Thursday, March 24, 2011

Pan American Silver Q4 rises; sees lower '11 production

Usually, when the price of a commodity soars, its producers plan on producing more of the commodity.  After all, what company wouldn't want to enjoy higher profits?  They only cut back production if the price of the commodity they produce plummets in price, as the production process becomes uneconomic--they can't sell the commodity profitably at lower prices.

Hence, it is puzzling that Pan American Silver announced that they are planning to reduce their production levels going forward--despite record profits from soaring silver prices.  Here's one explanation:  their reserves are dwindling--they are running out of silver in the ground.  Otherwise, they would plan on producing more silver, not less. 

http://mobile.reuters.com/article/idUSSGE71F02B20110216?feedType=RSS&irpc=43

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