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COVID-19 mining shutdowns hurt silver production the most, gold the least - report

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(Kitco News) All the COVID-19 shutdowns have impacted silver mining production the most, according to the GlobalData report.

The coronavirus pandemic has forced governments across the globe to shut down many non-essential businesses and in some cases that meant mining.

The latest report from GlobalData looked at different mining sectors and how they have been affected across the globe. Silver fared the worst, while gold was hurt the least out of all the major mining sectors the report looked at. 

There were temporary shutdowns introduced by more than 1,600 mines across 32 countries as of April 3, the report stated. Since then, the total mine shutdown have already dropped to 729, GlobalData added. 

Aside from temporary shutdowns, the mines that were working were functioning at reduced capacity, limiting the number of workers on site to minimize the spread of COVID-19. 

At the end of the day, silver production was hit the most by temporary shutdowns. As of April 27, there were an equivalent of 65.8% of yearly global silver production still on hold, GlobalData identified. 

Companies that withdrew production guidance included First Majestic, Hochschild, Hecla and Endeavour Silver.

In comparison, 32% of uranium production, 23.8% of zinc, 19.5% platinum, 14.6% of nickel, 14.4% of diamonds, and 12.7% of copper, 12% of lead, 10% of manganese, and 9% of gold were placed on hold, said GlobalData senior mining analyst Vinneth Bajaj.

Lockdowns remain in place in Peru (until May 10), Mexico (May 30), Bolivia (April 30), and Namibia (May4).

CPM Group also ran calculations to see how badly the silver mining sector was hurt, estimating that 21 million ounces of output was lost so far. 

“At the very least, based on the current duration of mine closures and the daily output in 2019, the mine closures in South Africa, Peru and Mexico should result in lost output of at least 21.1 million ounces of silver,” CPM Group said in its Silver Yearbook 2020 released Tuesday.

From a price perspective, silver has been lagging behind gold this year. Panic mass sell-off triggered by COVID-19 dragged silver prices to 11-year lows in March. Since then, the precious metal has recovered but is still trading well below February highs. Spot silver last traded at $15.16, up 0.07% on the day while May silver Comex prices were last at $15.250, up 0.52% on the day.

Analysts see a lot of potential in silver as demand is expected to pick up as the precious metal embraces a new position in the commodity world — an 'infrastructure' precious metal.

“While gold naturally gets most of the attention in a macro environment of aggressive monetary support, we feel there is an opportunity emerging in silver. As governments seek to further bolster economic recovery, we anticipate silver-intensive areas such as 5G and solar technology could well benefit from any fiscal impulse, making silver increasingly the 'infrastructure' precious metal,” Colin Hamilton, head of commodities research at BMO Capital Markets, wrote in a report in April.

In the short-term, some analysts see good upside potential for silver in comparison to gold. 

“Given 1)silver’s relatively healthier spec positioning than gold's and 2)a historically high gold:silver ratio, we think that silver prices could play some catch-up and outperform gold prices in the coming months,” Orchid Research said in a Seeking Alpha post this week. 

The fundamentals supporting silver are very solid, Wheaton Precious Metals CEO Randy Smallwood told Kitco News last week.

“The fundamentals behind silver are as about as good as I've ever seen. The industrial demand and its applications are truly important to society. It's high efficiency electronics and it's antibacterial applications. Also solar panels … silver plays a role in that in the world is getting more and more concerned about efficiencies. We want the best performance for the least amount of material,” Smallwood said.

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