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Chile Silver Production Plummets

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Silver production in Chile plummeted 32% in May.

This precipitous drop in output in the world’s fifth largest silver producing country is part of a broader trend of falling production and tightening silver supply.

According to reporting by Seeking Alpha citing Chile’s Ministry of Mines, the country’s silver production in May fell to 97.1 tons compared to 141.9 tons in May 2016.

Chile, a country which produced a record high of 54 million ounces of silver in 2014, is forecast to see its mine supply decline to less than 40 million ounces in 2017.”

According to preliminary production figures released by the ministry, Chile produced 485 tons of silver from Jan-May 2017. That compares with 655 tons of silver during the same period last year – a 170 ton (26%) decline.

A strike at the Escondida Copper Mine accounts for some of the drop in production. The massive mine also produces a significant amount of by-product silver. However, it only accounted for a 38 ton decline from January through May year-on-year. That’s a relatively small percentage of the 170 ton production drop-off nationwide during the same period.

Chile is not alone in declining mine production. According to preliminary figures, production fell 3% in Mexico and Peru and 5% in Australia through the first four months of 2017.

If this trend continues, total global silver output will fall for the second straight year.

The amount of silver mined in 2016 fell by 0.6% to 885.8 million ounces. It was the first drop in production in 14 years. Silver scrap supply also fell, dropping to 139.7 million ounces in 2016, despite higher silver prices.

Demand  for the white metal outstripped supply in 2016 for the fourth straight year. Falling supply drove the third largest silver market deficit on record at 147.5 million ounces. The shortfall came in at 106.7 million ounces in 2015.

Some analysts speculate the world may be at or nearing “peak gold,” meaning  the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s. Shrinking silver mine output could signal a similar situation for the white metal.

Regardless of whether we’ve hit “peak silver,” current supply and demand fundamentals point to a bullish future. In a recent Gold Videocast, Peter Schiff said the current silver price offers an incredible opportunity to buy silver. He pointed out that the price is almost at the same level it was in 2009.

And if you recall, at that time silver began a two-year rise that saw prices break $50 per ounce. That was a new record high … and of course, since that time, silver prices have fallen. But you know, even at $15 per ounce, we’re still about three times where we began the decade where silver prices were about $5 per ounce. So, the move from 2009 to 2011 was a ten-fold increase. But even though we’ve given back most of that rise, we’ve still seen the price of silver outperform the Dow Jones Industrial average since 2000. I believe the price we are seeing now is an incredible buying opportunity.”

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