Best of the Week
Most Popular
1.UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - Nadeem_Walayat
2.UK General Election 2015 Seats Forecast - Who Will Win? - - Nadeem_Walayat
3.Gold Price Downtrend Looks Set to Continue - Clive_Maund
4.Commodity Prices Set To Plunge Below 2008 Lows - Austin_Galt
5.New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - GoldCore
6.Gold and Silver Stocks or General Stock Market Indices? - Rambus_Chartology
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.UK House Prices Trend 2015 and the May General Election - Nadeem_Walayat
9.12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - GoldCore
10.Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - Mike_Shedlock
Last 5 days
Gold Price and Mining Stocks Decline Together - 3rd Mar 15
Financial Slaughter - The Silence of the Lambs - 3rd Mar 15
Bondholders “Bailed In” In Austria – New Banking Crisis? - 3rd Mar 15
How to Profit from the Coming Oil Price Crunch - 3rd Mar 15
Is Japan Zimbabwe? Could Japan go Hyperinflation? - 3rd Mar 15
Bill Gross Says Fed May Raise Rates 25 Basis Points in June - 3rd Mar 15
The Secret Behind My Hedge Fund Trade on U.S. Housing Market - 3rd Mar 15
BLS CPI Lie - How's That Dsflation Working Out for You? - 3rd Mar 15
Tesla Bonfire of the Money Printers’ Vanities - 3rd Mar 15
Gold Demand in UK, Europe and U.S. – Reuters Interview GoldCore - 2nd Mar 15
Watch the Skies... for Investor Profits - 2nd Mar 15
How Investors Can Identify the Best Small-Cap Stocks - 2nd Mar 15
Gold and Silver - What If the Precious Metal Stocks Bulls are Back - 2nd Mar 15
Students Getting a PhD in Subprime Debt - U.S. Debt Breaking Bad Part 3 - 2nd Mar 15
The Stock Market is in The Process of Major Top! - 2nd Mar 15
Stock Market Weakening Trend - 2nd Mar 15
Gold Price Glimmer of Hope - 1st Mar 15
Stock Markets Are Riding High on Thin Air - 1st Mar 15
Varoufakis vs. the Troika - Showdown in Athens - 1st Mar 15
Subprime Rising - U.S. Debt Breaking Bad Part 2 - 1st Mar 15
Gold CoT Improving, But ... - 1st Mar 15
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

Global Silver-Mining Trends

Commodities / Gold and Silver Stocks 2013 Feb 01, 2013 - 08:15 PM GMT

By: Zeal_LLC

Commodities

Over the course of silver’s secular bull, the miners have steadily increased production in order to meet fast-growing demand.  And in 2012 mine production exceeded 24k metric tons (770m+ ounces), an all-time production high and 28% increase over 2001.  As an investor interested in silver’s structural fundamentals, this rapid growth begs a question.  Where in the world is this silver coming from?

In our modern information age we can ask questions like this and easily find the answer.  And we need look no farther than the data provided by the U.S. Geological Survey.  The USGS is a global authority in collecting, analyzing, and disseminating information on both domestic and international mineral supply and demand.  And for silver it dutifully provides annual detailed country-level mine production data.


My preferred way to distill data like this is visually, via crafting a custom chart to paint a clear picture.  And in the chart below I plot the bull-to-date global silver-mining trends for the world’s top dozen silver producers using the USGS’s initial 2012 estimates that were released just this week.

With production volume scattered across such a wide spectrum, I indexed each country’s output at 100 beginning in 2001 (the first year of silver’s secular bull).  If a country is at 125, its silver mine production is up 25%.  And inversely if it’s at 75, it is down 25%.  Indexing ultimately allows us to easily compare the production trends of the top producers on a single chart.

Also included in this chart is the raw production data of the world’s top silver miners.  And it is important to note that these 12 countries are responsible for the lion’s share of mined supply, their combined total accounting for 90% (21.4k mt).  Interestingly #12 Canada produces nearly twice as much as the next closest country.  In fact, only 5 countries outside the top dozen actually produce greater than 100 mt of silver annually.

Starting at the top, you’ll notice that silver mine production is dominated by three countries.  And Mexico, China, and Peru have long been the three-headed monster of the silver market.  Back when silver’s bull began in 2001 these three countries were the leaders, accounting for about one-third of the global mined supply.  And as a result of strong growth from each over the last decade, they remain the leaders while accounting for now nearly half of the mined supply.

Mexico comfortably sits atop the silver-mining world.  This country is host to massive silver belts, including the illustrious Sierra Madre belt that flanks the Sierra Madre Occidental mountain range.  Silver has long been one of Mexico’s major exports, dating as far back as the 16th century when the Spanish colonials shipped it back to their homeland via large galleons.

It is believed that about one-third of all silver mined in the history of the world has come from Mexico.  But even with such rich history, this country’s silver mineralization is nowhere near depleted.  The miners continue to make big discoveries.  And these discoveries have great economics as seen by 50%+ production growth over the last decade.

