Mexico’s Silver Production Declined Over Past Two Years

In a surprising update, the world largest silver producer actually experienced a decline in silver mine supply over the past two years.  This is quite remarkable as several analysts and official sources reported or perceived that Mexico continued to shown an increase in silver production.  I wrote about this in my precious article, Biggest Silver Supply Losers for 2015.

In that article, I showed how the World Metal Statistics reported a growth in Mexican silver production (Jan-Aug) this year, while the official data from Mexico’s INEGI published a decline.  I contacted the folks at World Metals Statistics, and they replied by saying they were looking at different figures and didn’t realize Mexico’s INEGI had updated their data.  Since that article, the World Metals Statistics revised their figures and now show a decline in Mexican silver production (Jan-Aug).

While World Metals Statistics and the GFMS Team at Thomson Reuters show an estimated decline in Mexican silver production in 2015, they will have to revise their data lower for 2014 as well.  Why?  Because Mexican silver production has been falling for the past two years. 

I decided to write this article in response to Smaulgld’s newest pieced called, Primary Silver Miners Report Increased Production… No Peak Silver In Mexico:

Peak silver doesn’t seem to be coming to Mexico, the world’s largest silver mining country. Primary silver miners with operations in Mexico and the U.S. are reporting increases in silver mining production and some cases, record production.

The folks at Smaulgld then published data from several primary silver mining companies showing increased or record Q3 production compared to the same quarter last year.  While some of these mines did show an increase in Q3 production, their overall production for the year was lower.

For example, Pan American silver did show a rise in Q3 silver production of 7% compared to Q3 2014, however their total production (Q1-Q3) is actually down a little from 19.37 million oz (Moz) in 2014 versus 19.33 Moz during the first nine months in 2015.  Furthermore, one of the companies Smaulgld used in their example, Silver Standard, is not even located in North America.  Silver Standard’s Pirquitas Mine is operating in Argentina.

Now, I am not trying to NIT-PICK here, just trying to provide the public with the correct facts and data.  Smaugld also stated in the title of their article, their was No Peak Silver In Mexico.  Well, if we look at the facts provided by Mexico’s INEGI, silver production in country has fallen from a peak in 2013:

According to Mexico’ s Instituto Nacional de Estadística y Geografía (INEGI), Mexico’s silver production peaked in 2013 at 5,821 metric tons (mt), fell to 5,765 mt in 2014 and is estimated to decline to 5,634 mt in 2015.  Even though some primary silver mining companies are showing increases in 2015, some are suffering losses.  This low price is impacting the higher cost marginal mines in Mexico.

To provide actual proof of Mexico’s declining silver production, here is the spreadsheet downloaded directly from the Mexican Government INEGI website:

The spreadsheet starts in 1986, so I just highlighted the last three years.  The silver production figures are shown in kilograms.  The totals for the year are highlighted in yellow.  What the data tells us is this… Mexican silver production continues to decline even though some primary silver miners are experiencing growth.

If we convert these metric ton silver production figures to troy oz, this is the result:

Mexico Silver Production 2013-2015 est:

2013 = 187 .1 Moz

2014 = 185.3 Moz

2015 = 181.1 Moz Est

If Mexico estimated silver production falls to 181 Moz in 2015, it will be down 6 Moz, or 3% from its peak in 2013.

Has Mexico Peaked In Silver Production??

Now, this is the ultimate question.  Has the world’s largest silver producing country peaked?  Maybe, maybe not… it depends.  There are several new Mexican mines slated to come online to bring on more silver production in the next several years.  Fresnillo LLC, the world’s largest primary silver mining company in Mexico is forecasting to increase production to 60-65 Moz by 2018, up from 44-45 Mo in 2015.

While these new mines may bring on new silver supply, it may not add to Mexico’s total production?  Why, because Fresnillo LLC newest Saucito Mine (brought online in 2009), silver production is offsetting the declines in its flagship Fresnillo Mine.  The Fresnillo Mine produced 38 Moz of silver in 2009, but will fall to 15-16 Moz in 2015.  So, even though the newer Saucito Mine may produce 21 Moz in 2015, the Fresnillo Mine silver production has fallen 22 Moz since 2009.  Basically, the new mine offset the decline in the other.

NOTE:  Fresnillo LLC has several silver and gold mines  It’s old flagship Fresnllo Mine is just one of them.

I believe this will continue to take place as older and more high-cost marginal mines suffer production declines.  That being said, I don’t think Mexican silver production has peaked… but that depends on several factors going forward.  I will discuss these in future articles.

Lastly, the folks at Smaulgld need to look at more data before making assumptions that may or may not be true.  As for 2015, Mexican silver production continues to decline from its peak in 2013, even though some primary silver miners are experiencing some growth.

Global peak silver production is coming (or is here).  However, that all depends on what happens in 2016 and its impact on the base metal mining industry.  The base metal mining industry (zinc-lead & copper) supplies 58% of world silver supply.

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