these two articles by scott wright describe the challenges mining companies face. he focuses on gold, but given that three-quarters of silver production is as a byproduct, the same principles apply.

they can play all the games they want with paper silver and gold, but trying to get actual supply out of the ground has become extrememly difficult, even though gold has gone from $250 to $800. remember that an ore body is not a fixed amount. as prices increase lower-grade rock becomes economic, and will move from the resource category into reserves. but even with the price of gold and silver more than tripling during this commodity bull market, companies still can't replace their reserves.

Until the miners can find a balance and figure out how to actually grow their production, this bull market in gold simply must carry on. In the coming years the demand for gold will continue to rise, and the miners have no choice but to respond. So while the typical summer doldrums have spooked some investors into believing the gold bull is over, don’t believe what you hear.

At Zeal we believe gold is moving out of the summer doldrums and into a season that is likely to produce another powerful upleg.

http://news.goldseek.com/Zealllc/122...

http://news.goldseek.com/Zealllc/122...