By: Tomas Ronolski - AllPennyStocks.com News

Wednesday, July 17, 2013

Falling commodity prices have been taking a serious toll on miners across the world in 2013 as part of a downward trend that began after gold peaked in the third quarter of 2011. When gold dipped under $1,200 per ounce a few weeks ago, it was off 2011 highs by about 40 percent. Spot silver, which made a top at $49.82 in April 2011, was hit even worse; losing 63 percent of its value at lows of $18.17 on June 28. Looking at other commodities doesn’t paint a better picture. Copper is off 2011 highs by 35 percent and iron ore is down a similar amount. Unfortunately, production costs don’t move proportionately lower, eroding profit margins for miners and now triggering a series of announcements of shutdowns at mines. Even the mighty Glencore Xstrata Plc (OTCQX:GLNCY), the world’s biggest shipper of thermal coal, said this week that it is halting production at its magnetite iron ore operation in Australia because of high costs and low prices. Glencore slashed its staff by about 450 people in June.

Golden Minerals Company (TSX:AUM)(AMEX:AUMN) recently put its Velardena mine in Mexico on a care and maintenance program until metal prices support a re-start. The company had expected the mine to achieve a cash neutral position in the third quarter, but that was based upon $1,600 per ounce for gold and $30 per ounce for silver. At $1,500 per ounce for gold and $25 per ounce for silver, Golden Minerals projected a $5 million loss from operations. Gold and silver are substantially beneath those levels. About 470 jobs were eliminated with the shutdown.

The latest mine casualty story came Wednesday morning from Alexco Resource Corp. (TSX:AXR)(AMEX:AXU) in a good news/bad news announcement. The company reported that silver production increased to 576,155 ounces during the second quarter at its Bellekeno mine in the Keno Hill Silver District in Canada’s Yukon Territory. That was a 52-percent improvement from the first quarter. For the first half of the year, production totaled 955,772 ounces. That’s the good news.

The bad news is that plunging silver prices have the company suspending operations at the mine prior to the onset of winter. “This avoids selling silver at current or weaker market prices, and positions the mine and mill for a re-opening after the winter, assuming the silver market has improved from current levels and underlying fixed costs have been reduced,” said Alexco in a statement Wednesday.

The company intends to use the shutdown as an opportunity to restructure expenses at Keno Hill and devise a plan to increase production from the 283 tonnes per day that was milled in the second quarter to more than 400 tonnes per day during 2014 – 2015. Exploration will continue at other corporate projects as well as a preliminary economic assessment for known resources at Bellekeno, Onek, Lucky Queen and the Flame & Moth projects.

Toronto-listed shares of Alexco have sank more than 60 percent so far in 2013 through Tuesday’s closing price of $1.36. On the bright side, they’ve recovered about 45 percent from lows of 94 cents late in June.

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