Guest Post: "Future Silver Supply More At Risk Than Gold"

131
Mon, Jul 30, 2012 - 10:19am

Our friend and longtime Turdite, SRSrocco, has written another excellent research piece. It's lengthy, detailed and terrific so sit down, buckle in and enjoy.

Future Silver Supply More At Risk Than Gold

by SRSrocco

The focus of the markets and the alternative media is firmly placed on the continued disintegration of the world financial system. Many believe that the collapse of the fiat monetary system along with the global banking cartel is the worst possible outcome. However, this may actually turn out to be the good news in a sea of bad news that is lurking around the corner.

As the world's attention is currently directed at its massive paper-debt dilemma, a physical problem looms larger each passing day. This is what I call, the brontosaurus in the living room. The information provided in this article may help connect the dots to the reader who has been grossly misinformed by the highly specialized analysts in the various industries and media.

In the future as tens of trillions of dollars of debt masqueraded as wealth implodes, there will be a stampede into the best safe havens available -- the precious metals. Many believe gold will play the major roll in this upcoming transfer of wealth. While this may be true, silver could actually turn out to be the better choice when we consider the factors presented in this article.

The inspiration to write this article came while I visited several historic mining towns in Utah. One of these mines was the Horn Silver Mine located in Frisco, Utah. After spending most of the day looking at the remains of the town, its old kilns and the abandoned mine, I began to wonder how much silver was produced here and what were the size of its ore grades.

The Horn Silver Mine in Frisco was discovered in 1875 and by 1881 it was producing over one million ounces of silver annually. However, in a rush to get the silver out of the ground and not taking the time to brace the tunnels correctly, the mine collapsed in Feb, 1885. The one fortunate part about the mine collapse is that it took place between shifts so no one was hurt.

The mine started to produce again at a decent rate in 1887, but it never regained the level it had achieved prior to the mine collapse. In the 30+ years the mine was in operation, it produced over 14 million ounces of silver. This may not seem like a great deal today, but in its heyday it was the largest silver mine in Utah.

In its initial years of operation, the Horn Silver Mine produced silver at a staggering 1,608 g/t (grams per ton) or 51.7 oz/t (ounces per ton). We must remember that during this time, the United States was calculating these ore grades in short tons or 2,000 pounds. Today the predominant industry standard is measured in metric tonnes or 2,205 pounds. Thus, these earlier figures were approximately 10% lower than the comparable ore grades today. If we adjust the difference to fit present standards, it would be 1,769 g/t or 56.8 oz/t .

To understand just how much ore grades have changed in the silver mining industry in the past 100+ years, I decided to compare the Horn Silver Mine to a present day silver mining company. I choose First Majestic Silver Corp because it is a smaller producer and it has relatively decent silver ore grades (more about this later).

The Horn Silver Mine vs. First Majestic

If we look at the data compiled by the United States Geological Survey in 1913, we can see the annual amount of silver produced at the Horn Silver Mine:

The copy of the original image is hard to read, but the important figures to focus on are in the ORE & SILVER columns. We can see that prior to 1885, the mine was producing the most silver in a given year. At its peak in 1884, the Horn Silver Mine extracted 40,000 tons of ore and produced 1.56 million ounces of silver. The full potential of the mine was never reached due to the collapse of the main tunnels in 1885. 

To get a better idea of richness of the silver ore grades that were extracted from the Horn Silver Mine in the first few years of production, take a look at the graph below:

Furthermore, during the first several years of production, the Horn Silver Mine produced 10,352 tons of lead at a staggering 41% ore grade. In its final year of recorded production in 1909, the mine provided 192,22 oz of silver at 18 oz/t and 1,686 tons of lead at a 15% ore grade.

If we fast forward to the present day and look at First Majestic's Q1 2012 Financial Report, we can get an idea of just how much more ore is required to be milled to produce silver. In the second quarter of 2011, First Majestic processed 482,077 tonnes of ore to generate 1.78 million oz of silver. The reason I selected Q2 2011 will become apparent in the following charts.

I took all the data from this report and compiled the graph below:

In the five quarters shown above, First Majestic produced silver at a range of 3.2-3.9 oz/t. Furthermore, according to their Q2 2011 results, First Majestic's average lead ore grade was 1.2% -- a far cry compared to its historic counterpart. 

