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Costs at primary silver mines increased in Q2 2021 on higher sustaining capital spending - Metals Focus

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(Kitco News) - In a report published Wednesday, a leading metals consultancy Metals Focus said that in Q2 2021, global average all-in sustaining cost (AISC) for primary silver mines was $10.09/oz, down 10% quarter-on-quarter but up 3% year-on-year.

According to the report, the upward year-on-year trend was mostly the result of increasing sustaining capital spending.

North America has the largest share of production from primary silver mines and therefore the biggest influence on global AISC. In the region, AISC rose by 13% to $11.66/oz, Metals Focus noted.

The consultancy explained that the majority of this upside was due to higher sustaining capital expenditure in Q2 2021 compared to the same period last year, when the COVID-19 pandemic led to the suspension of many stay-in-business capital projects.

However, the authors of a report pointed out that 27% and 48% growth in lead and zinc prices, respectively, along with a strong gold price, up by 6%, provided substantial support in managing the cost of extracting silver through byproduct revenues. North America also recorded a 29% rise in average silver ore grades, which helped in maintaining cost efficient production.

The increase in North American AISC was mitigated by lower costs in South America, Russia, and Australia. In South America, the second largest producing region from primary silver mines, average AISC in Q2 2021 fell by 7% year-on-year to $15.14/oz.

“Despite AISC at primary silver mines increasing in Q2 2021, we expect to see a marginal year-on-year decrease for the full year,” Metals Focus commented. “This will be driven by higher base metal by-product credits, due to the expected increase in lead and zinc production, and rising prices for these metals. However, this will be partially offset by higher treatment and refining charges.”

Significantly higher silver ore grades are also expected to contribute to lowering unit costs. Several mines have reported better access to high-grade areas, while operations will process fewer low-grade ore stockpiles, which was often achieved last year during ramp-up activities after COVID-19-related shutdowns.

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