A Top Trio of Silver Miners

06/03/2020 5:00 am EST

Focus: COMMODITIES

Clif Droke

Weekly Contributer, Cabot Top Ten Trader

Gold is the traditional safe haven in volatile markets. But silver prices tend to rise even faster on a percentage basis — and so do silver stocks, notes Clif Droke, contributing editor to Cabot Wealth Daily.

Silver began its bull market around the same time in late 2008 but saw a far more impressive 400% gain in the ensuing three years before its run was over.

Due to its lower price relative to gold, silver has always attracted a much bigger following among small investors, and for that reason has been called the “poor man’s gold.” Yet in the last decade, institutional participation in the companies that mine silver has dramatically increased.

One important takeaway from past precious metal bull markets is that whenever gold demand is persistently high, silver sooner or later tends to outperform gold in percentage terms.

With that in mind, let’s take a look at some of today’s best-performing silver stocks ranked by relative performance Each of these companies is positioned to benefit from a secular bull market in silver.

SilverCrest Metals (SILV) is a junior stage silver mining company that hasn’t yet begun production at its Las Chispas silver-gold project in Mexico. According to a company resource summary, however, it’s estimated that Las Chispas contains north of 511,000 ounces of gold and around 50 million ounces of silver.

Las Chispas has historically shown some fairly high ore grades, so this could be a worthwhile longer-term investment due to the potential for low mining costs and solid production rates.

At this point, however, SILV is definitely more a speculative play and not something conservative investors should be heavily exposed to.

That said, based on its recent stock performance, investors evidently see some value in the company, so if you don’t mind the risk, owning a little SILV probably isn’t a bad idea in such a bullish environment for precious metals prices.

When it comes to silver plays, sometimes smaller is better. MAG Silver (MAG) isn’t as well-known as some of its bigger peers, but is one such example. It’s not much of a miner yet, so the company has much to prove before becoming a big player in the industry.

Yet it’s an advanced stage development and exploration company and has given investors above-average returns in past silver bull markets.

The stock, which trades on the NYSE American exchange, has rallied 160% from its March correction low and has benefitted from a recent $60 million infusion from precious metals financier Eric Sprott of Sprott Asset Management.

MAG’s main focus and asset is the Juanicipio Project located in the Fresnillo Silver Trend in Mexico, the world’s premier silver mining camp, and MAG intends to use the net proceeds to fund exploration and development of this project.

MAG is a bit speculative since its bull story is predicated on the Juanicipio mine will meet the firm’s expectations and become productive.

But with an estimated 19-year mine life, and all-in sustaining costs of around $5 per ounce of silver (versus current prices of $15 per ounce), the potential for future growth is immense.

Pan American Silver (PAAS) is one of the world’s largest silver producers with mines and exploration projects in Mexico, Peru, Bolivia and Argentina. Pan American saw record cash flow in the last quarter of 2019 on the back of a strong operating performance and rising metals prices.

The firm further expects production increases of 7% for silver and 16% for gold in 2020, and analysts expect revenues to rise 15% this year while per-share earnings are expected to trend impressively higher in the next couple of years.

The stock took a hit during the coronavirus-related panic in March, but has since rebounded strongly and has already risen over 80% in just the last few weeks.

It’s still well below its 2011 high, though, and appears to have plenty of upside potential ahead—especially if silver prices continue to rise. Pan American also recently increased its quarterly dividend by 43% to $0.05 per share, which is icing on an otherwise delectable cake.

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