SILVER
BY F. W. PAINE
USES OF SILVER
The chief and essential use of silver is as money. This form of
consumption takes place mainly in India and China, where silver serves
as a basis for the settlement of foreign exchange balances. In China,
silver is the money standard of the country. In India a gold standard
is used, but from time immemorial the natives have hoarded silver and
invested their savings in silver coins and ornaments rather than making
use of banks, bonds or other securities. Silver is used for subsidiary
coinage in all countries, but such coins in Europe and the United
States can normally be replaced to a considerable extent by paper, as
they circulate at more than their intrinsic value. In Mexico, Peru, and
other silver-producing countries silver money is extensively used.
A large amount of silver is used in the arts. To a small degree such
consumption is for photographic or chemical work but mainly for the
production of jewelry and luxurious household wares. The use of silver
jewelry in India is intimately related to silver hoards, the bank
balance of the natives. Such hoards are now mainly coin, however,
because coin has become of more stable value than ornaments since India
adopted the gold standard. Before 1914 it was estimated by the Director
of the United States Mint that two-thirds of the new silver annually
produced went into the arts. In 1912, however, coinage absorbed over
half of the 224,310,000 ounces produced by the world. During the war
the payment by the Allies for goods purchased in the Orient diverted
enormous stores of silver to India and China. In Europe greater amounts
of silver coin were needed under war conditions. Moreover, the large
issues of paper money make corresponding increases in the number of
silver coins desirable. In 1915 only 20 per cent. of the world’s silver
was used in the arts; in 1916, 15 per cent. was so used, the balance
being coined.
The importance of silver for essential uses during the war is best
indicated by the fact that old dead stocks of silver coin, United
States dollars in the Treasury, Manila dollars, etc., had to be called
into service. A stage not reached was the melting down of silver plate
and ornaments. This stage was reached in Germany in the case of gold
and probably of silver, just as the United States had begun to adopt
such a program to obtain platinum. During 1916 our exports of silver
exceeded $210,000,000, surpassing by $58,000,000 the total copper
exports for the same period.
As long as the centuries-old customs of India and China fail to change,
silver must be considered as ranking with gold as an essential money
metal of intranational and international trade.
The large use of silver in the arts, in the period 1900 to 1914, a use
naturally considered as entirely a luxury, leads to emphasis upon the
non-essential character of silver consumption as a whole. When the
European war broke out, prices for silver, in common with most metals
and other commodities, declined. But silver did not increase in price a
few months later, as did base metals. It was not until the end of 1915
that silver sold as high as before the war, and during the early part
of the war it sold so low that producers felt discouraged and regarded
silver as, in the main, an article of luxury.
On the other side is the fact that coinage of silver in Europe
increased tremendously in 1914 and 1915, although it did not seem to
offset fully the curtailment in manufacture of silverware and jewelry.
This need for coinage continued during the war at an accelerated rate,
just as did the demands for munitions and men. The “silver bullet” was
important in Europe, but still more essential in bringing supplies
from the Far East to the battle fronts. This fact is confirmed by the
advance in the price of silver to substantially twice the pre-war
quotation, and had a price not then been fixed the advance would
probably have been greater. The normal annual silver production of
the world is around 159,000,000 ounces, whereas the actual demand for
silver during 1918 exceeded 500,000,000 ounces.
All silver used in the arts by no means represents consumption in
luxuries. Silver enters the essential chemical and photographic
industries to a considerable degree. At least one-third of the silver
consumed in the arts before the war represented jewelry used in India,
and this use is much more a form of investment by the natives than it
is in Europe and the United States.
The United States Treasury Department has been much concerned over the
declining output of gold. Priorities during the war were granted to the
gold industry to place it in the position of a preferred war industry.
Silver cannot be considered as being in a different position, although
silver producers received priorities more as producers of base metals
and gold than of silver alone.
The credit and finance of the world is greatly helped by maximum gold
production, but of little less importance is a large supply of silver,
for although gold has become the general standard of money, silver is
still, as throughout man’s history, one of the two precious or money
metals. It is at least a crutch to aid gold.
