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Mining cost of silver

sumrtymsumrtym Posts: 394 ✭✭✭
in Precious Metals
This has come up before, but I found recent data for it showing it's not near as high as perceived by many.

Pan American Silver [PAAS 36.41 1.83 (+5.29%) ] — $5.90/oz (net of by-product credits)

Silver Wheaton [SLW 35.07 2.12 (+6.43%) ] —company typically buys silver production streams at $3.90 per ounce.

Coeur D’Alene Mines [CDE 24.71 1.23 (+5.24%) ] — reported cash costs of $4.87 per ounce

Hecla Mining [HL 8.96 1.03 (+12.99%) ] — after netting out its lead production, actually reported negative cash costs of -$1.92/oz for the first 9 months of the year

Comments

  • Mission16Mission16 Posts: 1,413 ✭✭✭
    Wow. So I should be lokking at opening a mine?
  • chumleychumley Posts: 2,305 ✭✭✭✭
    not unless you know 7 dwarves with pickaxes
  • Danny9995Danny9995 Posts: 115
    These costs are very decieving. They cant include "opportunity cost" which is the highest of all the costs.

    I mean if you own a mine with 10,000,000 ounces of silver in it that mine would have to be worth more than $50,000,000 just because of the 10,000,000 ounces of silver. Known, unmined silver would have to be worth more than $5.90 an ounce when silver spot is $34. So there is no way the true cost of mining an ounce could be anywhere near $3.90, $4.87, or $5.90 an ounce since the mine does lose an ounce of silver for every ounce that is mined.
  • BaleyBaley Posts: 22,660 ✭✭✭✭✭
    Some more discussion of this subject

    cost to produce certainly puts a floor under the silver price. question is, does it also imply, if not a ceiling exactly, than a factor in resistance to further advance?

    Someone is sure to mention that silver is largely a byproduct of other mining such as copper and tin. So in that respect, it's almost free, right? Icing on the cake for a copper miner?

    Liberty: Parent of Science & Industry

  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭
    Production cost has limited relevance. What does it cost the Saudis to extract a barrel of oil? Couple of bucks... yet oil is over $100/barrel.
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    The mining companies lure you in with cash costs or by-product costs which leave out key ingredients. What's not included:

    depletion or replacing ounces mined to maintain growth or at least maintain current production (exploration, takeovers, etc), depreciation and amoritization,
    mine closure costs, stock dilution to fund future programs, etc. Then of course there are always those unseen events that knock the company off track for 3-12 months
    at a time. Those include one off events like fires, flooding, cave ins, downward adjustments to known reserves/resources, political/environmental/court rulings against
    the company, strikes, nationalization by the govt, management negligence/incompetence, currency and derivative trades/swaps that don't work out as intended, goodwill,
    safety rulings and shutdowns, etc.

    In a nutshell "all-in" world mining costs probably average closer to $1,000/oz for gold and $15-$20 for silver. Factor in all unknown risks that happen during the course of any year
    and clearly there's no free lunch here. Look at Kinross that acquired the highly desired Red Back Mining in the last couple of years for $7 BILL. They just did a downward adjustment
    on the value of that acquisition by around -$3 BILL...which dropped the stock price/market cap by 24%. That wasn't in the "cash costs" per ounce. That would be in the categories of
    management incompetence and downward adjustments of reserves/resources. Hecla can report -$1.92/oz but don't have to include the impact of a $260 MILL judgement against them
    by the EPA that will most certainly affect bottom line in future years. And while reporting that -$1.92/oz they just had the Mine Safety Bureau shutdown their cheapest producing mine
    for all of 2012 (a 15% hit to annual production). This latest "one off" event will certainly hit the cash cost line for 2012.
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • Danny9995Danny9995 Posts: 115


    << <i>Some more discussion of this subject

    cost to produce certainly puts a floor under the silver price. question is, does it also imply, if not a ceiling exactly, than a factor in resistance to further advance?

    Someone is sure to mention that silver is largely a byproduct of other mining such as copper and tin. So in that respect, it's almost free, right? Icing on the cake for a copper miner? >>



    Pulling an ounce of silver out of the ground is a cost in itself. If a mine with 10,000,000 ounces of silver in it is worth $100,000,000 just because of the estimated silver in it then every ounce of silver you mine costs $10 before you even start adding on costs. Its impossible to say its almost free because even if you could get it out of the ground for 0 you are still losing the unmined silver, which has a value.

    And the lower the costs to mine silver, the higher the value the unmined silver would have. So if its true that they can pull it out of the ground for $4 an ounce with spot at $34 I would say value of unmined silver could be $15 an ounce.

    Agree 100% with roadrunner.
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