The following content is excerpted from the prospectus of Sunshine Silver Mining & Refining Corporation (to be renamed Gatos Silver, Inc.) dated October 6, 2020 filed on SEDAR.
Silver Supply
Silver supply is primarily driven by mined silver production, which, according to The Silver
Institute's World Silver Survey 2020, accounted for 81.7% of supply in 2019. Recycling largely accounted
for the remainder of silver supply. Global silver supply increased 0.6% year-over-year in 2019 to
1,023 million ounces compared to 1,016.8 million ounces in 2018.
Mine silver output in 2019 declined for the fourth consecutive year, falling 1.3% to 836.5 million
ounces from 847.8 million ounces in 2018. These recent production declines follow 13 consecutive years
of growth. The decrease in silver supply was largely driven by lower grades at primary silver mines,
lower silver production from copper mines and losses from production disruptions. In Peru, Compañía
de Minas Buenaventura's Uchucchacua Mine saw silver production decrease from a 27% decline in
grades and experienced a 21-day strike; Hochschild Mining's Arcata Mine was placed into care and
maintenance early in the year; and declining silver grades were a factor at large primary copper mines.
In Mexico, Fresnillo plc achieved lower grades at several of its mines; First Majestic Silver Corp.'s San
Martin Mine and Endeavour Silver's El Cubo Mine were placed on care and maintenance; and
blockades resulted in Newmont Corporation's Penasquito Mino being suspended for 90 days.
Mexico was the world's largest silver mining country in 2019 (190.3 million ounces, down 2.2%
from 2018), followed by Peru (135.4 million ounces, down 7.6% from 2018) and China (110.7 million
ounces, up 0.06% from 2018). The chart below illustrates global mined silver production from 2011
through 2019.
Source: Prospectus of Sunshine Silver Mining & Refining Corporation (to be renamed Gatos Silver, Inc.) dated October 6, 2020 filed on SEDAR.
In 2019, just 28.7% of silver produced globally (240.0 million ounces) was derived from primary
silver mines, down 3.8% from 249.4 million ounces produced from primary silver mines in 2018. The
remaining 71.3% of silver mined in 2019 was a by-product of lead/zinc, copper, gold and other
operations. By-product silver production, which represents over two-thirds of global silver production, is
typically inelastic with respect to the silver price.
Global recycled silver supply also expanded slightly in 2019 by 1.3% to 169.9 million ounces.
Industrial recycling is the largest source of recycled silver and rose for the fifth consecutive year. An
increase in recycled supply was recorded across all regions, other than the Commonwealth of
Independent States. Recycled supply from North America was the highest in 2019, representing 33.8%
of the global total.
Source: Prospectus of Sunshine Silver Mining & Refining Corporation (to be renamed Gatos Silver, Inc.) dated October 6, 2020 filed on SEDAR.
Historically, another source of supply has been government sales, which amounted to 44 million
ounces in 2010, according to GFMS data. However, government sales of silver stocks were minimal in
the early part of this decade, and GFMS estimates that no significant sales have occurred since 2013.
A combination of a slightly higher demand and a slightly higher supply in 2019 compared to 2018
resulted in a surplus of 31.3 million ounces, or 3.1% of silver demand, according to The Silver
Institute's World Silver Survey 2020. Net investment in exchange traded products of 81.7 million ounces
helped to propel the net silver balance to a 50 million ounce deficit, or approximately 5% of demand.
Source: Prospectus of Sunshine Silver Mining & Refining Corporation (to be renamed Gatos Silver, Inc.) dated October 6, 2020 filed on SEDAR.
Silver Market
Silver Industry Overview >>
Silver is one of the eight precious, or noble, metals; the others are gold and the six
platinum-group metals. Silver occurs naturally in its solid metallic state and is commonly associated with deposits of gold, copper, lead and zinc as a secondary metal. Silver is distinct from other precious metals in that it is...
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Silver Demand >>
The three principal drivers of silver demand are industrial applications, consumer use and
investment. According to The Silver Institute's World Silver Survey 2020, demand for industrial applications is mainly driven by electrical and electronics uses, which accounted for 58.3% of industrial demand and 30.0% of total...
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Markets and Outlook >>
The price of silver has experienced significant volatility over the last 25 years. The price of silver
averaged approximately $4.71/oz from 2000 through the end of 2003. Beginning in 2004, the price of silver began to appreciate considerably, reaching a high of $48.70/oz in April 2011. This significant ascent in the price of silver...
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