Mining companies in North Idaho are banking on a combination of higher ore grade, increased production and improved efficiency to offset sluggish silver prices. And they are waiting to see if the week’s volatile markets help the process.
“Last week was one of the best in this mine’s history,” said Harry Cougher, senior vice president and chief operating officer for Sunshine Mining & Refining Co.
At current production rates, the Sunshine Mine near Kellogg is approaching 500,000 ounces of silver per month. With the addition of the rich West Chance ore body, Cougher said the company moved into the black last month.
Predictions for ore grade from the mine range from 21 to 22 ounces per ton, but recent grades have been running higher.
“For last month, we were at about 26 ounces per ton,” Cougher said. “Even with the lower prices, we were cash-positive in September.”
Mitchell Krebs, manager of investment relations and business development for Coeur d’Alene Mines, looks for recent volatility in stocks to renew interest in silver. Coeur d’Alene Mines is a partner in the Silver Valley Resources Corp., which operates the Coeur and Galena mines in the Silver Valley.
“The precious metals sector has been a haven in times like these,” Krebs said of the volatile markets. “Economics 101 dictates that prices will be going up,” he said.
Krebs based that assessment on the eight-year supply-demand deficit in the silver trade and the historically low levels of above-ground inventory. Silver prices still have not reached the $6 mark that experts say is needed to turn a healthy profit. So far this year, the average selling price has been $4.86. The metal closed down 11 cents Tuesday at $4.65.
“It’s difficult to make money at this silver price,” said Vicki Veltkamp, communications manager for Hecla Mining Co. “But we’re approaching what they call the ‘pinch-point,’ because there are more industrial users of silver these days.
“In the meantime, we have to have good, low-cost operations that will weather the price swings.”
Efficiencies are being forced on the silver mines, which have had to wrestle cost of production below what the metal will bring on the market.
Sunshine, Silver Valley Resources and Hecla’s Lucky Friday mine all predict costs will come in well under $4 in 1998.
One broker said a comeback for silver is out of the question until gold settles down. On Friday, the Swiss National Bank announced that it might unload 1,400 tons of gold, prompting fears of a domino effect on European markets.
“The supply-demand ratio for silver is very favorable, but the price of the commodity is still tied to what happens with gold,” Bob Ciccone, a broker with Cohig & Associates in Spokane.
“My sense is that we can’t get a sustained rally going while the central bank in Europe is selling gold.”