Silver producer costs fall 13% in Q3 – Dundee

An examination of the silver miners under its coverage shows that costs have fallen over $3/oz during the third quarter of 2013, but there remains work to be done.

All-in cash costs for the silver companies covered by Dundee Capital Markets fell 13% on average of 13% in Q3, to $20.08/oz.

And, given the continuing cost reduction programmes underway across the sector, Dundee expects costs to fall further in the final quarter of the year.

As with most cost metrics in the precious metals sector, Dundee’s is slightly different to all the others, but it is useful as an indication of how the various companies have performed over the quarter. Dundee calculates their all-in cash cost figure on a silver equivalent basis. In other words, it explains, “by-product revenue is not deducted as a credit, but instead is used to gross-up ‘silver equivalent’ production in the denominator of the per ounce calculation.”

The calculation includes site operating costs, exploration, corporate G&A, interest costs, royalties, taxes and sustaining capital and takes account of the cost profiles of Coeur Mining, Endeavour Silver, First Majestic Silver Fortuna Silver Mines, Pan American Silver, Silver Standard SilverCrest Mines and Tahoe Resources. It is worth noting, however, that the average excludes Silver Wheaton, which, as is evident from the graph below, is built around a significantly lower cost profile.

It is also worth pointing out that, although the average for the seven companies under consideration is above 20, the cost per ounce range is rather wide, with SilverCrest putting in the most creditable performance, with costs of $12.72/oz in the quarter, while, Silver Standard Resources brought up the rear with costs at $30.50/oz. 

That being said, in average terms, the largest contributor to the fall in costs, Dundee says was site operating costs, which fell by $0.95/ oz on average, followed by a $0.83/oz fall in tax contributions. The remainder of the reduction, Dundee says was made up of a “$0.56/oz decline in maintenance capex, $0.37/oz decline in exploration, $0.23/oz decline in G&A, $0.10/oz decline in “other”, and $0.02/oz decline in interest charges”.

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