Lower spot prices have stimulated massive need for physical gold and silver. The paper prices of the metals are completely devastating the business, and their spot prices are unlikely to be below the fee for production for too long.
The costs for silver mining increase each year, regardless of the market price. Silver and gold spot market prices currently sit below the price of production for most major producers. Couer d'Alene Mines' cost to create an ounce of silver has become $27.72. Agnico Eagle reported the average cost of gold production nearly $1,350 per ounce.
At $27/oz. US silver mines generally would break even. Below $20/oz they can be losing money. Silver is not really profitable to mine itself. It comes down like a secondary product of other metals. To mine for silver alone would cost easily $50-$100 an ounce.
All mining companies sell their by-product metals at market value. Some mining operations use hedges, or have got a contracted price rate to insulate them against temporary price decreases. Sustained affordable prices are another story.
If the cost of silver falls as an example, so does the retail price for lead, zinc, copper and gold.
Every ounce of gold or silver mined to remain in business should be replaced with exploration for future deposits. This is a huge cost from the silver and gold Click here . With no exploration for additional deposits, the existing supplies simply run out.
The industry has such difficulty raising capital resources, locating new high quality deposits, as well as the political challenges with developing those deposits, that mining companies work on pretty thin margins.
Should spot prices for silver and gold languish at current levels mines will be forced to suspend operations.
Mining as with all other industries, seems to have a correlation between production volume and expense. The better volume, the low the total cost to have the metal to the consumer. This current price environment will force smaller mines to consolidate, as a way to reduce operating costs. This is comparable to what agriculture was forced into 40 to fifty years ago.
Silver and gold mines are cutting costs everywhere they can. They're reducing capital expenditure, exploration, and development. While silver and gold mining companies have been cutting costs all along, a sustained dip within their prices could be catastrophic for smaller companies operating mines with tight or no margins in any way.
If the price of gold falls to $1,280 or $1,260 for any short period of time, most mines would try and continue operations. Most mining companies are reluctant to close a mine on the first manifestation of weak prices. The expense involved to seal down and later on reopen a mine are simply too great.
The more time these spot prices remain low, the better upward energy they're storing. Discount prices are stimulating intake of the specific metals, while mining production is slowing, and exploration for brand new materials has stopped completely. Unless demand suddenly stops, the prices must increase, because demand will probably be outpacing supply.
If you ask me this can be a seldom seen ability to be buying as much gold or silver by means of bullion or coins when i can afford, even though the costs are so low.