WHAT IF SILVER WAS MINED IN RICH DEVELOPED COUNTRIES ONLY

[SILVERFINGER]

When I was doing a little research into where the majority of the worlds silver was mined I thought to myself, 

What if silver was only mined in rich, well developed countries ?,

Do you think the price would be far higher than it is now ?,

A lot of silver at the moment is mined in most countries that can employ a very low paid workforce, what if it wasnt, would this make a difference to the price by much, would it be much closer to gold do you think ?  (if gold was still mined in its current locations).

 

[RacerCool]

They would exploit the illegals that are in the country, or they would import them then exploit them. Cheap labor problem solved!

[KDave]

Oil is available in several developed countries and it was the US arguably that led to bargain basement cheap oil, so I would say commodity prices in general are not affected by location of source.

In regards to silver, it depends on how much wages cost proportionally as part of the overall operation. 

In developed countries the higher wages, health and safety, limited working hours (drivers), ect is a higher cost than slave labour equivalent, but due to the leverage provided by oil and machinery, it perhaps depends more on what the machinery (fuelled by oil) can do than it does the person operating it. If a machine can produce 1000 ounces a day then paying a man 1 ounce or 20 ounces a day isn't a huge impact on the overall price. Alternatively if that machine is producing 100 ounces then it is proportionately a greater cost and will impact the price.

My feeling (without having real examples of mining operation costs) is that wages are only a small part. It is likely the cost of the leverage (oil and machinery) on those wages that are the biggest factor. 

[SILVERFINGER]

3 hours ago, KDave said:

Oil is available in several developed countries and it was the US arguably that led to bargain basement cheap oil, so I would say commodity prices in general are not affected by location of source.

In regards to silver, it depends on how much wages cost proportionally as part of the overall operation. 

In developed countries the higher wages, health and safety, limited working hours (drivers), ect is a higher cost than slave labour equivalent, but due to the leverage provided by oil and machinery, it perhaps depends more on what the machinery (fuelled by oil) can do than it does the person operating it. If a machine can produce 1000 ounces a day then paying a man 1 ounce or 20 ounces a day isn't a huge impact on the overall price. Alternatively if that machine is producing 100 ounces then it is proportionately a greater cost and will impact the price.

My feeling (without having real examples of mining operation costs) is that wages are only a small part. It is likely the cost of the leverage (oil and machinery) on those wages that are the biggest factor. 

Some very good points made there, its not just the wages, its all the other things that could factor into it too, like H&S etc, I suppose a poorer country would use cheap labour and a richer country could offset by using automation.

[matrawr]

Imagine if they had to mine silver offshore! That would probably increase the price. I think the fact that a lot of silver is mined in poorer countries does play a part in it's price if oil was mostly drilled in poorer countries would it not be cheaper? But the fact that oil is going to be used a lot less in the nearish future probably won't be very good for the price.

[vand]

Australia has a lot of commodities activity

[KevjustKev]

Richer counties have higher tax rates. If was in the UK, which has high tax, not as high as quite a lot of other places, would add around 20% right off the bat. Also start up costs would add to the, erm, cost. Improved or brand new transport links may have to be built and new plants for processing and transport links to those places. The end it might not be worth smaller countries even trying to mine.

Try asking the same question on www.alternatehistory.com

[KDave]

You are right some places are very unfriendly to capital investment, the UK is a good example. But it is not necessarily higher taxes in richer countries, for example, Egypts tax/royalty policy on gold mining is very unfriendly to new investment. Certain poor countries are notorious for requiring other 'royalty' costs to put it politely, particularly in Africa.

The issue is complex, but at its most basic point the equation appears to be how much capital does it take to get how much 'stuff' out of the ground. Add all of the wages, infrastructure costs, machinery, running costs, regulatory costs, 'royalties', taxes, interest on borrowed capital, ect = this is the capital cost (energy cost).

How many units of stuff does that capital provide, or better put how much does extraction of each 'unit of stuff' cost in energy and can you make a profit on it. 

Rich or poor it doesn't necessarily matter, everywhere has its own additional energy cost per unit extracted, somewhere rich can have a better energy cost per unit extracted than somewhere poor all things considered. Australia is a good example or rich being cheap. Egypt is a good example of poor being expensive. 

[SILVERFINGER]

What if these countries had always been the main producers of silver how would things stand then, all the infrastructure already in place and had been for a few hundred years.

[KDave]

The cost associated with infrastructure would be a smaller part of overall cost of mining in those countries. 

Perhaps the metric you want to look at to see if a country is cheap or not is look at a mining companies quarterly reports for all in sustaining cost. I am not sure about silver, but Barrick gold might be a good place to look to see examples of where it is cheap/expensive to do the same thing in different countries. They have mines all over the world, developed countries including Canada, Australia, the United States as well as in South America and Africa.

I remember last year they were producing gold at $700 per ounce across all operations. There will be a break down of costs per nation if you wanted to go digging to see where it is cheapest in the world to mine gold. The principle can then be seen in a real example and applied to silver mining operations in the same regard.