In light of today’s paper futures smash sending silver towards $27 and several recent predictions by silver experts that silver’s long term price target is $20, we thought it apropos to re-post SRSrocco’s detailed analysis of the current COMPLETE COST FOR MINING SILVER, along with a NEW UPDATE from Steve.

By SD Contributor SRSrocco

Last year, I wrote an article titled THE COMPLETE COST OF MINING SILVER.  In it I used a quick formula to figure what a more true cost would be for an ounce of silver than the CASH COST.

This is an update of the complete cost for mining silver:

2013 Gold Eagles As Low As $74.99 Over Spot At!

2013 Gold Eagle



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.

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 truer 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 year’s 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:


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 had a NET INCOME LOSS.

Again, this is a BALL PARK WAY of getting to 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.

I have since been working on updating the BREAK EVEN ANALYSIS using spreadsheets and getting some help from an ex-CFO of a gold mining company plus another person who studies financial reports.

Let me tell you… BREAK EVEN is now above $27-8 for the GROUP of Primary Silver miners if we include ALL COSTS.

By the way… do you all remember this chart??


Well, I just did an update, and the darn YIELDS have fallen EVEN MORE in 2012…LOL

CASH COSTS are for BOZO’s.




buff 728

  1. Silver sits at $28 and change this AM.  If the price continues to fall the miners, particularly the juniors and those with high operational costs, low grade ore or cost of fuel impacting the extraction costs could simply stop mining. But since they have sunk costs and payroll to meet, costs which can’t just be stopped for a short time, these miners will continue to produce.  But they MAY hold a significant part of their product, hoping and waiting for a price rise to make their numbers work  This could exacerbate a silver shortage.  Additionally, those more profitable companies will also likely hold their product, selling only that needed to cover their expenses, take a much lower profit, reduce their taxes and simply lie low until the silver price makes it worth their while to sell their silver held from sale.  That’s Sprotts recommendation to silver producers  This price drop would present a great opportunity to take physical silver off the market, maybe even forcing the price upwards due to supply constrictions.

  2. I have always questioned these types of numbers on cost to produce.  Silver is also a byproduct of other mining operations and is almost free to mine since cost is calculated on the target product.  I wonder how much is mined free of charge?

  3. Saw on tv in Asia, china gold buying frenzy, because this was like the second or third time retailers adjust their price downwards. Due to the corrections. Quote” as the price goes down more people are buying the billion bars” there is not many bullion bars to go around. 

    It’s on news. I see no fear in people when there is price corrections. Chinese have different mindset, strange. Instead they buy more when price are cheap. Maybe only paper traders fear corrections. Physical buyers are too attracted to the glitter. Keep stacking till shtf.
  4. AGXIIK…. exactly.  The average price of oil was $111.26 (BRENT CRUDE) in 2011. For the first four months of 2012, the average price of BRENT CRUDE was $118.80 a barrel.  We must remember, Brent Crude is the world’s price of oil, not the pathetic West Texas Price we get in the states.

    So, for the first 1/3 of the year, the price of oil and related costs are higher than they were in 2011 and the average price of silver is currently $32.14 for 2012.  If we do get much lower prices of silver such as $24-$25, the average price will be more like $28-$30 for 2012.  Some of the small miners such as REVETT MINERALS and US SILVER CORP will have very little in the way of profits.

    We will see NET INCOMES in mining companies (in percentage terms) fall off a cliff this year if the price of silver does fall to the levels that some of these MORON TECHNICAL ANALYSTS forecast.


  5. Interesting stuff and good post. This is a good sign to stay away from Mining Stocks right now (Thank You Gut Feeling) and if it get worse then the mines will surely close down. Then silver will get scarcer.



    70%+ of the global silver production comes from by-product mining.  The majority comes from Copper, than Lead, Gold and finally Zinc.  More will come from Gold as huge mines like Penasquito in Mexico ramp up to total production as well as Barrick’s Pascua-Lame massive mine in Chile & Argentina that is slaeted to come online in 2013.  Pascua-lama mine will produce upwards of 700-800,000 ounces of gold and 35 million ounces of silver a year when in full production — 2016 and after.

    Some may think that because there is so much by-product silver, that a copper miner would just give silver away for next to nothing.  This is not the case.  ALL MINES try to maximize profits.  So they want to get the best price for their by-product metals.  Some have contracts to give metals away cheaply (such as Silver Wheaton),  but this was due to the help in financing or etc.  So in all actuality, that cheap silver was paid in offering FINANCE MONEY.

    Those who still believe (LIKE NED SCHMIDT) that a fair price of silver is $15, then FRESNILLO would only make a few bucks over spot as a profit… and this is one of the cheapest silver miners in the world.

    As you can see COSTS are much higher than the STUPID CASH COST put out by GFMS and the miners themselves.

  7. Again, we have issues.  Mostly with honesty.  Honesty in COMEX or paper contract pricing, as this stuff is NEVER delivered.