During the 30+ years the Horn Silver Mine was in commercial production, it processed a grand total of 474,780 tons of ore and supplied 14.2 million oz of silver. On the other hand, First Majestic processed 482,007 metric tonnes of ore (in just one quarter!) to produce 1.78 million oz of silver. This is the reason why I choose First Majestic's second quarter of 2011 as a comparable -- it was based on similar amounts of processed ore.

Over the life of the Horn Silver Mine, it produced 8 times more silver than First Majestic (in Q2 2011) when we compare tons of ore processed. Thus, First Majestic has to process 8 times more ore to produce the same amount of silver that came from the Horn Silver Mine.

We must remember, that during the late 1800's and early 1900's the majority of the work was done by human and animal labor supplemented by coal and wood energy sources. Today, the majority of work is accomplished by diesel powered earth moving machines and electricity from the grid or onsite electric generation. This is an extremely important factor when we consider the future production of silver... more on this later in the article.

How Do Other Silver Mining Companies Stack Up?

I can just hear it now. The skeptics are probably saying "Why don't you compare the Horn Silver Mine with mining companies that are producing silver at higher ore grades?" That is actually a good idea. Below you will find out how the more notable silver mining companies compare to the historic Horn Silver Mine:

As the graph states, the silver ore grades were calculated by the mining companies' Q1 2012 financial reports (unless noted) and by their total consolidated production. Fresnillo was the exception because its three primary gold mines (containing low grade silver) would have lowered its average silver ore grade unfairly.

Fresnillo had the highest average silver ore grade (10.6 oz/t) compared to the other current producers represented in this graph, while Silver Crest (1.3 oz/t) and Revett Minerals (1.0 oz/t) came in last. If we look at the different silver ore grades from the graph we can assume the average silver ore grade from the current producers would be between 5-6 oz/t.

Regrettably, I did not take the time to compile an overall average ore grade from all the current silver miners when I was acquiring the information for the article. However, I may be reproducing this figure as well as many other interesting statistics in future reports on the silver miners (possibly for a fee if the demand is there).

We can plainly see that the Horn Silver Mine produced nearly 3 times more silver during its lifetime than Fresnillo -- the highest silver ore grade of the group. If we compare the average silver ore grade of the Horn Silver Mine (30 oz/t) to estimated average of all the current miners (5-6 oz/t), then 5-6 times more ore is required to be processed today to produce the same amount of silver during the lifespan of the Horn Silver Mine.

For those who may have the notion that the Horn Silver Mine was an exceptionally high grade mine of its time... it wasn't. The average silver ore grades in the United States and Australia were extremely rich during the 1880-1900 period. For additional factual data, the reader can go to my article PEAK SILVER AND MINING BY A FALLING EROI, and scroll down to the chart that shows the average ore grades of various metals in Australia. During the 1880-1900 period, the average silver ore grades for mines in Australia were 1,000-1,400 g/t.

Now that we have an idea on how present silver ore grades have declined compared the silver mines in the previous century, let's take a look at what occurs in the future.

If we take a stroll to GoldMinerPulse.com where they have a link to their Silver List and we click on the area that says: BY GRADE, we will see a better view of the table below:

The companies posted above made the Canadian GoldMinersPulse Silver List if more than 25% of their in-situ (in the ground) value came from in-situ (in the ground) silver. Basically, the lower value and lower grade companies didn't make the cut. If we examine the list we can see that most of the predominant Canadian Silver Miners are included. Furthermore, this is the list in which I selected the majority of companies when constructing the Silver Miners Average Silver Ore Grades graph above.

The figure that stands out like a sore thumb and highlighted in yellow, is the overall average or grade of 62.3 g/t (or barely 2 oz/t) for all the companies on this list. This number is based on an average of all the companies' proven & probable reserves, measured & indicated and inferred resources. Some of these companies are still explorers and have not yet made it to the commercial production stage. Moreover, the later stage resources such as measured & indicated and inferred, normally contain the companies' lowest ore grades.

At a glance, we can see that Coeur 'd Alene (530 million oz @ 43 g/t) and Pan American Silver (1.38 billion oz @ 77 g/t) have helped bring the overall average down due to their larger volume of reserves & resources comprised of substantially lower ore grades. 