In many parts of the world silver ranks equal with or as more important
than gold for a money standard. Elsewhere, in countries where paper
currency is freely accepted by sellers, it is not an essential money
metal, _e.g._, in the United States. However, silver with gold helps to
support the credit and standing of paper money in Europe today, and in
countries with less elaborate financial systems it directly replaces
and so conserves gold.
Silver then is considered to be an essential metal of the world’s
finance, trade, and industry. It belongs with the group of vital
mineral raw materials and can not be classed with diamonds or other
non-essential mineral products.
The unlimited mining and production of silver cannot be considered as
an end in itself, as Spain found out in the days of the conquerors. But
the present silver production is not in excess of the real needs. In
fact there may be expected to be a great shortage of capital because of
the great destructive effects of the world war. Silver production adds
to the stock of money, increases confidence in financial conditions
and furnishes, with and subsidiary to gold, a basis for credit. In the
immediate future a maximum silver production may be of as great or
greater importance to the world than ever before.
GEOLOGICAL DISTRIBUTION
About one-half of the silver output of the world is obtained as a
by-product in the winning of other metals, notably lead and copper.
Such production comes from deposits of all geologic ages. The silver
obtained from high-grade silver ores associated with minor amounts of
gold or base metals is now derived chiefly from Tertiary deposits.
Pre-Cambrian deposits are of some importance, _e.g._ Cobalt, Ontario;
but the Tertiary is the great source of silver ores.
The Mexican mines, which are by far the most important as producers of
silver ores, are associated with Tertiary volcanic rocks. A similar
association occurs to the south, in Central America, Peru, and Bolivia.
The deposits of the United States, Nevada, Colorado, Utah, and Montana,
occur under similar conditions. This is also true of the chief
worked-out deposits of recent silver-mining history--the Comstock Lode.
A great deal of silver has been mined in Europe in the past, chiefly
from rich silver deposits which are now largely exhausted. Geologic
conditions here are obscure, because the mining was completed so long
ago.
In the future, Mexico and the Rocky Mountain-Andes Cordillera will be
the chief region for the mining of rich silver ores. The pre-Cambrian
areas of Canada may continue to be of some importance.
GEOGRAPHICAL DISTRIBUTION
A generalized table of normal outputs is as follows:
TABLE 69.--PRESENT NORMAL OUTPUT OF SILVER
----------------------------+----------+---------------+-------------
Country |By-product|Straight silver|
| silver | deposits | Notes
----------------------------+----------+---------------+-------------
Western Hemisphere: | | |
Mexico and Central America|12,000,000| 60,000,000 |Tertiary
Peru and Bolivia |10,000,000| 5,000,000 |Tertiary
Chile | 2,000,000| ...|Miscellaneous
United States | ...| 23,000,000 |Tertiary
United States lead ores |24,000,000| ...|Miscellaneous
United States copper ores |23,000,000| ...|Miscellaneous
Canada | ... | 21,000,000 |Pre-Cambrian
Canada | 4,000,000| ...|Miscellaneous
+----------+---------------+
Total Western Hemisphere|75,000,000| 109,000,000 |
Eastern Hemisphere: | | |
Spain | ...| 4,500,000 |
Austria and Turkey | ...| 3,000,000 |
India | 5,000,000| ...|Burma
Australia |16,000,000| ...|Broken Hill
Japan | 7,000,000| ...|
Miscellaneous | 2,000,000| 1,500,000 |
+----------+---------------+
Total Eastern Hemisphere|30,000,000| 9,000,000 |
----------------------------+----------+---------------+-------------
SUMMARY
Total output, Percentage of
ounces total output
Rich silver mines 118,000,000 53
By-product silver 105,000,000 47
----------- ---
Total 223,000,000 100
Mexico, the great center for rich silver mines, is now producing less
than one-half of its normal output, due to the unsettled political
and social conditions. In 1907 the Mexican production declined to
31,000,000 ounces, a loss of over 50 per cent. Consequently in 1917 the
world’s silver output was only 170,000,000 ounces; and of this amount
more than one-half was derived as a by-product in refining other metals.