    I love these insanely low prices but want them to end.  I work with Local Coin Shops and “I BUY GOLD” jewelers frequently and see them struggling to make ends meet.  Around here we lose coin dealers over time and that suits the Oligarchy, making Silver and Gold both less accessible and less familiar to the public, specifically JOHN Q. who needs to protect himself financially.

    With the collaboration of both Coin Shops, Mining Mgmt and other involved stakeholders such as those here on Silver Doctors, towards developing a more effective and equitable method of pricing silver for the physical side, rather then relying on Paper Quotes.  I find Rocco’s work a refreshing step in the right direction.  If you would like to share some input, I would be more than happy to include it as I continue to work on a physical silver pricing system that if fair to all.
      My blog is .  I read the comments so if you want to share there rather than here, its all good.

  8. Thanks for the awesome comments SRSR!  You are a one man wrecking ball for the stupid lying trolls.  In truth, I understand all the above ground silver would fit in a 38 foot cube, and all production is used up in industry.  So silver is a very very rare, essential, and precious substance which should be screaming to the upside along with every other tangible asset but for the incredible fraudulent paper games on the Crimex. 

  9. Arsenal009… I see what you did.  I used the NET PROFIT before TAX.  That makes a big difference.  Here is what I got:

    FRESNILLO 2011

    TOTAL REVENUE = $2.192 billion

    NET INCOME = $901.75 million

    $901.75 million / $2.192 billion = 41.1% PROFIT PER OUNCE

    $35.12 X 41.1% = $14.45 PROFIT PER OUNCE

    $35.12 -$14.45 = $20.67 COST PER OUNCE

    How come you got the $18.48?

  10. Hey SRSrocco,
    I used Earnings From Continuing Operations = $1,038.6 as the first chart in the original post suggested.
    Further, when I use EBT = $1,534.4 I get a cost of $10.54, not $12.40 like in the original post.  How did you calculate $12.40?
    Finally, do u feel Earnings From Continuing Operations, Net Income, or EBT is the best way to calculate the true cost of silver?
    Source: Bloomberg Businessweek
  11. SO, in the forwards markets, the vast majority of silver will be sold probably at a premium that we can’t see, and a comparably small, but growing investment base of silver will be sold at or near cost? I dearly hope the market breaks.

  12. The numbers are +- accurate. When oil hits 150.00 a barrel, miners will be takeover targets. When equities correct, some say similar to 1987, 2008, gold will be lowered still more, miners will be takeover targets. With QE Infinity, gold lowered yet, more, miners will be takeover targets. The projection floated, in 2009, reintroduced in 2011, is the USD pegged at .002 of the spot gold price. The bill can be revived. At 1000.00 spot gold, the USD is pegged at 2.00. At 500.00 an ounce, pegged at 1.00. This summarizes my prediction. Massive M&A in mining, consolidation and control of miners and lands by the “few” paid for by printing money and market manipulations, then pegging to USD or Amero to .002 spot by 2020 is the plan. Massive personal debt of nations and citizens, controlled by the Elite, is the result. In the interim, expect bail-in’s using pensions, paying out 8.5% UST Shares, and perhaps capital controls and deposit bail-in’s as seen in Cyprus. This is my gut instincts of the future seven years. See H.R.710 — Public Retiree’s Investment Act of 2009

