Submitted by SD Contributor SRSrocco
The two bigger silver miners came out with their Q2 Reports yesterday…. and they AIN’T PRETTY. Now, don’t get me wrong… I like silver miners, I am just showing some interesting things taking place as costs go up and prices paid for the metals go down.
Costs keep going up in a huge way and prices for silver are not keeping pace.
Let’s look at Hecla first. Of course, Hecla was going to do worse than last year because their LUCKY FRIDAY MINE is down and they have much less revenue while costs still need to be paid. Here is the horrible results:
2011 Apr-Jun Net Earnings = $57.8 million
2012 Apr-Jun Net Earnings = -$2.5 million (yes that’s right negative)
But, this is not the real issue as we all realize they can’t make money when one of their mines are out of action. Here is what I want you too look at below:
This is Hecla’s biggest silver producing mine GREENS CREEK. In just one year, the ore grade has fallen from 11.49 oz/t (JAN-JUN 2011) to only 10.26 oz/t (JAN-JUN 2012). Now… we have to remember, that is their ore grade before processing. If we do the math below we see a much different picture:
2011 JAN-JUN SILVER 3,157,118 oz / 379,250 MILLED TONS = 8.32 oz/ton
2012 JAN-JUN SILVER 2,693,797 0z / 362,948 MILLED TONS = 7.42 oz/ton
As we can see, the actual amount of silver from the milled ore has fallen nearly 1 oz in a year. But this is only part of the story. Let me bring back this table from a prior post on the annual GREENS CREEK production:
If we take a few of the years production and divide by the total tons milled we find just how much the silver ore grades are falling at GREENS CREEK:
1989 = 5,166,591 oz / 264,600 milled tons = 19.5 oz/t
2000 = 12,424,093 oz / 619,438 milled tons = 20.5 oz/ t
2010 = 7,206,973 oz / 800,397 milled tons = 9.0 oz/t
1H 2012 = 2,693,797 / 362,948 milled tons = 7.42 oz/t
Since 2000, the silver ore grades have fallen at Greens Creek. This has also made the costs increase. Mining costs have gone up 30% at Greens Creek compared to the same period last year.
Now… lets move to Coeur d’ Alene. If we look at the Q2 2012 report we see the following:
Net income has fallen 40% compared to same three months last year, but it’s worse if we look at the first 6 months compared to the same period last year. Net income JAN-JUN 2011 was $51.1 million, but JAN-JUN 2012 was only $26.9 million. This was a 6 month loss of 47% over last year.
This wasn’t the real good news… lets take a look at the PRODUCTION COSTS LINE. During the first 6 months of 2012 compared to last year, the production costs were 32% greater. However, if we compare the production costs Q2 2012 to Q2 2011…. it was up a STAGGERING 71%.
This is just off the charts folks. Costs keep going up in a huge way and prices for silver are not keeping pace.
ANY MORON TWIT ANAL-IST THAT SAYS THE FAIR PRICE OF SILVER IS $15 AN OUNCE…..NEEDS A GOAT MILK ENEMA.
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Don’t know a thing about goats but… it is clear that the price of silver HAS to rise because if it does not, miners will either stop production or hold their silver until it does. This is what any business would do and mining is no different in this regard. They cannot produce silver for $30 an oz. or more and sell it for less than $30 an oz. They aren’t the government. They HAVE to make a profit!
Hecla is a Lead/Tin mine, Silver is the icing on the cake from this mining operation. A reduction in Lead/Tin mining will naturally reduce the silver output. People, there are very few “SILVER MINES” most silver is an offshoot of Copper/Tin/Lead mining, so is at the mercy of world demand of these lesser valued metals.
silver psycho….if you don’t mind, I would like to clarify a few of your assumptions based on Hecla’s mining production.
Hecla produces silver, gold, lead and zinc…. very little if any tin. Even though it does have by-product base metals, it is a primary silver mining company. It has two primary silver mines. One is Greens Creek and the other Lucky Friday. Lucky Friday has been shut down but if we look at Hecla’s 2011 annual report we can see what is going on.
HECLA’S 2011 REVENUES PER EACH METAL
SILVER = $287 million
LEAD = $108 million
GOLD = $70 million
ZINC = $68 million
So, we can see that Hecla’s silver is not the icing on the cake… but is the CAKE ITSELF. Some may thing because Hecla has such a low cast cost that its silver production is its “ICING ON THE CAKE”…. however, this is not true. Cash costs are not GAAP (generally accepted accounting principles) but are a method for mining companies to brag just how big their package is. In reality, CASH COSTS do nothing for the profitability of a company.
According to the 2012 world silver survey, PRIMARY SILVER MINES accounted for 29% of all the silver produced in the world in 2011.
Something HUGE for silver bears to consider is Barrick’s massive cost overrun to get Pascua Lama online. That was going to be 30M+ozs of silver for the market. Instead, it will come to market 2 or 3 yrs late because the capex was supposed to be “only” $5B but really it’ll be more like $9B! Think about that. There needs to be a LOT more silver to satisfy the insatiable long term demand for silver. This mine would be bigger than Pan American Silver or CDE!
30M Ozs of silver really isn’t that much. It’s only about 500,000 of gold equivalent. It doesnt even cost 1 billion!! LOL.
The financial community trots out lies like silver is in “surplus” and try to tell us investment demand is only 100 million ounces a year. Bullhonky! It’s much more than that, and when the next phase of increased physical buying comes around, it will be painfully obvious.