The Galena Mine will cut its workforce by about a third in response to plunging silver prices and high production costs, officials said Tuesday.
Layoff notices are being sent to 126 of the underground silver mine’s 351 workers. Affected employees will be given a 60-day notice in compliance with federal law and the mine’s collective bargaining agreement, said Janice Mandel, a spokeswoman for U.S. Silver and Gold Inc., the mine’s owner.
Producing an ounce of silver from the mine costs about $16, so skidding prices for the metal took a toll on U.S. Silver and Gold’s profitability, according to a company news release.
Silver prices have dropped from about $30 per ounce to about $20 this year. Silver prices briefly spiked to $49 an ounce in May 2011.
Analysts say lower silver prices are a result of reduced industrial demand for silver and lower investment demand based on record stock market rallies and declining inflation.
Over the past year, the Galena Mine near Wallace increased production by 19 percent and lowered operating costs, but further cost reductions were still needed, officials said.
“I deeply regret the impact this will have on our employees, who have worked hard to help us achieve the progress we have made,” Darren Blasutti, the company’s president and chief executive officer, said in a news release.
The Galena’s smaller operation will focus on extracting ore that can be profitably mined at current prices, he said. Company officials will reduce the number of active mining sites, and several levels of the mine will be put into a care and maintenance program.
In addition to the layoffs, Blasutti and the company’s board of directors will take a voluntary 20 percent pay cut and the executive management team has agreed to a 10 percent cut, according to the release. The pay cuts take effect Aug. 1.
The Galena is expected to produce about 900,000 ounces of silver during the second half of the year, at cash costs of $15.50 to $17.50 per ounce, the release said.
U.S. Silver and Gold will release its second-quarter financial results in August.