FACTS & FIGURES — Bright future for silver

Undiscouraged by the downward trend of the early 1990s, silver miners are generally optimistic about production in the last half of the decade.

Increases throughout the world are forecast for each year through 1999.

Although they do not expect to match the 6% rise recorded in 1995, producers are projecting a 2% increase in 1996, followed by further increases of 4% and 5% in 1997 and 1998, respectively. Output in 1999 is expected to rise by 3%.

Production Down Under is expected to outpace that of the U.S. by 1999, which would make Australia the world’s third-largest silver producer, after Mexico and Peru. Despite this shift, regional production will remain relatively stable, with Latin America and North America leading the world silver mine supply.

It has been widely reported that silver production reversed its 4-year decline in 1995, primarily due to major new mines coming on-stream and some existing mines reopening as a result of a higher silver price.

Since most silver is produced as a byproduct of other mining, the long-term future of silver mine supply is largely decided by other metal miners.

Mexican silver production has hovered around 70 million oz. for the past 10 years, but producers there are projecting increases of 25% over the next four years, to 93.4 million oz. in 1999.

The significant devaluation of the peso led to a boost in profitability for the larger producers in 1995. Smaller producers also managed to increase output or reopen closed operations.

Silver production in Peru increased by more than 14% in 1995 and is projected to rise by another 5% by 1999. As the second-largest supplier, Peru currently produces more than 13% of world silver. Unlike many other countries, primary silver producers account for 28% of the country’s output, up from around 22-23% in 1992 and 1993. The 1999 forecast shows this trend continuing, with just five primary silver mines producing 25% of the country’s expected output that year.

As the world’s third-largest silver supplier, the U.S. is expected to increase production by 10% over the next four years, to 54.8 million oz. in 1999 from 49.8 million oz. in 1995.

While some of the highest-producing mines are projecting up to three-fold increases, others are reducing output. Echo Bay Mines’ McCoy-Cove mine, currently the country’s largest producer of silver, expects to cease mining altogether in 1999.

On the other hand, the Green’s Creek mine in Alaska, a joint venture between Kennecott and Hecla Mining, is scheduled to reopen. The mine has been idle since 1993, but production will begin again in 1997 and yield around 10 million oz. annually.

The Commonwealth of Independent States (CIS) produced 45 million oz. in 1995, but it is difficult to estimate output and projections for the future.

Four-year projections, however, show generally flat production cycles through 1999, with a slight increase in 1998.

The major part of the fall in the CIS’s silver output during 1995 is due to the drop in Russian production. Financial problems continue to plague what used to be the country’s largest single producer, the Dukat mine in Magadan.

Producing 8% of the world’s silver, Canada saw its output jump 70% last year to 38.8 million oz., compared with 22.8 million oz. in 1994. This significant increase reverses a 4-year decline, during which silver production dropped precipitously, from 44 million oz. in 1990.

Last year, all byproduct categories of silver mine production recorded increases, the greatest of which came from gold mines, which rose almost nine-fold. Prime Resources’ Eskay Creek mine in British Columbia accounted for 9 million oz. of production alone.

Although mine output is not expected to increase again at anywhere near last year’s rate, producers are projecting an overall increase of nearly 8% for the next four years, which would bring the country’s output to 41.9 million oz. by 1999.

— From “World Silver Production Forecast, 1996-1999,” a publication of The Silver Institute, based in Washington, D.C.