Have Silver Mining Companies Finally Reached Their Limits?

After many primary silver miners reported increases and or record silver mining production in 2015, global silver mining production is set to fall in 2016.

According to investment bank Société Générale, silver supply will fall for the “1st time in over decade“. Societe General’s projects a decline in silver mining production of 9.2% in 2016 and a 13% fall in 2017 over silver mining production in 2015.

Société Générale’s projections for silver mining decline in 2016 are greater than the 5% decline anticipated by the Silver Institute.

2015 – The Last Hurrah For Silver Mining Production?

In 2015 many primary silver miners achieved record results:

Silver Standard Resources Reports Record Silver Production in 2015

First Majestic reports an increase in silver mining production in Q4 2015 vs Q4 2014 and year over year increase

Pan American Silver Reports Record Silver Production in 2015

Hecla Reports Record Silver Production in 2015

Fresnillo, the world’s largest primary silver producer announces sales were up 11% in 2015 as Silver and Gold output increased.

Great Panther Reports Record 2015 silver mining production up 25% over 2014

These results were achieved largely out of necessity as the price of silver fell but miners’ debt obligations and operating costs did not. As the price fell, many miners found themselves in a hole in which a ‘stop digging’ approach wouldnt’ help, but would accelerate their demise. So, these miners pumped out record amounts of silver. In doing so, they “high graded” their mines, meaning they extracted the cheapest and easiest silver they could and cut back on exploration costs. As a result of doing this, it will be harder to maintain silver production going forward having deplete a good portion of their low hanging fruit and not invested in finding and developing future sources of silver.

Secondary Silver Mining Production

Base metal miners of lead, zinc and copper, which also produce silver as a by-product, have seen a decline in demand for their metals. As a result, they will produce less lead, zinc and copper and …less silver. Approximately 70% of silver production comes as a result of the mining of base metals.

Smaulgld discussed the predicament of miners in a podcast “Gold, Silver Miners Increasing Production until Bankruptcy?” on Wall Street for Main Street:

Silver In Surplus?

In “How is Silver Supply and Demand Calculated” we posted an interview with Eric Dubin of the Newsdoctors and Jason Burack of Wall Street for Main Street that outlined how the CPM calculates silver supply and demand. In that interview we discussed a quote that Jeffrey Christianson Managing Director of CPM Group made to a Bloomberg reporter

“Silver is in surplus, plain and simple.”

Yes, silver may be in surplus if once only includes silver industrial demand and excludes investment demand in the calcualtion!

Mr. Van Der Walt noted that the CPM and Silver Institute were different entitites. We responded that the CPM group does NOT include silver bar and coin investment demand in its supply/demand surplus/deficit analysis.

In this podcast we discuss the methodolody used by the CPM group to calculate silver supply and demand:

With the projected decline in global silver mining production and at least, steady if not increasing, silver demand in 2016, silver will once again be in deficit in 2016.

Will the price eventually reflect this imbalance?

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