There is a real threat of even more silver production lost due to the global economic slowdown…
With the data now finally out, Peru’s silver mine production collapsed in April. Due to the shutdown of a large portion of Peru’s mining industry, as a result of the global contagion, the impact on the world’s second-largest silver supply was enormous. While I had mentioned in previous articles that I expected to see silver production from Mexico and Peru to decline significantly, I’m amazed actually to see the real numbers.
Over the past several months, I have checked the Peru Ministry of Mines website for updates on the domestic mine supply figures. However, they have not updated their monthly production data since December 2019. I tried writing the Peru Ministry of Mines website to find out why they haven’t been updating their figures, but I received no reply.
I decided to do a bit more digging and found a newly released April 2020 Mining Update in response to the global contagion. This new Mining Bulletin published Peru’s mine production data for January to April 2020. According to the recently released data, Peru’s silver mine supply in April fell to 85 metric tons (mt) versus 322 mt during the same month in 2019:
Peru’s silver mine supply collapsed by 74% in just a few months. If we convert to troy ounces, the year-over-year change was a decline from 10.3 million oz (Moz) to 2.7 Moz. Thus, the world’s second-largest silver mine supply fell 7.6 Moz in April. Now, if we look at Peru’s monthly mine supply over the past year, we can see that silver production started to decline in March:
As the Peruvian government started implementing mine closures in the middle of March, silver production fell by nearly 100 metric tons compared to February.
So, if we compare the change in the first four months of 2020 versus the same period last year, here is the result:
Peru Silver Production Jan-Apr 2019 vs. 2020:
Silver production Jan-Apr 2019 = 38.3 Moz
Silver production Jan-Apr 2020 = 30.0 Moz
Peru’s silver production for the first four months of 2020 is down 8.3 Moz, or 22%. What about May?? Peru didn’t start opening up most of its mines towards the end of May. Thus, Peru’s silver production in May will also be significantly lower than the 340 mt reported during the same month last year How much lower?? Good question. My estimate would be between 75-100 mt. If this is true, then Peru’s silver production will be off by more than 15 Moz, and that doesn’t include any possible future shutdowns during the rest of the year.
I stated in past articles and videos that the global silver mine supply would easily fall by 50 Moz in 2020. If Peru loses 15 Moz, then we can assume that Mexico could lose 25-35+ Moz. And, if we add any additional silver mine closures around the world, it can easily curtail 50 Moz of global silver mine supply this year.
Although, I do believe the world is going to experience more economic and financial problems in the second half of 2020 (and into 2021), which will likely impact the production of base metals; copper, zinc, and lead. According to the 2020 World Silver Survey (Metals Focus), 55% of global silver mine supply comes as a by-product of base metal mining.
So, there is a real threat of even more silver production lost due to the global economic slowdown and the need for less copper, zinc, and lead metals. I don’t believe analysts realize just how bad the situation in the global economy can unfold over the next 6-12 months.
I will be providing more updates on silver mine supply out of Mexico when the data is released next week.
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