This category covers establishments primarily engaged in mining, milling, or otherwise preparing silver ores, including the production of bullion at the mine or mill site.
212222 (Silver Ore Mining)
Most world silver is produced as a byproduct or coproduct in the mining of other metals—such as copper and gold, and, to a lesser degree, lead and zincem. The outlook for silver production tends to overlap with the outlooks for other metals. Primary producers, which account for roughly one-third of world silver supply, are more vulnerable to swings in the historically volatile silver market than diversified metal producers.
Silver entered the new millennium with relatively static prices, fluctuating less than $1.00 between its high and low prices for the third consecutive year. In early 2001, silver reached a temporary high of $4.87 per ounce before slipping to a low of $4.16 per ounce. This drop can be attributed in part to a 10 percent decrease in global industrial silver demand during that period. Worldwide, photographic demand was slightly less than in 2001, whereas the demand for silver in jewelry increased that year. Silver trading remained relatively flat until the September 11, 2001, attacks on the World Trade Center, which closed markets until September 17, causing silver prices to rise to $4.32 per ounce—eventually reaching $4.65 in early October—as concerns arose about the vaults of silver buried under the rubble of the World Trade Center. After a brief downward trend, prices rose again in December to $4.65 as investors looked for a safe haven in a climate of economic uncertainty. Overall, silver was down 12 percent in 2001 from the average price of $5.00 in 2000.
In 2002, United States mines produced approximately 1,470 tons of silver with an estimated value of $214 million. There were 21 principal refiners of commercial-grade silver producing an estimated 2,900 tons of output. Approximately 30 fabricators consumed more than 90 percent of the silver used in the arts and industry. Mainly an industrial metal, industrial and technical uses of silver, including photographic materials and electrical and electronic products, are by far more in demand than aesthetic silver uses, which include jewelry, tableware, and coinage. In 2001, domestic industrial consumption fell by approximately 480 metric tons to 2,450 metric tons. Total 2001 U.S. consumption of silver, estimated at 5,300 metrics tons, fell 749 metric tons from the previous year.
Most silver is produced from argentiferous ores—the sulfides of lead, copper, and zinc—which may contain varying amounts of silver, depending on their location. Silver is also found as deposits of native silver (usually in alloy form), as sylvanite (gold and silver telluride) ores, and in many naturally occurring minerals, including galena (lead sulfide), argentite (silver sulfide), cerargyrite (silver chloride), and others.
Extraction and Refining. Various methods are employed to extract silver or a combination of silver and gold from ores, scrap, alloys, and used photographic materials. As most silver is a byproduct of copper, lead, and zinc ore treatment, the precise process differs with each ore. In every case, however, the silver is finally collected in the form of crude silver or silver-gold bullion. The former is refined by a process involving smelting in a furnace with lead oxide, fluxes, and a reducing agent to produce a purer alloy of silver and gold called dore. An oxidized lead residue melts away in the process.
Two methods—electrolysis and parting—are used to separate silver and gold in silver-gold bullion. In electrolysis, electric current is passed through a silver nitrate water solution, with silver, gold bullion, dore serving as the anode. In the parting method, the dore is dissolved in a bath of hot concentrated sulfuric or nitric acid. Gold is recovered from the residue, and the clear solution is treated with ferrous sulfate to precipitate the silver, which is filtered off and melted into bars. In 2001, approximately 1,100 tons of silver were recovered from recycled materials according to the U.S. Geological Survey, Mineral Commodity Summaries.
For thousands of years, silver's aesthetic and practical value, as well as its relative rarity, have earned it a position among precious metals. As a noble metal, it resists oxidation and demonstrates excellent properties of conductivity, making it particularly useful in both ornamentation and as a practical conductor of electricity and heat for numerous applications. Although it tarnishes easily in the presence of certain sulfur compounds and scratches easily in its pure form, it is the whitest of all metals and an excellent reflector of light—capable of reflecting up to 95 percent of incident light rays in the visible spectrum. Silver's chemical symbol, Ag, was obtained from the Latin name for silver, Argentum , which means bright and shining.
Early History. Silver was one of the first metals after gold and copper to be molded by humans, and silver artifacts have been found in Near Eastern tombs dating back to 4,000 B.C. The Romans developed a method of separating silver from ore by a heating process, which was used into the Middle Ages, when silver-copper mines were exploited in central Europe. By the sixteenth century, the Spaniards had discovered enormous silver and gold deposits in Central and South America. Mexico largely supported Spanish colonial wealth until its independence in the early nineteenth century. Into the 1990s, however, much of the silver remained, leaving Mexico the world leader in silver production. Minas de las Rayas, a mine that began operating in 1558, as well as other mines and general sites, still produced silver into the 1990s. Penoles' Fresnillo Mine, known as the richest silver mine in the world and in operation since 1550, produced 56 percent of Penoles' total silver with a record 893 metric tons in 2001. Until the discovery of the Com-stock Lode strike in the Sierra Nevada area of the United States, Central and South America almost exclusively supplied world silver. Moving into the twentieth century, silver leaders in the western world were Mexico, the United States, Canada, Peru, and Bolivia.
