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TLDR for the squirrels and goldfish. It appears as if there are only perhaps 5 (updated 2/1 to add GoGold) silver primary miners left in the world with a market cap over $100m. I could have missed a handful – but this list is pretty exhaustive – as there may be PRIVATE Russian or Chinese companies I don’t know about which could be a huge source of this. With mine lives diminishing, lower and lower ore grades, higher costs, and artificially low silver prices – historical silver primary miners had to adapt by becoming gold or base metal producers with a silver kicker. One might think the currently high GSR may have artificially made some of these no longer primary due to higher gold prices, but I show even at a 40-60 GSR these companies are now mostly gold or base metal companies. This has substantial, substantial effects on the ability to address the structural silver deficit we are facing. I like Rick Rule’s quote about uranium – “if the price doesn’t go up, the power will go out. Most don’t know silver is in 1,000 different products and the best electrical conductor on earth. If you do not have silver, you cannot substitute another metal, as the heat produced would require you to re-engineer the entire product for copper or another metal – which they have their own issues to deal with. My quote is, “the price is going up, or all assembly lines around the world stop”.

Edit 2/1/2023 – I added the production numbers in for GoGold, Guanajuato Silver, and SantaCruz silver. GoGold is a 494m mkt cap and 54% silver. Guanajuato Silver is 52%, but at 96m mkt cap. SantaCruz silver is 99m mkt cap, but comes in at 30% silver as it is a huge zinc producer – I had to check those numbers several times. I also revised SilverCorp silver up, as theirs had 22H1 results and I did not double the silver for a full year like I did gold, but it didn’t make a ton of difference in the overall percent, but had them as a “primary” at 42% given silver is the top revenue for their company.

Here is the summary of production for 16 companies “known” to be silver primaries. What you find is 7 of them are primary – it doesn’t mean over 50%, because some may mine gold AND base metals. 5 of these are over $100m mkt cap and the other 2 are below. I did not review companies like Gatos who have no financial reports for 2022. Guanajuato is a good day on the market from being over $100m mkt cap, but it is also 53% silver and 47% gold, so this as a “primary” can be affected by GSR favoring gold.

Impact – whether this is 5, 6, or 8 – it is important to note that there are VERY FEW around the world who could be considered a “silver primary producer”. What this means, ultimately, is that while some companies do have silver mines, as grades decline and less mines are “primary” silver mines, it SCREAMS that silver production for the next decade will decline. Base metal companies seem to hedge their silver production – I looked up KGHM for this and their financials had a lot of interesting hedging strategies I never heard of for silver. Meaning – THESE companies are the ones you are likely to see put sell hedges on the COMEX for 50m oz of production a year. I would guess at any given time they may have a few months out of sell hedging going on. Keith Neumeyer said previously that AG doesn’t hedge silver production anymore – but they are now a 70% gold producer. Does it not stand to reason that companies with shrinking silver revenues would hedge this production at some point?

Overall, what this report is suggesting is that the window is closing for mining companies to be able to “dial up” silver production as demand continues to overtake supply by a wide margin. This suggests that a palladium-like move is inevitable, but not necessarily imminent.

///////Back to the novel, with all of the research and charts I made over the last week.

I had noticed something in the 3.5 short years I jumped into silver and mining investing. The number of silver “primaries” are disappearing at a rapid rate. What do I mean by silver primaries? Consider a company with silver in its name like “First Majestic Silver”. That would indicate it’s a silver primary. However, to me, a company like “America’s gold and silver” indicates you have a mix of both and silver may not be your primary concern. Then you have other companies like SSR mining with no silver in its name and is not really talked about by any of us as a “go to” silver play.

This becomes important because while I love my silver, I love silver miners more – with the upside that can be exceptional to the price of silver. Consider a miner who is mining silver now at $24 and its cost to produce it is $20. That is $4 profit, per ounce. If you then see the price of silver go to $28, this is now a profit of 2x prior at $8. Meaning the price of silver moved 16.7%, but the profit for the miner doubled!! Now, your brain starts thinking of $40 silver, you have a 2x with your physical, but you now have $26 profit on your miner, or a 6.5x profits. The numbers start hurting your head if you consider many feel by 2030 we can see a $75-$300 silver price. So – while I love physical silver, it’s only a LAYER of my holdings, and very tiny compared to what I have with miners. My investment play will be different than yours, as metals are a hedge against my real estate holdings. So, I can afford for some of my riskier plays to fail, and while I have interest in the physical, it’s split between several sources and is dwarfed by my mining holdings. I write a lot about how to LAYER your precious metals holdings HERE – as I like the idea of carrying a lot more base metals at home like LEAD as opposed to PMs.

