Silver Sector Opportunities

Investors looking for a stake in silver do not have far to look.  There are numerous mining companies with silver operations and an even larger number of aspirants with exploration projects around the world.  Most silver mining is part of a mix of several in portfolios of precious or base metals, aligning production with silver geology in common with quartz, gold and copper.   For example, the largest silver producer in the world, Industrias Peñoles (IPOAF:  OTC) in Mexico, also produces gold at its principal silver complex and has interests in lead, zinc and copper.  Other silver mining aspirants simply use diversity as a risk mitigation strategy.  Silver Elephant Mining (ELEF:  TO), an exploration stage company, has wide ranging interests in vanadium, titanium and iron in Canada as well as silver, lead and zinc in Bolivia.

More elusive than silver mining projects are profits from the effort.  As expected all of the exploration stage companies have reported net losses as they continue to work toward proving their silver resources.  However, even some of the fully operational mines have recently reported losses.  Among those that are profitable, it is not entirely clear whether the silver interests are driving profits.  Silver mine yields have declined in recent years to 6.0 ounces per ton in 2019, from 13.0 ounces per ton six years ago.  The world’s top silver companies average about US$17.00 to US$18.00 in production costs per ounce, of which about US$6.00 to $7.00 is a cash cost. 

The current spot price for silver is in the mid US$20.00 per ounce, well off peak prices near US$30.00 in early August 2020 but still well above the level at the beginning year.  In January 2020, silver was selling near US$18.00 per ounce. Thus it seems prospects for silver producers have improved as the year 2020 draws to a close.

 

SELECTED SILVER COMPANIES
Name	SYMB	Operations	Revenue	(L)EPS
Abraplata Resource Corp.	ABRA.V	Exploration stage, Chile	-0-	na
Buenaventura Mining Co.	BVN	7th largest silver miner	$676 M	($0.52)
Canada Silver Cobalt Works	CCW.V	Exploration stage, Canada	nm	(CN$0.07)
Coeur Mining, Inc.	CDE	6th largest silver miner	$752.2 M	($1.07)
Discovery Metals Corp.	DSV.V	Exploration stage, Mexico	-0-	(CN$0.08)
Endeavor Silver Corp.	EXK	Production, Mexico	$115.5 M	($0.25)
Equity Metals Corp.	EQTY.V	Exploration stage, Canada	-0-	(CN$0.04)
First Majestic Silver Corp.	AG	9th largest silver miner	$343.3 M	($0.25)
Fortuna Silver	FSM	10th largest silver miner	$244.4 M	$0.12
Fresnillo Plc	FNLPF	3rd largest silver miner	$2.2 B	$0.27
Hecla Mining Co.	HL	8th largest silver miner	$727.9 M	($0.05)
Industrias Peñoles SAV de CV	IPOAF	Largest silver miner	$4.3 B	($0.78)
MAG Silver	MAG	Exploration stage, Mexico	-0-	($0.20)
New Pacific Metals	NUPMF	Exploration stage, Bolivia	-0-	($0.02)
Nubian Resources Ltd.	NBR.V	Exploration stage, Peru	-0-	(CN$1.18)
Pan American Silver	PAAS	4th largest silver miner	$1.3 B	$0.28
Polymetal International Plc	AUCOY	2nd largest silver miner	$2.4 B	$1.48
Reyna Silver	RSLV.V	Exploration stage, Mexico	-0-	na
Rio Silver, Inc.	RYO.V	Exploration stage, Peru	-0-	(CN$0.02)
Silvercrest Metals	SILV	Exploration stage, Mexico	-0-	($0.07)
Silver Elephant Mining	ELEF.TO	Exploration stage, Bolivia	-0-	CN$0.09
Silver One Resources, Inc.	SVE.V	Exploration stage, Nevada	-0-	(CN$0.01)
Silver Tiger Metals, Inc.	SLVR.V	Exploration stage, Mexico	-0-	(CN$1.19)
Vizsla Resources Corp.	VZLA.V	Exploration stage, Mexico	-0-	(CN$0.14)
Wheaton Precious Metals	WPM	Precious metal streaming	$1.0 B	$0.95
US$ unless otherwise indicated US quotation platform or exchange unless otherwise indicated

Investors taking long positions in silver producers should be well aware that stock price movements may not align with the price of silver.  Other fundamental factors can impact stock prices, such as profit margins on silver mining operations and the fortunes of other metals in the company’s portfolio.  At exploration-stage companies the stock is often a barometer of confidence in management ability to bring the silver resource to commercial stage.  

Holding up a balance sheet yard stick to the silver companies that deliver profits, the mining giant Fresnillo Plc (FSM:  NYSE or FRES:  LSE) is the bargain stock priced at 1.97 times book value.  The company seems challenged to deliver strong profits, so multiple of net earnings and cash flow are not as attractive.

The bargain in terms of cash flow is Industrias Peñoles (IPOAF:  OTC/PK) with its stock priced at 7.69 times operating cash flow.  The stock has a frightfully high price to earnings multiple suggesting there is some noisy capitalization or asset adjustment activity.  However, the relatively modest  price to sales multiple of 1.51 gives some reassurance that the stock is not too dear.

Some investors may want to go beyond numbers to determine if a resource company is worthy.  In the next post we look at silver mining and the environment.

 

SELECTED SILVER COMPANIES
SYMB	Mkt Cap	Price	Pr/BkVl	Pr/Sales	Pr/EPS	Pr/CshFlw
ABRA.V	CN$134.1M	CN$0.35	12.20	na	neg	neg
BVN	$2.9 B	$11.36	1.07	4.27	neg	38.24
CCW.V	CN$57.9 M	CN$0.53	43.69	177.74	neg	neg
CDE	$2.0 B	$8.15	2.99	2.61	9.1	15.74
DSV.V	CN$529.1 M	CN$1.89	7.58	na	neg	neg
EXK	$582.7 M	$3.70	4.25	4.69	Neg	34.34
EQTY.V	CN$10.2 M	CN$0.19	18.57	na	neg	neg
AG	$2.5 B	$10.99	3.02	6.66	19.27	27.86
FSM	$1.4 B	$7.12	1.97	5.55	64.90	17.04
FNLPF	$10.9 B	$14.90	3.50	5.06	55.19	15.73
HL	$2.8 B	$5.33	1.64	3.73	neg	16.00
IPOAF	$6.4 B	$16.46	2.06	1.51	118.14	7.69
MAG	$1.6 B	$17.15	6.39	na	neg	neg
NUPMF	$793.6 M	$5.14	5.88	na	223.82	neg
NBR.V	CN$17.7 M	CN$0.34	7.79	na	neg	neg
PAAS	$7.0 B	$33.02	2.84	5.29	113.86	16.57
AUCOY	$10.5 B	$22.93	6.53	4.51	15.52	12.11
RSLV.V	CN$85.1 M	CN$1.00	9.20	na	neg	neg
RYO.V	CN$4.9 M	CN$0.08	0.17	na	neg	neg
SILV	$1.4 B	$9.89	7.55	na	neg	neg
ELEF.TO	CN$64.3 M	CN$0.45	2.45	na	4.15	neg
SVE.V	CN$143.4 M	CN$0.74	6.10	na	neg	neg
SLVR.V	CN$129.4 M	CN$0.60	7.54	na	neg	neg
VZLA.V	CN$141.7 M	CN$1.60	3.39	na	neg	neg
WPM	$20.4 B	$45.45	3.65	19.62	47.48	26.54
US$ unless otherwise indicated US quotation platform or exchange unless otherwise indicated

 

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.