Silver in Recent Times. Domestic mine production of silver in the 1980s rose to its highest level in nearly 50 years. One reason is that during this period precious metal prices stayed higher in constant dollars than during the 1970s. Also, in 1979 and 1980, silver and gold prices were unusually high, whereas the prices of other base metals were relatively low. As a result, companies used their exploration budgets to search for precious metals. As a result, new discoveries were developed in producing mines. In the late 1980s, rising prices for metals such as copper, lead, and zinc indirectly contributed to increased domestic silver production. Higher prices were the reason some mines reopened. Other companies increased the capacity of their operations due to the fact that nearly all base metal mines contain some silver.
The Silver Institute, a Washington D.C.-based industry research group, projected that world silver production would reach 14,347 metric tons in 1994, followed by 14,622 metric tons in 1995 and 14,912 metric tons in 1996. (One metric ton is equivalent to 1,000 kilograms and to 32,151 troy ounces.) The actual production, according to the Silver Institute, was 14,266 tons for 1994 and 15,073 for 1995. According to the U.S. Geological Survey, world silver production was estimated at 16,200 metric tons in 1998, a slight decrease from 1997's 16,400 tons. U.S. silver mine production was valued at $338 million from about 76 mines in 1998, an increase of more than $200 million from the previous year. Given the magnitude of price declines, however, silver output remained relatively resilient due to the large portion—up to 70 percent—typically produced as a byproduct of copper, lead, zinc, and gold mining activity. Silver prices averaged $5.22 in 1999 before dipping to $4.95 in 2000.
U.S. silver mine production of about 1,470 tons was valued at $214 million in 2002, down from 1,740 tons produced by mines in 2001. The Silver Institute reported a slight increase in world silver mine production in 2001 at 18,400 metric tons, up from 18,100 in 2000.
Silver Supply and Stocks. The U.S. Mint safeguards a majority of the country's precious metals and is the caretaker of most of the silver supply of the United States. The values and amounts of silver under the protection of the mint at the end of September, 2001, was 220,062 kilograms (kg) of silver carrying an approximate market value of $32.422 million (at $4.5825 per fine troy ounce).
The early 1990s saw dramatic reductions in secondary silver supply. Compared with the early 1980s, silver supply from scrap during the 1990s fell to approximately half its former level and hovered around the 100-millionounce (3,215-metric-ton) mark. Reasons for the decline included lower prices, the prevalence of lower-content scrap, and restrictive sales policies on official reserves. Most secondary recovery came from photographic scrap materials, which remained economically recoverable even at $3.50 an ounce, whereas recovery of the lower silver content in electronic scrap became less desirable. Approximately 1,600 tons of silver was recovered from old and new scrap in the United States in 2002, up from a low of 1,100 tons in 2001 but somewhat lower than the year 2000 high of 1,680 tons.
Other secondary sources also declined. Most notably, the U.S. Defense Department's National Stockpile inventory of surplus silver was reduced from nearly 4,300 tons in 1982 to nearly 1,100 tons in 1998. Several regulations were enacted in the early 1990s to control the rate of change and nature of the National Defense Stockpile, including a 1992 law that restricted the disposal of silver from the stockpile to coinage programs or government contractors for use in government projects. Between 1981 and 1992, 65 million ounces of stockpile silver were used for coinage programs and roughly 3.5 million ounces were delegated to contractors, according to the Silver Institute. In 1992 Dennis E. Wheeler of the Idaho-based Coeur D'Alene Mines Corp. predicted that the National Defense Stockpile's supply of silver would be gone by 1997, at which time the U.S. Mint—which since 1985 has consumed roughly 45 percent of stockpile silver—would buy the metal from domestic producers. In 2002, the Defense Logistics Agency (DLA) transferred the remaining balance of silver, about 200 tons, in the National Defense Stockpile to the U.S. Mint—a unit of the U.S. Department of the Treasury—to manufacture bullion and numismatic coins. The transfer of the remaining silver indicated the termination of silver requirements in the National Defense Stockpile. The Silver Institute forecasts depletion of silver stocks in the first quarter of the twenty-first century if the yearly average reduction continues as previously illustrated.
In July of 2002, silver mining companies got support from Congress, however, as the Senate and the House of Representatives approved the American Silver Eagle Bullion Program Act. The legislation authorized the Treasury Department to buy silver on the open market from domestic sources to produce the Silver Eagle bullion coin after the surplus silver in the National Defense Stockpile had been depleted. The U.S. Mint was expected to purchase some 9 million ounces of silver per year to continue to produce the coin, aiding beleaguered U.S. silver mining companies.