The problem that the silver mining industry faces as its ore grades continue to decline, is the increased energy costs in processing more tonnage of ore to produce the same or even less silver in the future. Enter the Brontosaurus.

THE ENERGY SITUATION: The Brontosaurus In The Living Room

Alright, I get it. What do ore grades and energy have to do with the future supply of silver? A great deal as you will see. It is quite unfortunate that the U.S. Government and the main stream media have recently put forth information claiming, "The Future Oil Independence of the United States" when quite the opposite is true. 

In describing these so-called energy delusions during a recent interview with Chris Martenson, James Howard Kunstler stated, "It's like a collective psychological break by everybody in American Society, fostered by a climate of the retailing of lies." This may seem a bit blunt, but I believe Kunstler hits it right on the forehead here.

The situation in the U.S. and world oil industry is so dire, it is simply amazing that we find very little in the way of open honest public debate. To truly understand the ramifications of a declining oil supply on the world's markets, a book can easily be written. However, it can be addressed here in four simple charts.

The first chart is taken from an excellent article written by Gail Tverberg titled, "Evidence that Oil Limits are Leading to Limits of GDP Growth." Here we can see in plain grade-school logic that as the world oil supply declines... so does global GDP -- pretty straightforward stuff.

If the oil supply growth turns negative as well as the world GDP, how will this affect the mining industry? Does anyone actually believe the mining industry will continue to grow its metal production while the world oil supply and global GDP decline? Well, according to the future forecasts by expert mining analysts... they don't see any problem with it.

The world is currently experiencing a plateau in global oil production and will soon be heading down the slope of continued depletion. Very few realize the massive amount of oil the world's oil fields supplied in just the past decade. In a comment to a post on TheOilDrum.com , written by Jeffrey Brown (westexas) and citing official sources, the world produced 23% of the total cumulative oil production to date between 2002 and 2011. The second chart below puts it into perspective:

From the research provided by ExxonMobil and Ken Deffeyes, the world's cumulative oil production up until 2005 was 1,000 Gb (billion barrels) with an additional 160 Gb (EIA) produced from 2006-2011 for a grand total of 1,160 Gb. According to this ENERGY REPORT, the total ultimate recoverable reserves of conventional oil are 2,000 Gb. Thus, the world has approximately 840 Gb of conventional oil reserves remaining. The peak of conventional crude has come and gone without the slightest peep from the oil industry.

To offset the peak of conventional crude, unconventional sources such as Tar Sands, Shale Oil and Natural Gas Liquids have be utilized. Even though these unconventional energy sources have supplemented the overall supply to help meet the demand of the market, they suffer from a lower EROI (energy returned on invested). The lower the EROI of unconventional oil sources, the lower net energy is available for the market -- basically, it costs more to produce and you get less to use in the economy.

The third chart, The Falling EROI: The Destroyer of Net Energy, forecasts how the declining EROI of unconventional energy sources destroys the amount of net energy available for the market. The ratios in red depict the amount of energy consumed in the production of oil & natural gas. For instance, in the 1930's, it only took one barrel of oil to produce 100 barrels in the industry. You can see how the ratios have declined as we move up the oil production graph.

Here we can see that the unconventional liquid energy sources (the world is relying upon in the future) come at a very high energy cost. Few realize that capital formation in the financial markets is derived from a high degree of net energy. As the net energy continues to decline, so will the availability of capital formation... thus crushing the growth of the global economy.

The three charts above should provide enough information to win over the worst peak oil skeptic. However, if this is not the case, the last chart should clear up things nicely. Most of the diehard contrarians of peak oil always bring up the fact that total global liquid oil production is still rising. While this may be true in total liquid energy production, it is not when we look at net oil exports.

 It really doesn't matter how much oil a country can produce, but rather how much it can export that matters. In the final chart we can see that Available Net Oil Exports have already peaked in 2004-2005. The Land Export Model and the chart below were developed by Jeffrey Brown. According to Brown's calculations based on past trends, available net oil exports will decline from 35 mbd (million barrels a day) in 2010 to 16 mbd by 2020 -- a 50%+ decline in ten years.