A striking feature of the distribution of silver deposits is the large
number of great producing areas in Mexico and the western United
States. An argentiferous metallographic province is thus indicated; and
is well shown in the following table:
TABLE 70.--GEOGRAPHICAL DISTRIBUTION OF SILVER DEPOSITS, BY REGIONS
-----------------------+---------------------+-------------+----------
|Proportion from Rocky| Normal |Percentage
| Mountain-Andes | output | of world
Region | region | (ounces) | total
-----------------------+---------------------+-------------+----------
1. Rocky Mountain-Andes| | |
Region: | | |
United States |99 per cent. of total| 70,000,000 |
Mexico | All | 70,000,000 |
Central America | All | 2,000,000 |
Peru and Bolivia | All | 15,000,000 |
Chile | All | 2,000,000 |
Canada |16 per cent. of total| 4,000,000 |
| +-------------+
Total | ... | 163,000,000 | 73
2. Cobalt, Ontario | ... | 21,000,000 | 9.45
3. India and Australia | | |
(2 mines) | ... | 21,000,000 | 9.45
4. Japan | ... | 7,000,000 | 3.1
5. Miscellaneous | ... | 11,000,000 | 5.0
| +-------------+----------
Total for world | ... | 223,000,000 | 100.00
-----------------------+---------------------+-------------+----------
The relative geologic age of silver deposits is exhibited in the
tabulation below:
----------------------------------+-------------+----------+----------
| Probable | Future |
|future output|percentage| Present
| (ounces) |of total |proportion
----------------------------------+-------------+----------+----------
Tertiary | 170,000,000 | 76 | 73.0
Japanese copper (largely Tertiary)| 5,000,000 | 2 | 3.1
India and Australia (age of | | |
deposits not stated) | 25,000,000 | 11 | 9.45
Pre-Cambrian | 15,000,000 | 7 | 9.45
Unknown | 10,000,000 | 4 | 5.0
+-------------+----------+----------
Total | 225,000,000 | 100 | 100.0
----------------------------------+-------------+----------+----------
Examination of the above data shows that by far the greater part of
the world’s silver occurs in the great petrographic and metallographic
province which forms a bordering zone around the Pacific Ocean, and is
most productive in the western Cordilleras of North and South America.
CHANGES IN KNOWN GEO GRAPHICAL DISTRIBUTION IN THE NEAR FUTURE
Decreases may occur in Cobalt (Ontario) and in Japan; in Cobalt because
of exhaustion of ore, in Japan because of lower output of copper and
lead if prices of these metals fall. The Rocky Mountain-Andes output
should be maintained relatively at the proportion shown above--Mexico
being back to normal in this assumption. This Rocky Mountain-Andes
production is all, or substantially all, associated with Tertiary
igneous rocks.
The above figures allow in part for the increase in Indian output from
the new Burma mines.
CHANGES IN PRACTICE
It is doubtful if silver production will be materially increased in
the next few years by improvement in metallurgy, milling, or mining
methods. Silver production is perhaps unique in that a great part of
the output, produced as a by-product, comes on the market at a rate
determined more by the volume of lead and copper production than by
current quotations for silver. Also rich silver mines when discovered
can be operated at a large profit per ounce. However, high prices for
silver will stimulate that part of the production which comes from
silver mines proper.
The world’s production increased over one-third during the period of
1904 to 1913. At the same time prices had declined even below the
1893-1894 figures. The increased output was due to production from the
United States and from Canada.
Independent of price, the Cobalt discovery poured silver on the market.
Independent of price, the increased lead and copper of the United
States poured by-product silver on the market.
It seems clear that discoveries of new silver deposits or enlarged
and improved base-metal mining operations are the factors that will
influence silver output. Changes in methods of silver recovery and even
changed silver prices have no tremendous effect. Even the big drop in
silver prices in the early nineties was accompanied by no decrease in
silver production. Instead there was an increase.
