TN 295 No. 9090 t. 'if^:*'"^ ^. '- .°-^^ - •^0 * aV "K <>' „.. '^'t* '' •"'♦'' ^<^'' ""^^ 'o^T-' A •4 O • ^WJ3*> A^ s.. ^ ^ ^ •" «^^ °^ *oTo' ,0"' "^ ♦r^.' ^i-'^ v/^9- A ...* ,0 p^c^*,•^< ^^o V-^^ a5°^ iV->>^ ^ A*5 vO-n, A■*^ -$' A^ ^^ %-^«^;*r, ^V -^ t, " ' * 'V . A . 1. ' » . -i> a"*-' o»o '^*^ *'^* ^C>''* 'o^ if " '^or ;;^^'^ '-^^0^ f^'^a^; -ov^' '■^ . 10 _j T I T Average New York price Ql I I I '''''''■■■■'■■■■'■'■' I960 1965 1970 1975 1980 1985 Figure 3.— Silver price history, 1960-84. MEC NEW MINE PRODUCTION AND CONSUMPTION, 1968-83 The U.S. Treasury was faced with a tremendous in- crease in MEC silver consumption during the late 1950's and the 1960's. Table 1 compares MEC consumption estimates for the years 1952, 1965, 1975, and 1983. As shown, MEC silver consumption increased from 271 million tr oz in 1952 to 717 tr oz in 1965, then decreased to 416 million tr oz by 1975, and to 367 million tr oz in 1983. Of particular note is the enormous increase of 277 million tr oz for U.S. coinage uses from 1952 to 1965, followed by the subsequent drop to only 2 million tr oz for U.S. coinage use by 1983, owing to the elimination of 90-pct-silver U.S. coins after 1965. In comparison, total MEC new mine silver pro- duction only increased from about 186 million tr oz in 1952 to 218 million tr oz in 1965. Essentially, the deficit of total consumption compared with new mine production amounted to about 500 million tr oz for the year 1965. The interplay between these two forces since the late 1960's is described in the following paragraph. Consumption of silver in MEC's decreased by 16.5 pet from 1968 through 1983, while U.S. consumption decreased by 17.8 pet over the same period. U.S. silver consumption as a percentage of total MEC silver consumption also fell slightly, from 33.3 pet in 1968 to 32.8 pet in 1983. In con- trast, during the same period total MEC new mine silver production increased 32.9 pet, from 232 million tr oz in 1968 to 308 million tr oz in 1983. The result is that the deficit of consumption versus new mine production, which was 207.2 million tr oz in 1968, had been closed to only 59 million tr oz by 1983. Indications are that for 1984 the deficit had been closed further, to between 25 and 35 million tr oz. Obviously, if an annual deficit between consumption and new mine production exists, then demand is being satisfied from sources other than new mine production (such as from stocks and reclaimed industrial scrap). In order to understand the supply-and-demand relationships for silver, one must look back to historical production statistics to determine the amount of existing stocks of silver from prior production. The 1953 Minerals Yearbook reported a U.S. Bureau of the Mint estimate that total world output of silver from 1493 through 1953 was 19.8 billion tr oz (8, p. 1025). Table 1.— Consumption and mine production of silver in market economy countries for the years 1952, 1965, 1975, and 1983 (Million troy ounces) 1952 1965 1975 1983 U.S. consumption: Industrial 97 137 158 116 Coinage 43 320 3 2 Subtotal 140 457 161 118 Other MEC consumption: Industrial 70 199 219 232 Coinage 61 61 36 17 Subtotal 131 260 255 249 Total MEC consumption 271 717 416 367 Total MEC mine production . 186 218 232 308 Total deficit (consumption less production) 85 499 184 59 The Bureau of the Mint further estimated that, as of 1953, about one-third of this total production (6.54 billion tr oz) was in circulation as coinage or held by governments for monetary purposes, a similar amount was privately held (including hoarded stocks), and another one-third had been misplaced or dissipated. From 1954 through 1983, about 8.5 billion tr oz of total additional silver had been produced by mines in all coun- tries, and U.S. Government stocks had been almost com- pletely liquidated. Assuming that the circulation coinage and Government stocks in MEC's as of 1953 had passed completely into private ownership and that the entire 1954-83 production also passed entirely into private stocks, then about 21.5 billion tr oz would be in private stocks as of 1984. However, subtracting cvunulative 1954-83 MEC in- dustrial consumption of an estimated 10 billion tr oz, and an additional 1.5 to 2.0 billion tr oz of estimated CPEC in- dustrial consumption during the same period (assuming none of this silver was recovered), then private stocks could be as low as 9.5 to 10.0 billion tr oz.* This estimate is slightly higher than most other estimates, which range from 6 to 8 billion tr oz, but much less than a few estimates that have been as high as 20 to 25 billion tr oz. SILVER MINE PRODUCTION AND TYPE OF OCCURRENCE World silver resources are contained within five major economic categories of deposits: (1) predominantly silver deposits, (2) predominantly zinc deposits, (3) predominantly lead deposits, (4) predominantly copper deposits, and (5) predominantly gold deposits. The economics of silver pro- duction from each of these resource categories is different, yet interdependent upon the prices and markets for the associated commodities; this is especially so with the last four resource categories. The percentage contribution of each category to total silver production varies for each country, but on a worldwide basis a majority of silver pro- duction is as a byproduct or coproduct of base-metal opera- tions. For example, Australia (the fifth largest MEC and sixth largest world silver producer) obtained effectively 100 pet of its 1984 silver production as a byproduct or coproduct of lead, zinc, copper, and gold operations. Conversely, ap- proximately 60 pet of reported 1984 production in the United States (the third largest MEC and fourth largest world silver producer) came from the estimated output of the 14 evaluated predominantly silver operations, as herein defined. In Mexico and Peru (the two largest world silver producers), predominantly silver operations are estimated to account for approximately 42 and 27 pet, respectively, of total reported 1984 mine production. The distribution of byproduct or coproduct silver pro- duction also varies from country to country. In the United States and Canada, for example, byproduct silver produc- tion from primary copper mines is a significant source of total annual output, whereas in Mexico and Peru the most significant such source is from predominantly lead and zinc operations. Worldwide, lead and zinc operations are the largest source of silver production. The production data of table 2 and figure 4 demonstrate a number of major points: 1. The MEC's accounted for 79 pet of world silver mine production in 1984. 