My silver mining cost is kerosene to fly my learjet to the safe and back, and a hamburger at the macdonalds before the return.
Silver is a byproduct of other mining, so it is cheap. Silver is cheap, so it is a byproduct of mining, and not a primary product of mining. If gold were cheap (say, $600 an oz), would it be mined as primary, or as a byproduct? The cost of mining silver is low, because the price of sliver is low. The cost of mining gold is high, because the price of gold is high. The high cost of mining gold does not make it more valuable in a utilitarian sense, just more expensive. The low cost of mining silver does not make it less valuable in a utilitarian sense, just less expensive. The high cost of mining gold, justified by the high price of gold, is because.................?????? Beats me. Wait, it is prettier - is that it?
Which ore does not contain various commodities? Which mine does not contain ore with various commodities? Which mine company does not mine various commodities? Which company is not active in more than mining commodities? Which investment firm is not active in more than mining? Just to say, there is alot emphasis on silver as byproduct and that this would mean that the price isn't crucial to the company, but seen from an investment firm, every specific thing isn't crucial, since it can compensate eventual losses along its other branches, and even vice versa, gains on silver used to compensate losses elsewhere. I look at it from the whole. Since that is the level that matters as hedge against general price risings. What I see is that the silver production is closely tied to other productions (especially copper, but many others). Well, that's what I'm after. Because there is the link to general prices trends, and that is precisely that hedge. Imagine general economical production drops. Less copper needed. Less nickel. Less whatever. Well, whether they like it or not, silvers production will drop with the others. It doesn't make sense to process 100000 tonnes ore that delivers twice the required copper, just to maintain silver production. Gold, is an entirely different case, about 350 tonnes is used for industrial purposes (so requires recycling thus there link to general prices). The 'consumption' thus represents 8% of the total traded gold in a year. Silver, with 466 Moz industrial usage (2012), let's ignore silverware and photography - at the moment less than 100 Moz and downtrending since quite some years, has a 'consumption' of 47%. So consumption gold 8% versus consumption silver 47%. This makes clear that golds link with general prices is more than 5 times weaker than silvers. If the central banks wouldn't help golds price up during crises (and down outside crises), golds price trend and 'inflation reaction' would be a sissy compared to silvers. And finally, aside of all this, there is worlds stockpiled gold and silver in bullion form, so zero processing required to make it sellable and thus the weakest of all link to general prices trend. This stock ratio is much lower than the price ratio. This 'comes to the surface' in a great way during price risings, in the recycling: Recycling gold (tonnes) 1997 631 1998 1108 1999 620 2000 619 2001 749 2002 872 2003 985 2004 878 2005 897 2006 1126 2007 956 2008 1217 2009 1672 2010 1653 2011 1611.9 2012 1590.8 2013 1371.4 Just compare pre 2008 with post 2008 Over 2001-2007, the annual average was 816 tonnes. Over 2009-2012, it was 1632 tonnes, coincidentially (I may hope lol) exactly doubled, so +100% Let's now look at silver: Old Silver Scrap (Moz) 1997 169.3 1998 193.9 1999 181.6 2000 180.7 2001 182.7 2002 187.5 2003 196.0 2004 198.7 2005 202.7 2006 206.2 2007 203.0 2008 200.8 2009 199.8 2010 228.8 2011 258.1 2012 253.9 Over 2001-2007, the annual average was 172 Moz. Over 2009-2012, it was 235 Moz, so +37% So recycling gold +100% versus recycling silver +37% That again means that gold has a weaker link than silver to the general prices trend, because this extra recycling is extra supply which weakens price increase. Just to give another perspective on that 'byproduct' nature. If you think it through, it's a big advantage in the hedging against inflation strategy, not the 'thumbsdown' that some seem to make of it.