The chart is based upon a conservative 1% annual decline rate of global oil production. The dark red area of the chart shows the amount of oil consumed by the "Top 33" oil exporters. The light red area denotes the (increasing) amount of oil consumed by China & India and lastly, the green area forecasts how much net exports will be available for the remaining oil importing countries. Of course these are only forecasts based on prior trends, but if these trends do continue the world will have to survive on a great deal less oil in the present decade.

For those who would like to acquire more detail concerning the energy situation going forward, you can do so at my second peak silver article," PEAK SILVER REVISTED: Impacts of a Global Depression, Declining Ore Grades & a Falling EROI".

So... how does the approaching energy predicament impact the future silver supply as well as the broader mining industry? Well, according to the United States Geological Survey (USGS), in their most recent update of world silver reserves, it doesn't seem to matter that much at all.

WORLD SILVER RESERVES: A Good Percentage May Just Stay Where They Lay

If you spend any time in the precious metal blogosphere you will read comments stating that the world only has 10-12 years worth of silver reserves remaining. This may have been true a few years ago, but it is no longer the case. It looks as if the folks at the USGS finally woke up and decided to add some figures to the countries with a N/A in their reserve column as well as update others with existing reserves.

In 2009, the world held 270,000 metric tonnes of silver reserves (nearly the same amount for the past decade). However, in their latest 2012 Silver Mineral Commodity Summary, the world now has a whopping 530,000 metric tonnes of silver reserves -- amazing what a few taps on the keyboard can do.

In just three years, the USGS has nearly doubled world silver reserves. If we take a close look at the tables, we can see that the majority of increases came from Chile and Peru. In 2009, those Chileans had no idea how much silver they had in reserve, but by the very next year they managed to scrape together 70,000 metric tonnes (displayed in the 2010, 2011 & 2012 Silver Mineral Summaries). This is by no means a paltry figure as it turns out to be more than 2.25 billion ounces.

Furthermore, I guess those Peruvians didn't realize that they had an additional 84,000 metric tonnes of silver reserves just laying around in 2009. All kidding aside, Chile and Peru accounted for 154,000 of the total additional 260,000 metric tonnes of silver reserves added since 2009.

As it turns out, the world now has more than 22 years worth of silver reserves remaining. This may seem like a real bummer to the silver enthusiasts who were touting the low silver reserves as another bullish reason to own the metal. On the other hand, reserves on paper may not be reflective of the true amount of metal the world may be able to produce in the future -- especially in a world of declining energy reserves.

 For instance, a good portion of Chile's newly acquired 70,000 metric tonnes of silver reserves may just have to stay where they lay.

CHILE: Cracks Beginning To Appear In Its Massive Copper Industry

Chile is by far the King of copper producers. In 2011, Chile produced an estimated 5.4 million metric tonnes of copper. Peru came in a distant second at a mere 1.2 million metric tonnes. One of the by-products of copper production is silver and in 2011, Chile produced 42.1 million ounces of the precious metal. Chile is now the 5th largest silver producing country in the world.

For Chile to be able to produce those so-called 70,000 metric tonnes of silver reserves, it will have to mine a great deal of copper to do so. In order for the Chileans to be able to mine their huge copper reserves, they will need a growing supply of energy (especially liquid energy such as diesel to run the massive earth moving machines).

When I was researching diesel consumption in the mining industry, I came across an interesting trend taking place in Chile's copper industry. In the past six years (2005-2010) when Chile's copper production remained virtually flat, its consumption of diesel and fuel oil in the extraction of the ore has increased a staggering 50%.

This huge increase in consumption of liquid fuels was due to falling copper ore grades and the aging of the mine as well. As open-pit mines age, the haul trucks transporting the ore will have to burn more fuel as the mine expands and deepens. If Chile wants to grow their copper and silver production, they will only do so if they can grow their energy base. This is where the situation gets interesting.

In a recent news article, "Chile $100 Billion Copper Push Under Threat by Energy Scarcity", it was made clear that if Chile did not make massive upgrades to its electric power generation, a $100 billion worth of copper projects could be in jeopardy.

from the article:

The biggest-ever pipeline of copper projects is under threat as Chile, the world's top producer, struggles to contain rising opposition to new power plants.

