Silver Mining Update
On January 28, 2015, Endeavour Silver, a primary silver and gold mining company with operations in Mexico, announced “Given the current lower precious metal prices, the Company plans to reduce silver production this year in order to achieve a substantially lower all-in sustaining cost of production and generate free cash flow.”
Endeavour Silver announced that its second largest of three silver mines, the El Cubo mine, will see reduced production during the 2016 with the eventual placement of the mine on “care and maintenance” in the fourth quarter, as it “continues to lose money in spite of our successful efforts to expand the operation and reduce cash operating and all-in sustaining costs three years in a row.”
The company’s other two mines, the Bolañitos and Guanaceví mines, continue to be profitable at current metal prices, but cash flow is not suffcient to fund all of the company’s exploration and mine development projects.
Two weeks earlier on January 12, 2015, Endeavour Silver CEO Bradford Cooke reviewed the company’s 2015 objectives: “As precious metal prices continued their downturn in 2015, our main focus was on maintaining constant production, reducing operating costs and maximizing free cash flow.”
In 2015, despite declining silver prices, many primary silver producers achieved elevated or record silver production. It seems reducing operating expenses and increasing production in the face of declining metal prices, has been abandoned as a viable strategy for Endeavour in 2016.
Mexico is home of some of the world’s largest primary silver miners including First Majestic Silver Corp, Great Panther Silver, Pan American Silver Corporation and Silver Standard Resources.
Silver Supply in 2016
According to the Silver Institute, silver mining supply is expected to decline five percent in 2016 from approximately 867 tons in each of 2015 and 2014. Silver mining production comes from primary silver mines (approximately 15% of total annual out put) and as a by product of zinc, copper and lead mines (about 85%). Bankruptcy of miners or production cuts at mines may impact silver production in 2016 greater than the Silver Institute’s estimate.
Silver Demand in 2016
The Silver Institute anticipates silver industrial and investment demand to grow in 2016. When demand exceeds supply there is a deficit. The Silver Institute has reported a deficit for several years and expects the deficit to widen in 2016 resulting in a further draw down of above ground silver stockpiles. Despite the widening deficit in recent years, the price of silver has declined.
The Silver Institute noted in its 2015 Interim Silver Market Review: “While such deficits do not necessarily influence prices in the near term, multiple years of annual deficits can begin to apply upward pressure to prices in subsequent periods.”
About Endeavour Silver
Endeavour is a primary gold and silver miner with operations in Mexico. In 2015, the company produced 7.2 million ounces of silver and 60,000 ounces of gold. It’s symbol is EXK.
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