-- Posted 21 February, 2007 | Digg This Article
I have compiled a data table for the world’s 20 largest undeveloped silver mines. The list of these mines was obtained from a corporate presentation by Mines Management http://gold.seekingalpha.com/article/23676. The Mines Management list gave the top 20 mines but did not supply relevant data such as reserves, resources, annual production, ore grade, or estimated start up dates. I have attempted to supply this data as shown in the table below:
* Based on a 20 year estimated mine life and estimated 75% recovery. These estimates are by the author of this article and should not be considered completely accurate.
1.) Company estimates silver recovery rate 75.5%. Apex derivative liability as of 9/30/06 is $182, 000,000.
2.) Resource estimate based on 80 gram per ton Ag equiv.
3.) Reserve is for 5 veins contracted by Franklin Mining from COMIBOL. Franklin news letter says “The 2nd richest silver mine in Bolivia (Cerro Rico?) is reported to have a little over 200 million ounces.
4.) Stated recovery rate 72%. 20 year estimated mine life.*
5.) Stated recovery rate 92.3%. 20 year estimated mine life.*
6.) Mine operating life 8.8 years
7.) Mine operating life 11.5 years.
8.) Stated estimated recovery rate 92%. 20 year estimated mine life.*
A brief description of reserves and resources is warranted before we dissect the above table. The table includes both proven and probable ounces in the reserve category. Only proven ounces have been shown to be economically mineable when considering all costs. Resources are shown to be ounces which exploration has shown to exist, however mining of these ounces has not been shown to be economical. Resource ounces in this table include measured, indicated, and inferred ounces. All ounces shown in the table are fine troy ounces.
With the exception of the Prognoz mine, these mines have low to medium silver grades and the reason they are in the top 20 is that they have a large tonnage of ore. The silver grades shown for mines that have both reserves and resources is for the reserves only. The total grades of these projects considering reserves + resources are as follows:
1.) Penasquito 0.63 ounce/ton
2.) Corani 1.58 ounce/ton
3.) Prognoz 26.43 ounce/ton
4.) Pirquitas 4.88 ounce/ton
The total reserves for these 20 mines is 2522.6 million ounces. In 2005 total world mine silver production was 641.6 million ounces. Assuming an over all 80% recovery rate for these 20 mines, their reserves are 3.15 years worth of mine supply. Total reserves plus resources are 5790.5 million ounces which equates to 7.22 years worth of supply. Looking at the grades, I do not think all of the resources of these mines will be economical with out much higher silver prices.
Next I will attempt to determine how this new supply will effect overall silver supply. In order to calculate the annual amount of this supply, I have added the supply to the applicable years where an estimated start date was provided, and have phased in the remaining mines over a 10 year period starting in 2011. I have then added this supply to the supply from the top 20 existing silver mines. For the production of the top 20 existing mines I have estimated an annual production of 200 million ounces with a 10 million ounce per year reduction phased over 20 years. This data is graphed and tabulated below. An additional study in the graph looks at the effect of rising demand and the net annual deficit due to this demand even when considering the new top 20 mine production. The amount of annual demand growth is based on net total silver demand (Fabrication + investment – 70% photographic recycle) which in 1992 was 587.78 million oz and in 2005 was 796.34 million oz, an annual increase of approximately 16 million ounces.
From this graph and table, it is evident that supply can increase at the same rate as demand up until around 2010. After that, production from the existing and new top 20 mines will stagnate while demand continues to go up by 16 million ounces per year. After 2020, production from these large mines will begin to decline and this coupled with rising demand will accelerate the deficit. The only hope for a surplus will be due to rising production by small mines up to 2010. After 2010, I think it will be impossible for small mines to make up the deficiency.
A listing of web site for each of these top 20 undeveloped mines is as follows:
1.) Penasquito, Mexico – Goldcorp http://www.glamis.com/properties/mexico/penasquito.html.
2.) Pascua-Lama - Barrick Gold http://www.barrick.com/Default.aspx?SectionID=AE16ED96-78D3-4451-AB11-281B502746FB&LanguageID=1&ProjectId=8fadb7a7-1b99-4e7b-a37d-9da4b178f0b2.
3.) San-Cristobal, Bolivia – Apex Silver http://www.apexsilver.com/home.html.
4.) Navidad, Argentina – Aquiline Resources/IMA Exploration http://www.imaexploration.com/s/Navidad.asp.
5.) Cerro Rico, Bolivia – Corporacion Minera de Bolivia and Franklin Mining http://www.franklinmining.com/Projects/HardRockProjects/CerroRicoPalivariIIIBolivia/tabid/19638/Default.aspx.
6.) Corani, Peru – Bear Creek Mining http://www.bearcreekmining.com/s/Corani.asp?ReportID=99078.
7.) Ocampo, Mexico – Gammon Lake Resources http://www.gammonlake.com/ocampo.htm.
8.) Montanore, Montana, USA – Mines Management http://www.minesmanagement.com/overview.aspx.
9.) Veladaro, Argentina – Barrick Gold http://www.barrick.com/Default.aspx?SectionId=AE16ED96-78D3-4451-AB11-281B502746FB&ProjectID=8722a1f8-aa5b-4d87-a03b-6184e75266a9&RegionID=c0fd3be5-fda2-4417-8106-085c979a3df3.
10.) Rock Creek, Montana, USA – Revett Minerals http://www.revettminerals.com/revProRockCreek.php.
11.) Prognoz, Republic of Sakha, Russia – High River Gold Mines http://www.hrg.ca/s/Prognoz.asp.
12.) Hackett River, Nanavut, Canada – Sabina Silver Corporation http://www.sabinasilver.com/hackett.htm.
13.) Maverick Springs, Nevada, USA – Silver Standard Resources http://www.silver-standard.com/projects/maverick-springs.cfm.
14.) Pirquitas, Argentina – Silver Standard Resources http://www.silver-standard.com/projects/pirquitas.cfm.
15.) San Bartolome, Bolivia – Coeur d’ Alene http://www.coeur.com/property_sanbartolome.html.
16.) Dolores, Mexico – Minefinders Corporation http://www.minefinders.com/Projects/dolores.html.
17.) Palmarejo, Mexico – Palmarejo Silver and Gold Corporation http://www.palmarejogold.com/s/Trogan.asp.
18.) Candelaria, Nevada, USA – Silver Standard Resources http://www.silver-standard.com/projects/candelaria.cfm.
19.) Waterloo, USA – Pan American Silver http://www.panamericansilver.com/projects/investment_properties/hog_heaven.htm.
20.) Bowdens, New South Wales, Australia – Silver Standard Resources http://www.silver-standard.com/projects/bowdens.cfm.
I hope this article has been helpful for persons with an interest in the silver market. I am not an investment analyst (I am a structural engineer) and this article may contain errors. Please do your own research before investing in these companies or silver itself. I do own shares of Goldcorp and Sabina Silver. If any readers believe any of this data is incorrect please contact me at firstname.lastname@example.org and I will attempt to issue corrections if warranted. Some of this data may not be up to date since companies are constantly issuing updates. Regards,
-Bryant Blake, P.E.
-- Posted 21 February, 2007 | Digg This Article