Gold and silver are stores of value, especially in a world of persistently high inflation and low rates. Silver is also likely to be the main bottleneck for solar in the 2020s. Hence this 18-page note is an overview of gold and silver production, from mining to refining. We find very steep energy/CO2 curves, and fear supply shortages. What upside for well-run gold-silver incumbents?
Gold and silver are well-known stores of value, going back over 11,000 years. They may protect value in a world of persistently high inflation. While we also see silver becoming the key bottleneck for solar growth in the 2020s. Key numbers, and the reasons for exploring this topic are explained on pages 2-4.
How do you make silver and gold? This turns out to be one of the most complex supply-chains we have ever modelled, on a par with carbon fiber. In this note, we have broken down a typical mining-refining operation, into ten discrete steps. Each one is summarized, and then modeled individually on pages 5-15.
Different steps include mining, crushing, flotation, roasting, leaching, Merrill-Crowe, dore casting, Miller chlorination, the Wohlwill process and the Moebius process. Specifically, this overview of gold and silver production has estimated the capex costs, opex costs, energy consumption and CO2 emissions along each step of the chain. And then we can simply add all the steps together.
One conclusion is that silver and gold are two of the most energy intensive and CO2 intensive materials we have evaluated in our research to-date (chart below).
The reason this matters is that complex and energy intensive processes are more likely to get disrupted, in the strange, under-supplied world of 2022-2030. The key pinch points are identified on pages 16-17. This re-affirms our fears for a silver supply shortage, and a solar bottleneck.
Well-run incumbents may enjoy pricing power, and may be able to avoid bottlenecks. Leading integrated producers of silver and gold are charted and summarized on page 18.