Mexico Silver Production Down A Stunning 10%

The largest silver producing country in the world has seen its production decline substantially in the first five months of the year.  Mexico was forecasted to increase its silver production this year, however if present trends continue, total output could fall nearly 10% in 2013.

If we take a look at the last two latest reports coming from Mexico’s INEGI, we can see that the majority of the declines have come from Zacatecas  — the richest silver region in the country.

(Plata = silver & oro = gold: figures shown in kilograms)

In April, overall silver production in Mexico was down 10.3% y.o.y, whereas output from Zacatecas fell 21.6%.  Even though the drop in production in May was not as severe as in April, total silver production declined 9.1%.

Total silver production in Mexico from Jan-May was 2,062 tonnes down from 2,288 tonnes in 2012 — a difference of 226 tonnes or 9.7%.  Again, the majority of the declines in silver production came from the state of Zacatecas in Mexico where Fresnillo and Goldcorp’s Penasquito mines are located.

These two mines accounted for 50 million oz of silver production in 2012.  According to their 2013 half-year reports, silver production at Fresnillo was down 2.2 million ounces and Penasquito declined 2.5 million oz compared to the same period last year.  Thus, approximately 55% of the total decline in Mexico’s silver production so far this year has come from these two mines.

The reason attributed to the drop in silver production at Fresnillo and Penasquito was due to falling ore grades, however Penasquito had additional problems with water availability in treating its ore.

The Reliability of Silver Statistics

Part of the problem in obtaining data in the mining industry are the discrepancies in reported figures from the different official sources.  The main sources are the World Silver Survey by GFMS Thomson Reuters and the Silver Yearbook by the CPM Group (Jeff Christian’s organization)

According to the 2013 World Silver Survey, Mexico’s total silver production was 162.2 million oz., whereas CPM Group’s 2013 Silver Yearbook came in at 136.6 million oz.  How could there be such a huge difference between these two sources?

Well, I have corresponding with some of the folks who put together the World Silver Survey and I believe their figures are more credible than the CPM Group. The production figures from the World Silver Survey come directly from many of the different countries official government sources.

For instance, Canada’s Dept. of Natural Resources stated that total silver production in 2012 was 666.2 tonnes which translates to 21.4 million oz — nearly the same total in the 2013 World Silver Survey.  Furthermore, Mexico’s INEGI data for 2011 stated that Mexico produced 4777 tonnes of silver which is 156.3 million oz… the same figure shown in the World Silver Survey:

So, if silver production from Mexico continues to decline at its present trend, overall global production in 2013 may be lower than in 2012.  It is estimated that China’s total silver production is forecasted to increase 5% this year, however this may not be enough to offset the declines coming out of Mexico.

Lastly, if silver prices remain below $20, it is highly likely that more primary silver miners will be forced to put their high cost mines on care & maintenance until prices recover.  U.S. Silver already announced they were cutting a third of their staff and Alexco Resources is planning to put their only commercially producing mine (Bellekeno) on care and maintenance in the winter, hoping prices will recover in 2014.

If more companies elect to shut down their marginal mines until prices recover, we could see overall silver production to decline even further in 2013-2014.

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