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Global Silver-Mine Supply Expected To Get Boost In 2018

Kitco News

Editor's Note: View Kitco News' full 2018 outlook coverage

(Kitco News) - The global mine supply of silver should rise in 2018, assuming disruptions at a couple of large mines end and with Goldcorp Inc. (TSX: G, NYSE: GG) expected to move into a higher-grade ore zone, two consultancies report.

Metals Focus projected 2018 silver-mine supply of 867.2 million ounces, compared to 856.9 million in 2017, which in turn would be down from 888.3 million in 2016, said Oliver Heathman, head of mining research for the consultancy.

CPM Group looks for global silver-mining output to increase 2.7% to around 817 million ounces in 2018, said Rohit Savant, director of research at CPM Group. The consultancy looks for 796.1 million ounces in 2017.

Heathman blamed the decline in 2017 production on disruptions at certain mines, such as a strike by union workers at Hecla Mining Co.’s (NYSE: HL) Lucky Friday Mine in Idaho and the shutdown of Tahoe Resources Inc.’s (TSX: THO; NYSE: TAHO) Escobol Mine due to licensing issues with the Guatemalan government.

“The increase in 2018 is expected to be driven by those issues being resolved and those mines coming back on line and driving up production,” Heathman reported.

Additionally, Heathman and Savant both look for higher output from Mexican mines.

“You have a few increases [at mines] in China and Peru, but they are not as big as the ones we are expecting to see in Mexico,” Savant said.

Metals Focus also looks for increased production of silver as a by-product from gold mines, even though the consultancy does not anticipate a big change in global gold-mining supply itself.

One of the mines where silver output is expected to rise is Goldcorp’s Peñasquito Mine in Mexico, both analysts said. Heathman explained that mining is anticipated in areas with higher gold and silver grades.

While CPM Group expects mine supply to rise in 2018, output may then ease in future years, however.

“This is as a lack of [exploration and development] expenditures catches up and starts to weigh on mine supply,” he said. Mining companies cut back on such expenses around half a decade ago after a steep decline in the prices of precious metals.

CPM Group sees secondary, or recycled, supply of around 201.5 million ounces in 2018, not much different from the 202 million projected for 2017.

“The one thing that could change secondary supply is if prices go up strongly,” Savant said.

This could encourage more people to sell jewelry and other items made of silver, putting more metal back on the open market. Further, price rises in precious metals often coincide with periods of economic weakness, which also encourages people to sell silver in order to generate spending money.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.