The U.S. Geological Survey (USGS) estimated in 2002 that reserves of silver worldwide in demonstrated resources from producing and nonproducing deposits stood at 280,000 metric tons, with the United States owning 30,000 tons of that figure. The reserve base for the five top silver producing countries—the United States, Canada, Mexico, Australia, and Peru—held an estimated 56 percent of the world total at 240,000 tons. The USGS also reported that total discovered silver resources in the United States were estimated to be 330,000 metric tons and that the amount of silver in undiscovered mineral deposits ranged from 290,000 metric tons to 660,000 metric tons.
Consumption. Silver demand in the early twenty-first century was almost entirely industrial, with electrical, electronic, and photographic applications making up the majority of silver usage. Demand for silver experienced it largest drop in twenty years in the poor economic climate of the early 2000s and as its use in electronic products decreased. The 2001 consumption of silver in the United States, including scrap, was estimated at 5,300 metric tons, down from 6,049 metric tons the previous year. This drop was due, in part, to the decline in domestic industrial consumption, down by 480 metric tons in 2001 to 2,450 metric tons. Photography was the largest end-use application at 2,000 tons, whereas batteries, electrical, and electronic products accounted for 1,060 metric tons. Jewelry, silverplate, sterlingware, and dental and medical usage accounted for the balance of consumption. Globally, demand for silver was estimated at 27,000 metric tons in 2001, down more than 1,400 metric tons from the previous year.
In the fabrication of silverware and jewelry, 2001 worldwide demand amounted to 287.6 million ounces, up slightly from 281.4 in 2000. Demand in this sector was significantly lowered in the late 1990s and dropped 17 percent in 1998 in India alone, where jewelry, silver gift items, and silverware make up two-third's of that nation's demand for the metal; this figure was significant to affect worldwide assessments of demand. The 1998 decline was attributed to silver prices and poor economic conditions in India and East Asia. In the United States, demand for the fabrication sector rose to 214.4 million ounces, a rise of 13 percent. For the tenth year in a row, 1998 fabrication demand was greater than the supply from mine production and recycling. The gap was bridged by supply hedging on the part of suppliers and probably some divestment. Sales of designer jewelry and white metals including sterling silver were strong in the late 1990s, and these fashion trends and the supply of disposable income were expected to continue well past 2000.
Industrial consumption in the United States also continued to grow but at a rate that was not expected to materially affect prices. Worldwide, the industrial sector continued to be the largest consumer of silver in 2001, at 338.5 million ounces. The photography market retained its leading position as a silver end-user with 210.2 million ounces consumed in 2001, for example. This figure was lower than 2000 by 9.5 million ounces and was expected to further decrease as digital imaging became more widespread. The coins and medals sector accounted for 27.2 million ounces in 2001. The metal is also used for hundreds of other applications. Its excellent and long-lasting conductivity, even in high temperatures, makes it the material of choice in batteries requiring little space, long life, and high voltage, as in hearing aids, space technology, submarines, and portable television sets. Silver's germicidal properties make it particularly suitable for medical applications such as bone-replacement plates and sutures, antiseptic drainage tubes, and water purifiers. Its reflectivity also makes silver a perfect coating for high-quality mirrors. Among other uses, it serves as a freeze-resistant alloy in diesel locomotives and airplanes and is used as a colloidal catalyst in various vapor-phase organic chemical reactions. In early 2002, the potential existed for silver to replace toxic chemicals in wood preservatives and marine paints being banned for their toxicity. In early 2003, the growing popularity of the flat panel television—on the market for the past four years—gave silver another boost, as the technology is completely dependent on silver.
The particularly volatile nature of silver prices has been partly attributed to the metal's dual role as both a precious metal and an industrial material. As a precious metal, silver benefits from the same interests that influence gold prices (and other precious metals) as hedges against inflation. Thus, upturns in gold prices starting in 1993 were accompanied by similar patterns in silver prices; yet silver enjoyed a bigger boost relative to gold because of the notion that, as an industrial metal, it could benefit the most in the event of an economic recovery, according to Bette Raptopoulos, from Prudential Securities Inc. in American Metal Market.
Silver-Free Photography. Silver-halide salts (including silver chloride, silver iodide, and silver bromide) darken when they are exposed to light. As a result of this property, silver halide is coated on photographic film, paper, and plates, which makes the photographic industry the largest end-user by far for industrial silver. New developments in photography have some members of the silver industry uneasy. Some analysts fear that new technologies in electronic imaging that do not depend on silver-based chemistry will phase out traditional photographic practices, causing significant losses to the silver industry. Other industry observers, however, feel that such new technologies may actually offer new and related growth opportunities to silver-based imaging.