2. The four largest MEC producers (Mexico, Peru, the United States, and Canada) accoiuited for between 61 and 66 pet of total MEC mine production for ail the years shown. The six largest world producers accounted for between 68 and 76 pet of total world silver mine production for all the years shown, demonstrating dominance by only a few major producing countries. 3. Total MEC silver production increased by 12 pet over the ll-5Tr period from 1971 to 1981, or just over 1 pct/yr. In just the 2-yr period from 1981 to 1983, however, produc- tion increased by a much more rapid 16 pet, or approxi- mately 8 pct/yr. Production data for 1984 indicate a slowdown in the increasing world production trend, with production in most countries either remaining constant, declining, or increasing only slightly. The net result for MEC countries was a 1-pct decline in reported production for 1984. 4. The largest production increases since 1971 have come from Mexico and Peru, the two largest world silver producers. These two countries accounted for a combined 31 pet of total world (39 pet of total MEC) production in 1984, up from 25 pet of world and 30 pet of MEC production in Table 2.— Mine production of silver in 1971, 1981, 1983 and 1984 for the six largest producing countries Production, 10* tr oz Change, pet 1971 to 1983 to 1971 1981 1983 1984p 1981 1984 Silver-producing countries: Mexico 36.6 52.9 61.4 67.8 45.0 10.0 Peru 38.4 46.9 55.9 56.5 22.0 1 .0 United States 41 .5 40.7 43.4 44.4 (-2.0) 2.0 Canada 46.0 36.3 35.6 37.6 (-21.0) 6.0 Subtotal, 4 largest MEC producers 162.5 176.8 196.3 206.3 9.0 5.0 Soviet Union' 39.0 46.5 47.2 47.4 19.0 .0 Australia 21.7 23.9 32.2 32.0 10.0 .0 Subtotal, 6 largest world producers 223.2 247.2 275.7 285.7 11.0 4.0 Total MEC production 246.9 276 9 321.1 316.6 12.0 (-1.0) Total world production 294.7 361 .8 390.6 398.6 23.0 2.0 p Preliminary. 'Soviet Union silver production data are estimates. 1971. During 1984, Mexico's production increased by a fur- ther 10 pet. 5. On a percentage basis, mine production of silver has increased most significantly in Mexico (85.3 pet), Peru (47.1 pet), and Australia (47.5 pet) from 1971 through 1984. These three countries accounted for 85.5 pet of the increase to MEC annual output over this period. World = 398.6 million troz MEC » 316.6 million troz Figure 4.— Relative 1983 silver production shares, by country and country grouping. DEMONSTRATED RESOURCES OF SILVER IN MARKET ECONOMY COUNTRIES In 1968, the USGS, in Professional Paper 820 (9), estimated total MEC in situ silver reserves (including U.S. reserves) at 3.2 billion tr 02, contained in measured plus in- dicated ores, plus an additional 2.2 billion tr oz contained in inferred ores. This total of 5.4 billion tr oz represented silver contained in identified deposits from which minerals can be "extracted profitably with existing technology and under current economic conditions." The same source estimated in situ U.S. silver reserves at 0.59 billion tr oz in the measured plus indicated categories and 0.85 billion tr oz in the inferred category, for a combined total of 1.44 billion tr oz. Thus, U.S. reserves represented 18.4 pet of the entire MEC in situ demonstrated reserve (measured plus indicated reserves) and 26.6 pet of the measured plus in- dicated plus inferred reserves in these 1968 estimates. In the 16-yr period following the 1968 estimates, the price range of silver increased 375 to 400 pet in nominal terms and about 40 pet in real terms. Also, during that time, total MEC new mine production of silver was about 3.95 billion tr oz, of which U.S. production represented about 0.64 billion tr oz. In addition, technological and operational ad- vancements have occurred in terms of mining equipment, heap leaching practices, carbon extraction methods, geological and exploration techniques, and smelting- refining. With these recent changes in mind, this study's estimate of demonstrated silver MEC resources as of January 1984 is presented in tables 3 and 4. This study has only estimated the demonstrated resource level of mineable ore at identified deposits and mining operations. No attempt to estimate hypothetical resources has been attempted, and inferences of possible resources have been made in only a few cases. As shown in table 3, demonstrated silver resources of the 436 mines and deposits included in this study were ap- proximately 8.16 billion tr oz of contained silver as of January 1984. This is 2.76 billion tr oz larger than the 5.4 billion tr oz estimated to be contained in "measured plus indicated plus inferred in situ reserves" estimated back in 1968 and would represent a productive life of about 27 yr at 1983 production levels of the MEC's. Because absolute coverage of all undeveloped deposits in the 41 countries included in this study has not been achieved, this study's total estimate should be considered as conservative. As shown in table 3, 64.9 pet (5.29 billion tr oz) is contained in 339 producing mines while only 35.1 pet (2.86 billion tr oz) is contained in 97 explored deposits or developing mines not in production as of 1983-84. Also of interest is that 62 of the 97 undeveloped deposits included in this study are in only three countries, with 30 in the United States, 24 in Canada, and 8 in Australia. Thus, the total demonstrated resource estimate for any study of this type has inherent biases towards such countries, where more effort has been put into analysis of all known deposits. It should be noted that, while the breakdown of produc- ing mines versus undeveloped deposits and idle mines shown in table 3 provides a general ratio of silver resources between producing mines and nonproducing deposits, it can- not provide an exact production status of every mine or deposit included in this study. The production status of silver producing mines, particularly lead and zinc mines, is in a constant state of flux depending on the state of the economy and the prices realized for the various commodities. The 1984 demonstrated resource estimates of contained silver and production status shown in table 3 are based on January 1982 data, as updated to January 1984. Thus, the 1984 demonstrated resource reflects subtraction of 2 )t or production from the producing mines with no assumed or estimated replacement of extracted resources diu"ing the 2-yr period. , A more meaningful method of providing resource estimates of