The world’s largest primary silver producer reported a plunge in production in the first quarter of the year, continuing a global trend of declining silver output.
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.
Fresnillo ranks as the world’s largest producer of silver from ore.
Total silver production for the company came in at 13.1 million ounces through the first three months of this year compared to 15.4 million ounces in Q1 2018. According to a company press release, output at its flagship Fresnillo Mine plunged by 31%. Production at its San Julian Mine fell by 17%, and its Saucito Mine saw a 10% drop in silver production.
Fresnillo PLC wasn’t the only silver mining company to experience a year-on-year decline in production. Endeavour Silver reported a 21% drop in output in Q1 with production falling by 280,000 ounces.
As SRSrocco noted, Endeavor CEO Bradford Cook glossed over the Q1 drop in mine output, saying, “All four mines typically start slowly each year as we commence our annual capital investments, then production improves as the mines work toward achieving their annual mine plans.”
But this hardly provides comfort considering the numbers compare the first quarter of 2018 with the first quarter of this year.
The plunge in silver production for these two major mining companies through the first three months of 2019 continues a broader global trend of falling silver output. Globally, mine production fell for the third straight year in 2018, according to the most recent report by the Silver Institute. Mine output dropped by 21.2 million ounces last year – a 2% decline.
Earlier this year, the Silver Institute projected another 2% decline in mine output this year.
While we expect a small rise from silver recovered in gold mining, all other primary and by-product production is expected to fall, except for supply from lead/zinc operations which are forecast to rise this year.”
Meanwhile, silver demand was up 4% and hit a three-year high in 2018.
The silver-gold ratio remains historically high. At the time of this report, it was running at over 86-1. As we’ve been reporting for the last year, this is essentially silver on sale. The ratio hit a quarter-century high last November.
Given the supply and demand dynamics, along with the prospects of a weakening dollar in the midst of the “Powell Pause,” it seems likely that gap will close.