With Friday's sell off it's time to look at the true intrinsic value in silver. What's the actual 'value' or cost to make an ounce of silver? While mining companies will provide cash costs per ounce referred to at $8 an ounce, this is not the true cost of producing silver. The "cash cost" of production is a statistic provided in order to attract investment. The complete "all in" cost of producing silver is much much higher at around $29 per ounce. The quarterly profit reports from the publicly traded companies give the actual profit per ounce. When the market price per ounce falls below the true cost of production the silver miners are not going to give it away for free. One way or another, they will either shut down production and the price will rise back up above the cost of production. sources: http://www.financialsense.com/contr...tions-large-surpluses-and-low-production-cost http://seekingalpha.com/article/1303691-the-true-cost-to-mine-silver-complete-2012-figures http://silverdoctors.com/2011-complete-cost-for-mining-silver/
Silver is a by product. That is what I heard. Citation needed. So not necessary to be the actual cost.
This is the 'cash cost' per oz. Not the actual true cost. Real Costs of Production for PAAS - 4Q 2012: amortized silver production costs rose to $21.88 Source: http://seekingalpha.com/article/121...o-mine-silver-the-pan-american-silver-edition
I know a geologist that works for a mining company in the Gold fields and he says they are losing at least $4M a month.
For some mining operations it is, but it is still part of the profit vs cost for mining operations to remain solvent and in production. The world's largest silver only producer is First Majestic. 4th Quarter production cost per oz $17.71 source: http://seekingalpha.com/article/125...sts-to-mine-silver-the-first-majestic-edition Remember that 'cash cost' is not an accurate cost of production as it does not include smelting and refining, transportation and other selling costs like depreciation, depletion, amortization, general and administration, exploration, interest expense, and taxes.
What for? Is this cost of running the mine or someone tries very hard to close all the mines. Then all pm will shot sky rocket eventually. When there is no supply sure this will happen.
so much misinformation from i am sorry to say, but ignorant posters. Silver miners will continue to produce from EXISTING mines so long as cash costs are less than market price. Silver miners will not expand production, take on new mines where the 'all in cost' is more than market price. You guys need to get your facts right. Given the sunk costs in recent silver mines, they will be happily producing away so long as silver prices are somewhere north of US$10
Agreed, this fundamentally provides support for the price of bullion at current prices. At this current price, demand will exceed supply. Mines are suddenly going to go offline, ore not refined and bullion not brought to market.
i am sorry but no it doesnt. What is demand? what is supply?, how long is the time frame you are looking at? Underlying real demand comes from industry, investor demand is a build up of physical supply. If investors change their mind, they can dump their position onto the physical market. That physical supply has to be taken up by industry for price stabilisation. At US$26 it becomes a difficult decision for new mining supply, but a no brainer to keep extracting from mines already built. Mines are NOT GOING TO GO OFFLINE, ore will continue to be rifined, and an INCREASE IN BULLION BROUGHT TO MARKET OVER THE NEXT SEVERAL YEARS WILL CONTINUE. Why? because cash costs relative to market prices is still attractive for current products. Therefore for the next several years PHYSICAL SUPPLY OF SILVER from mining will continue to increase.
For mines & recyclers silver is one of the elements in the ore. The profitability of a miner / recycler is determined based on the totality of what the ore contains, not on one element in it. The real question then becomes another: what part of the value of the ore/ground, as an average of all miners/recyclers does silver represent? If that part is big, then a low silver price could render the business nonprofitable. If it's small, then a low silver price has little impact on the profitability. I didn't see enough figures to have an idea about the answer. One thing is sure though, since extracting the various elements out of ore mostly require the same processing equipment, even at a silver price that causes a 50% loss, they wouldn't just throw away the silver, because that would be a 100% loss. Something, including 10%, is always better than nothing. This again changes the question: what is the general profitability of mines? Also, it's exactly this that links commodity prices (including silver) to inflation. The hedge against inflation starts there. There are also other things to take into account. Businesses can operate at losses (for ex governments do this in a nearly permanent fashion, hence their debt). Because they receive compensating dollars from other sources (bank lending / bail outs / support with other peoples money in any form / privileges). Causing them to be able to continue mining despite the losses. So the question what the true cost of the production of silver is, is abit... useless. If it was $1, it wouldn't mean that miners/recyclers would throw away the silver part of the ore, and if it was $1000, it wouldn't mean that miners/recyclers would throw away the nonsilver-rest of the ore. All they do is chew out everything that the ore/garbage contains, as long as the total cost of doing it doesn't exceed the return from it.
Wow that took some taking in but made for a good read thanks. I think you all would agree that while these figures are critical and will play a role very soon. In the meantime the virtual paper game goes on that is taking the piss out of physical prices.
Yes and byproduct of copper normally and copper tank a lot too. ;-) I think is posibble silver go to 24/25 uss but in the long term 26 iss is a very good buy
Which hat did you pull the $10 from? The subject is the "true cost of production." My guess that it is NZ$13.21. Perhaps we should run another guessing competition?
Things like this will ad to the cost, as it becomes increasingly more deficit to mine. I think we are getting closer to the point where people are not going to take huge risk for a small reward. http://www.perthnow.com.au/huge-lan...gham-canyon-mine/story-fnhocq8b-1226619124124
Gerald Celente said it costs $1200 to pull gold out of the ground. $20 sounds about right for silver.
Just my 2 cents worth. As already mentioned, Silver is found in conjunction with other ores whether it is Copper/Gold/Silver or Lead/Tin/Zinc/Silver. Due to low concentrations, we might consider it a byproduct even though that sounds wrong. The cost of extracting silver depends upon how you or the mine treats the accounting side of things. If you take a mine where Silver is a small proportion of the metal in the ore then you could pretty much neglect the cost of extraction, crushing and milling of the ore. Refining is probably the most significant factor that contributes to cost. I don't know typical proportions of silver/gold that you would find as a byproduct in Copper/Gold/Silver ore or Lead/Tin/Silver ore. Some mining companies may have started processing silver while looking for an additional income stream. We then have the cost of mineral processing. The cost of adding the processing and concentrating equipment to an existing mine might be fairly low. Costs can also be altered by reprocessing of tailings that were previously ignored in years gone by. As for refining, it depends upon whether the concentrate is refined at the mine (Olympic Dam), refined in Port Pirie or Cockle Creek or sent to London as lead bullion for copper refining. Some mines send their concentrate overseas to be refined. Another thing to consider is labour & equipment costs. When gold out of fashion and cheap there wasn't a mining boom and labour plus equipment costs were cheap. The price goes up, the mining boom hits with full force and the cost of production rose such that profits of gold mines didn't really increase. It would be a similar story for mines that have silver as one of their products. So there are a few variables to think of and we know that not much silver is mined or processed. I apologise I can't actually answer the question of what it costs to produce.
hahaha so we may see the miners buying bullion and filling their minecarts with bars rather than ore. Why not? if its costing them over the current price to get it out of the ground they may as well just buy it and say "hey boss look what we dug up "
