Silver is a precious metal. It is used as money (still). It is used in jewelry. Over the last century; numerous important industrial uses for silver have emerged. In other words, by any objective metric silver is more valuable than ever.
For over 4,000 years; the silver/gold price ratio averaged 15:1. This reflects the natural supply of the two metals in the Earth’s crust, 17:1. However, today, despite silver being more valuable than ever, it’s price ratio versus gold has expanded, not declined. The current ratio is at an extreme level of roughly 75:1 – five times the normal ratio.
There are no reasonable explanations for this differential. In absolute terms, in the 1990’s the price of silver was driven to a 600-year low, in real dollars. This bankrupted well over 90% of the world’s silver mines. Since that time, silver has been in a permanent supply deficit.
For over 4,000 years, the vast majority of the world’s silver came from primary silver mines. Today, more than 70% of our silver comes as a byproduct of other mining. There is only one reason for this dramatic shift in silver mining: the price of silver is much, much too low. If the price of silver rose sufficiently (becoming more in line with the price of gold), most of our silver would once again come from primary silver mining, restoring health to this important metals market.
We’re here today to get some insights on the silver sector, as well as examining First Majestic’s prominent role in the mining industry.