Mexico’s prominence is also apparent in its continued attractiveness to the juniors.  In my latest round of research focused on junior silver explorers, I found Mexico to be the top destination for these companies.  With Mexico’s plush geology and friendly mining laws, about half of all silver juniors own a project in Mexico.

In the #2 spot we find China.  And per the USGS’s latest update to 2011’s numbers that increased Chinese production and lowered Peruvian production, it turns out that 2012 was China’s second year in a row as runner up to Mexico.  This is quite notable, as China had never before cracked the top two.  With Mexico and Peru holding the top-two spots from 1999 to 2010, this is certainly a big shuffle at the top.  China is no longer the third wheel!

China’s journey to #2 is the result of massive production growth, mainly via byproduct production from primary base-metals mines.  Over the last 11 years its silver production has doubled, with the addition of 1.9k mt (61m ounces) to its annual output.  By volume this growth is unmatched by any other country.  And China’s silver production is expected to continue to rise, eventually giving Mexico a run for its money.

Rounding out the big three is Peru, where most of its silver is found high in the Andes Mountains.  And Peru is certainly no slouch considering it had a recent stint as the world’s #1 silver producer, edging out Mexico from 2002 to 2009.  Silver has long been engrained in Peru’s culture.  In fact, the ancient Incans were so enthralled by this soft-white metal that they referred to it as the “tears of the moon”.

Peru’s production is up 34% since 2001.  And though its output has trended down a bit over the last few years, the mining companies have had great success renewing their reserves and making new discoveries.  With the world’s largest reserve base (120k mt), by far, Peru is highly likely to revisit its 2009 all-time production high in the near future.

Next up is Australia.  And as you can see by its production trend, this country has been quite consistent over the last decade or so.  Interestingly over half of Australia’s output comes from a single mine.  And this massive Cannington mine owned by BHP Billiton ranks as the largest silver and lead mine in the world.

Russia has been one of the top performers by percentage growth over the course of silver’s bull.  And considering this country’s huge geographical and geological potential, it sure ought to be among the top producers.  Attributing to Russia’s nearly 300% bump in production is the restart of the massive Dukat mine and an increase in byproduct output from its large gold mines.

The South American country of Bolivia has grown to become a silver powerhouse over the last decade or so.  And this is actually quite surprising considering its geopolitical issues over this same span.  Large operations like Sumitomo’s San Cristobal mine and Coeur d’Alene’s San Bartolome mine successfully navigated their ways around Bolivia’s challenges to account for a big chunk of this country’s 200%+ growth since 2001.

Poland is another country where the bulk of its silver comes to market as a byproduct of primary base-metals mines.  And nearly the entirety of its output comes from three massive copper mines that are owned by KGHM Polska.  Poland’s flat production from an isolated source is a sign of consistency, yet also a clear display of fruitless exploration and/or new development.

Chile’s silver output has also been fairly consistent over the years, with much of its 16% decline coming just last year.  A big chunk of Chile’s silver is a byproduct of its large copper and gold mines, however there are a handful of primary silver mines that do make material contributions.

Chile has struggled a bit with water, energy, and labor challenges, but these are typical Latin American growing pains that will work themselves out.  Looking forward Chile will see a big boost in production in the near future once Barrick Gold finally gets its massive Pascua-Lama gold/silver mine online.

In the #9 spot is the United States.  And as you see by its downward trend, the US has experienced quite a fall from silver prominence.  Since 2001 US silver output is down an appalling 40%.  And if you go back to its peak levels in the 1990s, things are even worse with a decline of well over 50%.

Provocatively prior to the turn of the 21st century silver’s big three were Mexico, Peru, and the US.  China was not in the picture yet.  In fact, as recently as 1997 the US was the world’s #2 silver producer, responsible for nearly 14% of the global mined supply that year.

It really is amazing that one of the world’s top silver producers could tumble in such epic fashion during one of the most powerful bull markets this metal has ever seen.  Factoring into this decline is large-mine depletion, pinched economics for harder-to-access ore, regulatory burdens, and a lack of new discovery.

Though the US has several historic primary silver districts (the most prolific being in Idaho, Montana, and Colorado), they were the first to shut down during the bear-market years of the 1980s and 1990s.  And as a result, the majority of the US’s silver these days is a byproduct of copper and gold mining.  Making matters worse, the US’s production of both of these metals is also way down in recent years.

In stark contrast from the US, Argentina has seen incredible production growth over the last decade or so.  Amazingly in 1998 it ranked as the world’s 27th largest silver producer, with output of only 36 mt.  It really has come out of nowhere to join the world’s elite.

Argentina has actually long been known to host robust mineralized systems.  Unfortunately as a result of antiquated mining laws it took awhile for the miners to realize the resources held within these systems.  Thankfully Argentina’s decades-long lag behind its Latin American cohorts finally started to burn away following some big reforms in the 1990s.  And when the miners finally got on the ground they found a wide range of mineral deposits, including several large ones that were primary silver.

