There has been much focus on physical silver (Ag) in recent months primarily due to the price spike, and small investor interest in silver as a monetary metal (as is with Au-gold). As a monetary metal Ag can be utilized as a protective hedge against the uncertainty of the stock market and shenanigans of politicized and manipulated fiat currencies.
For those investing in physical Ag long term, it would be prudent to review the fundamentals driving the supply demand equation every now and again. In other words, look at the data for yourself. Estimates change and as new information and feedback from exploration companies and the market these numbers can change, so an annual if not a 6 month review might be considered justified. With investors speculating on silver-to-the-moon prices now heading toward $50 we might want to understand if this is justified from the perspective of the supply/demand equation of silver as just another commodity (an asset primarily for industrial use) as-well-as a monetary metal.
Here is what is currently reported:
Summary - Physical Silver Supply ("napkin math"):
(Note: current rates of production, supply and demand are 100% improbable as a constant.)
Mining at CURRENT RATES: :
Global reserves: 510,000 tons (16.4 billion ounces)
Annual Global Mine Production: 22,000 tons (826 million ounces)
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Ave. number years of mining at 2010 rates: 23 years of mine production remaining
510 / 22 = 23
Total Supply / Total Demand cumulative at CURRENT RATES:
(CPM: Fabrication demand has declined annually by 6.5% since 2005)
Annual Fabrication Demand 631 million ounces
Years of Global Reserve to Meet Fab. Demand 26 years
16,400 / 631 = 26
Source Data:
2010 Demand (est.):
Fabrication Demand 631 million ounces projected total (CPM)
Fabrication Demand 2009:
![Silver Annual Total Demand [CPM Group]](http://www.kitco.com/charts/images/Annual-Total-Demand.gif)
Investment physical holdings 2010 - ETFs (not demand) 450 million ounces (CPM)
2010 Inventories and Supply (estimates):
Bullion Inventories 800+ million ounces (CPM)
Total Annual Supply 826 million ounces (CPM)
Estimated Silver Production additons through 2014: 113 million ounces (CPM)
Global Reserves: 9 billion ounces (CPM)
US reserves 25,000 tons (804 million ounces) (USGS)
GLOBAL reserves 510, 000 tons ( 16.4 billion ounces) (USGS)
Reserve Base 18+ brillion ounces (CPM)
Annual Supply 2009:
![Silver Annual Total Supply [CPM Group]](http://www.kitco.com/charts/images/Annual-Total-Supply.gif)
Here is the source of data I found and researched online. If you have other sources for supply demand that you can recommend, and believe are reputable and reliable, please comment below.
CPM Silver Yearbook 2010 Presentation
https://docs.google.com/viewer?url=http%3A%2F%2Fwww.cpmgroup.com%2Ffree_library1%2FPRECIOUS_METALS_YEARBOOKS_RELEASE_PRESENTATIONS%2FCPM_Group_Silver_Yearbook_2010_Presentation_May_2010.pdf
USGS: Mineral Commodity Summaries 2011
Silver:
All Minerals:
http://minerals.usgs.gov/minerals/pubs/mcs/2011/mcs2011.pdf
From Appendix C of USGS Minerals report:
Reserves data are dynamic. They may be reduced as ore is mined and/or the extraction feasibility diminishes, or more commonly, they may continue to increase as additional deposits (known or recently discovered) are developed, or currently exploited deposits are more thoroughly explored and/or new technology or economic variables improve their economic feasibility. Reserves may be considered a working inventory of mining companies’ supply of an economically extractable mineral commodity. As such, magnitude of that inventory is necessarily limited by many considerations, including cost of drilling, taxes, price of the mineral commodity being mined, and the demand for it. Reserves will be developed to the point of business needs and geologic limitations of economic ore grade and tonnage. For example, in 1970, identified and undiscovered world copper resources were estimated to contain 1.6 billion metric tons of copper, with reserves of about 280 million metric tons of copper. Since then, about 400 million metric tons of copper have been produced worldwide, but world copper reserves in 2010 were estimated to be 630 million metric tons of copper, more than double those in 1970, despite the depletion by mining of more than the original reserves estimate.