... "Chile will have to shelve many of the country's mining investments due to the high cost and scarcity of electricity," Joaquin Villarino, president of mining lobby group Consejo Minero, said in Santiago on April 19. Delays will jeopardize a "significant" part of the proposed mine investments, he said.

and from another article concerning the same subject:

There are no easy fixes for tumbling ore grades at massive mines in northern Chile, protests over key energy projects that are threatening mining expansions and possible disruptions from extreme weather and labor unrest.

.... World No. 3 copper mine Collahuasi's output dipped in the first quarter of the year due to weather disruptions and grades, Anglo reported on Thursday, while the world's No. 1 copper mine Escondida saw its output plummet 25 percent last year due to a shock two-week strike and ore grade slips. (Link to the article: HERE)

Chile faces several daunting challenges in the future if it plans to increase its overall copper production. Furthermore, these two articles failed to mention the future threat of peak oil and the declining net oil exports on top of their rapidly increasing domestic mining problems. If we consider all of these factors facing the future of Chile's mining industry, it may be prudent to believe that a good portion of its copper and silver reserves may just stay where they lay.

Future Silver Supplies More At Risk Than Gold

We have witnessed that as silver and copper mines age, their ore grades continue to decline. This is also true in the overall mining industry when we consider the passage of time. Unfortunately, the best quality low hanging fruit in the metal industry were picked over a century ago. Today, a good percentage of the mining companies are just going over old mines and trying to make something out of the remaining scraps and crumbs left behind.

It would be nice if this phenomenon of falling ore grades did not affect the gold industry... but it does. Again, as ore grades decline and as open-pit mines age, it takes more energy to extract and produce the same amount of gold. To get an idea of the energy demands in the gold industry, I have focused on the top five gold miners in the world.

Trying to obtain the energy information and to list it in a standard format was a task in itself. The amount of fuel consumed was listed differently in various company reports. Mining operations chose to present their figures in either petajoules, megajoules, gigajoules, cubic meters or barrels. Each was then converted to more recognized measurement in gallons.

In 2005, the top five gold miners (Barrick, Newmont, Goldcorp, Newcrest & Kinross) consumed approximately 303 million gallons of diesel in their operations. By 2010, this figured increased 55% – to a total of 470 million gallons. (additional note: Lihir Gold now merged with Newcrest was excluded from Newcrest's figures in the chart below)

If we look at the diesel consumption in the top five gold miners, 20.4 gallons of diesel were needed to produce one ounce of gold in 2006. To produce this same ounce of gold in 2010, nearly 24 gallons of diesel were required. 

New gold mining projects slated to come online in the future on top of those already in production will need additional sources of diesel to run their operations. If available net oil exports continue to decline, where will these companies acquire the liquid energy to run their gold mines? I would imagine this question rarely if ever crosses the minds of mining analysts.

Even though the gold mining industry faces the same future energy problems as the silver industry, it may indeed suffer a great deal less. Why?

The following chart provides the answer:

In order for the future global silver production to grow, it must predominantly take place in the base metal mining industry. When the world oil supplies start their inevitable decline in the next several years it will also force global GDP to fall as well. As the global GDP declines, so will the supply of base metals such as copper, lead and zinc. Thus, future silver supply is at more risk than gold because 70% of its production comes from the mining of base metals.

In contrast, 80% of the world's gold production comes from primary mines. When the world finally succumbs to the gravity of the hundreds of trillions of dollars in derivatives reverting back to their original value of zero, gold will become the center of banking and trade. Because the majority of gold comes from primary mines, it makes perfect sense for the world to focus its energy sources on the very metal that will be in the forefront of global banking industry.

That being said, this is not at all negative for silver. Silver is still the second best monetary metal to gold. In addition, as future base metal production declines (along with it silver production), this would force the price of silver to increase in response to its enhanced rarity.

I would also imagine this will motivate the mining industry to enlarge its number of primary silver producers as well as increase its overall percentage of primary silver production. We must remember, the most efficient way to use less energy to extract silver is the mining of underground reserves with high ore grades. That is why it makes perfect sense that these underground high ore grade mines will take a premium in the future -- basically, they utilize a higher EROI in their production.

Final Remarks

It is simply amazing to see professional engineers and geologists planning and designing technical mining reports for operations that are based on 25, 50 and 100 year life spans (such as the Alaska Pebble Project) without a comprehensive consideration of the future energy supply. 

