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Friday, August 9, 2013

SILVER MINING INDUSTRY: Unsustainable at Present Market Conditions

For whatever triggered my memory this report got me to remembering growing up and the word "trade" applied to those who  attended 'trade' school, not college. The word was usually employed by the upper crusties in a condescending manner, inferring either the bloke lacked either brains, money, or both. I resented when a friend of mine who went to trade school was denigrated as a societal outsider. I didn't know why at the time, and stuck by them. Friends are friends.

But, you know having a "trade" goes to the meat of what we do. We trade or barter our skills for other things we need. Having no needs at any given time, we'd accept silver coins, sound money, in exchange for our service skills. Today, we call it "savings".  For in our 'uneducated' minds we knew our 'stored trade services' would not be depreciated when we needed them.

Can you say the same is true today with any savings other than gold or silver? 

Think about this when someone says they have a trade, will ya?

SILVER MINING INDUSTRY: Unsustainable at Present Market Conditions

Steve St. Angelo, SRSrocco Report

Friday, August 9th

The primary silver mining industry is not sustainable at present market prices. Financial reports are starting to be released and by the end of the month we should have a pretty good idea on how bad the losses will be.

As I stated in my previous article "The Largest Silver Producer Facing Losses at Current Prices", Fresnillo saw its profits plunge 60% in the first half of 2013. Frensillo only reports its financials twice a year, so we don't know how much more their bottom line would have been impacted in the second quarter alone.

According to my calculations of my top 12 primary silver miners (excluding Frensillo & Hochschild as they only release financials twice a year), the net income break-even for the group as a whole was $25.40 in Q1 2013. The average realized price of silver for this group during the first quarter of 2013 was $29.85 which resulted in a $90.7 million in net income from the top 12 miners.

If we look at the table below, we can see the results from Q1 2013:
As I explained before in a prior article, the estimated silver break-even of $26.45 is higher than the net income break-even ($25.40) as I separate the by-product revenue to obtain a more realistic pure silver break-even figure. However, I am only going to focus on net income break-even during this article as it is much quicker and easier to explain.

If we go to and look at the average price of silver during the second quarter of 2013, it was $23.10 -- that should set off some alarm bells. Not only is the average price of silver Q2 2013 much less than the realized price for the group Q1 2013 ($29.85), but its less than their net income break-even of $25.40 by $2.30 an ounce.

This next chart shows each of the 12 different primary silver miners and their net income break-even as of Q1 2013. I have not included the names of the individual mining companies as I will be providing this in a detailed report in the "Paid Reports" area of the site in the future.
As we can see, of the top 12 silver miners seven will more than likely state net income losses for the period. Furthermore, only five are likely to show some positive gains, but this number might be less depending on other circumstances of increased costs and less revenue from by-product credits.

For example, the fifth most inexpensive silver producer in the group had an average net income break-even of $23.97... this is the last one shown in the first group. If this company had a realized price closer to Kitco's average of $23.10, higher costs and lower revenue from by-product credits, then they would be showing losses as well… Read more @SilverSeek