a) Diminishing Supply: Increasing Demand
- 600 million ounces of silver are mined yearly yet industrial demand for silver is over 900 million ounces per year, and new uses for silver keep expanding.
- Investment demand for physical silver has exploded with the advent of a number of silver ETFs and the increase in actual ownership of the physical metal by interested parties worldwide (for example China is now encouraging its citizens to own silver; the US mint is rationing silver coins).
- Total known world inventories of silver in the past 75 years show declines in above ground silver inventories of greater than 98%.
b) A Massive Short Position Exists
- Silver has a massive short position, probably greater than any commodity in history. If one factors in short positions on COMEX, the leasing of silver by bullion banks, banks and brokers selling silver certificates and other silver instruments with no silver to back them then it is quite possible that hundreds of millions – perhaps even billions – of ounces of silver are sold on paper that do not physically exist.
c) Inground Silver Is Limited and Will Become Much More Expensive to Mine
- The average occurrence of silver in igneous rock (igneous rock composes ~92.5% of the earth’s crust) is 0.07 PPM or 0.07grams of silver per metric ton of igneous rock, which means that on average 444.3 metric tons of igneous rock must be mined to obtain 1 troy oz of silver (1 metric ton/.07gram Ag)*(31.1gram/1troy oz)!
- Because of the geological phenomenon of epithemal deposition, very little silver remains underground.
- Only the recycling of silver containing products, the mining of scarce surface silver veins and the silver byproduct of base metal mining can provide fairly cheap silver.
- Silver is not found in placer deposits like gold but, rather, in veins and these silver veins are formed as epithermal depositions or condensation near the earth’s surface (like whipped cream on the surface of coffee). Simply put, the richest silver deposits are nearest the surface of the earth, and the deeper mines go, the less silver they tend to produce. Economically, the deeper the mine, the more expensive the silver.
The Result: The Price of Silver Can Only Increase – Dramatically!
- As current silver is depleted from the above mentioned epithermal deposits and mined deeper at much lower grades (approaching 0.07 grams per metric ton), the costs of mining silver must skyrocket and consequently the price of silver must explode.
How can one get the most reliable numbers on silver mining, recycling and industrial demand? I'm about to plunk down $100 or whatever it is for a copy of Christian's annual silver book. Is there a better source?
FWIW, I'm out of silver right now (expecting it to take a major hit with the next leg down of stocks and other risk assets) except for the fact that my favorite miner, GORO.OB (Gold Resource Corp) is actually half-silver. This kind of story is pretty tempting, but for it to be a slam dunk, the industrial demand has to be significantly higher than current mine supply.
So, once again: How can one get the most reliable numbers on silver mining, recycling and industrial demand?