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January 03 2018

moneymetals

How the Investor Fundamentally Changed the Silver Market

While silver investors continue to be discouraged about the low price, the market has experienced a fundamental change that needs to be understood. Ever since governments removed silver from official coinage, over 50 years ago, the market has been supplemented by several billion ounces of silver. The majority of that supply has been depleted.

The reason the United States and other countries stopped producing official silver coinage wasn’t due to any monetary conspiracy; rather it was based on a straightforward problem; supply versus demand. Because industrial silver consumption had skyrocketed after World War 2, the silver market would have suffered deficits if the U.S. Treasury didn’t sell silver into the market.

It was quite simple; there just wasn’t enough silver to go around. So, governments started to reduce, then eliminate silver from their coinage in the 1960’s. A lot of this silver, known as “junk silver,” was either purchased by investors or remelted and sold back as supply into the market. While there is no way of knowing how much of the older official junk silver remains in the market, the majority of it was recycled for much-needed supply.

We can see the dwindling down of government stocks and older official silver coinage in the following chart:

Global silver scrap supply & net govt. sales (chart)

The BLUE bars represent silver scrap supply, and the OLIVE colored bars show the amount of net government silver sales. From 2000 to 2013, governments sold 636 million oz (Moz) of silver into the market. Net government sales were from stockpiled silver and older official coins. However, in 2014, this supply totally dried up. For the past four years, there haven’t been any government silver sales.

Another interesting aspect of this chart is the declining amount of silver scrap supply. Even though the price of silver during the 2015-2017 period was much higher than from 2000-2007, scrap supply is considerably less. For example, the price of silver in 2000 was $4.95 while global scrap supply was 181 Moz. However, the silver price has been three times higher (2015-2017), but the average scrap supply has been 140 Moz.

Continue to the full article (source)

July 11 2017

moneymetals

WORLD’S 2ND LARGEST SILVER MINE SHUT DOWN: Implications For Company & Market

World's 2nd largest silver mine shut down

The world’s second largest primary silver mine, Tahoe Resources Escobal Mine, was forced to shut down operations in Guatemala by a ruling from the country’s Supreme Court. This was due to a provisional decision by the Guatemalan Supreme court in respect of a request by CALAS, an anti-mining group, for an order to temporarily suspend the license to operate the Escobal Mine until there is a full hearing. (picture courtesy of Tahoe Resources)

While this story has been out for a few days, I believe there is a great deal of misinformation on the Mainstream and Alternative media about the current situation and future outcome of Tahoe’s flagship Escobal Mine. Some analysis suggests that this is just a small speed-bump for Tahoe, so when they are able to address disputed regulatory issues, production and profits will shortly return once again.

However, there also seems to be a another side to the story that could cause more problems for Tahoe with a much longer suspension time than the company is publicly stating. For example, the following was published in the article… Tahoe Resources forced to halt Escobal mine in Guatemala:

While Tahoe is preparing for a three-month mine suspension, Haywood analysts project no production from the mine for the remainder of 2017.

Here we can see that the company (Tahoe) is very optimistic that production at Escobal will start back in three months, while Haywood analysts forecast operations won’t likely resume this year. So, who should we believe, or which forecast is more correct? Before we get into the details, let’s first look at the impact of suspending the 2nd largest primary silver mine in the world on the market.

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