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Silver Miner Production Growth: The Outlook for 4Q16

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Upgrading guidance

Hecla Mining (HL) recorded strong 67% silver production growth and 19% gold production growth YoY (year-over-year) in 3Q16. For fiscal 2016, the company increased its production estimates at Greens Creek and Lucky Friday.

Now it expects to produce 44.5 million ounces of silver, as compared to the previous figure of 44 million ounces. The expected gold production is also higher at 582,000 ounces, as compared to 576,000 ounces previously.

Tahoe Resources (TAHO) reported in-line production results in 3Q16 with 5.0 million ounces of silver and 98,419 ounces of gold production. With its year-to-date strong production, it’s on track to meet the higher end of its annual guidance of 18 million–21 million ounces of silver.

In 3Q16, Coeur Mining’s (CDE) silver and gold production levels were slightly lower than market expectations. The company produced 3.5 million ounces of silver and ~85,000 ounces of gold.

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Despite some one-off events, Coeur upgraded its 2016 operating production guidance from 33.8 million–36.8 million SEO (silver equivalent ounces) to 34.4 million–37.0 million SEO. As its Palmarejo mine transitions into higher-grade, higher-margin underground operations, production is expected to accelerate going forward.

Strong operating performance

Pan American Silver’s (PAAS) silver production in 3Q16 was 6.36 million ounces, as compared to 6.61 million ounces in 3Q15. This fall reflects anticipated production declines at Alamo Dorado, with the mine reaching the end of its life.

For the nine-month period, silver production totaled 19.11 million ounces in 2016, as compared to 19.34 million ounces in the same period of 2015. The company mentioned that the production is marching ahead of plan. To reflect this, it raised its outlook for silver production in 2016 from 24 million–25 million ounces to 25.0 million–25.7 million ounces.

Maintained guidance

First Majestic Silver (AG) reported a record quarterly silver production of 3.1 million ounces in 3Q16. This was primarily due to a 5% increase in tons milled and a 3% improvement in average silver recoveries. Due to weaker performance in 1H16, the company had reduced its 2016 silver equivalent production guidance from 17.8 million–19.8 million ounces to 16.8 million–18.7 million ounces. In 3Q16, it maintained the previous guidance.

Notably, most miners (SIL) either maintained or upgraded their production guidance for 2016.

But while looking at near-term production growth is important, it’s even more important to look at producers’ medium- to long-term production growth. This growth impacts companies’ mergers and acquisitions, exploration spending, and capital expenditure decisions.

In the next part of this series, we’ll look at this variable for silver miners.

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