Miners Making A Bullish Case for Silver Prices

Silver mining companies are making a very strong case for higher silver prices in the coming years. A shortage in the silver market could be looming. It's nothing but great news for precious metal investors.

Understand this (and don't let anyone tell you otherwise): silver miners are struggling with producing more and keeping costs low.

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The longer this goes on, the bigger the possible upside on silver prices.

For instance, look at First Majestic Silver Corp. (NYSE: AG). It's one of the best-known and purest silver plays out there.

In the first quarter of 2018, the company produced 2.16 million ounces of silver. In the same quarter a year earlier, its production amounted to 2.71 million ounces. This represents a decline of 20% year-over-year. (Source: “First Majestic Reports First Quarter Financial Results,” First Majestic Silver Corp., May 9, 2018.)

Costs at the company have been skyrocketing.

In the first quarter of 2017, First Majestic produced an ounce of silver at all-in sustaining costs of $11.85. In the first quarter of 2018, these costs surged to $16.01.This was an increase of 35% year-over-year.

Here's the kicker: First Majestic's average realized silver price was $16.76 per ounce. In other words, this was the price it received for selling silver.

With a production cost of $16.01, we are looking at a gross margin at this company of just $0.75 per ounce.

Assuming that silver prices drop below $16.00 and First Majestic's production price remains at the current level, will it have any reward for producing? It would be a very bad business decision.

This Sort of Thing Prevails Across the Sector

Look at Coeur Mining Inc (NYSE: CDE), one of the biggest silver producers. In the first quarter, it produced 3.2 million ounces of silver. A year earlier, it produced 2.7 million ounces. Its production increased by 18.5%. (Source: “Coeur Reports First Quarter 2018 Results,” Coeur Mining Inc, April 25, 2018.)