Future world energy constraints will impact the production of silver in a larger degree than gold. As the world finally catches on to the fact that silver production will decline greater in percentage than gold, its value will more than likely increase to a greater extent than gold.

All we have to do is to turn off the boob-tube broadcasting MSM propaganda and patiently await for the fireworks to begin.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  131 Comments

JackPutter · Jul 30, 2012 - 4:15pm

A very good article

I'm wondering what the volumes of ore required to get these numbers. Back in the day it might have been a single ore-cart vs. a behemoth dump truck now to get the same yield. Just a thought.

I was wondering if there's any energy usage estimates for the undersea mining that may come online? Obviously energy intensive but the grades that are estimated near the undersea vents are phenomenal. This form of mining is much more practical than the asteroid-mining suggestion.

JackPutter · Jul 30, 2012 - 4:20pm

@Xeno

It's good to remember that part of the worlds supply of base metals gets used up in non-recoverable ways. Including silver. Whereas gold doesn't usually get consumed in non-recoverable ways.

ferretflat Doctor J · Jul 30, 2012 - 4:28pm

@ Dr.J. next president

The democrats are grooming Kamala D. Harris for the the presidency in 2016 or 2020. She is currently the attorney general of California and has been assigned as the next governor. Check her photo on WIKI. sexiest politician ever!!

Here in Illinois our next Governor will be that vile closeted homosexual Ram Emanuel. He reeks of evil, especially in person!

ReachWest · Jul 30, 2012 - 4:29pm

Excellent Article!

@SRSrocco:

Baravo! An excellent and extremely informative article that covers a complex subject - and, yet, is easy to read. Well done, indeed.

I was especially struck by the fact that increasingly large amounts of raw earth must be handled to get but a few ounces of Silver. When one considers the amount of fuel required to do this, it really reinforces the point that the real value of a "One Ounce Silver coin" is surely worth more than the measly $30 in fiat we're currently required to pay.

The natural laws of economics will prevail - your article nicely proves this.

babaganoush2307 · Jul 30, 2012 - 4:30pm

@ JackPutter

Silver will always be recoverable, the question is what price would it have to be at in order for you to start mining landfills to recover micrograms per ton while still making a profit...? frown

Zoltan · Jul 30, 2012 - 4:36pm

Excellent Analysis SRS

Bodes well for those with the real thing in hand now.

Silver demand is inelastic in that a significant amount is consumed annually in the production of real goods. There is also a huge naked short position and our pals at the Morgue claim to hold countless tonnes in the SLV (which is mysteriously cheap to store).

The silver market is as crooked as they come (and that is saying something).

Z

The Vet Nana · Jul 30, 2012 - 4:41pm

Maybe Sprott bought his silver?

He would have bought it long ago, but maybe he called and asked why it hadn't been delivered wink

obiwan · Jul 30, 2012 - 4:44pm

There is a lot of chatter out

There is a lot of chatter out there on the 2012 Olympics symbolism and possible false flag.

This link has 2 parts and is interesting.

https://www.redicecreations.com/radio/2012/07/RIR-120716.php

The Vet dropout · Jul 30, 2012 - 4:58pm

gold and silver ETF's are such a great deal....

If gold and silver ETF's are such a great deal, then why do they trade below the spot price?

They trade pretty close to spot. You must allow for the fact that the ETF's take their expenses by selling metal out of the general pool which gradually reduces the amount of metal backing each share.

One GLD share started as being equal to 1/10 ounce of gold but today it is only 97% of that.

So instead of 1 share being equal to .1 ounce it is now only .097 of an ounce. 

GLD closed today at $157.07 which equals $1619.20 an ounce when Spot Gold was $1622

If you check the historical figures GLD varies up to 0.2% higher or lower than the NAV but not much more than that. IMO short selling of the shares causes a lot of this variation nothing to do with the NAV per share.

https://www.spdrgoldshares.com/sites/us/value/historical_archive/

Havenstein · Jul 30, 2012 - 5:04pm

SRS

Thanks for this excellent contribution - this is first class research. Regarding the increasing (doubling) levels of reported world silver reserves - that is shocking. On the other hand I am consoled by the reports that tell me the US unemployment rate is barely 8% and inflation is contained to a mere 2%.