POLITICAL CONTROL
The silver output of the world is divided among the various political
groups as shown in Table 71:
TABLE 71.--PRODUCTION OF SILVER IN 1917 AND 1913
------------------------------+----------------+-----------+----------
| 1917 | 1913 | 1913
| production |production |percentage
Country | (ounces) | (ounces) | of total
------------------------------+----------------+-----------+----------
United States | 71,740,000 | 66,801,000| 30.0
British Empire (chiefly Canada| | |
and Australia) | 34,001,000 | 50,429,000| 22.6
France | 235,000 | 521,000| 0.2
Italy | 450,000 | 424,000| 0.2
+----------------+-----------+----------
|106,426,000 |118,175,000| 53.0
Japan | 6,922,000 | 4,716,000| 2.1
Peru | 11,000,000 | 8,351,000| 3.7
Central America | 2,369,000 | 2,135,000| 1.0
Bolivia | 2,434,000 | 2,410,000| 1.1
Russia, Greece, etc. | 1,000,000 | 1,000,000| 0.4
Mexico | 31,214,000 | 70,704,000| 31.7
Chile | 1,673,000 | 2,000,000| 0.9
Spain | 4,500,000 | 4,232,000| 1.9
Germany, Austria | 1,500,000 plus| 7,195,000| 3.2
Turkey | | 1,509,000| 0.7
Miscellaneous | 1,700,000 | 700,000| 0.3
+----------------+-----------+----------
Total |170,038,000 |223,126,000| 100.00
------------------------------+----------------+-----------+----------
COMMERCIAL CONTROL
=Through Ownership of Mines.=--The production of silver in the
United States is all controlled by United States capital. One-third
is controlled by lead-mining interests, one-third by copper-mining
interests, and the remaining third by silver miners. Moreover,
United States capital owns Mexican mining property normally capable
of producing over half of that country’s output. Central American
production and the by-product silver of Peru are similarly controlled.
About one-quarter of the Canadian production comes from properties
owned in the United States. In all, the capital of the United States
controls over half of the yearly output of silver throughout the world.
Most of the Canadian and all of the Australian, Indian, and African
silver is controlled by British capital, as is one-quarter of the
Mexican production and some from Bolivia, Peru, and Chile. In all,
Great Britain controls a third of the world’s output.
Germany probably controls close to 10 per cent. of the world’s silver
production. A part of this is produced locally, but the main German
control is in Mexico, the mines owned by Mexicans being taken as, in
the main, German properties.
Mines owned by Japanese, Spanish, French, or Chilean capital are
responsible for substantially all the remaining 5 per cent. of the
world’s silver output.
FINANCIAL CONTROL THROUGH OWNERSHIP OF MINES
Capital 1913 output,
percentage controlled
United States 52
British 33
German 10
Japanese 2
Spanish 2
French, etc. 1
---
100
=Through Ownership of Reduction Plants.=--As would be expected from
the geographic location of the silver deposits, the United States and
Mexico are the centers of silver smelting and refining. Important
silver-smelting interests are as follows
Company Situation of smelters
The American Smelting & Refining Co. United States and Mexico
The United States S., R. & M. Co. United States and Mexico
The International Smelting Co. United States
Anaconda Copper Mining Co. United States
Consolidated Mining & Smelting Co. Canada
Compañia Metalurgica Mexicana. Mexico
Compañia Metalurgica de Torreon. Mexico
Compañia Minera de Peñoles. Mexico
Through ownership of reduction plants, the United States exercises
control over a somewhat larger share of the world’s silver than it
does through mine ownership. Much of the Canadian and Mexican as well
as most of the South and Central American silver production enters the
United States either as refined bullion or as ore and base bullion.
It is estimated that control through reduction plants is about as
follows:
United States, ⁴⁄₇; Mexico, ¹⁄₇; Canada, ¹⁄₁₄; Europe and Asia, ³⁄₁₄.
