For now we'll look at Mexico’s example of falling net oil exports, focusing primarily on Fresnilo’s processed ore and diesel consumption. All oil-exporting nations go through the same cycle of growing oil production and domestic oil consumption. This ratio functions fine until production declines while domestic consumption continues to increase. A perfect example of this at work is Indonesia. Read more at http://www.silver-
Indonesia used to belong to OPEC until it became a net oil importer. In 1977, Indonesia produced 1.7 million barrels a day of oil while it only consumed approximately 300,000 barrels. Thus, it had a net oil export of 1.4 million barrels a day (mbd). By 2010, Indonesia became a net importer of oil as it consumed over 1.3 mbd domestically while it only producing 700,000 barrels a day (BP Statistical Review 2011).
This same fate of falling net oil exports will take place in Mexico, as well. In 2004, Mexican oil production peaked at 3.8 mbd while domestic consumption was 2.0 mbd. Even though its oil consumption remained relatively flat at 2.0 mbd by 2010, the country’s production declined to 2.9 mbd. In just six years, Mexico’s net oil exports were cut in half from 1.8 mbd in 2004 to approximately 900,000 barrels a day in 2010 (BP Statistical Review 2011).
Mexico is the largest silver producer in the world with many future silver mining projects in the works. These projects will rely upon additional supplies of diesel to run their operations for the next several decades. Will they be able to obtain enough diesel to power their mines?
Fresnillo has stated in its 2011 Annual Report that it will increase its silver production to 65 million ounces and its gold to 500,000 ounces a year by 2018. In order for Fresnillo to achieve this production forecast they will have to increase their diesel consumption, as well.
In 2007, Fresnillo processed 13.9 million metric tonnes (MMT) of ore and consumed 8.6 million gallons of diesel. By 2011, their mining operations processed 37.7 MMT of ore and consumed 24.7 million gallons of diesel. This rise in diesel consumption was due to Fresnillo starting two new mines and ramping up production in three existing mines. Go here now to http://silverdollar.cc for profitable investing ideas.
The majority of the increase in processed ore and diesel consumption at Fresnillo came from ramping up production at Herradura and starting commercial operation of the Soladad-Dipolos mine in 2010. Both of these mines are predominantly gold producers. The chart below shows the breakdown of gold and silver mines at Fresnillo:
Here we can see that of the 37.7 MMT of ore that was processed at Fresnillo’s operations in 2011, its gold mines accounted for 34.2 MMT - or 91% - of the total amount. Even though Fresnillo is described as the largest primary silver mine in the world, the majority of its energy consumption is geared towards gold production.
This increased gold production has been revealed in an interesting trend taking place at Fresnillo’s mining operations. In 2005, Fresnillo’s electric energy demand was 41.8% of its mix, while its diesel consumption accounted for 57.1%. Today, this ratio has changed significantly.
According to information obtained from Fresnillo’s 2011 Annual Report (just released), its diesel consumption now consumes 72.5% of its total power requirements, while only 25.5% is attributed to its electricity demand. If diesel supplies become harder to acquire in the future, Fresnillo’s energy trend may be indeed heading in the wrong direction. Now is a perfect time to buy gold and buy silver to protect your wealth. Read more at http://silver-