Punk-Assets · Jul 30, 2012 - 5:34pm

Incredible article. Thanks a

Incredible article. Thanks a lot for that.

IveBeenDrinkin · Jul 30, 2012 - 5:44pm

Nice Piece

Great piece SRS. Made me want to crack open a cold one, but what doesn't.

I'll only add that not much in this world has become unobtainable when people really want or need it. They just find a different way to get it, and it actually becomes more plentiful and cheaper.

If fuel costs and low grade ore makes for inefficient silver mining, and there's no substitute for silver, something like nano-technology will have a reason to focus ...programmable molecular machines that can soak into landfills and low grade deposits and pull back just the silver atoms.

Other than short term dislocations due to poor political decisions, laws, and government, I wouldn't make plans based on the unobtainability of anything that's highly valued.

Roark · Jul 30, 2012 - 6:16pm

Really good work SRS. TOP

Really good work SRS. TOP SHELF!

Can you point me to the references you used to get the fuel burn per year? Not that I dont believe you, its just they seem very high to someone who done a fair deal of work on really big iron diesels. :)

JackPutter babaganoush2307 · Jul 30, 2012 - 6:22pm

Non-recoverable silver

Silver nitrates for photography and other chemical processes goes down the drain. There's also the anti bacterial silver used in medicine. I had a treatment of silver sulphidiazine for a nasty tequilla-fireworks combo in my youth. It's really a life saver for those in burn units. (Mine wasn't that bad.)

It's a tradition to throw a silver coin into a source of drinking water to reduce bacteria.

Urban Roman · Jul 30, 2012 - 6:40pm

Great article, SRS!

Combining Westexas' Export Land Model with a logistic analysis on the mining industry!

It was enough to inspire me to go by the LCS at lunch and pick up a few more ASEs, even though I had to pay retail + sales tax on them.

SRSrocco · Jul 30, 2012 - 7:12pm

THANKS FOR ALL THE COMMENTS....

To me, this graph below really shows the difference in mining silver today:

Again, I appreciate all the comments. This chart has inspired me to start doing bi-annual reports on silver and then gold miners. It will have all their information in one report including new statistics you can't find anywhere else. I am thinking about providing these reports for a fee as the research and work will just be OFF THE CHARTS...LOL

I would like to know from any of you if this sort of report would be worth buying. If it is, what is better, a subscription or one time fee??

NOTE: I have a PDF file of the article if anyone wants a copy please email me at SRSrocco[at]gmail[dot]com

balz SRSrocco · Jul 30, 2012 - 7:55pm

Mistake

I always hat tip your comments SRS... I accidentally hat tipped the "disagree" comment. Sorry... So you can substract one.

Keep up the good work!

AinT · Jul 30, 2012 - 8:17pm

Future energy

SRS I'm curious what your thoughts are on nuclear fuel as a potential future energy source for the mining industry.

While I realize that Uranium, and potentially in the future Thorium, fuel deposits are generally located in pretty geographically distant places do you foresee the potential for mining companies that have cut their teeth in the precious metals mining industry shifting over to mining Uranium etc in the future?

This could, in theory, provide a separate source of revenue for the mining companies and also safeguard their future energy requirements.

bam AinT · Jul 30, 2012 - 8:49pm

...

...

SRSrocco · Jul 30, 2012 - 9:54pm

REPLy @ FUTURE ENERGY

Aint.... You are probably asking the wrong person about Nuclear fuel. I have done enough research to come to the conclusion that NUKE POWER is by far the most dangerous energy we have on the planet.

Several years ago, I had the wonderful opportunity to spend part of the summer working with DON ARABIAN. He was a retired engineer from NASA, living in Cape Canaveral Fl. This is a good story in itself. However, I found out that Don was one of the four man credited in putting man on the moon. He was in charge of the MER... Mission Evaluation Room in Houston, TX during the Apollo program.

Most people think the folks at MISSION CONTROL in Cape Canaveral were the smart folks.. they weren't... it was the engineers in the MER that were the brains and solved all the hard problems.