What I had noticed when I got involved with this in 2019 was that silver was like $16-17 and my silver miners I invested in were like 60-70% silver primaries. 3+ some years later and many of them are below 50% while silver is 50% higher at $24. What gives?

Steve St. Angelo had produced an awesome chart with the gold price seemed to be having a floor around the price of production. Given most gold companies are primarily gold, by revenue, by a wide margin – it is FAIR to say that if the price of gold falls below this line for any sustained period of time, that gold production would slow/cease – perhaps making the new available supplies dwindle and drive up prices.

Steve also presented one for silver primaries. However, I believe the chart is somewhat misleading because today, an overwhelming majority of silver comes in as a BYPRODUCT of other metals. Consider Newmont – a few years ago I had calculated Newmont had produced 54m oz as a BYPRODUCT of gold. The sales of silver were miniscule compared to the gold sales, and with this, the price of silver was irrelevant to selling silver. Meaning, whether it was $8 per ounce or $25 per ounce, the silver was getting sold into the market, regardless. Likewise, they did not sit around and calculate how to “turn up the dial” of silver production. Their PRIMARY focus was on gold production, and they had a nice silver credit. When it came to investing in gold majors, I had picked them for the silver upside – in case silver went ballistic, as a 54m oz silver producer, this would have had a definite impact if silver had gone from $20 to $100 per oz. The revenues would be $1b to $5b, which would have produced $4b more in profit, and with the 797m shares, that’s perhaps an additional $5 to the share price. For a company the size of NEM, that’s a nice upside.

Here is his silver chart.

Steve has the cost here somewhere around $19. Part of this now makes sense why you would have AG/FSM start to increase their gold production over their silver production. As a PRIMARY in 2019, had they just stayed on course when silver was $16-17, they would have potentially lost their shirt. Micro producers like Impact Silver need much higher prices than that to be profitable. I had even heard Endeavor silver, who was a 60% silver producer the last time I checked, isn’t profitable until $24 silver.

When researching this, I looked at SILJ, SIL, looked at my own holdings, and asked for some players you wanted me to look at. At issue, is Silver Institute says silver primaries account for 30% of mine production. My contention with this article is that silver primaries are going extinct, and with this, the ability to “dial up” production is limited. This makes a difference in how you have to digest the silver supply and demand structure today. I used this chart previously, and credit this also to Steve St. Angelo. A chart LIKE this may have been one of the first charts I saw when I got into silver mining investing, and it made a lasting impression.

This chart only goes to 2016, but you can see a clear downtrend. And, given the low silver prices from 2016 to 2019, one could argue that there was continued lack of exploration. Any new “discoveries” or mines coming online would be things like MAG, Silvercrest, etc – but are not current producers. Others like Discovery and Bear Creek aren’t potentially coming online for years yet, IF a construction decision is even made. I had a note once a few years back about how Discovery and Break Creek were massive in size, but lower grade silver – my note had “Discovery a home run at $20 silver” from the CEO Taj Singh at the time. They had then taken the low grade billion oz to a higher grade 600m oz.

You then have other companies like Hecla boast everywhere about how high of a grade their silver is, but their labor costs are explosively higher in the US as compared to miners in Mexico, so the “high grade” is pretty much the only way you can mine here, but even with Hecla you see them needing to take on other metals to keep the lights on due to higher costs of mining – despite excellent ore grades. The unicorn here is where is the uber-high grade mine with stupid low costs of production? MAG and Silvercrest MIGHT be the answers here, at some point. However, I looked at Aya’s site and they tried to put together a chart of the “purest” silver producers, by revenue, or anticipated by revenue for near term producers.

Here, you have MAG at like 55% silver and Silvercrest at perhaps 58%. This has Aya “gold and silver” as the only pure silver play. The name of them indicates that at some point, they will have gold involved.

If mine supply is 830m oz, 30% of this indicates about 250m oz come from “primary” miners. Why don’t we look at all of the silver primary miners we can find to see where this 250m oz comes from? Then, why don’t we look to see at what percent of revenue we are now? My contention is most of these are at or far below 50% silver. This would indicate to me that all of these companies – AS SILVER PRIMARIES – are in GREAT DISTRESS and REQUIRE other metals as PRIMARY sources of income.

