What are the costs of mining silver?

Discussion in 'Silver' started by Cheepo, Mar 26, 2014.

  1. Cheepo

    Cheepo New Member

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    I keep hearing that it now costs about $15/oz to mine silver. Yet, it seems to have costed about $5/oz until 5 years ago, and I never saw a serious report explaining how it arrived at $15/oz. On the internet, things get recycled. One says something, and others repeat it until everybody hears it often enough that everybody believes it. Has anybody ever come across a serious study that estimates the price of silver? Can you link to it?
     
  2. House

    House Well-Known Member Silver Stacker

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    It varies so much between all the mines so that's where the discrepancy lies. You have some very big miners who could mine it as a byproduct for cheaper than the mid-cap miners who will have a higher cash cost to do the same thing.

    I've read it could be as low as $5/oz and as high as $25/oz. Still haven't seen a definitive study on it though but these links that may be of interest;

    http://forums.silverstackers.com/topic-41294-mining-silver-costs-much-higher-than-most-realize.html

    http://forums.silverstackers.com/topic-42398-silver-mining-costs-exposed-cash-cost-fallacy.html
     
  3. SpringfieldStacker

    SpringfieldStacker New Member

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    Its my believe that $15 per ounce is fair value for actual cost, and $16 per ounce is fair market value.
    I think we will see $16 retail very soon!
     
  4. Cheepo

    Cheepo New Member

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    Thanks. A great debate on the websites you linked.

    I read at https://www.silverinstitute.org/site/supply-demand/silver-production/ that

    "Global silver mine production grew last year to 787.0 Moz, primarily due to by-product output from the lead/zinc sector. Primary silver mine supply grew by 1 percent to account for 28 percent of global silver mine output. Mexico was the world's largest silver producing country in 2012, followed by China, Peru, Australia and Russia. Primary silver mine cash costs rose to $8.88 an ounce, reflecting higher prices for labor, electricity, and maintenance charges."

    Cash costs of $8.88 means that this is what it costs for these "primary silver mine" producers, right? So we can expect something like $9-10 as the bottom price? (and yes, of course a lower price is possible because production costs are lower for those who produce silver as a by product).
     
  5. finicky

    finicky Well-Known Member Silver Stacker

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    Was costing Alcyone Resources (AYN) $91.27 per oz of silver in the December Quarter 2013. That is just simple production costs alone (not counting admin, exploration & development, or working capital) This was a big improvement on their September Quarter, which was pleasing to shareholders. Think this was in ramp up phase? Nope, been a hole in the ground with story tellers at the top for years. Thankfully for some entrepreneurs, there will always be people with savings who want an investment that gives them leverage to the price of silver. That's called a silver mine.

    Quarterly silver bullion production of 72,373oz.
    . Production cost $6,606,000 (line C of operating cost in cashflow section)

    $6,606,000 / 72,373oz = $91.27 per oz of silver.


    Alcyone Resources December 2013 Quarterly Report
     
  6. SpringfieldStacker

    SpringfieldStacker New Member

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    $8 an ounce would be great but don't hold your breath!

    $16 is a more realistic vision!
     
  7. Cheepo

    Cheepo New Member

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    Either that Alcyone Resources is run by fools, or the costs include exploration, which will be amortized over the next few years, or the purchase of buildings which will be used for decades, or many other possible expenses unrelated to extracting one oz of silver. That's the problem when looking at a company's accounting. There are legal ways to make up numbers.
     
  8. finicky

    finicky Well-Known Member Silver Stacker

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    Nope - that was just the cost of mining and processing. It's in the cashflow (page 6 of the linked report). It's actually not all that unusual - it's predecessor, Macmin Mining, that went broke exploiting the same mineral asset delivered similar cash costs.
     
  9. bull_bear

    bull_bear New Member Silver Stacker

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    Cash costs are basically operating costs.
    It may or may not include royalties,
    And wont include capital costs (amortisation/depreciation) / explorations / taxes / cost of capital etc
    Look up the difference between C1, C2 and C3 mining costs.. there is a big difference, and thats before you even start looking at varing grades, and differences in costs between companies.
     
  10. jjrici

    jjrici New Member

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    and what is the 'cost'.
    Do you include exploration costs?
    Do you include development costs?
    Do you just run with operational costs with the above being a 'sunk' cost?
    Most importantly what is the time frame between the above factors with regards to current global demand/supply

    This is why its just so so easy to make money from the mugs.

    So much misinformation out there, which makes it just so easy for the 'intelligent buyer'. A fool and their money is always parted its just simple mathematics:
    (a) recent historical price performance (to suck in the mugs). Especially after such a nice run up. All the mugs say 'dollar average downwards'. Yip that worked pretty well after the dot.com crash, the tulip crash the everything else crash. If the market price was 'x' before then the belief is that it should priced at 'x' again in the near term future.
    (b) the story (especially when it can have a nice sprinkle of mis-information that is believable under the current times)
    (c) in which currency are you buying, is that currency intrinsically over/under valued
    (d) near term future increases in supply vs near term future demand (because the big players out their rely on this, and its the big players that determine marginal pricing)
    (e) additional factors, but since this a 'free' comment, I will let others figure it out.
    People don't appreciate free comments, but they demand 'free responses'
     
  11. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    I take it you are not bullish on silver at the present time?

    Where do you see the silver price going over the next decade?
     
