First thanks for the Podcast. The discussion about silver came up and Chris mentioned it cost around $17 USD to mine the silver at one location. Mr. Lundin thinks silver as a industrial metal is only worth 5 to 7 dollars. How does that math work out? I was riding my bike while listening so hopefully I heard that correctly.
To understand this you need to know two things about silver.
1) 75% of silver comes as a by-product of other base metal mining. For example, copper mines usually produce trace amounts of other metals including silver and gold.
2) 25% of silver (roughly) comes from straight up silver mines. These mines, and the one I was specifically talking about, have all-in costs of production in the %16-$17 per ounce range last I looked into the matter. Some are lower, some are higher, this was the average.
The base metal miners in (1) don't care if silver is $1/Oz or $100 they will still keep doing what they do which is make profits mining the base metals (copper, zinc, lead, etc).
Silver is a by-product. It's gravy. Again, they will sell that gravy if the price is $1 or $100.
I believe what Brien was saying is that if we removed investment demand, the remaining industrial demand would be satisfied by the base metal by-product output and that the price for that might settle around $5 or $6.
It's a guess. Might be higher. Might be lower.
But that price would settle around a clearing price for the volume of silver being produced as a by-product and the demand of various industries. Just supply and demand. With the suppliers being price insensitive because it's just a by-product. They will sell for what they can.