silver is to provide demonstrated resource data in terms of the recoverable silver fi-om each mine or deposit. Resource comparisons in terms of recoverable silver provide a more accurate picture of the resource, since silver losses during processing can be significant. The reader should note that all of the resource estimates, potential availability estimates, and silver grade estimates throughout the re- mainder of this study are expressed in terms of recoverable silver unless otherwise specified. Table 4 shows these estimates as of January 1984, by country and by predomi- nant commodity classification. As shown in table 4, this study estimates a recoverable demonstrated resource of 5.99 billion tr oz Ag as of January 1984 fi-om the 436 mines and deposits included in the study. Of this total, only 1.41 billion tr oz (23.5 pet) is in the 66 mines and deposits classified as predominantly silver deposits. The largest quantity of silver, 2.6 billion tr oz (43.9 pet), lies in the 121 mines and deposits classified as predominantly zinc deposits; 1.6 billion tr oz (26.5 pet) is in mines and deposits classified as predominantly copper deposits; 245 million tr oz (4.1 pet) is in mines and deposits classified as predominantly lead deposits; and 120.2 million tr oz (2.0 pet) is in predominantly gold mines and deposits. Comparing the recoverable silver resource estimate of 5.99 billion tr oz as of January 1984 with the estimated con- tained silver resource of 8.16 billion tr oz leaves a difference of 2.17 billion tr oz. This difference, equivalent to 26.6 pet, represents the estimated losses in benefieiation, smelting, and refining. On a primary commodity basis, these losses equate to 19.0 pet for the predominantly silver deposits, 26.4 pet for the predominantly zinc mines and deposits, 18.4 pet for the predominantly lead mines and deposits, 33.7 pet for the predominantly copper mines and deposits, and 21.4 pet for the predominantly gold mines and deposits. On a country basis, 5.83 billion tr oz, or 97.4 pet of the recoverable silver resource as of January 1984, is contained in the top 20 countries listed in table 4. Only 153.6 million tr oz, or 2.6 pet of the total, is contained in the 21 other in- eluded countries. Almost 85 pet of the MEC demonstrated resource is located in seven countries: the United States (1.32 billion tr oz), Mexico (1.08 billion tr oz), Canada (971 million tr oz), Australia (717 million tr oz), Peru (604 million tr oz), the Republic of South Africa (222 million tr oz), and Chile (153 million tr oz). All these countries were among the eight largest MEC silver producers in 1983. These seven countries contain 93.7 pet of the silver in primary silver deposits, 84.6 pet of the silver in zinc deposits, 76.4 pet of the silver in copper deposits, 84.2 pet of the silver in lead deposits, and 86.2 pet of the silver in primary gold deposits. Japan, the seventh largest MEC silver producer, is ranked only in the 18th position in terms of the estimated demonstrated silver resources in table 4, which indicates that a fair portion of its production probably comes from the smelting and refining of imported concentrates. Of the 436 included mines and deposits, 339 are Table 3.— Contained silver from the demonstrated resources of 436 deposits in market economy countries as of January 1984, by status Producing or developing deposits Nonproducing deposits °"" ^ Resources, 10^ tr oz Ranking^ Resources, 10^ tr oz Ranl \ r J L \ \ 48.00 (Jan. I982J \ $8.00 (Jon. 1984) V ^ ^ J4.OO ( Jon. 1984) $4.00 (Jan. 1982) J \ \ \ \ \ L 1984 1986 1988 1990 1992 1994 1996 1998 2000 Figure 9.— Potential annual silver production from 39 foreign predominantly silver producers at selected constant dollar- cost-price levels, 1982 versus 1984. 21 byproduct prices were both offset by an almost equally rapid rate of devaluation that resulted in the weighted-average total cost estimate remaining essentially the same. Table 11 demonstrates the overall impact of these various cost changes by detailing the shift in the amount of total silver available within different cost-price ranges. The amount of silver available in the $3/tr oz cost-price range increased from 17 pet of the total in 1982 to 39 pet in 1984, primarily because of a significant decline in Mex- ican long-term costs. Similarly, the cumulative amount of silver available in the up to $6/tr oz range increased from 41 to 58.5 pet. The implications of this analysis are twofold. First, the large and discrete devaluation of the Mexican peso has resulted in a significant decline in U.S. dollar-based costs (per troy ounce revenue requirements), which has enhanced the competitive position of Mexican silver producers relative to those in the United States and Canada. Second, the total amount of silver recoverable in a cost-price range of up to $6/tr oz has increased significant . This should have the effect of helping to depress silver prices. An indication of this is given in figure 9, which depicts annual potential production curves for cost-price levels per troy ounce of $4 and $8 determined in terms of 1982 and 1984 constant dollars. As shown, the amount of annual pro- duction potential at a cost-price level of up to $4 has nearly doubled. It must be emphasized that this analysis has looked only at foreign predominantly silver producers, as defined. These 39 foreign producers clearly demonstrate the economics of silver production at predominantly silver deposits, yet they represented only 17 pet of total MEC silver production in 1984. With U.S. dollar-based costs in many foreign countries declining further due to devalua- tion, the outlook for U.S. dollar-based silver prices is one of continued weakness. AVAILABILITY OF BYPRODUCT AND COPRODUCT SILVER Detailed availability and economic analyses of silver from copper, zinc, lead, and gold deposits in MEC's are beyond the scope of this study, which focuses on the availability of silver from predominantly silver deposits.