The era of high-grade silver mines may be coming to an end. Remarkably, the top primary silver miners’ average yield fell to the lowest ever in 2019. Which begs the question, will high-grade silver mines become extinct in the not-so-distant future? Well, if we look at the data, it seems to be already happening.
Since I started researching the primary silver mining industry, the yields at many high-grade silver mines have fallen drastically. For example, Fresnillo (LON:FRES) PLC’s Flagship mine, the Fresnillo Mine, had seen its average yield decline from 15 oz/t (ounce per tonne) in 2005 to only 5.3 oz/t last year. That is one hell of a reduction in just 14 years… nearly 10 oz/t of silver yield evaporated.
Take a look at how much more silver the Fresnillo Mine was producing in 2005 compared to 2019… processing LESS ORE!!
- Fresnillo Mine 2005 Production = 33.4 million oz
- Fresnillo Mine 2005 Processed Ore = 2.2 million tons
- Fresnillo Mine 2005 Average Yield = 15.2 oz/t
- Fresnillo Mine 2019 Production = 13.0 million oz
- Fresnillo Mine 2019 Processed Ore = 2.5 million tons
- Fresnillo Mine 2019 Average Yield = 5.3 oz/t
As we can see, workers at the Fresnillo Mine processed more ore in 2019 to produce 20 million fewer ounces of silver. No wonder the cost to produce silver has risen from $4-5 per ounce back in 2005 to over $15+ an ounce presently.
Now, if we combine the top seven primary silver miners in my group, the average yield fell to a record low of 6.0 oz/t in 2019:
The top primary silver mining companies’ average yield fell from 13 oz/t in 2005 to 6.0 oz/t last year. That’s a 54% decline in average yield from the top primary silver mining industry. This means these silver mining companies have to extract, transport, and process more than twice the amount of ore than they did in 2005 to produce the same amount of metal.
The companies that impacted the group’s average yield the most were from Peru. Peru’s Hochschild average yield declined from 7.5 oz/t in 2018 to 5.9 oz/t last year, while Buenaventura’s average yield fell from 10.6 oz/t to 7.5 oz/t during the same period. Mexico’s Fresnillo PLC’s average yield from its primary silver mines (Fresnillo, Saucito & San Julian) fell from 5.7 oz/t in 2018 to 5.0 oz/t in 2019.
Also, Russia’s Polymetal International's (LON:POLYP) Dukat Operation saw its average yield fall to 7.7 oz/t last year down from 8.5 oz/t in 2018. The only primary silver miner that saw an increase in yield was Hecla (NYSE:HL). Mainly due to Hecla’s Greens Creek Mine, the company’s average silver yield increased from 10 to 11.5 oz/t during the same period.
The world is running out of its high-grade, easy-to-get to silver deposits. While there are still some high-grade silver deposits still remaining in the world, the primary mining industry continues to burn through its better quality reserves. At some point, production from these top seven silver mines will no longer be able to offset the declines from falling ore grades.
Investors have no idea what a deal they are getting in acquiring silver for such a great price, when we compare it to most of the over-valued financial paper assets and real estate. The few silver miners in the world may just surprise the market when investors begin to move into them in a BIG WAY.