The gold and silver coins and bars you purchase and invest in often have a long and storied past. Most physical gold and silver is mined from all over the earth. Mines can exist close to the surface, far beneath the ground, or deep inside a cave. The amount of gold and silver a mine produces depends on a number of factors, including its workers, efficiency, amount of gold and silver contained in the mine, funding for the mining efforts, government involvement, quality of working conditions, and much more.
Let’s look at an example of the San Jose mine, about an hour’s drive south of Oaxaca, Mexico, at the southern end of the Mexican silver belt. The mine is run by Fortuna Silver Mines Inc. (NYSE: FSM).
Last year, this single mine produced just shy of 2 million ounces of silver, and almost 18,000 ounces of gold. In today’s prices per ounce of each metal, which are low, that equates to nearly $60 million in silver and nearly $28.8 million in gold…all in one year, from one mine.
However, expect those numbers to grow. The mine is nearing the end of a multi-year mill expansion project, a $9 million construction project that began in 2006. When complete (which is expected to be Q3 this year), the mine is expected to produce roughly 3.2 million ounces of silver ($90.6 million based on today’s estimated price per ounce), and 23,000 ounces of gold ($36.8 million based on today’s estimated price per ounce) in a year.
One of the drills at the San Jose mine cuts nearly 550 meters into the earth to find some of its yield, with the ability to go deeper. They typically use the drift and fill method, by which they fill drilled veins in the earth with cement and waste rock once the ores (which contain the metals) are removed. The company practices other sustainable mining efforts, such as pond water recycling, and helps irrigate water to nearby residential areas for various public uses.
Experts say this area of the world is generally underexplored and believe that a significant amount of silver and gold (and other metals) still exists somewhere nearby, waiting to be discovered and mined. The only other modernized precious metal mine nearby is El Aguila, run by Gold Resource Corporation (NYSE: GORO). This mine is even further south of the San Jose mine by about 70 km. Agriculture is the primary livelihood for the people who live in this area, and while mining can be dangerous work, the gold and silver mining industry provides a livelihood for many people.