* However, since 76.5 pet of the estimated recoverable silver in demonstrated resources is from these other types of deposits, a general, updated availability section for the availability of silver from zinc, lead, copper, and gold deposits follows. PREDOMINANTLY ZINC The 85 producing mines and 36 nonprodueing deposits evaluated as predominantly zinc operations can potentially produce 2.63 billion tr oz of byproduct or coproduct silver, of which 1.66 billion tr oz is from the producing operations. As shown in figure 10, a total of 2.51 billion tr oz Ag is potentially recoverable from 111 zinc mines and deposits at average total costs of zinc production ranging from $0.00/lb to $1.00/lb. Slightly over 116 million tr oz Ag poten- tially available from the remaining 10 properties, with average total zinc production costs of over $1.00/lb, are not shown on the curve. The estimated average total cost of zinc production equals $0.00 for nine operations that have a total poten- tial production of 152 million tr oz Ag. This situation ap- pears in cases where revenues from byproducts and coproducts are able to cover total production costs (which are burdened against the predominant product in the analysis). This situation exemplifies the complexity of zinc and lead ores and underscores the effect that byproduct and coproduct values can have on a mining operation. About 796 million tr oz (30.3 pet of the total of 2.63 billion tr oz) is estimated to be recoverable at average total zinc production costs of under $0.20/lb. Slightly under 500 million tr oz (19.0 pet) is estimated to be recoverable at costs ranging between $0.21Ab and $0.40/lb; 916 million tr oz (34.9 pet) at costs ranging from $0.41/lb to $0.60/lb; and 414 million tr oz (15.8 pet) at £Osts over $0.60/lb."' PREDOMINANTLY LEAD Figure 11 illustrates estimated total recoverable silver from the 21 mines and deposits evaluated as predominantly lead operations. As shown on the curve, a total of 244.8 million tr oz (99.9 pet of the total of 244.9 million tr oz) is potentially recoverable from 20 mines and deposits with average total costs of lead production ranging from $0.02/lb to $0.50/lb. The remaining 78,000 tr oz, from one deposit with an average total cost of lead production above $0.50/lb, is not shown on the curve. Approximately 33.6 million tr oz Ag (13.7 pet of the total) is estimated to be recoverable at average total costs of under $0.15/lb Pb. At costs rang- ing between $0.16/lb and $0.25/lb Pb, 119.3 million tr oz Ag (48.7 pet) is potentially available; and at costs ranging between $0.26/lb and $0.50/lb Pb, 91.9 million tr oz Ag (37.5 pet) is potentially recoverable." PREDOMINANTLY COPPER The 80 producing mines and 40 nonprodueing deposits evaluated as predominantly copper operations can poten- tially produce 1.59 billion tr oz of byproduct silver, of which 982 million tr oz is contained in the producing operations. As shown in figure 12, a total of 1.49 billion tr oz Ag is potentially recoverable from 102 copper mines and deposits, with average total costs of copper production ranging from $0.00/lb to $1.50/lb Cu. The remaining 97.1 million tr oz Ag, from 18 mines and deposits with estimated production costs above $1.50/lb, is not shown on the curve. At costs ranging between $0.00/lb and $0.40/lb Cu, 270.6 million tr oz Ag (17.1 pet of the total 1.59 billion tr oz) is potentially recoverable. Another 133.4 million tr oz Ag (8.4 pet) is potentially recoverable at costs between $0.41/lb and $0.60/lb Cu; 464.4 million tr oz (29.3 pet) at costs between $0.61/lb and $0.80/lb Cu; 71.7 million tr oz (4.5 pet) at costs between $0.81/lb and $1.00Ab Cu; and 646.3 million tr oz (40.7 pet) at costs above $1.00/lb Cu.'^" "See IC's 8809 and 8930 (copper), 8962 and 9026 (lead and zinc), and 9070 (gold) for details on the availability and economics of the.se commodities. '"Average total cost of zinc determined at January 1984 costs and given prices for lead at $0.25/lb, copper at $0.69/lb, silver at $8.18/tr oz, and gold at $371/tr oz. "Average total cost of lead determined at January 1984 costs and given prices for zinc at $0.49/lb, copper at $0.69/lb, silver at $8.18/tr oz, and gold at $371/tr oz. '"Average total cost of copper determined at January 1984 costs and given prices for lead at $0.25/lb, zinc at $0.49/lb, silver at $8.18/tr oz, and gold at $371/tr oz. 22 0.5 1.0 1.5 2.0 TOTAL RECOVERABLE SILVER, lO^troz Figure 10.— Total recoverable silver from zinc mines and deposits in market economy countries. 2.5 0.50 1 j: .40- 3^ 30 5 .20 O < UJ .10 I r _L 1 1 1 r 1 r _L X J_ X -L X X X 20 40 220 60 80 100 120 140 160 180 200 TOTAL RECOVERABLE SILVER, lO^troz Figure 11.— Total recoverable silver from lead mines and deposits in market economy countries. 240 260 23 1.60 1.20- 00 o o a: ui Q. o o 0.2 1.4 0.4 0.6 0.8 1.0 1.2 TOTAL RECOVERABLE SILVER, lO^troz Figure 12.— Total recoverable silver from copper mines and deposits in market economy countries. i:6 PREDOMINANTLY GOLD The 104 producing and 4 undeveloped operations evaluated as predominantly gold operations can potentially produce 120.2 million tr oz of byproduct silver, of which 116.2 million tr oz (96.7 pet) is from the producing mines. As shown in figure 13, a total of 115 million tr oz Ag is potentially recoverable from 93 gold mines and deposits with average total costs of gold production ranging from $35 to $500 per troy ounce of gold. The remaining 5.2 million tr oz Ag from 15 properties with average total costs above $500/tr oz Au, is not shown on the curve. Approximately 27.9 million tr oz Ag (23.2 pet of the total) is estimated to be recoverable at average total gold production costs per troy ounce of under $200. Another 74.8 million tr oz (62.2 pet) is potentially recoverable at gold costs between $201 and $400; 12.3 million tr oz Ag (10.2 pet) at gold costs between $401 and $500; and 5.2 million tr oz Ag (4.4 pet) at gold costs above $500." SUMMARY As a summary of total availability, figiu-e 14 illustrates '^Average total cost of gold determined at January 1984 costs and given prices for lead at $0.25/lb, zinc at $0.49/lb, copper at $0.69/lb, and silver at $8.18/tr oz. the relative percentages, by country, of silver from predominantly zinc, lead, copper, and gold deposits as well as the combination of all five of the individual classifica- tions used in this report. The recoverable amounts shown in figure 14 were also presented in table 4. The United States, with 1.32 billion tr oz, contains the largest amount of silver from all evaluated sources (22.1 pet), followed by Mexico with 1.08 billion tr oz (18.0 pet), Canada with 971.3 million tr oz (16.2 pet), Australia with 716.8 million tr oz (12.0 pet), and Peru with 604.3 million tr oz (10.1 pet). However, from the total contained 1984 silver resources shown in table 3, only 56.3 pet of the U.S. resource is from producing mines, compared with 95.5 pet of the contained resources in Mexico, 70.7 pet in Canada, and 62.6 pet in Peru. Of the major silver producers, the United States has the lowest percentage of demonstrated silver resources in predominantly silver and in predominantly lead and zinc deposits. Approximately 65.9 pet of the total U.S. recover- able resource is from these three categories, compared with 84.3 pet in Mexico, 71.8 pet in Canada, 69.4 pet in Peru, and 97.8 pet in Australia (all from lead and zinc deposits). About 33.2 pet of the U.S. recoverable resource is in predominantly copper deposits, which, given the current state of the U.S. copper industry, makes much of this resource uneconomic at present. As for silver in zinc deposits, a detailed analysis of long-run average total costs of potential zinc metal production from predominantly zinc 24 500 40 60 80 TOTAL RECOVERABLE SILVER, lO^troz Figure 13.