Pure-play Silver Miners Increasingly Shifting to Gold

Reuters reported that pure-play silver miners are becoming more and more rare as companies that have traditionally mined silver branch out into gold. The news outlet notes that this diversification is partially the result of the 68-percent drop in the silver price since 2011.

As quoted in the market news:

According to BMO Capital Markets, large primary silver miners have increased their gold output on average by 19.4 percent a year since 2009 to 2 million ounces.

That makes them faster-growing gold producers than gold miners themselves. In that same period, large gold producers increased their gold output by 2.8 percent on average annually.

Helping drive this trend is big gold miners’ sales of smaller, non-core operations as they try to cut costs and debt. Although gold has outperformed silver, it is still down nearly 40 percent since 2011.

Mother nature is also a factor in the silver-to-gold shift. Large, high-grade silver deposits have always been scarce and are becoming more so. Already some 70 percent of silver is mined as a by-product from copper, gold, lead and zinc mines.

Andrew Kaip, a BMO analyst, told the news outlet:

I don’t see enough discoveries for all the silver companies that exist right now to be able to maintain silver production and replace it. They are becoming precious metal producers because they kind of have to. The days of the pure silver producers are behind us.

Click here to read the full Reuters report.