Illuminati Silver : The Truth about Costs of Production and Most Silver Miners are not going bust.

The truth about Costs of Production and Most Silver miners are not about to go bust.

There are lies, untruths and exaggerations perpetrated on the Internet in order to panic you into buying silver to prop up an inevitable price falling commodity – so that dealers can exit their stocks at reasonable prices.

This is how it goes:

These guys claim that $16 silver is below the cost of production – therefore the miners and mines will go bust or close down, supply will dry up, and silver prices will sky-rocket – so buy now while it’s cheap and while you can actually get hold of the stuff. Well let’s look at this situation a little closer shall we?

Firstly, there are 2 main cost assessments;

1. Cash Costs – the actual physical direct costs of extracting silver from the ground

2. All-in sustaining costs – which include cash costs, plus admin, plus exploration charges.

Now it does make sense for any business to look at the all in sustaining costs closely as this depicts its level of profit before tax. However, companies can survive on cash costs for a while and in the past many have for cash flow purposes.

The second area to look at is the types of mines which exist; as the 2 main types have very different cost levels.

1. You have the Primary Silver mines which represent 30% of all silver mined.

2. And you have those mines such as Gold, Lead and Zinc which produce silver as a by-product – and these represent 70% of the silver mined in any given year.

It makes sense therefore that the mines which produce silver as a by- product can do so much cheaper than the Primary silver mines.

According to Mineweb.com, who, from our analysis produce relatively reliable assessments, the top 10 mining companies in the world in 2014 mined some 400 million oz – just under half of the silver mined globally. Of these 10 mines, 4 are Primary Silver Mines.

The 10 companies are:

KGHM Polska Miedsz
Fresnillo
Gold Corp
BHP Billiton
Glencore Xstrata
Poly metal
Pan American Silver
Cia Minera Volcan
Buenaventura
Coeur Mining

A report by Metals Focus (a UK specialist consultancy) shows that these miners had an average All-in sustaining cost of $14.09 oz.

To look at these issues, a little deeper, let’s now assess cash costs – you remember the direct costs of extracting silver from the ground. According to the Silver Institute, a renowned professional Industry Body, Primary Silver Mine cash costs dropped to $7.74 an oz. in 2014. So even the more expensive mines have cash costs more than 50% lower than current silver prices, so what are the cash costs of those mines that produce silver as a by- product? You’ve guessed it, in many cases below $5 an oz. and remember they represent 70% of the Market.

Now before we are heckled, we are not saying that these miners can survive at prices equivalent to cash costs for long, but they can for a while. This will undoubtedly affect explorations and therefore long term silver prices, but short term though, these companies can still survive.

So our conclusion is this:

At $15 and above silver mines are not going to close or go bust (except those which are already inefficient or have insufficient capital – as in any industry). In fact most are making money.

At $12 – $13 an oz., silver mines are not going to close or go bust, but explorations will be affected

At $10 an oz., some mines will close and one or two companies will go through

Below $8 only the strongest will survive more than a year or two or those which produce silver as a by- product.

It is for these reasons, we believe that it is unlikely (though not impossible) for silver prices to fall much below $12 and a base of $10 is the lowest we can see prices fall to before serious ramifications affect the market.

One of the greatest critics on You Tube, the Internet and at conferences of the silver price level is Keith Neumeyer the CEO of First Majestic Silver. But even his company have reduced all in sustainable costs to $13.88 an oz and cash costs to $8.22 – so draw your own conclusions.

We hope you have found this video helpful, and would appreciate it if you would give us a thumb up or down, comment and if you haven’t already done so subscribe.

First Video – Illuminati Silver – Silver prices are going to fall further:

World Silver Report 2015:

Silver prices to fall – Summer 2015:

Illuminati Silver – advice to New Gold and Silver Stackers:

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