As regards silver, this type of control is not at all powerful.
Silver-bearing materials can bear a high transportation charge as
soon as the first process of freeing from gangue has been completed.
Consequently, ownership of mines, rather than of reduction plants, is
the vital factor of control over silver resources, so far as production
is concerned.
=Through Trade Combinations.=--The world’s output of silver is
controlled by the London market. To a small extent this may be due to a
trade combination; to a large extent it is due to the relations of the
London market with consumers.
Four firms form the London silver market. Silver prices are fixed daily
in London, and this “fixed” quotation controls the price of the metal
in every important financial center throughout the world.
There are three refineries in London that handle practically the whole
of the silver bullion that comes on the London market. No silver can
be bought or sold in London unless assayed by one of the four official
assayers to the Mint, Bank of England, etc. Silver treated by the
London refineries and certain bars from European government refineries
are exceptions to this rule.
The London refineries produce silver of the fineness ⁹⁹⁶⁄₁₀₀₀ to suit
the Indian market. Other silver current in the London market has a
fineness of ⁹⁹⁹⁄₁₀₀₀.
In the words of Benjamin White: “The care taken to safeguard the
reputation of the London silver market, the high standing of the firms
that comprise it, and the confidence built up by the methods and
practices adopted to protect the interests of buyer and seller alike,
provide a strong guarantee that in the future, as well as in the past,
silver will find its business center in London.”
=Through Relations with Consumers--England’s Control of Silver.=--As
already indicated, India and China are the great consumers of silver.
For the five years preceding 1914, fully 40 per cent. of the world’s
silver output was shipped from London to those two countries, which,
with a combined population of over 700,000,000, represent the buying
side of the world’s silver market, just as North America represents the
selling side.
Since 1914 the capacity of these countries to absorb silver has
steadily increased and in 1918 it was mainly a question of where the
silver could be obtained. Current production was inadequate to meet the
demands, and old stocks of the precious metal were of necessity put on
the market.
The world’s silver business consists in getting the metal from the
Americas to the East. Why send it via London, exposing the precious
metal to greater marine hazards and losing interest while in transit?
The main reason is that the chief trade of China and India with western
nations is with England, and the great banking houses that finance this
trade are in London. These banks purchase silver in London to adjust
exchange balances. Funds to purchase such silver usually originate in
London, whether from bills on London, loans from London banks or in
other ways. In addition, London has been the center of the world’s
finance and foreign trade, and also the center from which the mail
steamers, the swiftest and cheapest routes to the principal consumers
of silver, have radiated.
When the submarine became a menace the United States shipped silver
direct from San Francisco to India and China. A large part of the
United States production was thus diverted from London, and in 1918
exports of silver from London were far below normal. However, the
officials of the American Smelting & Refining Co., refiners of over
one-third of the world’s silver output, say that they do not expect
these conditions to continue. The established business of the London
silver trade, and, of more importance, the relationship between
commercial London and the silver-consuming countries, will no doubt
quickly re-establish the normal status of London--importer of American
silver, exporter of the silver needed in the Far East.
The American refiner or silver producer is glad to have a steady and
broad market for his silver, such as is furnished by the four London
firms. Smelting interests and mines are able to dispose of their
product through London; otherwise they would have to deal with brokers
or banks in the Far East. The London firms keep in close touch with the
big bullion dealers of Bombay, Calcutta, and other cities, which are
the centers from which silver is distributed throughout India. Silver
for the Indian imperial coinage, however, is purchased in London by the
government.
=Through the Pittman Act in the United States.=--The above silver trade
flow-sheet has recently (1920) been materially changed by the program
of the Government of the United States to purchase domestic silver at
$1 an ounce. If the world price for silver remains below this figure,
all American silver will be absorbed by the Government for about four
years, or until the 207,000,000 ounces specified in the Pittman Act are
bought. If silver, however, should rise above $1 the flow to market as
sketched above would be resumed.
