The average production of the largest primary silver mines (those that extract silver as their main product) fell in 2019 to its minimum levels. This raises the question of their possible exhaustion and the need to find new fields to replace them.
As Steve St.Angelo from Money Metals explains, the production of the most productive silver mines has decreased dramatically in recent years. For example, the Mexican Fresnillo mine, operated by the Fresnillo PLC company, has reduced its production from 15 ounces per ton in 2005 to just 5.3 ounces in 2019. This is virtually a drop of 10 ounces per ton in only 14 years.
St.Angelo notes that it is not surprising that the price of silver has grown. It came from $4-5 an ounce in 2005 to more than $15 today.
Since 2005, the world’s seven most massive silver mines’ average production has fallen to 6 ounces.
St.Angelo points out that a 54% drop in average production means that these mining companies have to extract, transport, and process more than twice as much ore as in 2005 to produce the same amount of silver.
The most significant impact on average production comes from companies that work in Peru. For example, Hochschild saw its average drop from 7.5 ounces per ton in 2018 to 5.9 in 2019. Buenaventura reduced its average from 10.6 to 7.5 ounces per ton in the same period.
Meanwhile, the average production of the Dukat mine (Russia) fell to 7.7 ounces per ton in 2019. This was from 8.5 in 2018.
Only one silver mine saw an increase in production last year
Among the world’s main primary silver mines, only one saw an increase in its average production. This was one Hecla held. The Greens Creek mine (Alaska, USA) allowed the company to go from 10 ounces per ton in 2018 to 11.5 in 2019.
St.Angelo says the bottom line is that the world may run out of mines with a high concentration of silver. This is where metal deposits are easier to access. Although there are still some highly concentrated deposits of silver globally, the primary mining industry for this metal is burning its highest quality reserves.
This future threat to the supply of silver may be one more factor contributing to the expected rise in the price of this metal.
