The World's Fourth Largest Silver Producer's Mine Production Is Plummeting

SRSrocco says "falling mine supply of silver when investors around the world wake up to the tremendous STORE OF WEALTH properties of the..."

by Steve St Angelo of SRSrocco Report

Silver mine supply from the world's fourth-largest silver producer fell significantly at the beginning of 2018. According to Chile's Ministry of Mines, domestic silver production in January declined 20% versus the same month last year. Chile's silver production has been falling considerably since its recent peak in 2014.

In just three years, Chile's domestic silver mine supply fell 10 million oz (Moz) from 50.1 Moz in 2014 to 40.4 Moz last year. Interestingly, Chile's silver production is down 20% since 2014 while the country's copper mine supply is only down 5%. Because most of Chile's silver supply comes as a by-product of copper mining, it's surprising to see such a significant decline in their silver production.

If we look at three of the top four silver producers in the world, Mexico's silver mine supply in January increased 7% while Peru declined 6%:

According to the official data, Mexico' silver production increased 29 metric tons (mt), Peru fell 20 mt and Chile dropped by nearly 21 mt. Thus, overall silver mine supply from these top three producers fell 13 mt in January versus the same month last year. Even though Mexico will likely experience an increase in silver mine supply in 2018, declining production from other leading countries may curtail overall world supply.

If we look at total silver production from these three countries, the peak took place in 2015 at 373 million oz:

In just two years, the combined silver output from Mexico, Peru, and Chile is down 21 Moz. Now, what's even more interesting is the growing disparity in production figures released by the official governments and those collected by Thomson Reuters GFMS and published in the World Silver Surveys.

For example, the official government sources report that the combined silver production in 2016 from Mexico, Peru, and Chile was 362.3 Moz versus 378 Moz published in the World Silver Survey:

As we can see, the World Silver Survey stated a total of nearly 16 Moz more in silver production than what was reported by the data from three official governments. When I look at the previous mine supply data published in the World Silver Survey, it was very close to the same figures reported by the official government data. However, over the past few years, the World Silver Survey's silver production figures for several countries were higher than the data put out by the government sources.

Now, there isn't an advantage for these governments to understate production. We must remember, these governments receive royalties payments and taxes from domestic mine production. So, for whatever reason, that data in the World Silver Survey shows an additional 16 Moz versus what these governments are reporting. If the government sources are more accurate, then World Silver Survey's total of 886 Moz published for 2016, is more like 870 Moz.

Now, this is quite interesting because the preliminary mine supply figures published in the Nov 2017 Silver Interim Report, shows world silver production of 886 Moz in 2016 will decline to 870 Moz in 2017. According to the data from the 2017 Interim Report, the decline in world silver production was due to significant decreases coming from Chile, Australia and Guatemala. Well, if world silver production was actually closer to 870 Moz in 2016, and we include the declines from those three countries than the forecasted global total for 2017 should be approximately 850 Moz.

Lastly, even though we may see an increase in silver production from Mexico, overall global mine supply will likely start to decline more rapidly over the next several years. Why? A stock market meltdown will destroy demand for base metals and the silver supply as a by-product of copper, lead and zinc production.

A falling mine supply of silver when investors around the world wake up to the tremendous STORE OF WEALTH properties of the poor man's gold should do wonders for its value in the future.

NEW UPDATE: April 1st

There seems to be some confusion in the comment section as to the correct sources to use in determining Mexico's silver production figures. While there are official sources reporting lower amounts, I have corresponded with the folks at Mexico's INEGI and have received what is to be the more relevant figure of 465 metric tons for January, not the reported 289 mt by a few mainstream news sources.

Furthermore, if we multiply the 289 mt by 12 months, it would equal 3,468 mt or 111 million oz (Moz). Now, if Peru's Ministry of Energy & Mines reports its domestic silver production at 140 Moz, then does it make sense that Mexico is producing nearly 30 Moz less than Peru??

As I have stated, Fresnillo has brought on several new projects and is now producing nearly 60 Moz of silver or 1,866 mt a year itself. Also, Fresnillo plans to increase silver production to 65 Moz in 2018 and 72 Moz by 2020. There are countless other primary silver mines producing silver as well as a lot of by-product silver coming from the base metal mining industry in Mexico. So, I stand by the 174 Moz figure for Mexico in 2016.

Here is a new table I put together from various Silver Mining Companies and Mines in Mexico:

Even though news releases stating that a number of mines in Mexico closed down since 2016, I would imagine they were small mines. The medium to larger mines, which produce 90+% of primary silver production, mostly stated increases in 2017 over 2016. Even if many small mines did shut down, we can see that the net increase of 14.5 Moz in 2017 versus 2016 could offset a lot of mine closures. Again, these figures do not include silver production from base metal mining, which is significant.

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