  12. heyimderrick

    heyimderrick Active Member

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    U.S. Silver & Gold is large silver miner in the U.S. Their all-in sustaining costs last year were upwards of $21/oz. This year, through increased production and higher grades, they are looking at $18-19/oz. When you look at miners, they report costs in several ways... cash costs usually reflect just the cost to pull the metal out of the ground and turn it into a dore, all-in costs reflect how much it costs to sustain the entire business, and then there are miners that will report costs/oz after they sell the other base metals or convert into gold. It can get a bit confusing. Bottom line, all-in sustaining cost is the best price to look at, but every miner will have a different all-in sustaining cost depending on the grades of their ore and size of operations, exploration, CAPEX, taxes, etc.
     
  13. Pirocco

    Pirocco Well-Known Member

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    Take into account that, as said, "primary silver mines" are responsible for only 28% of the silver production.
    Meaning that the weight on the silver price of their production cost is 3 times smaller than the weight of the production cost of the as-byproduct producers.
    If a primary silver mine has a cash cost of $9 an ounce, and as-byproduct producers a cash cost of $6 an ounce, then the average (as what affects the silver price) is 9+6+6+6/4 is $6.75, showing the small impact of the primary silver mine cash cost.
     
  14. heyimderrick

    heyimderrick Active Member

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    Looking at Cash Cost only still doesn't give you a real picture of the actual expense of producing the metal and bringing it to market.

    See common definitions used in evaluating mining costs below:


    Cash Cost: the cost of production at the mine site, not including head office costs, interest expense, capitalized development or stripping, off-site costs (like smelting or refining costs), taxes or depreciation

    Total Cash Costs: Cash Costs plus off-site costs, head office costs, and sometimes interest

    Total Costs: Total Cash Costs plus depreciation, interest, and reported taxes (not necessarily paid)

    All-in Cash Costs: Cash Costs plus exploration expense, head office costs, and sustaining capital

    When you look at a miner to determine if it will be profitable and able to bring their reserves into production and into the market, you have to look at the all-in cash costs, because they need to be able to sell their ounces for more than that price to stay in business. Cash cost alone is very misleading. The most revealing information would be if The Silver Institute did a study on the avg. all-in cost.
     
  15. Pirocco

    Pirocco Well-Known Member

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    Since a couple years I'm 'Comex averaging downwards' haha.
    Because a futures market is mainly a hedging environment so their total net position reflects the risk that they see in the price. They can be wrong ofcourse, but usually they are not, because most of them are the 'better-aware/informed' people on the market, simply because they have more at stake than our average peanut. :D
     
  16. toorak13

    toorak13 Member

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    maybe $15 an oz soon? back to 2008 ?
     
  17. Ag bullet

    Ag bullet Well-Known Member

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    i'm not an expert on the world of high finance but i know this simple fact- profit= income-expenses. every cost has to be taken off the income from silver sold from the turning of the 1st sod in explorartion to rehab at the end.
    like i said i'm not a financial expert, there probably is some way to make money for nothing.
     
  18. Prospectorsgoldandgems

    Prospectorsgoldandgems New Member

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    Such an open question. Depends on where and who is mining it and what the ore is.

    Most leaching chemicals to treat ore available in the USA Cost on average $6-8 per kilo.
    Most ores require 30 Kilos of leaching compounds to treat a batch of ore.
    So just chemical cost is $180-265 for a ton of crushed rock.

    This does not include your mine cost. Getting it out of the ground, crushing, concentrating, permits, equipment, employees on and on and on as well as disposal costs. So for silver it had better be some rich ore. So lets put it this way 10 oz per ton wont cut it.

    Most of the silver mined is by product of other things like copper, nickel, Gold and zinc etc etc.

    My Company produces Refines a lot of gold for small gold mines. The Gold has silver that comes with it. Anywhere from %4-24 silver per oz of gold.

    So on average every 100 oz of gold we process we may get 10 oz of silver. A nice bonus but not enough to really pay the bills.

    Silver is mainly a byproduct metal. Maybe for every ton of copper you get a few oz of silver...well that contamination of silver has to go somewhere. so it gets saved and processed. Same with traces of gold from base metal mining. one does not throw it away...like the copper from our gold and silver refining. It gets sent to a copper mine to process. so it all goes back into the system somewhere.


    To make silver into 999 silver is cheap. Hence why I can pay 90% and higher on scrap to process it to 999 fine. It costs maybe 30-35 cents per oz to make silver pure from high grade silver. 80% pure and up. Gold is the same. hence why i can pay 99% on it. if we can make $8 or more per oz of gold that is a good rate of return profit.

    But for silver and gold fear not. Even if prices get forced down to less than a dollar per oz. It will still be mined and processed so long as there is a need for base metals and copper....just good luck finding anyone willing to sell at such prices.
     
  19. Lmac

    Lmac Member

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    Also just bear in mind that silver is primarily a by-product of other materials mined. I think 2/3 of silver is from this, so it is probably more accurate to find out how much the cost of extracting silver is from the processes of whatever the other material they are looking for is. My friends work in QLD and WA mining. One told me they find about an ounce per dump truck of gold. I forget the details, but I remember the take-away from the conversation was that gold/silver and whatever else can in an ideal world, pay for the cash costs and then the profit comes from the other materials.

    Something like that Or I might be reciting poorly interpreted anecdotes.

    Either way - hope you enjoyed! haha
     
  20. Lmac

    Lmac Member

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    "Propectorsgoldandgems" said it better in his post above
     

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