Peak Silver Revisited Impacts of a Global Depression, Declining Ore Grades & a Falling EROI

Impacts of a Global Depression, Declining Ore Grades & a Falling EROI

The world is about to peak in global silver production. This will not occur due to a lack of silver to mine, but rather as a result of the peaking of world energy resources, declining ore grades, and a falling Energy Returned On Invested – EROI. The information below will describe a future world that very few have forecasted and even less are prepared. This is an update to my previous article Peak Silver and Mining by a Falling EROI. In my first article I stated that global silver production may peak in 2009 if we were to enter a worldwide depression. We did not have the global depression as massive central bank printing and bailouts have thus far postponed the inevitable.

The world has entered a plateau of global oil production over the past 5-6 years. A higher oil price has not brought on more supply to offset depletion rates from existing fields. From the graphs above we see a correlation between global silver supply and oil production, especially in the latter part of the 20th century. Up until the late 1800’s and early 1900’s the majority of energy used in mining silver came from human and animal labor. It is truly amazing just how much silver was produced in the United States at this time without the use of oil and modern mining practices (information provided later in the article). This all changed as global oil production as well as the technique of open-pit mining increased.

The 3 Big Energy Game Changers for Silver Mining

There are a number of some very large open-pit mining projects supplying silver that are forecasted to go into production within the next several years as well as others by the end of the decade. It is astounding to see these 25-45 year extended forecasts by these mining companies without any consideration of what the energy environment will be like in 2015-2020 or later. It seems like everyone in the sector assumes there will be ample supplies of energy at commercially viable prices.

This is where the trouble begins. There are three negative energy game changers that will impact the mining industry going forward. They are: (1) the Peaking of global oil production, (2) the Land Export Model and (3) the falling EROI – Energy Returned On Invested. Of the three, I believe the falling EROI will be the most devastating. Before explaining why this is the case, let’s take a look at each.

Peak Global Oil Production

According to JODI’s global oil production figures represented HERE in a post on theOilDrum.com, it looks like the global peak of convention crude/condensate and natural gas liquids took place in 2006:

Global oil production has increased steadily since the early 1980’s and has now been in a bumpy plateau for the past 5-6 years even with much higher oil prices. It is true that there are more projects and oil fields slated to come online in the next several years, but much of the increase will be offset by depletion in existing fields. To add insult to injury, the majority of oil that is exported throughout the world is being supplied by countries that are also increasing their own domestic oil consumption. This is a double-edged sword for dependent oil importing nations— which leads us to the Export Land Model. (more)