I would ALSO posit that “primary miners” make up FAR LESS than 30% of annual mine supply. IF it is FAR LESS than 30%, perhaps maybe 15%, it would then indicate a VAST MAJORITY of the silver produced in mines, worldwide, is thus a byproduct of other metals. Meaning, like the Newmont example – Newmont doesn’t care if it’s $16 or $24. IF you have perhaps 85% of world’s silver supply coming as a byproduct of other metals, it somewhat validates and negates Steve’s chart at the same time. In that, IF the lowest price silver could go would be $19 as a floor for primaries – it makes sense that it has driven a lot out of the primary business. However, it also shows how it has zero bearing on the world silver supply – as this is being produced by a vast majority of base and gold metal producers as a byproduct and thus the price on the chart has no effect on perhaps 700m oz of market supply.

However – remember the lower grades? Can we see how low the production is of silver primaries? This tells us…

1. Ore grades are going lower and lower, so base metals and gold producers could perhaps be mining the same number of tonnes but over time contributing less and less to overall mine supply
2. Without much higher prices, lower grade mines like Discovery and Bear Creek may not get a good construction decision.
3. It is hard to permit anything in the US, and even if we do, the high costs of labor may prevent silver “primaries” here.
4. Without a much higher price in silver, less silver exploration will by done by the diminishing number of silver primaries.
5. Companies like MAG and Silvercrest may not be as much of a “pure silver” play as we thought.
6. Increasing demand for silver with solar and EVs leads us to believe that we would need even more mine supply.
7. Per Keith Neumyer, silver recycling companies cannot stand on their own with these silver prices. Existing recycling efforts are a byproduct of gold and thus cannot be “dialed up”.
8. While there are potentially 60b oz of silver above ground ever mined, perhaps only 5b oz is in bars/rounds/coins and it is fair to say a lot of this supply can be unlocked at $50
9. At $24 silver and 32+ m oz in COMEX registered (not moving much the last month) it is fair to say that this represents 3% of yearly silver demand. With ETFs drawing down – presumably selling these bars into industrial usage, there is an inflection point coming where COMEX may be the ONLY place to get silver for sale.
10. It is FAIR to say that the 260m in eligible may be long term investment holds or have other owners such as SLV that COULD be available at higher prices. This represents about 25% of yearly demand, or about 3 months’ supply.
11. It is FAIR to say that as a Giffen Good – that as the price of silver rises, to a point, investment demand will also pick up. Industry would be competing against millions of investors for bars, rounds, coins, and ETF holdings.

All of this is to say that unless the price of silver moves up to perhaps $30-$35 as a base for a sustained period of time, the structural silver deficit THEORIZED above will play out in a Palladium-like move.

Let’s look at the silver chart through this lens and speculate that IF the paper games are subsiding, and we break up a 7x like Palladium did in a 6 year span, what does that look like for silver?

This, of course, is crazy talk. Or is it? What I’m trying to tell anyone that wants to listen is this – silver primary miners are disappearing, Newmont doesn’t have a “turbo silver” dial when mining, it takes 10-15 years to build a mine, costs are higher, grades are lower, and we now have approximately 50% of yearly silver demand being sold in paper trades on the COMEX DAILY.

The bars there are daily trades. Each contract is 5,000 oz. So Friday, we had nearly 100,000 contracts TRADE. 500m oz were “sold” into the market. Remember, this is the entity with 32m oz in the “for sale” section of the vault. The buying and selling could be the same oz perhaps 16 times in a day. The total OPEN interest is roughly 140,000 contracts – or about 700m oz in contracts. Meaning, someone has “sold” about 22x what is in the vault. This can be somewhat misleading, as some of this could be forward selling future production, or it could be large holdings hedging against downside price risk. However, there is a BUYER to that contract. That could also be buy hedges as well. Lots of this traffic “rolls over” month to month.

However, what cannot be understated here is by how much silver is oversold to any other commodity. Let’s look at days of silver production to cover silver short contracts. This shows 180 days, which is about half of a year’s mine production which I showed above.

You can make an argument silver is used in over 1,000 products, and thus there’s a lot of hedging going on, but crude oil is used in far more products, and it’s just a fraction of silver.

You can see platinum is up there as well – but platinum may be the next to go palladium as the cupboards are getting bare in the COMEX with this. However, platinum has some concentrated suppliers and only a few large commercial production uses – like catalytic converters.

What this chart shows me is that:

1. there are some large piles of silver being hedged against downside moves. However, these piles have drastically shrunk over the last 2 years.
2. at 22x REGISTERED vault holdings, there could also be a lot of speculative silver plays
3. Forward mine selling could account for maybe 400m oz, but are sold over time, and NOT each day.

What all of this has told me, along with this….

This article shows perhaps 194m oz deficit in 2022. I cannot see this trend reversing in 2023 unless there is a MASSIVE worldwide recession, but even then the demand may be muted due to the incessant need for green which will continue to push EV and solar requires higher.

