Market deficit may bring increase in silver price

According to a study made for Mexico by the Silver Institute of Washington, D.C., last year, world silver consumption is greater than production.

If this trend continues, silver prices could rebound, says Alfredo Elias, the assistant secretary of mines and basic industry of Mexico’s Ministry of Energy, Mines and State Industry (SEMIP).

Upon disclosing the main results of the study presented to him recently in New York, the assistant secretary added that, at a price of US$5 per oz., available world silver stocks are 146 million oz.

Consumption this year will be 350 million oz., and output only 300 million oz. With the 50-million-oz. shortfall in production, inventory available for 1992 will decline considerably.

This demonstrates Mexican affirmations that despite substantial silver reserves, the available amounts for market purposes are substantially less than previously estimated.

Modernization of the mines makes it possible for Mexico to increase its silver production. Output for 1992 will be 65 million oz., a slight rise over the 62 million oz. mined in 1991. Mexico’s mining volume has also increased, and the country retains its position as the world’s leading silver producer. Despite price declines, domestic mining output has risen in general. Gold production has increased about 32% in volume and 25% in value. This is attributed to the US$20 decline in the price of an ounce of gold on the international market.

Major new projects that have come on stream, especially Santa Gertrudis in Sonora, have enabled Mexico to produce a surplus in gold. As new investments are being made to modernize plants with state-of-the-art technology, mining will become more profitable, and it is expected that output will continue to expand.

Meanwhile, reports from SEMIP reveal that the domestic mining industry will take off during the next three years. Investment in the sector is doubling annually, and mining companies are spending more on exploration. One million hectares will be added to the seven million currently devoted to mining activity, and technical support and credit will be provided to small-and-medium-scale mining projects.

The reports state that several projects are currently being studied to industrialize mining production to augment aggregate value and, at the same time, expand the industrial plant and increase exports of manufactured goods to offset the low international prices of metals.

For their part, experts from SEMIP indicated that on the threshold of the 21st century, Mexico could once again become a mining powerhouse. — Submitted by the Mexican Investment Board, Mexico City.