LAWRIE WILLIAMS: World top 20 Silver Producers – countries and companies

London-based precious metals consultancy, Metals Focus, has produced its latest silver survey for the Washington, DC, based Silver Institute, having taken this task over from GFMS.  We’ve extracted the production tables for 2019 silver output by country and by company for the top 20 leading producers in each category as well as the pluses and minuses in output for each country and company compared with 2018 – see Tables 1 and 2 below.  The full 86 page report may be viewed courtesy of the Silver Institute – click here for the pdf.

As well as detailing silver output by country and company (and also mine by mine for the top individual mining operations), the survey goes into great detail regarding global silver supply and demand patterns with numerous tables, graphs and other data setting out how the report authors view the global silver market. The silver price has underperformed that of its gold sibling for the past few years, and continues to do so for the time being, despite the rise in the gold price and the white metal’s past history of outperforming gold in a rising market.

Silver followers tend to pay close attention to the Gold:Silver Ratio (GSR) which calculates the weight of silver required to match, in price levels, an equivalent weight of gold, hence the lower the GSR the better for the silver investor vis-a-vis gold.  This, as I write, is sitting at around 113, meaning the amount of silver to match say an ounce of gold, based on current spot prices, would be 113 ounces.  Silver aficionados will comment that the historical GSR is around 16, which at the current gold price of $1,730 would put silver at $108 an ounce – clearly an unlikely target given recent performance of both metals.  We are in a new pricing era for gold and silver with the latter nowadays primarily an industrial metal rather than a monetary one and while we might anticipate the GSR coming back a little, certainly not to 16.

It is thus interesting to note how Metals Focus and the Silver Institute see the silver price progressing in the months and years ahead.  In their executive summary they note that in spite of the adverse impact of the coronavirus on industrial demand and the ongoing supply surplus for silver (which has persisted for several years now) and the recently negative stance of institutional investors, the outlook for silver prices over the rest of 2020 remains constructively positive.  The analysts expect physical investment to enjoy strong growth. Importantly, they also believe that professional investor interest in silver will improve considerably in the months to come, as confidence that gold is once again in a sustainable bull market grows and silver’s historical undervaluation compared with gold makes it look yet more attractive.  The silver price still moves up and down with the gold price, but without the sometimes extreme volatility we have seen in the past

On price the report comes up with the conclusion that its authors would not be surprised to see the white metal’s price testing the $19 mark before the year-end. Even so, taking the recent weakness in the metal price into account, the analysts anticipate that the full year average may still fall a modest 3% year on year to $15.70.  That is despite the analysts probably banking on the GSR coming back down in the days and weeks ahead, perhaps to below 100, which would mean silver outperforming gold in percentage terms from its current low level, but maybe not by the kind of huge amount the silver bulls will be hoping for.  Even so, a $19 price before the year end would probably be a nice bonus for the silver investor – and perhaps mean gold rising to around $1,900 an ounce – perhaps a higher level than the more realistic gold investor might anticipate.

Overall the report suggests that global mined silver production fell for the fourth consecutive year in 2019, dropping by 1.3% year-on-year to 836.5 million ounces (26,019 tonnes) due to declining grades at large silver mines, lower silver output from copper mines and disruption-related losses at some major producers.

Lead-zinc mines still accounted for the bulk of the global total, with silver output from these rising by 2.3% year-on-year. Silver production from gold mines was flat while output from copper and primary silver mines dropped by 3.1% and 3.8% respectively.

On a country level, the largest year-on-year drop emerged in Peru, where output fell almost 8%. This was largely a result of lower head grades at major silver producing mines alongside mine closures. Other notable year-on-year declines came in Mexico, Indonesia and Kazakhstan. But these losses were partially offset by increases in Argentina, Australia and the U.S.  Metals Focus anticipates global mine production to decline by a further 4.6% in 2020.  This is partly a result of expected disruption from the Covid-19 virus pandemic.  Even so it is anticipated that the supply/demand balance will remain in surplus in 2020, albeit a smaller one than in 2019.