I would spend days just talking with Don in his backyard balcony discussing everything under the sun..... Arabian was a genius. Don was hired that year in the fall to go work for the Chinese in helping them with their rocket program to get satellites in orbit.

Anyhow, Don told me that Nuclear Power was the most dangerous energy humankind could use. He said, "WHY ON EARTH WOULD YOU TAKE THE POWER OF THE SUN AND PUT IT IN YOUR BACKYARD?"

After years of research, I have found out that in all the ways you look at nuclear power, it was the worst choice we made as species. Not one commercial nuke plant has been retired 100%. The capital it requires to decommission just one Nuke plant is staggering. It is just simply scary to think about all those plants we have running right now and at some point in time will need to be decommissioned. My fear is that we could have FUKUSHIMA TIMES 50.

Was that the answer you were looking for?....LOL

bam SRSrocco · Jul 30, 2012 - 10:03pm

@SRS

>Several years ago, I had the wonderful opportunity to spend part of the summer working with DON ARABIAN. He was a retired engineer from NASA, living in Cape Canaveral Fl. This is a good story in itself. However, I found out that Don was one of the four man credited in putting man on the moon.

Uh oh, Steve. There are a few folks on here who think that was a hoax! :D

RE the viability of Uranium from a practical perspective. Cost would too prohibitive. It would likely cost more to build the tools/infrastructure/reactors needed to fuel a mine than you would get in extracting the materials.

Not only that, but mines are both finite and remote, two qualities antithetical reactor creation. Once a mine is used up, what do you do with the reactor?

Thirdly, the political problem. You already have enormous push back from local populations when building and operating mines. Imagine adding the 'nuclear option' to that powder keg. Not happening.

Urban Roman · Jul 30, 2012 - 10:12pm

Solar mines it is then!

With NaS batteries for overnight. Lots of mines are in good solar country -- up on mountains, in deserts.

bam · Jul 30, 2012 - 10:14pm

Santa with a zinger....

Jim Sinclair’s Commentary

Geithner is on a trip to fix the problems of the euro.

clip_image002

S Roche · Jul 30, 2012 - 10:14pm

Re Read this asap...

Full circle...https://www.goldmoney.com/gold-research/alasdair-macleod/gold-reentering-monetary-system.html

Taken together makes it pretty clear who wants the Euro to fail. Currency Wars indeed!

whitebeard TF · Jul 30, 2012 - 10:16pm

Read this

Funny you ask Turd, just finished reading, amazing truth.

AinT · Jul 30, 2012 - 10:46pm

Nuclear safety

It depends on how you look at it. Recently here in Tokyo there have been a lot of protests against nuclear power, obviously spurred mainly by Fukushima, however a lot of the people who are protesting don't even realize what they are protesting against. I hear "American professors" being quoted a lot here in the media, saying that the Japanese government has covered up the extent of the problem and, to a certain extent, I believe that they have however even if there has been a cover up Japan really has no option but to continue using nuclear generation.

In America you are lucky, you guys have reserves of just about everything. In Japan there is nothing.... No ores, no oil, no gas and no coal. I think the trade deficits which Japan has been posting so far this year due to the massive increase in fossil fuel imports after all of the nuclear reactors here were shut down post Fukushima shows just how unsustainable a fossil fuel driven economy is, particularly in a country where there are no natural reserves. 

I recently had a conversation with a co-worker here about electric cars. He was trying to convince me that if Japan swapped over to electric cars then it would solve all of the economic woes as the country would no longer have to rely on oil imports etc, knowing that this person was also strongly against the nuclear option I then asked him where the electricity to operate these cars was going to come from. He didn't have an answer.

To be sure nuclear power is a scary option but eventually it's going to be the only one and for Japan at least that reality is gonna be sooner than later.

MelbourneGirl · Jul 30, 2012 - 10:50pm

Wow - what an article

What an article. Thanks SRSrocco for your generosity in sharing this with the Turd Community.

The Watchman · Jul 30, 2012 - 11:22pm

Japan is undertaking a HUGE SOLAR INITIATIVE

Much safer than nuclear-also very good for the future price of Silver. It is a win-win especially for us Silver investers.

Art Lomax · Jul 30, 2012 - 11:51pm

Thanks SRSrocco. Great

Thanks SRSrocco. Great article. Appreciate the time you put into it.yes

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