— Total recoverable silver from gold mines and deposits in market economy countries. 120 mines and deposits in IC 9026 (10, p. 35) concludes that the lowest cost source of zinc from producing mines in major producing countries is Mexico (with an average cost of $0.16/lb Zn in 1981 dollars), followed by Australia ($0.20/lb Zn), and Peru ($0.35/lb Zn). The average cost of zinc from producing mines in the United States equalled $0.58/lb in January 1981 dollars. On an annual basis, the 339 properties evaluated as pro- ducing mines have an estimated total annual output ca- pacity of 266.8 million tr oz Ag (table 12) compared with reported 1984 MEC mine production of 316.6 million tr oz. Thus, the estimated annual capacity of the analyzed pro- ducers equals 84.3 pet of the reported 1984 MEC produc- tion. The countries with the largest differences between the capacity estimated by the Bureau and reported production are summarized below. 1. Reported production from Peru in 1984 was 18.5 mil- lion tr oz larger than the Bureau's capacity estimate. One major reason is that about 8 million tr oz was produced in 1984 from new operations developed since 1982 and not in- cluded in this study's evaluations for silver, lead, or zinc. Table 12.— Annual ore tonnage and annual silver capacities, by deposit type and status, for mines and deposits in marltet economy countries Predominant commodity deposit type Ore tonnage, 103 mt/yr Silver capacity, 103 tr oz/yr Producing Nonproducing Producing Nonproducing mines deposits mines deposits Zinc 52,025 Silver 27,513 Copper 573,087 Lead 15,678 Gold 222,567 Total 890,870 40,246 11,041 299,167 985 3,573 115,015 82,377 47,851 15,495 6,066 43,596 14,579 20,999 1,842 198 355,012 266,804 81,214 In addition, the predominantly silver operations evaluated in this study have increased their overall production ca- pacity by about 5 million tr oz over estimates of this analysis. Also, Southern Peru Copper Corp. (Toquepala and Cuajone Mines) reported 1984 silver production of over 2 million tr oz. At the time of the Bureau's copper study, the silver grades for these two operations were not available and, hence, not estimated for the original copper analysis. Finally, about 2.5 million tr oz Ag was produced in 1984 from small mines not included in the analysis. 2. In Japan 10 million tr oz Ag were produced in 1984; much of this production was probably as a byproduct of the smelting and refining of imported concentrates. 3. This study has only included demonstrated resources of silver in copper ores at Codelco's operations in Chile. It is estimated that in 1984 approximately 6 million tr oz Ag was produced in Chile from non-Codelco copper operations and from other small producers that do not report silver grades. 4. In Bolivia, production of about 4.9 million tr oz Ag was reported in 1984, much of this probably as a byproduct of tin, tungsten, and gold operations. The above differences reflect essentially (1) expansions and new developments occurring in Peru from 1981-83, (2) lack of data on silver grades and production from some ma- jor copper operations, (3) an unspecified amount of reported MEC production that derives from the smelting and refin- ing of imported concentrates, and (4) silver production from small producers not included in the analysis. Regarding this last point, the Bureau's criteria for deposit evaluation precludes the inclusion of all of the minor silver producers in MEC's. The size of these minor producers should not have a significant impact on the average cost data presented in this report on a country basis or on the relative availability of resources. 25 All properties (Including predominantly silver) Zinc properties Figure l4.-Dl8trlbutlon of recoverable silver, by country, as of January 1984 26 SUMMARY AND CONCLUSIONS DEMONSTRATED SILVER RESOURCES This study estimates a total of 5.99 billion tr oz Ag to be contained in 436 mines and deposits as of January 1984. In terms of classification by the predominant commodity of each deposit, there were 66 deposits classified as predominantly silver properties, 142 classified as lead and zinc properties, 120 as copper properties, and 108 classified as gold properties. Of the 436 mines and deposits included in this study, 339 were estimated to be in production as of January 1984, 7 were in development, and 90 were undeveloped or past producing deposits. Using these classifications, the total recoverable demonstrated silver resource cited above breaks down as shown in Table 13. Several caveats to the above resource estimates must be made to place MEC silver resources in the proper perspective: 1. The type of resource data reported. 2. The type of resource occurrence that accounts for pro- duction in an individual country. 3. The impossibility of evaluating all of the small silver- producing mines in MEC's, which by themselves are in- significant but in the aggregate could be an important source of silver production for an individual country. 