Physical Silver Shortage Rumors Confronted
Miners report increase in silver production in 2012
During the past week, a number of events gave silver traders reasons to speculate that shortage in physical silver may occur. Some expected even a panic buying to drive silver price higher in the short term.
However, until this moment that didn’t happen. As a matter of fact, the white metal even lost some of its last week’s gains on Monday. As of now, 8 am Dubai time, it trades in the green territory, around $30.99 per ounce, without a major price movements on either site.
In response to the recent physical silver shortage speculations, we researched data provided by mining companies for their performance in Q4 of 2012 and the past year in general. According to what the companies state, most of them increased silver production between 2% to 15% and aim to rise production further in the course of 2013.
Here are few facts that don’t suggest physical silver shortage, but rather stronger supply :
1. Pan American Silver Corp. reported it produced a record amount of silver in the fourth quarter of 2012 and forecasted growth in output for 2013, largely a result of the Dolores Mine acquisition last year. The precious metals producer said silver output in the latest period was 6.9 million ounces, 30% higher than a year ago, propelling the company to a new annual record of 25.1 million ounces of silver for the year. The yearly total is 15% more than the company produced in 2011. Pan American bought Minefinders Corp, which owned the Dolores mine in Mexico, for about C$1.5 billion in 2012.
2. Alexco Resource Corp. reported silver production of 595,823 ounces during the fourth quarter of 2012, approximately 16% higher than the previous quarter and its second highest ever quarter of production as the Bellekeno mine completes its second full year of operation in the Keno Hill Silver District in Canada’s Yukon Territory. For the full calendar year 2012, Alexco produced 2,150,959 ounces of silver, generally in line with full year production guidance of 2.2 million ounces. Operations are expected to continue at generally the same pace as 2012, with guidance for silver production in the range of 1.9 million to 2.1 million ounces of silver.
3. Scorpio Mining Corporation announced its operating results for the fourth quarter ended December 31, 2012 (“Q4″) and total 2012 production results for the Nuestra Seora Operation in Mexico. The Nuestra Seora Operation continues to track positively on a quarterly basis with cost reduction measures and increased efficiencies improving overall performance. 2012 saw record plant throughput from previous years, while operations in Q4 focused on extracting and processing metals with a higher dollar value. Silver head grade increased 2% and total silver produced for Q4 increased by 5% compared to the third quarter ended September 30, 2012 (“Q3″).
4. Coeur d’Alene Mines Corporation produced 3.8 million ounces of silver in the fourth quarter of 2012 and 18.0 million ounces of silver for the full year 2012. During the fourth quarter of 2012, Palmarejo produced 1.6 million ounces of silver compared with 1.8 million ounces of silver in the third quarter of 2012. Silver grades from open pit operations are expected to increase throughout 2013. Coeur estimates that it will produce 18.0 – 19.5 million ounces of silver in 2013.
Although this data does’t suggest booming supply, it provides some evidence for increased silver production, but not for physical silver shortage.
For silver prices to remain stable and rise further, markets should accumulate the additional supply realized from the increase in production. Various industries, such as manufacturing and jewelry, should accumulate more silver than they did in 2012. Would they be able to add between 2% and 15% increase in demand in 2013?
Although, we expect silver prices to advance, the available current data provokes a doubt.