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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