Global silver supply is heavily dependent on one factor that is overlooked by the majority of precious metals analysts. For some odd reason, analysts only consider the cost of this factor and not the future supply. Without this supply, 98% of the silver production from these two primary silver mines would not have been possible.

Without energy, silver mine supply would likely collapse more than 95+%. Unfortunately, analysts only focus on the cost of energy and not the future availability of it.

For example, even though the cost of diesel for Pan American Silver was approximately 7-8% of its total mining costs in 2018, without the 15.4 million gallons of diesel consumed by the company’s mines, the overwhelming majority of that silver would have stayed in the ground. I estimated Pan American Silver’s diesel cost by multiplying the 15.4 million gallons by a wholesale price of diesel of $2.50. This is just an estimate.

I decided to focus on Pan American Silver’s two highest ore-grade primary mines. The La Colorado Mine in Mexico had a silver ore grade of 11.5 ounces per ton (oz/t) and the San Vincente Mine in Bolivia was 11.6 oz/t. These two mines would use the least amount of fuel per oz of silver production versus the other mines. Thus, the figures below are a BEST CASE scenario and are quite conservative compared to the entire primary silver mining industry.

First, here are the different amounts of energy consumed by Pan American Silver’s mines:

table from Pan American Silver 2018 Sustainability Report

These figures are in GigaJoules, so I converted them to gallons. You will notice I did not consider any other energy sources, so the figures below are likely higher.

La Colorado & San Vincente Mines consumed = 151,601 GJ of Fuel

1 GJ Fuel = 6.825 gallons Fuel

La Colorado & San Vincente Mines Fuel consumed = 1,035,000 gallons Fuel

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