If all of this indicates we have mine production stagnation and systemic decline – coupled with potentially high yearly deficits, unless the price goes up, a LOT, it will not really unlock the investment category of those 5b oz. At higher price points, some of this comes back into the markets.

However, the paper shenanigans may break at any moment. Or any year. No one knows. I have been writing a LOT about commodities and felt that due to the West’s low production of metals, as compared to worldwide production – that pricing power can easily by lost to BRICs. There is massive evidence of physical metals leaving the West’s vaults for the Easts over the last decade or so. Recently, it was discussed that Russia will start pricing silver in gold grams.

At some point, it appears price is destined to move far higher. I believe the “silver primaries” are destined for great things if a palladium-like move happens inside of 7 years. The problem is, “today” – a silver primary is not a primary.

Meaning, this is driving many of them to abandon future silver mine plans. If at some point like the SI says that silver primaries were 30% of worldwide production, and silver prices went to $35, one could imagine these primary miners could perhaps dial up production to take advantage of these higher prices. But one has to take a sober look at where we are to understand that $30 silver is not really going to move the needle with silver production in mining. It may loosen SOME investment grade silver. However, this mining deficit will have a come to jesus moment when they realize the vaults are bare, COMEX has 3% of worldwide yearly usage (perhaps a few weeks, at best), and it might take many months or years to start to cut this deficit to get a surplus.

Exacerbating all of this is the G7+ and BRICS+ rivalry that threatens the West’s supply. If we can sanction them on oil, and they can deny us oil, why would they not deny us strategic items like uranium and silver? My chart below shows what kind of imports we need with metals. Where are we getting it?

Where are we getting the Uranium?

Mining needs to be a national strategic priority at the moment, and it’s not. Saving trees is. I’m not saying one is morally right over the other, but if you skate to where that puck is going, you are seeing massive, massive deficits in silver and other metals coming. And policy at the moment is driving a bus off a cliff with no one at the steering wheel. The question is, how far away is the cliff?

My findings

Edit 2/1/2022 – updated below chart to include BASE metals rather than zinc and lead because some also mined copper that was not reflected in original chart. If silver was 30% of revenue, but zinc was 25% and lead was 25%, I counted them combined as a base metal for 50%.

I also added GoGold, SantaCruz, and Guanajuato.

Note – on the above, some were 2022 guidance, some were 2023 guidance, and some were a quarter or several quarters extrapolated to a full year. My Excel sheet linked below has the supporting data. This gives a BALLPARK idea of the approximate percent of silver miner a company is.

Let’s now take a look at the silver “primary” miners – and production. I’m going to try and attach this spreadsheet here for download. Haven’t done this yet, so this will be a first on this platform. If there’s issues, let me know.

What you find here is the biggest “primary” silver producers I could think of came up to a total of 145 million ounces of production. This is about 17% of mine supply. Remember when the silver institute said 30% of mining production came from silver primaries? That’s 250m oz. Where is the other 105m oz coming from? I could perhaps think there may be another 40-50 companies worldwide like Santa Cruz Silver, GoGold, Impact – which make up a very small percent of the worldwide silver production.

When you look at the primaries TODAY as a percent of revenues OVER 50% silver, you are left with 4. Andean, Aya, Endeavor silver, and Impact silver. The market cap of Impact (Mexico) is 39m, Andean is 123m (Bolivia), Endeavor silver (Mexico) is 673m, and Aya (Morocco) is 716m.

The next closest to 50% is Fresnillo (Mexico) at 41% and Silvercorp (China) at 37%.

My friend Jim this morning suggested that the reason these are no longer silver primaries are attributed to the high GSR. As you can see up there, this is calculated with a price I got from one of the companies (Penoles) at turned out to be an 84 GSR.

Let’s take everything today with $30 silver, which gives us a 64 GSR. If we get a $30 print on silver tomorrow, would that make any more of them silver primaries? The same 4 are over 50%. No one else popped up over 50%.

Edit 2/1/2023 – I did not add some of the ones above to the below charts. These are more or less showing that as silver prices rise, more will be “primary” silver miners, but it has to be raised substantially to make any real discernible difference.

What you then have to do is perhaps look at $50 silver to see where we might get interest. That takes us to a 38 GSR, which I have never seen.

Only at 38 GSR does First Majestic even become a 50/50 silver to gold. This keeps the same 4, but now adds silvercorp, fresnillo, AG.

When I got thinking about the “silver primary” it was in context of First Majestic, Fortuna, and Endeavor silver, who were all like 60/40 silver to gold at one point. What I then saw was this ratio dropping. However, “primary” you then have to think – if silver is 40%, gold is 30%, and base metals are 30%, silver is still your primary metal, even if it’s not over 50%.

