[SMM Analysis] Changes in Mined Silver Production

Entering 2024, the average price of SMM #1 silver increased by 30% YoY, and the significant price surge has provided strong production incentives for the mining market. From 2023 to 2024, domestic demand for silver-containing ores has continued to rise.

1. Production

SMM recently surveyed 74 mining enterprises this year, among which 34 reported silver production ranging from 3,946.33-4,133.71 mt. (Based on the grade ranges of copper, lead, zinc, and silver across various regions in China, domestic miners' silver production is estimated to be between 742.8-8,521 mt.) Due to declining silver grades in aging domestic mines and the depletion of silver in older mines, domestic mine-supplied silver has shown a downward trend. However, the significant price increase this year has prompted enterprises to release inventory.

2. Prices

From the end of 2023 to around the Chinese New Year in 2024, due to market expectations for silver prices this year and production needs, smelting enterprises increased their demand for raw materials, driving up coefficients in the market. In H1 this year, as prices continued to rise, the pricing coefficients for silver-containing ores also increased. The domestic market has seen a trend of negotiating prices on a case-by-case basis. After the overall price of silver-containing ores rose, it stabilized at relatively high coefficients. Currently, purchasing silver ores at high coefficients is relatively easy, but acquiring ores at low coefficients is nearly impossible.

3. Distribution, Association, and Grade

Domestic resources are relatively scattered, with distribution across Inner Mongolia, Jiangxi, Yunnan, Henan, Tibet, Fujian, Shaanxi, Guangxi, Qinghai, Hunan, Anhui, and other regions. Annual silver output from mines is relatively low, and mines are relatively dispersed. Most high-silver-content mines have annual silver production ranging from 200-300 mt (large enterprises typically own multiple mines), while the annual production of most silver mining enterprises fluctuates between 100-200 mt. This is closely related to the scarcity of large independent silver mines in China, with associated silver being the primary source. Domestically, silver is mainly associated with lead, copper, zinc-lead, and gold. The grade of silver per mt of ore varies significantly, ranging from a few grams to over 10,000 grams per mt. Among these, copper-associated silver in China is primarily in the hundreds of grams, while lead-associated silver spans a wider range. High-silver ores are mainly associated with lead, zinc, and copper. Zinc ores generally associate with lead before associating with silver, making lead-associated ores a significant proportion of domestic associated ores.

Future Developments

Currently and in the future, with advancements in smelting technology, lower loss rates, and higher recovery efficiency, enterprises are also importing silver-lead ores and copper ores as supplements. Due to the rise in imports and related pricing issues, imported silver-lead ores are preferred for their high silver content, which facilitates blending for smelting. Meanwhile, domestic silver reserves remain relatively abundant.