I am currently working on my next article. This is a sneak peak. I truly believe that future silver production is more at risk than gold. Thus, I believe silver will gain much more in percentage than gold.

We all know about the serious trouble coming down the pike when it comes to ALLOCATED GOLD & SILVER that has been sold into the market and replaced by paper certificates.
The information that I will provide in this article will add insult to injury to a silver market that is about ready to explode.

 A friend of mine and I recently took a drive around some old mining towns (now ghost towns) in Utah. We stopped at the old Frisco mining town and spent most of the day looking at the remains of the town as well as the mine itself. It was simply amazing to see that at one time, Frisco had a dozen saloons, businesses and several thousand people at its peak.

 The Frisco mine later named the HORN SILVER MINE, was founded in 1875 and by 1881 was producing over a million ounces of silver a year. However, due to the a rush to get the silver out and not bracing the mining tunnels correctly, the mine collapsed in Feb, 1885. The fortunate part about the major collapse is that it took place between shifts so no one was hurt.

The mine started to produce again at a decent rate in 1887, but never regained the level prior to the mine collapse. In the 30+ years the mine was open it produced over 14 million ounces of silver. This may not seem like a great deal today, but it was the largest silver mine in Utah at the time.

The most interesting part of researching the Horn Silver Mine in Frisco was finding out the tremendously high silver ore grades they were mining. When the mine first opened they were producing silver at a staggering 1,608 grams per ton (51.7 oz per ton). We must remember, at this time, the United States was figuring these ore grades by short tons or 2,000 pounds. The industry standard today is metric tonnes or 2,205 pounds. Thus, the earlier figures were 10% lower than the grades today.  If we add that 10% to this figure we see that compared to present mining ore grades it would have been 56.8 ounces per metric tonne — or 1,769 grams per tonne.

Visiting the mine in person, gave me the inspiration to write this article.  I looked at several present silver mines and decided to compare the Horn Silver Mine with First Majestic.  The chart below gives the STARK COMPARISON of how times have changed in 100 years.

 Here we can see dramatic difference.  During the entire 30 year lifespan of the Horn Silver Mine, they processed a grand total of 474,780 tons of ore and produced 14.21 million oz.  However, if we look at just one quarter of silver production at First Majestic, they mined a total of 482,077 metric tonnes of ore in Q2 2011 and produced 1.78 million oz.

WHAT A DIFFERENCE A 100 YEARS MAKES…

Basically, we have a 10 fold decrease in 100+ years.  We also must remember that during the early days, most of the mines did not use oil as a source of energy.  It was coal, wood or human and animal labor.

The remainder of the article discusses the energy issue and how it will impact the mining industry going forward.  Furthermore, due to the fact that 70% of silver is a by-product of base metal mining, it will suffer much greater than gold when the energy crunch hits hard in the next several years.

GOT YOUR PHYSICAL SILVER????

SRSrocco’s FULL ARTICLE on Future Silver Supply has just been posted!
Click here for the full research!

 

  1. Steve, love your stuff.
    And can read or listen to stuff like this all day.
    Yet having said that, have heard this kinda thing for ages and it sorta
    just bounces off now. I’m just a battle weary warrior; But here for the duration
    and tired as I may be of waiting for the end game to play out genuinely fearful
    for family and friends that should have fallen into the ranks……and
    haven’t….
  2. If 95% of all S&G are bought and sold outside the exchanges, then what effect does the silver sitting on a vault shelf have on spot?  Who buys a bar of silver from the COMEX, verses calling a coin dealer or a silver mine?  Who (what 5%) HAS to have COMEX bars, and nothing else, and thus effecting supply and demand on COMEX spot.  I would think these customers are at risk of not getting any or all of requested delivery, someday.  It’s a frickin zoo, and no caretakers.

    It’s all about to end soon anyway. 

    Thanks for the research, and it’s always good to have additional knowledge.

  3. Steve  I look forward to seeing the entire report.  WIth  First Magestic getting 3.7 ounces per metric ton, it’s fortunate that silver, $27 an ounce, is even worth the effort and risk.. What happens when ore produces .3 ounces per ton?  If the EROI doesn’t kill the industry silver then this white metal will have to be $300 an ounce or more.  Otherwise the industry will die. 

