According to the data released by Mexico and Peru’s governmental mining data, domestic silver production continued to be depressed in May. Interestingly, the production data just released from Mexico’s INEGI shows that the country’s silver production in May was even less than what they reported for April.
I first wrote about this in my article, World’s Two Largest Silver Producers Mine Supply Cut Drastically In April. The combined silver production loss from Mexico and Peru in April was 432 metric tons or 53% versus the same month last year. Peru accounted for the largest of the decline in April at 237 metric tons (mt) compared to 195 mt for Mexico.
However, Mexico’s silver production in May dropped to 298 mt compared to 301 mt in April. Here is the combined silver production by Mexico and Peru from April 2019 to May 2020:
The net loss of silver production from Mexico and Peru over the last three month period (March to May) is 770 mt, or 32% less than it was during the same period last year. Thus, just these two countries have lost nearly 25 million oz of silver production. I imagine once we factor in losses of silver production from other countries, we could see upwards of 35-40+ million oz decline so far.
But, this is only PHASE ONE of the collapse in global silver production. I stated that as the U.S. and the global economy begin to roll-over in the second half of 2020, and onwards, we are going to see a reduction in base metal demand. With so many people becoming unemployed, the global recession- depression will cause a significant decrease in copper, zinc, and lead demand. Thus, in PHASE TWO, demand for base metals will decline, and with it, the curtailment of copper, zinc, and lead production.
With 55% of global silver mine supply as a by-production of base metal mining, any reduction of copper, zinc, and lead production will negatively impact the silver market.
With the negative fundaments for global silver supply continuing in the future, along with increased investment demand, the world will eventually find out that silver is one of the most undervalued assets in the world.
Yes, it’s true that demand for silver in Jewelry and Industrial applications has likely fallen significantly in Q2 2020. Still, with over $450 trillion held in global Stocks, Bonds, and Real Estate, total global silver investment is a fraction of a fraction. According to the World Silver Survey, there is about 2.5 billion oz of “Identifiable Above-Ground” silver investment stocks in the world. I provided some simple silver valuations below:
2.5 Billion oz Silver Investment Stocks X $25 per oz = $62.5 billion
5.0 Billion oz Silver Investment Stocks X $25 per oz = $130 billion
If just $1 trillion of that $450 trillion attempted to move into silver, that would push the silver price up nearly eight times… almost $200 per oz. But, that is if all that 5 billion oz of silver was able to be accessed. I would imagine a large percentage of that silver will continue to stay in STRONG HANDS.