Table 1.  Top silver producing nations (Millions of ounces)

Source:  The Silver Institute, Metals Focus

There has been little change, therefore, among the world’s major silver producers with Mexico, Peru and China comfortably ahead of the rest, Australia has overtaken Russia and Poland to move into fourth place and it is interesting to note that now that three of the world’s top 5 silver producing nations, China, Australia and Russia, are also the world’s top three gold producers.  If the pundits are correct and gold is due for a strong bull run as a result of the coronavirus-induced global recession/depression, and drags silver up with it, then these three countries will do particularly well in terms of revenues. 

Latin America, though, remains the world’s top silver producing area with both primary silver mines as well as ever-continuing high byproduct output from the region’s massive lead-zinc and copper mining sector (in Mexico, Peru and Chile in particular).  North American production is also significant with the U.S. coming in in in 10^th place and Canada 14^th, although here again much of the silver production is byproduct output from the two nations’ gold and base metals mining industries.

Notable by its continuing absence from the listing of the world’s biggest silver mining nations is Guatemala where silver output peaked in 2014-2016 making the country one of the world’s largest producers of the metal from the Escobal silver mine, then owned by Tahoe Resources, but now wholly-owned by Pan American Silver (PAAS) following the merger with Tahoe last year. Escobal remained among the world’s biggest individual silver mining operations until 2016.  It is probably potentially the world’s second largest silver producing mine, but has been closed since mid-2017 due to a dispute under Guatemalan law that still remains to be settled.  If Escobal re-opens it will immediately propel Guatemala back into the world top 20 silver producing countries, but PAAS will not make any predictions on a likely re-opening timescale.  The dispute is too deep set to make any accurate re-opening forecasts.

Poland remains comfortably the top European producer, followed by Sweden which mainly produces silver as a byproduct from its big copper mines.

Asian production was also significant, although there was a fall-off in Kazakhstan. India, Indonesia, Uzbekistan and Turkey all made the top 20 listing.

Africa is not particularly well represented with only Morocco coming into the top 20 listing.  However there will have been a fair amount of cumulative silver output as a byproduct from the continent’s gold and base metal mining operations which will have been an important part of the ‘other’ category.

Table 2.  Top silver producing companies (Millions of ounces)

Source:  The Silver Institute, Metals Focus

Fresnillo comfortably retains the top spot among silver producing companies despite an 11% fall in output last year, allowing Poland’s KGHM to close the gap with an 18% year-on-year increase.  Pan American Silver is coming up too and if it is allowed to reopen Escobal in Guatemala could rival Glencore, with its multiplicity of base metal mines producing byproduct silver, for third place in 2020, although its Argentinian operations, among others, have been shuttered temporarily due to that country’s Covid-19 lockdown.

The big gainer among companies was Newmont following its merger with Goldcorp early in 2019.  That, in particular, brings the massive Penasquito mine in Mexico, currently the world’s second largest silver mining operation by volume, into the Newmont universe.  Indeed were it not for continuing disputes with the Penasquito workforce and local population Newmont might have made the Top 10 silver producing companies rather than the 11^th place estimated by Metals Focus in 2019.

Hecla picked up well too and following the end of the longstanding dispute at its Lucky Friday mine in Idaho should see further silver output increases this year despite the temporary closure of its Canadian and Mexican mines due to Covid-19.  Production is now being allowed to resume at Casa Berardi in Canada, but this is a primary gold producer.

Despite the anticipated 4.6% fall in global new mined silver output in 2020, silver may remain relatively depressed while the supply/demand surplus persists.  Given perhaps 60% of demand nowadays is industry related, the Covid-19 related global recession/depression won’t be doing the metal price any favours, but it does retain a propensity to follow the path of the gold price and the outlook for gold, for the moment, remains positive, so perhaps it should be for silver too.  If the gold price does continue to progress, as many expect, we could well see a decline in the GSR which is definitely even more positive for silver.  We shall see.

26 Apr 2020 | Categories: Gold, Silver, Mining

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