Further, analysts expect world silver output to be affected by the closing of several zinc mines due to low zinc prices in the early 2000s. A significant amount of silver is a byproduct of zinc mining. Some of the mines will remain permanently closed whereas some are earmarked to reopen when zinc prices rebound. Although these mines together represent a loss of only approximately 80 metric tons of silver per year, another 60 metric tons per year will be lost by cuts in copper mining. Further mining production cuts are expected and may considerably reduce mined silver production in 2002.
Overall, analysts expect silver demand and prices to increase in 2002, due to increases in industrial demand, restocking, and investment silver demand recovery. These estimates proved true in the first half of 2002, as silver prices improved some 20 percent over a low of $4.07 per ounce in November 2001. By May of 2002, silver prices were between $4.50 and $4.75 per ounce, riding a wave of excitement in the gold market. Silver producers announced new, multimillion-dollar financing while their stocks climbed to new heights. Supply of silver is expected to decrease, however, in 2002. This drop is due to a mine supply decrease as a result of mine closings, a lack of new silver mines in production, and lowered byproduct silver production from reduced base-metal production. The resulting silver deficit was estimated to increase further in 2002, causing a further increase in silver prices.
Silver and the Environment. The mining industry in general is not one favored by environmentalists. Gold and silver mines typically operate in delicate ecosystems, causing environmental damage, disruptions in native populations, and hazards to nearby water systems. Mining companies have primarily relied on insurers offering reclamation bonds pledging to clean up land affected by mining. However, after the attacks of September 11, 2001, insurance companies became wary of such risky bonds. A 2002 rule issued by the Bureau of Land Management required the mining industry to up its bonding requirements, obliging some mining outfits to show more than 100 times as much money as before so that mining cleanup does not come out of taxpayers' pockets. The mining industry reacted unfavorably to the new rule, claiming that some mines would be forced to close. Critics, however, argue that there are thousands of abandoned mines throughout the western United States, causing taxpayers to foot the bill for cleanup to streams and related environmental damage, estimated at $32 to $72 billion.
Nevada was the largest of the 16 silver-producing states in 2002, producing more than 600 tons. According to the United States Geological Survey, 30 fabricators were responsible for 90 percent of the silver used in art and industry.
According to the U.S. Geological Survey, 2000's leaders in silver production were Nevada, with 633,000 kilograms of silver; Idaho, with 416,000 kilograms of silver; and Arizona, with 132,000 kilograms of silver. Alaksa, Missouri, Montana, New Mexico, Utah, and other states produced 671,000 kilograms that year. Significant silver producing mines in 2001 included the Greens Creek Mine, near Juneau, Alaska, which produced approximately 342,000 kilograms of silver. Greens Creek—a joint venture with Hecla Mining Company, Kennecott Greens Creek Mining Company, and Kennecott Juneau Mining Company—was expected to produce 93,300 kilograms of silver in 2002. McCoy/Cove Gold-Silver Mine in Lander County, Nevada, produced about 200,000 kilograms of silver in 2001. Silver production at the Galena Mine, in Shoshone County, Idaho, reached 140,000 kilograms in 2001, up 13 percent from 2000.
International supply in 2001 was led by Mexico, Peru, Australia, and the United States. China (1,800 metric tons) and Canada (1,270 metric tons) were also major producers according to 2001 figures. Silver mine production increased globally in 2001 to 18,700 metric tons, up 400 tons from 2000 despite lessened silver byproduct from gold mines. This increase in silver production was due to growth in several base-metal mines in Mexico, Chile, and Peru. Central and South America produced more than 6,400 metric tons of silver in 2001—about 34 percent of total world output—led by Mexico, with 2,760 metric tons, and Peru, at 2,353 metric tons. Mexico's San Sebastian silver/gold mine, located in central Mexico, produced more than 31 metric tons of silver in 2001, the year it began operation, and is expected to double that figure in 2002. The number-two silver producer, Peru, enjoyed a 9 percent increase in production largely due to the recent addition of its Antamina Mine where 120 metric tons of silver were mined in 2001.
With the significant political changes in Eastern Europe of the early 1990s, silver production data were available from those regions for the first time. The Silver Institute estimated production in those so-called transitional economies as follows: the Commonwealth of Independent States (CIS—the republics that were formerly the Soviet Union) at 39 million troy ounces from 1992 to 1996; Poland at 28.9 million troy ounces for the same period; China at 6.4 million troy ounces; Bulgaria at 3.1 million troy ounces; and North Korea at 1.6 million troy ounces.
Between 1998 and 2001, Canada accounted for 40 percent of American imports; Mexico accounted for 37 percent, Peru for 7 percent, and the United Kingdom for 3 percent, with the remaining 13 percent from elsewhere. The United States imported 3,310 metric tons of silver and exported 963 tons in 2001. Imports for 2002 were estimated at 3,630 metric tons, whereas 2002 exports were estimated at 885 metric tons.
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