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All Contents © 2019The Kiplinger Washington Editors
By Aaron Levitt
| May 23, 2018
When it comes to precious metals, gold captures most of the spotlight. However, silver could be the real money metal in our current market. That’s because silver has the best of both worlds.
On one hand, silver is seen as a precious metal. While not as glittery as its yellow sister, the “poor man’s gold” does tend to hold up its value during times of duress and can be seen as a store of value. That makes it a prime holding and portfolio diversifier — especially in a volatile market like today’s.
Secondly, it’s also an industrial metal. Silver finds its way in all sorts of end products. This includes various electronic components, photovoltaic/solar panels and even medicine. This creates additional demand for the metal.
For the miners of silver, the combination of the metal’s two sides creates plenty of potential — even more so now that silver prices have begun to rise. For investors, the time to add a dose of silver stocks is now.
Prices and data are from the original InvestorPlace story published on May 11. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
When it comes to silver stocks, some of the best opportunities lie within the mid-tier producers. These miners feature plenty of growing production and low all-in sustaining cash costs, and they serve as a vital source of supply for the larger miners during buyout situations. These three factors underscore Endeavour Silver's (EXK) potential.
The key for EKX comes from its operating area. The silver stock owns three high-grade mines located in three of Mexico’s historic mining districts. This provides it with plenty of already-in-place infrastructure and a miner-friendly government. An added bonus is that many of these mines also feature gold and gold by-products. As a result, EXK has a relatively low cost of production. And the silver stock continues to reduce those costs further — falling 22% last year.
With production steadily growing, costs falling and silver prices beginning to rise on the back of industrial growth, EKX has seen its revenues and profits jump year-over-year. That should continue throughout 2018 as the trends persist.
All in all, Endeavour could be one best mid-tier silver stocks to buy.
Truth be told, there’s a lot risk when it comes to mining. And various mining risk can hinder a stock’s performance even if silver prices are surging. That’s why Wheaton Precious Metals (SLW) could be a great pick.
SLW — formally-known as Silver Wheaton — is a royalty firm. That is, the firm doesn’t actually operate mines. What it does is provide capital to other miners in exchange for a piece of the action. As these other miners take on the risk, do the heavy lifting and sell their production, SLW just sits back and collects a check — and it collects many checks. Wheaton currently has streaming agreements for 17 operating mines and nine development-stage projects.
And as prices for silver or gold start to rise, SLW makes more money. As a result, the firm is more of a direct play on rising precious metal prices than an actual miner.
As a royalty firm, SLW has been one of the better performers among silver stocks. Performance so good, that Wheaton actually pays a steady dividend.
For investors looking to profit directly from rising silver prices, SLW has to be on your list.
Hecla Mining Company (HL) hasn’t exactly had a great year or two. That’s because one of HL’s key mines in Idaho hasn’t produced an ounce in more than a year. A labor strike has shut down production for over a year now. That’s a problem as the Lucky Friday mine produced more than 294,000 tons of ore in 2016.
Naturally, HL has seen lower profits and revenues — and a crashing share price — because of this.
However, that could make HL a bargain for investors. For one thing, Hecla’s other mines are still humming along and the firm has been investing in automation and extending the reserve life of its other mines. Meanwhile, it features some of the largest reverses in the sector.
It’s a risky gamble for investors, but there is some value here — value that a larger miner just may want to take advantage off. And if labor negations finally break at Lucky Friday, HL shares should surge on the news. It’s not a stock to bet the mortgage money on, but for some risk capital, you can’t go wrong with the risk-reward proposition at this silver stock.
If Hecla is a risky play, then Pan American Silver (PAAS) is more of a sure thing. PAAS is the world’s second-largest primary silver producer.
The firm operates six mines as well as has six development projects under its umbrella. This provides it with plenty of reserves, economies of scale and real cash flows. Something that many silver stocks don’t have the luxury of having. In fact, things are so good at PAAS, it has more than$224 million in cash on its balance sheet and no debt.
This has allowed it to realize some of the lowest all-in costs in the sector and continually drive profits. Thanks to rising silver prices, Pan American saw a 68% jump in its earnings for the first quarter of 2018 over the same period in 2017. As the trends in silver pricing and industrial demand continue to grow, PAAS should realize additional jumps throughout the year. The firm recently guided higher for its EPS expectations for the full year.
While those expectations pan out, investors can sit back and collect the firm’s 0.75% dividend. It’s not much, but it highlights just how good PAAS is in the sector.
Another interesting choice could be Great Panther Silver (GPL). The mid-tier silver firm operates three mines in Mexico and has been pretty successful in converting opportunities at those mines into cash flows.
Thanks to rising silver prices, GPL’s latest quarter was pretty impressive and saw a 38% jump in total revenues. That resulted in some decent cash flows and Great Panther was able to improve its cash balance to more than $60 million. Even better is that GPL has no debt.
The only downside was that the firm’s all-in cash costs did rise this quarter. However, the $8.97 per payable silver ounce GPL recorded is still one of the lowest among the silver miners. There’s still plenty of wiggle room for the firm to make additional profits. And the absences of debt provides it plenty of opportunities if prices were to fall.
At under $2 per share, investors aren’t really appreciating the potential at Great Panther. As silver prices rise, so will they. Don’t let the bargain slip away.
This article is from Aaron Levitt of InvestorPlace. As of this writing, Levitt did not personally hold a position in any of the aforementioned securities.
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