    Here in Nevada we still have productive silver mines and Nevada is the 4th largest gold producer in the world.  It’s one of the few states that still has a decent high wage for miners with over 12,000 miners making $80,000 plus a year.  But with the low quality ore,  I am concerned that this won’t continue if the costs to produce continue upwards. One another note,  with price supression such as it is, it’s as if the  bankers who are manipulating the price are trying to kill the entire silver mining industry. If it was not their intent, it sure seems to be producing that result.  If they are even partly successful, the lack of silver production will have  a harsh and damaging effect on the dozens of industries that rely on silver for their productions

     The one other  metal that absolutely mission critical is platinum, 75% of which comes from South Africa and another significant percentage from Russia.  As scarce as it is and as subject to the deteriorating rule of law SA,  it’s present price is $1,400 an ounce  What little I know about its availability it is somewhat hard to extract but it does not seem to that much more difficult than silver nor that much more scarce in the earth.   I find it difficult to fathom how PT can be 52 times more valuable than silver when silver has more uses and is getting pretty scarce   Then there is the crazy GTSR of 57 to 1.   Suffice it to say, it is a bit more than I can fathom because of the continuing dynamics of those factors that you eloquently speak about.

    4 OZ  I am with you  I really enjoy reading this, more because I love information and increasing my knowledge base.  It’s tough to try to take in some much data and process it when we are just trying to get from day to day, seeing what is coming our way.  At least we have the foresight to have the information here in SD and people like Steve to keep us up to speed.  Here’s to silver, Heigh Ho(w), Or how high. Who noze

  4. Steve,

    I read somewhere that almost all silver mined in the US is now shipped to China for refining and the .999 is then reshipped back.

    If true, are you figuring that into your EROI calcs?

    I wonder, not too much though, if China would keep a bunch of this when the system implodes?

  5. THANKS FOR ALL THE COMMENTS…

    AGXIIK… you bring up several good points.  It is interesting that Nevada had two different peaks in silver production.  Their last peak was in 1997 and that was due mainly to the huge amount of silver coming from the McCoy Cove Mine.  Between 1987-2003, the McCoy Cove Mine produced 35% of all the silver coming from Nevada.

    At its all time peak, Nevada produced 24.75 million oz of silver in 1997.  However, if we look at the following graph, we can see that its first peak was all the way back in 1912:

    Again, if it wasn’t for the McCoy Cove Mine, Nevada’s peak would still be a 100 years old.  I believe as fuel prices increase along with shortages, NEVADA’S LOW GRADE ORE MINES just may face serious porblems in the future.

    SILVER ALERT….  according to my conversation with HARVEY ORGAN, countries are no longer sending a great deal of silver concentrate to China.  It seems as if they just kept the refined silver and just sent back fiat paper notes.  Now most of the countries refine more of their own silver than lose this supply to China.  Interesting aye?

     

     

  6. 10-4 Steve  this information is intriguing. This is great data for us info wonks.  Keep it coming.

    Fortuntely the mining in Nevada is fairly broad based so silver is not the Comstock be all-end all of mining.  In my fantasies I imagined buying a silver mine. Me and Clementine. I’d hire Mark Twain to be the spokesperson. When I see him at the gym this week I’ll ask him about it. There are plenty of mines  for sale.  Some are about $100,000 and some are just holes in the ground. The interesting part of this story is that if, and there’s that big if,   buying a closed mine is like buying fallow farm land and silver shoots up, like the food prices today, those farms and mines might be a good place to store depreciating FRNs,waiting   when prices move upwards.  It’s probably a safer bet than putting cash in the mattress. 

  7. Peak silver?  Probably.  At a minimum all the low hanging fruit has been picked.  Here’s a few notes for your article SRSrocco.  Originally all U.S. silver eagles were required to be minted with U.S. silver.  That had to be changed as silver eagle demand outstripped U.S. production. Very few pure silver mines in the world today.  Majority of the silver production is a byproduct metal.  As we rollover into a deep double dip recession demand for base metals will fall and thus so will silver production.  Countries(Bolivia just recently) are beginning to nationalize silver mines.  Eric Sprott is buying millions of ounces with every tranche.  Electronics are using up more silver than ever.  There are no above ground stockpiles of silver like there is of gold.  Looking forward to your article.   

  8. Whatever happened to the plans in Idaho to build a silver refinery and mint?  They wanted to increase employment and also to create a 1oz state coin that would be for legal trade.

  9. I live right down the street from Sunshine Minting in CDA, ID.  Were they going to build another mint?  Also, Wallace, ID is a silver mining town, I wonder how much silver they get from their ore.

  10. Idaho is an anamoly.  All the states produced the majority of their silver production before 1950 except Idaho.  Idaho produced 568 million oz of silver from the 1800-1950.  However they produced 624 million oz from 1950-1990 (only 40 more years).

    Currently, US Silver Corp in Idaho is producing silver at 9 oz per ton, and Hecla’s Lucky Friday Mine as of last year (when it was opened) was producing silver at 10 oz per ton.  Again, Idaho is an execption to the rule — a good one.

    I would imagine other mines in the state are producing similar ore grades.

     

  11. Well, good on ya, Idaho!  I’m glad I live up here, I wonder if it will be good to live near an area that is gaining wealth from the ground post collapse.  I suppose it couldn’t hurt.

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