    H.R. 835 (111th): Dollar Bill Act of 2009

    A BILL

    To stimulate the economy and provide for a sound United States dollar by defining a value for the dollar, and for other purposes.
    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
    This Act may be cited as the ‘Dollar Bill Act of 2009’.
    Congress finds the following:
    (1) Article I, section 8 of the Constitution of the United States provides that the Congress shall have Power to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.
    (2) Congress effectively delegated the power to regulate the value of United States money and foreign money to the Federal Reserve System via the Federal Reserve Act of 1913.
    (3) The value of the United States dollar has fallen dramatically relative to gold, crude oil, other real commodities and major foreign currencies.
    (4) The value of the United States dollar has become unstable and uncertain.
    (5) The Board of Governors of the Federal Reserve System has not produced a stable and reliable value for the United States dollar.
    (6) The Board of Governors of the Federal Reserve System cannot reasonably be expected to produce a stable and reliable value for the United States dollar.
    (7) An unstable dollar slows the growth of the economy by increasing the cost of capital, increasing the risks attendant to long-term capital investment, and increasing the effective rate of the corporate income tax.
    (8) An unstable dollar reduces the real earnings of American workers.
    (9) An unstable dollar reduces the real value of financial assets held by the public.
    (10) An unstable dollar reduces the real value of pension plans and retirement accounts upon which Americans depend for their security.
    (11) An unstable dollar damages the economic and political standing of the United States in the world community.
    (12) An unstable dollar gives rise to anxiety, uncertainty, and risk among the financial markets and the public.
    (a) In General- Before the end of the 90-day period beginning on the date of the enactment of this Act, the Board of Governors of the Federal Reserve System shall make the value of the U.S. dollar equal to the market value of 0.002 of a troy ounce of gold and maintain the value of the United States dollar at this level.
    (b) Target- In regulating the value of the United States dollar, the Board of Governors of the Federal Reserve System shall–
    (1) conduct open market operations against an explicit target for the price of gold on the exchange operated by the Commodities Exchange, Inc. (COMEX) of the New York Mercantile Exchange, Inc.; and
    (2) shall not conduct open market operations indirectly, as in the current practice of targeting the Federal Funds rate.
    (c) Promotion of Stable and Effective Financial Markets- The Board of Governors of the Federal Reserve System shall use the banking and bank regulatory powers of the Board to maintain and promote stable and effective financial markets during and after the transition to a defined value for the United States dollar.
    Effective January 1, 2009, all entities that depreciate capital assets for tax purposes shall be entitled to 100 percent expensing of all capital investment for tax purposes in the year that the investment is made.
    In addition to the scoring that the Congressional Budget Office will do of the tax changes provided in this Act in the normal course of events, the Congressional Budget Office shall also calculate the impact on Federal revenues on a present value basis. This calculation shall be done in the manner that such calculations are done by the Social Security Trustees, and shall take into account the following:
    (1) That first year expensing of capital investment accelerates, but does not change the total amount of the depreciation that taxpayers take based upon their investments.
    (2) Capital investments by businesses have historically earned much higher returns than the interest rate on government bonds.
    In the event that any provisions of this Act are found to be in conflict with those of the Full Employment and Balanced Growth Act of 1978, the provisions of this Act shall supersede the provisions of such Act to the extent of the conflict.

  13. Wish I hadn’t bought those Noaha’s Arks two days ago. I could have got them for a $ or more less. Oh well. I sure do like the pictures on my metal. —– NOPE, Apmex changed the premium as the paper price dropped. Not much of a difference. I’ll skip a 1/4 of a pizza and it’s history!!!!

    • @silverballs: Thats exactly what I did. Some of all the weights. I know they are probably over priced, but I want them! I didn’t know they were minted in Germany, Thx for that info. I’m of German dissent and American heart. I know the weight and measures will be right on! I grew up with a file in one hand and a rifle in the other!

    • The fact they are minted in Germany was a pulling / plus factor for me, don’t think I would be so confident about them if they were minted in Armenia!
      I know that you shouldn’t touch silver coins with bare fingers, but these have a wonderful texture, a type of coin porn perversity to put a name to it.
      The fact they are fairly rare (or not very common), should ensure rarity value with a nice premium when it comes to sell.

    • I got a tube last summer, when they were a similar or lower premium than Philharmonikers and Maples, that is living in Euroland.
      Currently they seem to be coming to the fore again, with the 2012’s gaining quite a bit of premium (me likey, even though I just have one tube and 2 loose ones). They’re not matching the Maples for price as yet, but getting there. I don’t give for them at all, but might have to pick some more up anyways. Cheaper than Eagles, and more precious. Peace if a wonderful concept, liberty by now the world’s greatest lie. 

  14. I see Brent in a bit of a downtrend (or sideways, if you will) over the past few years. So for this first quarter of 2013, we may expect complete costs to drop a bit? If ore grade fell more than needed to compensate, of course the complete cost might go up anyway.

  15. This is funny   Silver May 12 was $28  Down was $12,600 plus.  I predict silver will be under $28 an ounce by April 2, 2013.  Don’t notice the date of this post.
    Dow now up $2,000   silver??? Flat as a pancake.  oh well, there’s still next year/

  16. I did some calculations before reading this article on the cost of mining silver
    Realized silver price 32.11
    Sales of products $321,143,000.00
    Expenses (Total) $306,189,000.00
    Net Earnings $14,954,000.00
    Equ. Silver produced 10,001,339.15

    Cost to produce one oz silver $30.61

    Endeavour Silver
    Realized silver price 30.99
    Sales of products $208,079,000.00
    Expenses (Total) $169,593,000.00
    Net Earnings $38,486,000.00
    Equ. Silver produced 6,714,391.74

    Cost to produce one oz silver $25.26

    First Majestic
    Realized silver price 31.10
    Sales of products $247,177,000.00
    Expenses (Total) $161,122,000.00
    Net Earnings $86,055,000.00
    Equ. Silver produced 7,947,813.50

    Cost to produce one oz silver $20.27


    Aggregate of Hecla, Endeavour, and First Majestic
    Expenses (Total) $636,904,000.00
    Equ. Silver produced 24663544.3907772
    Cost to produce one oz silver $25.82

    This is a small sample with First Majestic and Endeavour Silver as more efficient producers. My guess is that most silver miner’s profibility is some where between Endeavour Silver and Hecla.

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