4. The static nature of resource estimates in this type of study. The type of resource data reported often veiry not only because of government policies but also because of a reluc- tance on the part of many mining companies to divulge data on their mining operations. This is due to a number of fac- tors, among them the desire to minimize or avoid taxation in countries that tax the value of unmined mineral resources. Also, most publicly held mining companies are required to annually report their reserves (as opposed to resources) to various institutions. For valid reasons, these annual reported reserves are usually defined as that ore which h£is been developed on at least three sides and assayed as thoroughly as required. These "proven reserves" are redefined each year based on production, new develop- ment, new assays, changes in prices and costs and, possibly, changes in technology. These proven reserves are justifiably conservative due to the above reasons, as well as to the fact that many vein-type silver mines are geologically erratic, which makes reasonable inferences of resources difficult or perhaps impossible. Also, exploration work to delineate resources is a costly and time-consuming endeavor and will not be done by small operators or poor countries, or perhaps even large operators that have been in production for a long time. Many mining operations will not estimate beyond the proven reserve level without a very good reason, such as plans for major capital investments. The largest and best established areas generally have the best estimation and reporting. Those countries or areas with geological occurrences that lend themselves relatively easily to estimation have the best available data in terms of quality and quantity. Basically, the key to ascertaining world demonstrated silver resources is to know were it has not been measured or reported in addition to knowing where it has been measured and reported. This study, by neces- sity, deals only with countries and areas where enough basic deposit information is collected and reported so that it is possible to estimate demonstrated resources with a reason- able degree of confidence. As a result, almost two-thirds of 1.41 23.5 2.63 43.9 .24 4.1 1.59 26.5 .12 2.0 Table 13.— Summary of total recoverable demonstrated silver resources, by deposit classification Deposit classification lOM^oz 'total Predominantly silver Predominantly zinc Predominantly lead Predominantly copper Predominantly gold Total 5.99 100.0 the recoverable resource estimated for this report is con- tained in producing mines and two-thirds of the undeveloped deposits included in the analysis for this study are located in the United States, Canada, and Australia. The two largest silver producers, Mexico and Peru, most likely are underrepresented in the explored deposit category. This study deals also with a very large number of prop- erties where silver is a byproduct of gold, lead, zinc, and copper production. In many of these operations, no data on silver resources are estimated or reported because of the insignificance of silver to the economics of the operation or the operator's inability to estimate the amount of silver con- tained within the overall demonstrated resource tonnage. This is especially so because the occurrence of silver can be very erratic within that resource tonnage itself. The resource tonnage estimates for this study are de- rived solely from the 436 evaluated mines and deposits. Thus, the resource estimates exclude the resources of a large number of very small silver producers, which may account for as much as 15 pet of annual silver production in MEC's. In addition, the resource estimates for this study reflect demonstrated resource estimates circa 1980-82 minus estimated production fi-om producing mines for the interven- ing years to January 1984. This implies that no new reserves or demonstrated resources have been added to replace that production, an implication that is highly unlikely. For all these reasons, the demonstrated resource estimates of this study must be considered conservative. AVAILABILITY ANALYSIS Predominantly Silver Mines and Deposits The sole criterion for inclusion of a deposit in the predominantly silver category was that all silver-bearing mines and deposits with grades of 3.5 pet or less combined lead plus zinc were essentially predominantly silver prop- erties. Even with this classification system, 5 of the 66 predominantly silver deposits had breakeven silver price determinations of $0.00/tr oz, indicating that commodities such as lead, zinc, copper, and gold provide sufficient revenues to cover the total cost of production as of January 1984. Mexico was shown to have the lowest long-term total production costs and the largest amount of silver available from producing predominantly silver mines. Although the United States was shown to possess a significant amount of available silver in predominantly silver producers at relatively competitive long-term production costs, this com- petitive position was shown to have eroded in recent years owing to the currency devaluations of many mineral- 27 producing countries, which has reduced dollar-denominated foreign production costs. In particular, Mexican predominantly silver producers were shown to have ex- perienced significant dollar-denominated production cost decreases. The relatively unfavorable economic position of the U.S. predominantly silver producers may explain why the two major U.S. deposits now close to initial development (Green's Creek and Red Dog), and a third deposit that is likely to be developed (Montana Tunnels), are all essentially coproduct silver deposits. The Big Hill deposit in Maine is a "borderline" coproduct deposit that could likely be developed, as is the Ward Mountain deposit in Nevada, which could see development given silver prices somewhat higher than at present. In addition, the Cabinet Wilderness area of Montana, which is adjacent to the relatively low- cost Troy mine (also a "borderline" coproduct deposit), is undergoing exploration activity to determine the potential of this copper-silver resource and could possibly result in two new operations similar in size to the Troy mine. Byproduct and Coproduct Silver Mines and Deposits An estimated 76.5 pet of the total recoverable silver in the analyzed demonstrated resource is contained in mines or deposits that can be classified as predominantly zinc, predominantly lead, predominantly copper, or predomi- nantly gold. With an estimated recoverable resource of 2.63 billion tr oz, the properties evaluated as predominantly zinc deposits are the largest source (43.9 pet) of the potential silver available from MEC's. In many cases, particularly in Mexico, Peru, and Australia, the high grades of b5T)roduct silver have an important impact upon the profitability of the mining operation (10, p. 38). For example, nine opera- tions evaluated as predominantly zinc producers had an estimated average total cost of zinc production equaling $0.00, indicating that revenues from silver and other coproducts or byproducts are sufficient to cover the total costs of production. However, it should be noted that this is the case for only 9 of the 121 zinc properties included in the analysis. Excluding the Missouri