Mining Costs of Silver?

[arsenal009Member]

Hey guys,

According to Ben Davies, the mining costs of gold are $1250 to $1350, so that is the absolute bottom in price.

Does anyone here know the mining costs of silver?

Thanks

[chafroMember]

The cost is  between  6-10 USD an OZ in Mexico. Not sure in other countries but should be similar.

[mrgneissMember]

I think the above estimate is valid for third world or developing countries, and you would probably see $10 – $25 per ounce in places with higher levels of labor costs/environmental regulations in places such as the US, Canada and Australia etc.  Other mineral offsets can make a big difference as well, like copper; apart from that grade and metallurgy probably play the biggest roles in the P&L equation.

[SilverStandardMember]

There was a great comment about this I saw by SRSrocco on TFmetals report, here it is:

COST OF MINING SILVER

Submitted by SRSrocco on May 14, 2012 – 12:38pm

MY BALLPARK FORMULA FOR CALCULATING COMPLETE MINING COSTS FOR SILVER

Last year, I wrote an article titled THE COMPLETE COST OF MINING
SILVER.  In it I used a quick formula to figure what a truer cost would
be for an ounce of silver than the CASH COST.  Miners use the CASH COST
to compare just how cheap it is to mine silver.

They arrive at their CASH COST by adding all the by-product revenue
against an ounce of silver.  For example, if a miner has some Gold, Lead
and Zinc in a ton of ore, they take the revenue received from those
by-product credits and get an INSANELY LOW CASH COST.  In 2011, HECLA
had a CASH COST of only $1.15 an ounce for silver.  To the layman they
would think that they would have all this wonderful profit – but they
don’t. 

In 2011, Hecla actually had TOTAL REVENUE of $477.6 million with a NET INCOME of only $151.1 million.  You
would think with such a low CASH COST that they would be
making nearly $350-$400 million.  That is why I came up with my COMPLETE
COST for getting a more accurate figure.

Before I put out the CHARTS… let me give you my DISCLAIMER.  After I
came out with the article last year, I had several emails telling me
why my formula was incorrect.  While it is true, that my COMPLETE COST
is not the best way to get a accurate estimation, it is the simplest
way.  I like KEEP IT SIMPLE STUPID — KISS.

First, this is last years formula (repeat…. LAST YEARS FORMULA) for getting the Complete cost from  HECLA’s 10-K:

And this was last year’s COMPLETE COST CHART for (4) primary silver miners:

I did the calculations for 2011, and this is what I found to be the COMPLETE COST PER OUNCE for mining silver at this time:

The RED LINE is the CASH COSTS put out by the Mining companies.  The
BLUE LINE is my COMPLETE COST that I arrive by dividing the NET INCOME
by the TOTAL REVENUE… this gives me a percentage of PROFITS.  I then
take that percentage and times it by the average price of silver in 2011
which was $35.12 oz.  That figure is the PROFIT PER OUNCE for each
mining company.

First hand, we can see that actual CASH COSTS for two of the mining
companies in the United States (US SILVER-REVETT MINERALS) is actually
very high at $17.50+.  I will take US SILVER for an example:

US SILVER CORP:

Total Revenue = $93.4 million

Net Income = $21.3 million

$21.3 mil / $93.4 mil = 22.8%

$35.12 X 22.8% = $8.00 PROFIT PER OUNCE

$35.12 – $8.00 = $27.12 COMPLETE COST PER OUNCE

————————————————————————————–

Now if the AVERAGE PRICE of SILVER had fallen below $27.12, US SILVER
CORP would have started to get into what I call the BREAK-EVEN area.  I
would imagine if we had $20 an ounce silver in 2011, US SILVER CORP
would have a NET INCOME LOSS.

Again, this is a BALL PARK WAY of getting a TRUER figure.  As for
by-product metals… we  must remember, all mining companies are selling
their by-product metals at market value.  Some have used hedges, or
have a certain contracted rate (such as Silver Wheaton)… but they all
do this.

If the price of Silver falls, so does the price for Lead, Zinc,
Copper and Gold.  My method just makes calculating this figure simply.  I
could spend hours comparing what the mining company PRODUCED and what
it actually SOLD in metal ounces.  They always sell less than they mine,
so to me it all evens out in the wash.

If the AVERAGE PRICE of SILVER keeps falling in 2012, but the COSTS
for mining increase (which they have), these miners will make a lot less
NET INCOME this year.

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