vrijdag 20 maart 2015

An update on AISC of silver miners

The silver price has been clobbered in 2015, pushing the metal towards $15/ounce. Investors in silver mining companies need to assess what this means for their earnings.

With declining silver prices, the trend today is that the miners are shifting from low grade mining to high grade mining, which is called "high grading". For example, Endeavour Silver (EXK) just announced that they will expand their El Cubo mining operation. By switching to the higher grade ore areas, they will increase capacity at a lower cash cost. This way the company can push down the all-in sustaining cash cost (AISC) from $20/ounce last year to $16/ounce this year. This implementation of cost efficiency was very much needed as silver dropped under $20/ounce. Of course, these actions will shorten mine life in the long run as low grade areas are less viable for mining operations in the future.

Today, it's not anymore about how much reserves and resources you have, but at what cost you can mine it from the ground. In the chart below, a summary of the cost cutting measures of several silver miners is presented.

To read the analysis, go here.

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