Let’s look at that by revenue, to see who is a primary based on revenue. If you look at that, you then add Fresnillo (by a hair) and Silvercorp (more than the two different base metals, but I would consider is a “base metal” producer)

Changing this to 30 only adds Hecla. But you are comparing this with silver to zinc to lead. Rather, I’d say you need to look at it as silver vs gold versus base metal.

Using those definitions, the only SILVER PRIMARY miners today (over 100m mkt cap) are:

• Aya
• Endeavor Silver
• Andean

Then, you would have to think there’s perhaps a lot of Impacts out there. Additionally, I didn’t cover the GoGold or Santa Cruz, which by all means could be a junior silver producer, meaning it might be over 50% but not consequential to the 834m supply.

Conclusion

Remember I said above silver primaries are 17% of supply? After looking at the 3 over $100m mkt cap, they account for a total of about 12 million oz of silver per year, or about 1.4% of production. If you want to take the GoGolds, Santa Cruzs, and all of those others I missed, maybe we are looking at 3-5% are PRIMARY SILVER.

What this means, now, is that 95-97% of silver is produced by either gold mining primary or base metal miner primaries with a silver byproduct. The PRIMARY focus on these companies now is NOT silver, it’s the other metals keeping the lights on, today. At $50 silver, you start to see a handful more of these then become silver primaries, by revenue – but how many more millions of ounces are you going to need to fix these deficits? Remember, last year was a 200m supply deficit.

With a structural silver deficit, and an obvious lack of primary silver miners, one can reasonably expect that silver deficits can not continue without violent price spikes up to not only entice investors to sell metal, but also for miners to invest in silver mines. It is also clear that it is not inexpensive, trivial, or inconsequential to bring mines off of care and maintenance and would need higher prices, sustained, in order to order these back online. While there are near term producers coming online, it is not obvious how much of this supply that is merely supporting other mines at end of mine life. Additionally, with some larger mines at lower grades a few years away, higher prices will be needed to make construction decisions for hundreds of millions of dollars of investment. Lastly, with lots of silver exploration plays out there, many of these could take 7-10 years to bring online which could take us to 2030 before we would see substantial relief from any deficits.

It is unclear where environmental policy makers are getting their silver from. If all investment grade silver was confiscated, today, there is approximately 5 years of supply to the market. Plenty of silver. At issue is the prices to entice sellers to part with this may need to be $30-50. With nothing but increases in expectations of solar panels and EVs, pressure on available supply can remain high. Add to investment demand with the Giffen good effect and it is very reasonable to see a $50 price tag in the 1-3 year range and $100-$150 price tag in the 7-10 year range if silver does do a palladium move.

All indications are that “silver primary miners” are now all but extinct in any size. Meaning, IF you want to invest in silver mining companies of any size, you are looking for:

1. One of the 3 silver primaries I listed above
2. Gold companies with silver in their name to hope they have a good silver kicker.
3. Base metal companies with strong silver presence, like PAAS or Hecla
4. Junior silver producers with very low costs of labor in risky jurisdictions.

Overall, I think Steve’s silver to oil chart made a lot of sense, but I believe the main issue there is that AISC does not equal overall costs. Just because a mine says it is AISC, that might just be the mine metric for one mine and not take into account G&A, exploration costs, or development costs for new mines. The last decade saw a lot of those companies drop the exploration, and even stop them from building new mines. It is clear over the last few years that silver primaries now need to be a gold or base metal company with silver as a byproduct.

What this all means is that as ore levels continue to degrade, lack of mines come online, pressure for more EV, investment, and solar demand – that silver is in a death spiral of production leading to an absolutely stellar short squeeze to happen when a run on the last available silver in the COMEX is hit.

It is POSSIBLE that where we are with the registered is as low as they can let it go. Many days in January with 0 change in registered, which was odd. Then reports of like 700 contracts getting “adjusted” out of Feb OI where it seemed like people were trying to come and grab a few million ounces. All of this as it appears like premiums have come down on retail products.

I have my core positions, and while I may sell some or all into a $50 price, to me there would be a steep pull back to perhaps $30-$40 and then the reload/launch to $100-$150 in 2030. Some can watch their miners go up and come back down. Buying miners is great, but you cannot hold them forever. You need to discuss a buy/sell plan with your financial advisor. Not me. I’m trying to point out that in the grand scope of the world, it appears there are THREE primary silver miners on the planet with a market cap over $100m. Maybe a few others like GoGold or Santa Cruz I missed, but there are not a ton.