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Ardent Listener
6th February 2007, 19:39
Silver Production

By: Bryant Blake



-- Posted 23 October, 2006 | Digg This Article

After reading how Mr. Frank Veneroso is bearish on silver and how he believes supply is going to expand, I decided to check silver production in 2006 versus the previous two years. The Silver Institute compiles a list of the 20 top silver producers each year. I have been able to find the 1st 6 month or 9 month production results of 11 of these companies. These results were obtained from the companyís web sites, quarterly financial statements or from response to my emails. A twelfth result, was obtained from Barrick which responded to my email saying they do not keep quarterly statistics on silver production, but expect to produce 10 million ounces this year. A listing of the top 20 companies in 2004, and their 2004, 2005, and estimated 2006 production, in million of ounces, is shown below.
Rank Company Country 2004 2005 2006
1 BHP Billiton Australia 49.7 53.8 38.4
2 Indust Penoles Mexico 44.5 47.4 44.9
3 KGHM Polska Poland 43.2 40.0 40.2*
4 Grupo Mexico Mexico 19.4 18.5 15.4
5 Kazakhmys Kazakhstan 17.7 20.5 21.4
6 Barrick Gold Canada 17.3 12.5 10.0
7 Polymetal Russia 17.3 18.9 17.0
8 Rio Tinto UK 14.8 14.9 13.1
9 Coeur Dí Alene USA 14.1 13.7 12.1
10 Cia de Minas Peru 12.8 15.3 14.3
11 Xstrata Australia 12.2 13.3 8.2
12 Noranda/Falconb. Canada 11.6 12.5 12.5*
13 Volcan Cia Minera Peru 11.3 11.1 11.1*
14 Pan American Canada 11.2 12.5 13.3
15 Zinifex Australia 11.0 9.7 9.7*
16 Codelco Chile 9.6 9.2 9.2*
17 Newmont USA 8.5 9.2 9.2*
18 Cai Minera Ares Peru 7.9 7.6 7.6*
19 Boliden AB Sweden 7.7 7.3 7.3*
20 Comsur/Goldcorp Bolivia/Canada 7.2 7.2 9.1
TOTAL 349.0 355.1 324.0
The 2006 figures are annual estimates based on the 1st 6 or 9 months results. The one exception to this is the top producer, BHP Billiton whose production dropped drastically from the 1st to 2nd quarter. For BHP the 2nd quarter result was used and extrapolated for the entire year. The 2006 figures with an asterisk indicate that the 2005 figure was used because 2006 data could not be found and the companies did not respond to my emails. The only change to the Silver Institutes list from 2004 to 2005 was number 20 which was Comsur in 2004 and was Goldcorp in 2005. The 2006 figure for the number 20 spot uses an annual figure for Goldcorp based on their 1st 6 months of production this year.
This list shows how difficult it is for the majors to increase production even with the higher prices this year. The only producers with significant growth this year are Kazakhmys, and Pan American. On the contrary, most of the production rates have dropped, including significant drops by BHP Billiton, Grupo Mexico, Barrick, Coeur Dí Alene, Xstrata, and Goldcorp.
A far as new supply in coming years, Coeur says new mines in the next couple of years will return them to the number one primary producer, a title which has been won by Pan American this year. Apex Silver is scheduled to start stripping overburden at their San Cristobal project next year. The San Cristobal mine is anticipated to produce 22.3 million ounces of silver per year. This mine should be opened with the only obstacle being that Apex has lost 10ís of millions of dollars already by hedging this mine. A 2nd major project is Barrickís Pascua-Lama which Barrick had said they would open in 2009. This mine is anticipated to produce 30 million ounces per year; however, environmental resistance to the mine has surfaced due to potential damage to glaciers which supply local communities with water. I believe a suit has also been filled against Barrick regarding the case that they only paid $10 for the land or mineral rights to the owner of some of the Pascua-Lama property.
The Silver institute gives total 2004 silver mine production to be 620.4 million ounces and 2005 to be 641.6 million. That means that smaller producers (other than the top 20) produced 271.4 million ounces in 2004 and 286.5 million ounces in 2005. This means smaller producers increased production by 15.1 million ounces between 2004 and 2005. The above table shows production by the top 20 is projected to have a 35.8 million ounce drop this year. If we assume the small producers have another 15.1 million ounce gain this year, total production will still drop 20.7 million ounces to 620.9 million. This returns production to roughly 2004 levels, and means that 2005 may have been a watershed year.
I donít doubt Mr. Venerosoís claim that new production will come on line. The problem for the bears is that old production is going off line. Based on the above production list, I leave it to the reader to determine which of the following is true. Either the Silver Institutes 2005 numbers are inflated, or I canít read production tables and emails (had my eyes checked last year and did not need glasses), or Silver production by the big boys is falling fast. Maybe fast enough to send the last 4 bears on COMEX. running. I do own silver and silver shares of Goldcorp.

oroborean
6th February 2007, 19:59
you've probably heard of gold as "the barbarous relic". and of course silver has some of that old world air to it. unfortunately, none of the precious metals have made it to the twenty-first century of (relative) transparency. the fact is that most countries, including the united states, consider their reserve of precious metals to be a national security secret, and perhaps rightly so. it's therefore impossible to know with certainty the total available aboveground supply with public information.

