The structural decline in new silver supply has strengthened, and can’t be easily resolved or reversed, according to a report by U.S.-based commodities consultancy CPM Group.
“The main issue is the deterioration in mine production, although scrap sources are falling as well,” said the report by Jeff Clark of goldsilver.com.
“This is important because much of the bullion you and I buy comes from newly-mined silver.”
According to CPM Group, global mine production fell for the fourth straight year in 2019.
This was before Covid-19 struck and temporarily shuttered operations, so a further decline this year is expected, with estimates that silver mine output would drop by at least 10 percent in 2020.
Mine production from primary silver companies fell by 3.8 percent last year, CPM Group said. It, too, is expected to drop by double digits this year.
“For as long as records have been kept on silver mine output, we’ve never seen a four-year drop this severe,” CPM Group said.
“It’s largely a result of declining grades at existing projects, a lack of new discoveries, and very few new mines coming online.”
The 10 largest silver-producing countries have produced 12 percent less silver since 2016.
“And when we zero in on the primary silver mines, we find that mine ‘capacity’ has essentially disappeared,” CPM Group said.
The amount of silver produced last year from new primary silver operations was less than 6 million ounces.
“In fact, only one new primary silver mine came online last year, the Sotkamo silver project in Finland. That’s it. All other new capacity came as a byproduct of gold and base metals mines.”