at fresillo? Are there any other new supplies coming on line soon?

  3. Michael Kohlhaas | November 13, 2017 at 3:33 pm |

    I don’t know what the consequences will be for the silver miners like Panamerican Silver. Will they share prices go down because of falling output or rise because it will be more than made up by a rising silver price?

  4. Steve,
    Another well researched article.
    Every year we have seen supply fall short of demand and this year looks like another in a long line. How do see demand this year? Talking about supply without mentioning demand seems a bit narrow minded in focus. If demand shrinks more than supply is shrinking then the supposed benefit to us silver stackers is lost. As long as silver supplies fall short of demand then the only thing we know for sure is that stockpiles will have to make up the difference. Even though we don’t know how large these stockpiles are, we have a pretty good idea that they are shrinking at an alarming pace. But don’t expect to see this falling silver supply to effect the price of silver …it won’t. Just like it hasn’t over the last 11 years or so.
    I’ll keep reading…watching…and stacking until real economics comes back. Last year we had a shortage of 147 Moz and according to your data this number may be more like 200 Moz short this year. Well the 147 Moz didn’t effect the price this year and maybe 200 Moz won’t effect it next year…but soon…hopefully very soon…the piper will be paid.

    • Crayfish,

      Silver Demand looks to fall considerably due to a big drop in investment demand this year. We could actually experience the first annual silver surplus in decades.

      That being said, I don’t look at the SUPPLY-DEMAND balance to determine the price. It hasn’t been an indicator of price for more than 30 years. What has been the leading indicator is the OIL PRICE. if you have read my past articles, you are likely familiar with my analysis on this.

      However, the silver price will skyrocket going forward not because of the OIL PRICE or SUPPLY-DEMAND FORCES, but rather the gutting of the U.S. and global oil industry and the negative impact on the value of most STOCKS, BONDS & REAL ESTATE.

      Lastly… the silver market has been working through 100 years worth of old silver coinage that was meltdown and used to supplement the market. That old inventory has dwindled. Now, the nearly 2 billion oz of silver held in Custodian Stocks is in TIGHT HANDS.

      steve

  5. I seem to recall a report some years back, by the US Geological Survey, that stated silver would be ‘extinct’ by 2020 (?…or somewhere in that neighborhood). Maybe we’re headed there.

    • andy,

      Back in 2008, the USGS reported that the world held approximately 270,000 metric tons of silver reserves. Thus, if the world was producing between 21,000-24,000 metric ton per year of silver, then it would theoretically run out somewhere around 2020. However, the USGS updated their global silver reserves a few years later to 540,000 metric tons. The reason for the huge increase was due to two reasons:

      1) Many countries hadn’t updated their silver reserves because the price was so low before the 2008 Market crash. Once the silver price surged to over $35, many countries updated their figures as it made economic sense

      2) Several countries hadn’t provided data to the USGS for decades. China being one. So, now we had a better idea of the true amount of global silver reserves.

      So, now we still have about 20 years remaining. But, I highly doubt we will ever get close to mining half of that amount, due to the upcoming disintegration of the Global Oil Industry.

      steve

  6. “as the market and economy continue to disintegrate” what planet are you on !!!, please explain why the Baltic dry index is near record highs and companies like Catapillar report strong earnings and even stronger projected earnings, why don’t you comment on that because there is a huge disconnect on what you write and what is actually going on in the world economy

    • Leon,

      The short-term spike in the Baltic Index and Caterpillar results have occurred because of the recovery in the oil and base metal prices. However, this is not a long-term viable recovery. Oh no. What is currently taking place is quite similar to the setup of the massive 25% ONE DAY CRASH of the Dow Jones Index back in 1987.

      We must remember, the oil price fell from $30 to $8 in 1985. It took a year and a half for the oil price to recover. As the oil price recovered, so did the commodities and base metals prices. Unfortunately, the market still crashed in 1987, even though indicators were improving.

      The situation in the markets today is much worse than they were in 1987.

      steve

  7. Steve,

    You state that Silver will jump in price when markets collapse because of large numbers, (maybe most) of fleeing investors seeking a save haven in PM. Makes sense, but why isn’t it equally or even more likely that this time they all pour into crypto instead?

    Also, if the # of new pm people is moderate because of above, couldn’t their affect be negated by flow the other direction? I.e, market investors who also hold pm and need to sell it because are desperate for cash to cover large losses.

    • Frank
      People always default to what they are familiar with. Remember the first time you tried chop sticks instead of a fork? IF you had to sell immediately for an emergency which would you sell Gold, silver or crypo-currencies.

      As for PM being sold I believe you are right. Harry Dent declares that Gold will go down to $700 dollars but didn’t say why. When Venezuela hit the skids it sold all it’s gold. Imagine 80 countries doing that !

      Silver on the other hand is different …. No silver NO technology!
      It takes 1 ounce of silver to make 4 cellphones.
      It takes 3/4 of an ounce of silver to make a solar panel.
      It takes 400 ounces of silver to make a cruse missile.
      Electric cars with their batteries almost double the usage of silver than missiles.
      Satellites, rockets, sensors and telescopes use tremendous amounts of silver!
      Technology never slowed down even in the worst of times in history.
      If we don’t start mining asteroids NOW silver will be renamed “Unaffordium” or “Unoptainium”

  8. Dear all silver and gold (but particular silver) shills:

    Stop with the bullshit and sending a losing message to people. You have done countless harm to millions and millions of people who have already absorbed your message and have suffered tremendously while others who ignored the metals gained tremendously.

    Stop blaming the mainstream, or manipulation, or any of that nonsense. Take responsibility for your own failed predictions, for once. Gold and silver in the doldrums, while every other asset is rising to infinity. THE EXACT OPPOSITE of all of your predictions.

    • “While every other asset is rising to infinity”

      That’s the whole point. Get out of the fake paper to infinity bubbles. And watch your back, severe trouble in oil markets will arrive before 2022.

    • DisappearingCulture | November 14, 2017 at 5:08 pm |

      “… while every other asset is rising to infinity.”

      LMAO! Rising towards any number of pins waiting to burst the bubble.

    • dolph
      I know EXACTLY how you feel !!!
      I felt the same way in 2000 !
      I felt the same way in 2007 !
      I lost half my customer base to closures and bankruptcies
      I lost my house forced into a short sale.
      I lost my 5 figure investment when Bear Sterns dissolved.
      YES I thought the same way as you do right now!
      But NOT anymore!

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