Silver mining costs rise on operational challenges
Production costs among Latin America's top silver miners moved higher in Q1 on factors including higher stripping costs, operational challenges and lower output.
Average non-weighted all-in sustaining costs (AISCs) of six of the region's main silver miners were US$13.80/oz, up from US$12.02/oz in the same quarter last year, according to figures compiled by BNamericas.
While one company reduced AISCs, the general northward shift squeezed margins as prices of the metal declined to US$15-16/oz from US$16-17.20/oz in 1Q18.
With spot prices currently languishing in the US$14-15/oz range, some miners will need to significantly reduce costs to return to profitability in the current quarter.
The companies in the list produced at least 5Moz silver from Latin America operations in 2018. SSR Mining is also included based on its 2019 forecast of 6-7Moz.
Miners that do not issue silver AISC data were excluded. These include Fresnillo and Hochschild Mining, which report AISCs every six months.
Figures are on a by-product basis, where available.
LOWER COST
Pan American Silver and Fortuna Silver ranked among the region's lower cost silver producers in Q1, with AISCs below US$11/oz.
Both saw costs rise compared to the prior-year quarter.
Pan American's AISCs were up from US$6.55/oz due to a surge in costs at the Dolores mine in Mexico and Manantial Espejo in Argentina, where the company is bringing the COSE and Joaquín deposits into production.
The 2019 figure also reflects the addition of a string of gold mines acquired in the acquisition of Tahoe Resources.
Fortuna's AISCs rose from US$9.56/oz due to lower production, with costs at the Caylloma mine rising to US$12.91/oz from US$10.30/oz.
Fortuna, which also has the San José mine in Mexico, reports AISCs on a silver equivalent basis. On a by-product basis, as reported by most of the other miners in the list, the company's figure is likely to be several dollars lower.
In full-year 2018, silver equivalent AISCs were US$10.60/oz, but just US$5.40/oz silver net of by-product gold, lead and zinc credits.
Coeur Mining has stopped issuing AISC figures this year, but adjusted costs applicable to sales for its Palmarejo asset in Mexico were US$9.66/oz, up from US$7.43/oz in 1Q18, due to lower output.
HIGHER COST
First Majestic Silver's AISCs were US$12.91/oz, a sharp improvement over the US$16.01/oz in 1Q18, in part due to strong gold output at its San Dimas mine, acquired last year, and La Encantada.
Costs surged by more than US$5 at Endeavour Silver's Mexican mines to US$19.37/oz, as mine development challenges pushed silver and gold production lower, coupled with higher training and pumping costs.
Steps to address these issues are underway, along with comprehensive cost reduction efforts.
The highest AISC miner from the group was SSR, at US$19.76/oz at its Puna operations in Argentina, up from US$18.37/oz, mainly due to higher stripping costs at the Chinchillas mine.
While the company has not issued AISC guidance for 2019, cash costs at Puna are expected to drop sharply to US$8-10/oz from US$15.91/oz in 2018.
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