Via Peter Schiff

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Mine output fell significantly in three of the world’s top silver-producing countries through the first half of the year.

Peru’s silver production fell 10%, mine output in Mexico fell 4%, and silver production in Chile was down 7%, according to data released by government agencies in those three countries.

According to the data compiled by SRSrocco, in total, mine output in Peru, Mexico and Chile was off by 373 tons through January through June. (Mexico’s data was from January-May.)

Chile, Mexico and Peru account for 45% of the world’s silver supply.

The top-five silver producing countries in 2018 were as follows:

  • 1. Mexico
  • 2. Peru
  • 3. China
  • 4. Russia
  • 5. Chile

SRSrocco was not able to obtain silver mine production from Russia or China, but Russia’s top primary silver mining company also reported a decline in production through the first six months of 2019, with silver mine output falling 15% compared to the same period last year.

In another sign of declining silver output, the world’s largest primary silver producer reported a plunge in output in Q1 2019. Total silver production at Fresnillo PLC dropped by 15% in Q1. The company blamed falling mine output on lower ore grades and reduced volume of processed ore.

According to SRSrocco, the drop-off in silver production appears to be widespread.

It seems that many countries are showing declines in silver mine supply this year, right when the silver price has broken above a 6-year resistance level.”

Globally, silver mine production fell for the third straight year in 2018. Mine output dropped 2% to 855.7 million ounces, according to data released by the Silver Institute.  Meanwhile, silver demand grew by 4% and hit a three-year high last year.

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Silver charted its biggest single-day gain since 2016 earlier this month. Continued trade war woes and more central bank easing have helped drive both gold and silver higher.

Silver’s big move up is a good sign for both the silver and gold market. The white metal began to play catch-up with gold in mid-July. After pushing close to 93-1, the silver-gold ratio began to close as silver rallied. At the time, Peter Schiff said this also indicates to him that the bull market in gold is about to kick into a higher gear.

The silver-gold ratio currently stands just below 87-1. While this is a healthy improvement from the 93-1 levels we were seeing early last month, i is still a significant spread. Keep in mind, the modern average over the last century is around 40:1. This tells us that silver remains significantly undervalued compared to gold. In effect, we still have silver on sale. If you look at how cheap silver is compared to gold, the upside has probably never been this great. Given the supply and demand dynamics, along with the prospects of a weakening dollar when the recession hits, it seems likely that gap will close.

Silver has hit an all-time high of $49 per ounce twice – in January 1980 and then again in April 2011. If you adjust that $49 high for inflation, you’re looking at a price of around $150 per ounce. In other words, silver has a long way to run up. As one analyst put it, “With the long-term downside potential of silver very low versus its current valuation, the risk/reward is one of the best investments on the planet.”

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