SILVER
Silver was used as a replacement metal for platinum in catalytic converters in automobiles. Silver also was used in clothing to help regulate body heat and to control odor in shoes and in sports and everyday clothing. The use of trace amounts of silver in bandages for wound care and minor skin infections is also increasing.
http://minerals.usgs.gov/minerals/pubs/mcs/2011/mcs2011.pdf
From Appendix C of USGS Minerals report:
Reserves data are dynamic. They may be reduced as ore is mined and/or the extraction feasibility diminishes, or more commonly, they may continue to increase as additional deposits (known or recently discovered) are developed, or currently exploited deposits are more thoroughly explored and/or new technology or economic variables improve their economic feasibility. Reserves may be considered a working inventory of mining companies’ supply of an economically extractable mineral commodity. As such, magnitude of that inventory is necessarily limited by many considerations, including cost of drilling, taxes, price of the mineral commodity being mined, and the demand for it. Reserves will be developed to the point of business needs and geologic limitations of economic ore grade and tonnage. For example, in 1970, identified and undiscovered world copper resources were estimated to contain 1.6 billion metric tons of copper, with reserves of about 280 million metric tons of copper. Since then, about 400 million metric tons of copper have been produced worldwide, but world copper reserves in 2010 were estimated to be 630 million metric tons of copper, more than double those in 1970, despite the depletion by mining of more than the original reserves estimate.
SILVER
Silver was used as a replacement metal for platinum in catalytic converters in automobiles. Silver also was used in clothing to help regulate body heat and to control odor in shoes and in sports and everyday clothing. The use of trace amounts of silver in bandages for wound care and minor skin infections is also increasing.
World silver mine production increased to 22,200 tons as a result of increased production at new and existing polymetallic mines. Global silver output increased owing to a full year’s production from the San Cristobal Mine in Bolivia, the Dolores and Parmarejo Mines in Mexico, and the Kupol property in Russia. Production from several mines in Argentina also increased. Silver production increased at lead-zinc mines, such as the Lucky Friday Mine in Idaho, where production was at its highest level in 10 years. Production at the Greens Creek Mine in Alaska also increased owing to improved mining techniques, and production from the Bingham Canyon Mine in Utah increased because of increased mill throughput. In July, the Rochester Mine in Nevada was preparing to mine new ore zones that would extend mine life by several years.
World Mine Production and Reserves : Reserves information for Peru and Poland was revised based on new information from Government and industry sources.
Mine production
2009 2010 Reserves
United States 1,250 1,280 25,000
Australia 1,630 1,700 69,000
Bolivia 1,300 1,360 22,000
Canada 600 700 7,000
Chile 1,300 1,500 70,000
China 2,900 3,000 43,000
Mexico 3,550 3,500 37,000 Low - new deposits found?
Peru 3,850 4,000 120,000 Low - new deposits found?
Poland 1,200 1,200 69,000
Russia 1,400 1,400 NA ? CPM:14.7m oz in 2011
Other countries 2,820 2,600 50,000
World total (rounded) 21,800 22,200 510,000
World Resources:
Silver was obtained as a primary product from mines in Mexico, Peru, and Australia, in
descending order of production. Silver was also obtained as a byproduct from lead-zinc mines, copper mines, and gold mines, in descending order of production. The polymetallic ore deposits from which silver is recovered account for more than two-thirds of U.S. and world resources of silver. Most recent silver discoveries have been associated with gold occurrences; however, copper and lead-zinc occurrences that contain byproduct silver will continue to account for a significant share of future reserves and resources.
Substitutes:
Digital imaging, film with reduced silver content, silverless black-and-white film, and xerography
substitute for silver that has traditionally been used in black-and-white as well as color printing applications. Surgical pins and plates may be made with tantalum and titanium in place of silver. Stainless steel may be substituted for silver flatware, and germanium added to silver flatware will make it tarnish resistant. Nonsilver batteries may replace silver batteries in some applications. Aluminum and rhodium may be used to replace silver that was traditionally used in mirrors and other reflecting surfaces. Silver may be used to replace more costly metals in catalytic converters for off-road vehicles.
AuCanary
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