BREAK EVEN COST FOR SILVER RISES TOWARDS $30 AS COEUR, HECLA & SILVER STANDARD SHOW NET INCOME LOSSES

By SRSrocco:

Well, the third quarter results are now out, and it looks like several of the primary silver miners stated a net income loss for the period.

The three primary silver miners produced 8.1 million ounces of silver during the third quarter of 2012 and all showed a net income loss.  Here we can see that for several of the primary silver miners, the break even cost now for producing silver is now $30 an ounce.

As costs rise, so will the break even price of silver.

 

Coeur produced the most of the three at 4.4 million ounces in Q3 2012.  Even though Coeur said they had a $9.83 cash cost per ounce,  it had a net income loss of $15.8 million for the period:

Coeur received $30.09 an ounce for their silver Q3 2012 and had a total of $230 million in revenues.  However, it looks as if break even price of silver for Coeur is now at least $31-32 an ounce.

Silver Standard was another primary silver miner that stated a net income loss for the third quarter in 2012.  Silver Standard produced 2.1 million ounces of silver and had total revenues of $73.5 million in Q3 2012 with a $2.5 million net income loss:

What is noteworthy about Silver Standard’s financials, is that they actually sold 600,000 more ounces of silver in the period (2.7 million oz) than they produced and still came up with a net income loss.

Silver Standard does show in their report that their total production cost of silver coming from their Pirquitas mine is $29.20 an ounce.  They received an average $29.37 an ounce for their silver that they sold during the period.  If we figure that they sold 28% more silver than they produced in the third quarter and still ended up with a net income loss… I would believe Silver Standard would require at least $32-33 to break even.

Hecla as another primary silver miner to show a net income loss for the same period.  While it is true that Hecla lost production and revenue due to the temporary closing of their Lucky Friday Mine (until Q1 2013), we can make a case that Hecla also needs close to $30 to break even.

Hecla stated a net income loss of $885,000 on $81.8 million in total revenues.  This revenue came solely from their Greens Creek mine.  Hecla produced 1.6 million ounces of silver in Q3 2012 at a cash cost of $3.52 an ounce.  With that sort of cash cost, you would think Hecla would be a so-called LOW COST SILVER PRODUCER.  They are… on paper.

Even though Hecla sold 300,000 ounces of silver less than it produced in the quarter, it also did the same thing during the same period in 2011.  What is interesting is that Hecla actually received $35 an ounce for their silver in Q3 2012.  If we were to add another 300,000 ounces of silver sales to their total revenue, but dropped the priced received to only $30 an ounce, I would imagine that Hecla would also be close to break even.

The three primary silver miners produced 8.1 million ounces of silver during the third quarter of 2012 and all showed a net income loss.  Here we can see that for several of the primary silver miners, the break even cost now for producing silver is now $30 an ounce.

Of course all the silver miners did not show a net income loss for the period.  However, Pan American Silver’s net earnings fell from $52.5 million Q3 2011, to only $22.6 million in the present quarter.  This is a 57% decline in net earnings compared to the previous year.  That would be bad enough… however Pan America’s revenues were $252 million this quarter compared to $221 million in the same period in 2011.

Here’s the real clincher.  In Q3 2012, Pan American Silver produced 6.3 million ounces of silver by processing 2.5 million tonnes of ore compared to 5.5 million oz of silver from 1.1 million tonnes of ore the same period in 2011.  Thus, Pan American Silver’s cost of production increased a staggering $49 million (55%) to $138 million from $89 million from the same period last year.

As costs rise, so will the break even price of silver.