=Position of China and Japan.=--Chinese foreign exchange rates depend
to a large extent on the price of silver. All importers or exporters
dealing with China must deal in the silver market. Although copper
“cash” is the basis of Chinese currency, silver is the standard legal
tender for transactions involving large amounts, and weights of silver
are used as units. Fineness and weight of Chinese coins are manipulated
so that coins issued by the silver-producing states, _e.g._, Mexican
dollars (two varieties), British dollars, Spanish dollars, etc., are
prized by the Chinese because they are uniform in value.
Japan produces considerable silver, a great deal coming from her
electrolytic copper refineries. Gold is the money standard and silver
is not used extensively in the arts. Consequently Japan produces more
than enough silver to satisfy local consumption. The government is
alive to the importance of silver in connection with all dealings with
China. In 1918, Japanese banks bought up Chinese silver supplies,
paying prices in excess of all other traders. It is believed that
American silver has been flowing into Japan via China and that Japan
seeks to control the Chinese silver market. A large silver reserve is
being built up in Japan. On account of the international importance of
the whole Chinese problem, Japanese activity in silver should be noted.
SUMMARY
Silver is used both for money and in the arts, the former use being
the more important and more essential. In some countries, especially
those producing silver in large amounts, it is the money standard,
either alone or with gold. In other countries on a gold standard,
silver is used for subsidiary coinage. In India and China it is used
for the settlement of foreign trade exchange balances. Normally about
two-thirds of the silver produced annually is used in the arts, mainly
for the manufacture of jewelry and luxurious household wares, though
some is consumed in the photographic, chemical, and other essential
industries. During the war more silver went into coinage and less
into the arts than formerly, as the large issues of paper money made
corresponding increases in the number of silver coins desirable.
Large amounts have been exported to the Far East. The war has shown
that silver should still be considered an essential metal of the
world’s finance and trade, despite the increasing amounts consumed in
non-essential uses.
About one-half of the silver output of the world is obtained as a
secondary product in the mining of other metals, notably lead and
copper, from deposits of all geologic ages. The high-grade silver ores
are derived chiefly from Tertiary deposits, and it is probable that in
the future Mexico and the Rocky Mountain-Andes region will be the chief
sources of ores of this type.
Of the total world silver production over 80 per cent. comes from
the mines of the Western Hemisphere. For many years Mexico was the
leading silver-producing country of the world, but the unsettled
political conditions have so interfered with mining operations that the
production for 1917 was less than a half of that for 1911 or 1912. The
United States, a close second to Mexico in pre-revolutionary years, now
occupies the leading position. Canada and Central and South American
countries also produce important quantities of silver. In the Eastern
Hemisphere, Australia is the leading silver producer. Smaller amounts
are contributed by Spain, Austria, Turkey, India, and Japan.
Changes in practice of silver recovery and even silver prices have
little influence on silver production. It will be stimulated rather
by discoveries of new silver deposits or by enlarged and improved
base-metal milling operations.
The principal silver deposits of the world are controlled politically
by the United States, Mexico, and Great Britain, the three nations
controlling about 85 per cent. of the total production in 1913. United
States capital controls the entire silver output of the United States,
and mines producing half of the Mexican output, one-fourth of the
Canadian output, and much of that of the Central and South American
countries, in all something over one-half of the world’s normal silver
production. Great Britain controls probably one-third of the world
production, chiefly in Canada, Australia, India, Africa, and Mexico.
German capital owns probably one-tenth, located partly in Germany but
mainly in Mexico. The remaining silver deposits of the world are owned
by Japanese, Spanish, and French capital. Ownership of reduction plants
is not a powerful form of control in the case of silver. The United
States owns about four-sevenths of the total smelting and refining
capacity of the world, the remaining three-sevenths being controlled
largely by German, British, and Mexican capital.
Although the greater part of the silver produced each year comes from
North and South America, the world’s silver market is located in London
because of the close relations between English business interests and
India and China, the chief consumers of the metal.
The United States Government, however, will (1920) purchase all
American silver offered at $1 per ounce, up to 207,000,000 ounces.