mines, which have low silver grades, the economic impact of byproduct silver is similar for the properties evaluated as primary lead deposits, although revenues from silver and other byproducts were not sufficient to provide an average total lead production cost of $0.00 at any of the 21 properties evaluated. Copper mines are the second most important source of potential silver; however, it should be noted that this category has the largest percentage of the silver contained in nonproducing deposits. Silver grades in these deposits generally tend to be low (2.3 g/mt on average) and except for a few extreme cases, silver does not have a significant influence upon the overall economics. Gold properties are the least important source of potential silver of the five classifications of deposits evaluated. Byproduct silver grades in the gold properties show a wide range, but, on average, are an order-of-magnitude lower than the silver grades in the evaluated copper deposits and tend to be too low to significantly impact the overall economics of the primary gold operations. REFERENCES 1. U.S. Biu-eau of Mines and U.S. Geological Survey. Principles of a Resource/Reserve Classification for Minerals. U.S. Geol. Surv. Circ. 831, 1980, 5 pp. 2. Ryan, J. P. Silver. Ch. in BuMines Minerals Yearbook 1963, V. 1, pp. 1001-1024. 3. . Silver. Ch. in BuMines Minerals Yearbook 1968, V. 1-2, pp. 1003-1018. 4. Drake, H. J. Silver, Ch. in BuMines Minerals Yearbook 1978-79, v. 1, pp. 801-820. 5. . Silver. Ch. in BuMines Minerals Yearbook, 1980, V. 1, pp. 731-745. 6. Reese, R. G., Jr. Silver. Ch. in BuMines Minerals Yearbook, 1984, v. 1, pp. 809-826. 7. .Silver. Ch. in BuMines Minerals Yearbook, 1983, v. 1, pp. 763-779. 8. Bell, J. E., and K. M. McBreen. Silver. Ch. in BuMines Minerals Yearbook 1953, v. 1, pp. 1007-1025. 9. Heyl, A. V., W. E. Hall, A. E. Weissenborn, H. K. Stager, W. P. Puffer, and B. L. Reed. Silver. Ch. in United States Mineral Resources. U.S. Geol. Surv. Prof. Paper 820, 1973, pp. 581-603. 10. Peterson, G. R., K. E. Porter, and A. A. Soja. Primary Lead and Zinc Availability— Market Economy Countries. A Minerals Availability Appraisal. BuMines IC 9026, 1985, 44 pp. 11. Mining Magazine. Polish Copper. V. 145, No. 11, 1977, pp. 500-506. 12. Engineering and Mining Journal. Massive Development Plans Herald Poland's Entry Into World Copper Market. V. 178, No. 2, 1977, pp. 27-31. 28 APPENDIX A.— CENTRALLY PLANNED ECONOMY COUNTRIES Mine production of silver in centrally planned economy countries (CPEC's) for the years 1972 and 1983 is shown in table A-1. In 1972, eight CPEC countries were estimated to have produced 52.8 million tr oz Ag, or about 17.7 pet of total world mine production of 298.1 million tr oz. The Soviet Union, the CJerman Democratic Republic, and Poland, with 40.0, 5.0 and 4.0 million tr oz, respectively, accounted for 92.8 pet of the CPEC production. Twelve years later, in 1983, estimated production from these eight CPEC countries w£is 80.6 million tr oz Ag, or about 20.5 pet of total world mine production of 390.6 million tr oz. For 1983, the Soviet Union, Poland, and China, with 47.2, 24.9 and 2.5 million tr oz, respectively, were responsible for 92.6 pet of the CPEC silver production. The previous discussion raises four important points concerning CPEC mine production of silver. First, about 30 pet of the increase in total world mine silver production from 1972 through 1983 came from CPEC's. Second, the Soviet Union's increase of annual production level has been relatively small, with production in 1983 only 18 pet higher than in 1972. Third, Poland has increased its annual silver output dramatically, from 4.0 million tr oz in 1972 to 24.9 million tr oz in 1983, accounting for 75 pet of the total in- crease in annual CPEC silver production over that period. Fourth, China, although showing a 212.5-pct increase in annual silver output over the 12-yr period, is still a fairly insignificant factor in the world's silver mining industry, with estimated annual production of only 2.5 million tr oz as of 1983. Essentially, a discussion of CPEC mine production of silver as of the early- to mid-1980's is limited to the Soviet Union, ranked third in world production, and Poland, ranked seventh, as of 1983. Throughout the 20th century, mine production of silver in the Soviet Union has been almost completely as a byproduct of the treatment of predominantly copper, predominantly lead-zinc, predominantly gold, and since the 1940's, predominantly nickel-copper ores. In 1938, at the onset of World War II, silver production in the Soviet Union was estimated to be 8.04 million tr oz, with 70 pet coming from lead-zinc ores, 22.5 pet from cop- per ores, and 7.5 pet from gold ores. For 1983 (46 yr later), total Soviet silver production had increased to a level of 47.2 million tr oz/yr. The Bureau estimates that, as of 1983, lead- zinc and copper ores still account for the vast majority (85 pet) of the Soviet Union's mine production of silver, with approximately equal contributions from each type of ore. The Bureau also estimates that, as of 1983, the nickel- copper sulfide ores of the Norilsk Complex in the Urals and the Pechenga-Monchegorsk areas of the Kola Peninsula were contributing around 12.5 pet of the total mine produc- tion of silver, while the predominantly gold ores only con- tributed about 2.5 pet of the total. Estimates of mine pro- duction of silver, copper, lead, zinc, and nickel in the Soviet Union for the 1936-38 period and for the years 1972 and 1983 are presented in table A-2. The scope of this study prohibits any assessment of demonstrated resources, economies, or total availability of silver, but this section can provide a perspective by which silver production in the Soviet Union can be compared with that of the MEC's. Toward that end, the following brief comments are presented: Table A-1.— Mine production of silver in centrally planned economy countries, 1972 and 1983 (Thousand troy ounces) Country 1972 1983 Bulgaria NA 930 Czechoslovakia 1 ,250 1 ,300 German Democratic Republic 5,000 1 ,450 Hungary 42 NA Korea, North 700 1 ,600 China 800 2,500 Poland 4,000 24,900 Romania 1 ,000 900 U.S.S.R 40,000 47,200 Total 52,792 80,780 NA Not available. Table A-2.— Production of copper, lead, nickel, silver, and zinc in the Soviet Union for selected years Commodity 1936-381 1972 1983 Copper ...10^ mt. . 115 733 1,000 Lead 10^ mt. . 58.3 510 435 Nickel 103 mt. . Negligible 140 204 Silver . . 1 03 tr oz . . 8,038 40,000 47,200 Zinc 103 mt. . 