Interestingly primary silver deposits are quite rare since this mineral is usually subservient to higher concentrations of accompanying base metals and/or gold.  Less than a third of global mined silver actually comes from primary silver mines!  Argentina is a geological exception though, with well over half its output coming from primary silver mines owned by such companies as Silver Standard, Pan American, and Hochschild.

Moving to Kazakhstan we see a material decline in production over the course of silver’s bull.  Like Poland, the vast majority of Kazakhstan’s silver output comes from byproduct base-metals production from a single large company (Kazakymys).  This massive country has great silver potential, but lacks attractiveness due to its precarious political environment.

Rounding out the top 12 is Canada.  And like the US, Canada’s silver story tells of a fall from greatness.  Mining historians will recall the great Cobalt Silver Rush early in the 20th century that made Canada a global silver powerhouse.  And even as recently as 2002, the Great White North still held its head high as the world’s #5 silver producer.

Unfortunately many of the same things that plagued the US also hit Canada hard.  And with primary silver mines now all but extinct (the exception being the recently revived Keno Hill camp) coupled with declines in byproduct output, Canada has seen a staggering 60% plunge in silver production.

Overall silver’s global mining trends are quite revealing in the grand scheme of this metal’s structural fundamentals.  There have been some great growth stories, and some pretty alarming declines.  And as investors the information we get by drilling down into country-level dynamics can certainly assist in our trading decisions.

Since geographical logistics don’t matter much when it comes to investing in the physical metal, the trading I’m referring to involves the mining stocks.  And believe me, mining companies are very sensitive to where in the world they seek to explore/develop/produce their silver.

One major takeaway we can gather from this information is that total output and/or growth rates don’t necessarily translate to opportunity for the miners.  Some of these countries are host to geopolitical situations that all but block foreign investment.  And some are producing silver solely as a byproduct, ultimately lacking geologically favorable primary silver deposits.  These situations are not conducive to mining companies looking to directly leverage silver.

Another takeaway is that Latin America is definitely a silver hot spot these days.  Some of the best growth trends are coming from this part of the world.  This observation is further supported by the fact that in 2012 half the production from the top dozen came from Latin American countries.  Back in 2001 they were only responsible for 43%.

One other observation I can add is somewhat counterintuitive to what the trends are showing.  But per my recent research looking at the universe of silver juniors, I found there to be a lot of exploration activity in the countries that are the two biggest losers over the course of this bull.  Nearly a third of all juniors have a project in the US, with nearly a third also having a project in Canada.

While the silver-mining industry in these upper North American countries is struggling, they both have a distinct advantage when it comes to exploration.  The miners know where the silver is.  The US and Canada both hold historic silver-mining districts that were shut down due to economics.  These districts have plenty of resources remaining.  And with higher prices and better technology, the juniors are finding great success in their exploration endeavors.  I suspect we’ll see a US and Canada silver revival in the coming years that will finally turn around their decade-long downward trends.

At Zeal we love poring over data like this to give us better insights into a given sector.  And we implement it into our exhaustive research that turns out high-probability-for-success stocks to trade in our newsletters.  In our last two research reports profiling these stocks, our focus was on silver.  And even amidst this downtrodden mining-stock environment, several silver stocks that we recommended in our newsletters are sporting excellent unrealized gains.

If you’d like the detailed fundamental profiles of our favorite silver stocks at your fingertips, buy your reports today!  And if you crave a unique and exciting market tilt, something you won’t find with the mainstream herd, consider a subscription to our weekly and/or monthly newsletters.  Investors all over the world have enjoyed our acclaimed contrarian market analysis and trade recommendations for over a decade!  Get your subscription today!

The bottom line is global silver mine production is on the rise.  And it is certainly interesting to see where in the world the silver is coming from.  Just this week the USGS released its 2012 country-level production estimates, and these latest numbers tack onto some fascinating trends over the course of silver’s bull.

We are seeing a big shuffle at the top with China making a move.  And the Latin American countries are continuing to show their force, now collectively responsible for over half of the world’s mined silver production.  Drilling down on these country-level dynamics really helps us to better understand a big component of silver’s structural fundamentals.  And with this knowledge we are better equipped to invest in this growing sector.

Adam Hamilton, CPA

So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence , that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research. Please consider joining us each month for tactical trading details and more in our premium Zeal Intelligence service at … www.zealllc.com/subscribe.htm

Questions for Adam? I would be more than happy to address them through my private consulting business. Please visit www.zealllc.com/adam.htm for more information.

Thoughts, comments, or flames? Fire away at zelotes@zealllc.com . Due to my staggering and perpetually increasing e-mail load, I regret that I am not able to respond to comments personally. I will read all messages though and really appreciate your feedback!

Copyright 2000 - 2013 Zeal Research ( www.ZealLLC.com )

Zeal_LLC Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014