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Quantifying Above Ground Silver
Regarding how much above ground silver is available, “the big problem is that nobody knows for sure,” according to a forum discussion on the Kitco website.
The Kitco forum member added, “What we do know is that somewhere around 500Moz [million ounces] to 1Boz [billion ounces] exists in known locations (for example, COMEX warehouses have 100Moz , the SLV ETF has 350Moz, etc.).”
According to historical records, about 60 billion ounces of silver has been mined since such records existed. The silver was used during ancient times for coins, made into silver bars, formed into sculptures, jewelry, and much more. In more modern times, silver is being used for photographic purposes, in electronic equipment, and for antibacterial purposes in medicines, food, and drinking water.
“We do not know how much of that 60Boz has been saved, how much is currently in products, and how much is sitting in landfills,” the Kitco forum member said.
Since about the 1950s, the United States has stockpiled about 3 billion ounces of silver in a vault in New York. However, any silver used by the U.S. mint is bought in the market.
“Since 1950, we have witnessed a collapse of 93% in global silver inventories yet, demand hasn’t stopped. The last time above ground silver inventory was this low was in 1380, and the usage for silver has accelerated,” according to statistics on the GoldSilver website.
Between 1950 and 2010, the silver bullion global supply decreased from 40 billion ounces, which was considered a 140-month supply, to 700 million ounces, considered to be an 11-month supply.
The electronics industry used 100 million ounces in 1999 and an estimated 250 million ounces in 2011. Researchers say that the available silver supply, both in the earth and already recovered, is limited, and there will be no in-ground silver available in about 25 to 30 years.
There are very few newly discovered silver deposits, as most silver is mined from greatly depleted existing mines. Also, the silver used by the electronics, health, and other industries isn’t recoverable once used, which means that it is lost forever.
“In all cases, unlike gold, silver is used and consumed and then not recoverable. The demand side of silver is very significant. There are some statistics from the U.S. geological studies indicating that just with the current demand for silver, all known mineable silver will be exhausted in just 29 years. This is very bullish for silver in the long term,” according to a February 2011 article on the submityourarticle website.
Reviewing Silver Mining Companies
“I was falling for dazzling investment propositions…each one with attributes that dreams are made of: bonanza discoveries of thick veins of ore. …When it came decision time, I reverted to what I know: earnings growth and fundamental value,” said Stanley Barton, investment analyst, in a recent article on the Seeking Alpha website.
The first silver mine stock Barton bought was Revett Minerals Inc. Revett is owner of the Troy Mine, located in Montana, which mined 1.3 million ounces of silver in 2011 at a cost of $2.22 per ounce. Besides the Troy Mine, Revett is the owner of the Rock Creek mine in Montana, which is said to hold the largest silver deposit in the United States with 300 million ounces.
Before buying stock in a mining company, one needs to evaluate the silver deposits available for mining, and determine if the mine is in a development stage or production cycle. For example, a development stage mining company will have to pump $100 million into the operation over a period of three years before taking out the first ounce of silver, according to Barton.
“Precious metal miners are not always evaluated according to traditional methods. Undervalued land makes book value deceptively low, and accounting to amortize mine life reduces profit numbers. … Bright earnings reports may blind one to the realities of a voluptuous vein flaming out,” Barton said.