63.7 717 805 ^Source: Confidential document. Table A-3.— Production of copper, lead, silver, and zinc In Poland, 1962, 1972, and 1983 Commodity 1962 1972 1983 Copper .... mt . . 26,608 Lead mt. . 44,100 Silver tr oz. . 128,600 Zinc mt. . 159,961 135,000 380,000 68.000 58,600 14,000,000 124,900.000 195,000 146.000 iMlne ouput, recoverable. 1. Resources of predominantly copper, nickel-copper, and gold ores containing silver are believed to be Isirge relative to those of most MEC countries, while Soviet lead- zinc ores are probably less abundant. 2. Nearly all of the silver production in the Soviet Union comes from the production of other primary com- modities. This could be one of the reasons that the level of annual production in the Soviet Union has only increased 18 pet from 1972 through 1983. 3. It appears that, in the existing silver mining industry in the Soviet Union, any major increase in silver produc- tion would likely have to result from increased output of copper, nickel, lead, and zinc. As mentioned previously, mine production of silver in Poland increased dramatically from only 4 million oz in 1972 to 24.9 million tr oz in 1983. This increase represented not only 75 pet of the increase in annual CPEC silver out- put from 1972 through 1983 but also 22.6 pet of the entire world's increase over the same period. Nearly all of Poland's silver production comes from the mining of copper ores of the Zechstein sedimentary forma- tions of Permian Age, which underlie a very large areal ex- tent of western Poland and comprise a very large copper resource. The first mines to extract and treat Zechstein cop- per ores began development in 1961 {11); there has been a large and rapid increase in capacity over the past 20 yr. For example, in 1968 only about 2.8 million mt ore was mined and treated from Zechstein deposits; however, by mid- to late-1979 the total installed capacity for mines ex- tracting and treating these ores was 41.0 million mt/yr, with further expansions planned. 29 It is interesting to note that since the in situ Zechstein copper ores grade from 30 to 50 g/mt Ag (12), 41 million mt ore would contain 40 to 65 million tr oz Ag, and recoveries of 50 to 60 pet would result in silver production from these copper ores of from 20 to 40 million tr oz/yr. Table A-3 presents data on Poland's production of cop- per, silver, zinc, and lead for the years 1962 (prior to the major development of the Zechstein ores), 1972, and 1983. The data show the tremendous increase in both copper and silver production resulting from development of the Zech- stein ores. The lead and zinc production values for these years have also been included to illustrate that there has been very little change in Polish production of these com- modities from 1962 through 1983 and, most likely, for byproduct silver output resulting from production of these commodities. 30 APPENDIX B.— EVALUATED PROPERTIES LISTED BY PRIMARY COMMODITY Table B-1 .—Properties evaluated as predominantly silver operations (Ownership and production status as of January 1984) Location and property name Owner Mine type! Status^ United States: Alaska: Golden Zone Arizona: Silver-Eureka District Colorado: Bulldog Mine Revenue-Virginius Idaho: Clayton Silver Mine Crescent Mine Delamar Galena Lucky Friday Mine Sunshine Maine: Big Hill Montana: Black Pine Butte District Zinc Flat Head Troy Nevada: Candelaria Sixteen-to-one Taylor Silver Mine Ward Mountain New Mexico: St. Cloud Mine Utah: Escalante Trixle Mine Canada: Abcourt-Barvue Agnico-Eagle (Silver Division) Beaverdell Detour Project Coldstream Silverfields (Teck) Terra United Keno Hill Finland: Pyhasalmi Vihanti France: L'Argentiere Italy: Funtana Raminosa Mexico: Angangueo Avino Huautia La Colorada La Negra Lampazos Las Torres Parral Unit Real de Angeles Real del Monte y Pachuca San Geronimo Santa Maria de La Paz Tayoltlta Tocayos Morocco: Bougaffer Imiter Zgounder Peru: Alpamarca Areata Berenguela Caylloma Julcani Morococha Orcopampa Quiruviica San Genaro Sayapullo Ucnucchucua Republic of South Africa: Black Mountain Spain: Aznalcollar Cartagena Sweden: Vassbo-Guttusjo Enserch Exploration, Inc Orbey Minerals-New Jersey Zinc . Homestake Mining Co Revenue-Virginius Mines Co Clayton Silver Mines Bunker Hill Ltd Mapco Minerals-Superior Oil Callahan-Hecia Mining Co. . Hecia Mining Co Sunshine Mining Co Scintilore Explorations Ltd. . Inspiration Consolidated Copper Co. Anaconda Copper (ARCO) Coca Mines ASARCO Nerco Minerals-Coca Mines Sunshine Mining Co.-MidContinent . . Silver King Mines-Agnew Enterprises Gulf Oil-Silver King Mines St. Cloud Mining Co Ranchers Exploration and Development . Sunshine Mining Co Abcourt Silver Mines-Noranda Mines Ltd Agnico-Eagle Mines Ltd Teck Corp Seico Mining Corp. Ltd Noranda Mines Ltd Teck Corp Various owners United Keno Hill Mines Ltd.-Falconbridge Ltd. Outokumpu Oy ..do Penarroya SAMIM Impulsora Minera de Angangueo. Cia. Minera Mexicana de Avino . . Rosario Mexico S. A. de C.V. . . . Minera Victoria Eugenia Industrias Penoles S. A. de C.V. . Minera Lampazos S. A. de C.V. . Cia. Minera Las Torres Industrial Minera Mexico S. A. . . Minera Real de Angeles Cia. Real del Monte y Pachuca . . Industrias Luismin Minera Santa Maria de La Paz . . Industrias Luismin Minera Victoria Eugenia SODECAT (100% BRPM) Societe Miniere Imiter . . . BGPM-ARMICO Sindicato Minero Rio Pallanga Minas de Areata S. A Minero Peru Compania Minera de Caylloma Cia. de Minas Buenaventura S. A CENTROMIN Cia. de Minas Buenaventura S. A Corporacion Minera Nor-Peru Cia. Minera Castrovirreyna S. A Cia. Minera Sayapullo S. A Cia. de Minas Buenaventura S. A Phelps Dodge-Gold Fields of South Africa Socledad Andaluza de Piritas Penarroya Boliden Metall AB U N S N u P u N u p u P s p u p u p u p s N u p u N s N u p s p u p s p u N u P u p u N u N u P u P s P C N u P u P c P u P u P u N u P u P c P u P u P u P u P u P u P s P u P u P u P u P u P c P u P u P s P u P s N c P c P u P u P u P u P u P u P u N s P s P u P 'U = Underground; S = Surface; C = Combined. *P = Producer; N = Nonproducer. 31 Table B-2.— Properties evaluated as predominantly zinc operations (Ownership and production status as of January 1982) Location and property name Owner Mine type' Status^ United States: Alasl ♦ O H O ' ^ O » • * ' "%> rV ''JW.' ** ** •- i' J'^\ ''JW.' ^^ % '■: ^ •. .^" '^^ '?.^'^\ < o <> *'.. v^V o^ '<>•»* «A. (1 » «<> » * ^^ -^0 4 ^°^ iOvS '%^^ «? •>>. oVJ§Af* aV "^ BOOKBINDING II />,«> ^^ A' » ^f^ • <^^ V <>■> "^^K^^ "c-^^ . *7^T'