my take on the data is that overall metal supply is increasing and will probably continue to do so, but is unlikely to exceed demand unless and until there is an end to low interest rates and easy money globally, a dramatic slowdown in industrialization and manufacturing, and, particularly in silver, if markets simply fail to develop for the numerous commercial uses of the commodities!

richiedoc
11th February 2007, 19:36
" my take on the data is that overall metal supply is increasing"

What data would that be oroborean?

oroborean
12th February 2007, 10:24
the data in blake's article that AL posted. my reading is now supported by blake's follow-up on "silver demand", which is currently available at silverseek.com.

richiedoc
14th February 2007, 01:31
But this thread is about silver "production", not demand or even "supply" (some supply could be coming from hoarded stocks or new melt)

I was interested in mining production stats, and AL seems to have the only updated data on it. Demand is not being met by production alone...new mines are moving at a snails pace as everyone has predicted. AL's data shows mine production is falling. Would love to get some official coroboration of this. :)

richiedoc
14th February 2007, 04:43
reformatted for easier viewing:

Rank Company Country 2004 2005 2006
1 BHP Billiton Australia 49.7 53.8 38.4 DOWN
2 Indust Penoles Mexico 44.5 47.4 44.9 DOWN
3 KGHM Polska Poland 43.2 40.0 40.2*
4 Grupo Mexico Mexico 19.4 18.5 15.4 DOWN
5 Kazakhmys Kazakhstan 17.7 20.5 21.4 UP
6 Barrick Gold Canada 17.3 12.5 10.0 DOWN
7 Polymetal Russia 17.3 18.9 17.0 DOWN
8 Rio Tinto UK 14.8 14.9 13.1 DOWN
9 Coeur D’ Alene USA 14.1 13.7 12.1 DOWN
10 Cia de Minas Peru 12.8 15.3 14.3 DOWN
11 Xstrata Australia 12.2 13.3 8.2 DOWN
12 Noranda/Falconb. Canada 11.6 12.5 12.5*
13 Volcan Cia Minera Peru 11.3 11.1 11.1*
14 Pan American Canada 11.2 12.5 13.3 UP
15 Zinifex Australia 11.0 9.7 9.7*
16 Codelco Chile 9.6 9.2 9.2*
17 Newmont USA 8.5 9.2 9.2*
18 Cai Minera Ares Peru 7.9 7.6 7.6*
19 Boliden AB Sweden 7.7 7.3 7.3*
20 Comsur/Goldcorp Bolivia/Canada 7.2 7.2 9.1 UP
TOTAL 349.0 355.1 324.0

So was silver mine production up or down for 2006?

Let's hope it was DOWN!

Supply must be tight...silver just kissed $14 in London...or maybe we are just being led into a bull trap led by the PPT!

oroborean
14th February 2007, 08:09
...new mines are moving at a snails pace as everyone has predicted.

you could probably come up with one or two references to support this if pressed, but it would still not convince me that "everyone" predicted new mine production would increase at "a snail's pace". the list blake put together is not comprehensive, but even if total mine production was slightly lower in 2006, silver investors should be very wary of the current situation in copper, which got it's boost on the blastoff in housing, but is now collapsing because of weaker demand and increased supply.

higher spot prices allow miners to develop ores that were previously noncommercial grade. avino is a perfect example of a company who had halted all operations when silver was too cheap and is now working existing mines with previously discovered ore simply because it is commercially viable again. if higher silver prices haven't brought a flood of new silver to the market yet it's because production is a labor and capital intensive process, and because prices have not yet reached the suddenly sky high levels that would flush existing metal products back into the market. my "unofficial" opinion is that while the conditions above exist, high global liquidity and growth, as well as expanding markets for new silver products, then industrial and investment demand for silver will roughly offset increases in production. ultimately, of course, there is a finite supply of silver.

richiedoc
14th February 2007, 16:13
From today's Mogambo:

Al Korelin at kereport.com quizzically notes that the statistics show that the supply of silver has actually been higher than the demand. Instead of shrugging his shoulders at the anomaly and moving on (like I would have done to avoid the actual work of research), he takes positive action to solve the mystery, and calls David Morgan of The Morgan Report to remark upon the table of the historical supply/demand on the Kitco Silver site, and say to him, "I donít get it; Kitco is well-known for accurate statistics and this one makes no sense.Ē

The explanation was obtained when Mr. Morgan revealed that "these statistics were obtained from Goldfield Mineral Services from the United Kingdom, and of the three components making up the supply numbers, government sales and scrap supply, often known as 'above ground supply' are somewhat open to conjecture. The only component, which cannot be questioned, is 'mine supply', and there is a deficit between mine supply and total demand. This fact, coupled with the growing medical and industrial demand for silver, is one of the reasons that the price of the commodity is increasing." Nice analysis, Mr. Morgan!

oroborean
15th February 2007, 08:03
from two weeks ago's silverseek forum:


my take on the data is that overall metal supply is increasing and will probably continue to do so, but is unlikely to exceed demand ...