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Silver Linings: Could Silver Mining Stocks be the Real Winners of 2023?
Does the current economic cloud have a silver lining? To examine the topic, we’re picking out three amazing-looking silver stocks and delving into some investing intel.
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Olá, and welcome to another edition of Investing Intel from the team at ValueTheMarkets!
Across this newsletter you’ll find:
👉 Three stock insights
👉 Investing signals
👉 Fear & Greed Index
👉 The finest content from ValueTheMarkets
👉 Key dates for your diary
👉 Some fun facts!
This week, we’re chatting about the shiny stuff. And by that, we mean silver. Is it just gold’s less-interesting younger brother? No! Here’s why.
Silver prices had a strong end to 2022, ending the year at just shy of $24 per ounce as demand reached historic highs. In this issue of Investing Intel, we’ll examine three silver stocks that stand out to us, explore why silver could be poised to have an even better 2023 and take a look at some of last week’s top trending stocks.
So, is one of our stock tips the silver bullet your portfolio needs? Read on to find out!
Made in China - Silvercorp Metals Inc (TSX: SVM)
This China-focused miner currently offers investors a general trend of growing sales, cash flow and shareholder equity.
Silvercorp Metals Inc (TSX: SVM) has a particular reputation for running low-cost operations, potentially giving the business an edge over its competitors. This helped the company to double its net income in the most recent quarter, while income from its mining operations increased despite a 1% dip in revenue.
It’s also the top North American silver mining company by price-to-equity ratio and one of the top five when measured by operating margin.
Aside from solid financials, the company also appears to have solid exploration and expansion potential. Recent developments include the receipt of a new mining license for the development of its Kuanping Silver-Lead-Zinc-Gold Project in its most recent quarter, along with $2.5m worth of exploration drilling.
Current operations appear solid too, with Silvercorp Metals expecting production volumes to increase by between 3% and 8% across 2024. Finally, it’s worth noting that the company also holds just under 30% interests in both New Pacific Metals (NYSE: NEWP) and Whitehorse Gold (TSX: WHG).
Free cash flow growth
Shareholder equity growth
Fortuna Silver Mines Inc (NYSE: FSM)
The next entry on our list is Fortuna Silver Mines Inc (NYSE: FSM), a precious metals exploration, extraction and processing specialist founded in 1990.
Though it is largely focused on Latin America, Fortuna’s current operations being spread across Peru, Mexico, Argentina and Burkina Faso offers the business a high degree of geographical diversification.
Like Silvercorp, the company has a record of low-cost production, while it also offers a history of successful exploration and mine expansion projects. This could prove crucial as the business is currently constructing its fifth mining operation in Côte d’Ivoire.
This project, named the Séguéla Gold Project, is currently in the midst of a drilling programme. Fortuna says this work has the aim of upgrading resource confidence, as well as the ultimate intention of conversion to mineral reserves to expand the current 1.1 million ounces of gold reserves and nine-year life-of-mine.
This project leads nicely to another of Fortuna’s strengths. The company has significant exposure to gold through its Lindero mine in Argentina and the potential Séguéla Gold Project. This has the bonus of bolstering the business against price fluctuations in silver prices. Additional diversification comes in the form of limited lead and zinc production.
Historical exploration and expansion success
The Streamer - Wheaton Precious Metals Corp (NYSE: WPM)
This third entry on our list presents something a little out of the ordinary. Instead of operating actual mines, Wheaton Precious Metals Corp (NYSE: WPM) instead helps to fund mining operations in exchange for the rights to buy the produced precious metals at a fixed price.
This is called streaming.
Effectively, this allows investors in the stock to enjoy exposure to silver and precious metals projects without having to do their own due diligence on the projects they back. Instead, they are trusting Wheaton Precious Metals to perform the necessary checks.
We’re not all brandishing degrees in geology, so WPM stock could be a nice option to have.
Additionally, Wheaton’s dividend yield is among the most generous in the silver-mining game, so this stock might stand out for investors who are more focused on income.
Finally, the business’ financials are also impressive. Wheaton is backed by a huge amount of cash and, while sales and earnings did fall slightly in 2022, diluted earnings per share of $1.48 was a solid result.
Silver exposure without due diligence.
Lower risk option
For starters, we’re going to spend this week’s Investing Signals sections taking a deeper dive into the world of silver.
Many analysts expect serious growth in the price of silver across the current year. One key reason for this is the high-inflation environment, which many cite as a positive sign for the shiny metal and its backers. For example, ABC Bullion managing director Janie Simpson told CNBC earlier this year:
“Silver has historically delivered gains of close to 20% per annum in years inflation is high. Given that track record, and how cheap silver remains relative to gold, it wouldn’t surprise to see silver head towards $30 per ounce this year, though that will likely offer significant resistance.”
Industrial demand for the metal is being bolstered by vehicle electrification and governments’ expanding commitment to green infrastructure, according to The Silver Institute. Additionally, the same source cited the end of zero COVID in China and the accelerating deployment of renewables due to the Russia-Ukraine war as factors which support sentiment towards industrial metals, including silver.
That being said, there are potential headwinds for silver prices across the year ahead. These include a projected downturn in jewelry demand and silverware fabrication, while production is anticipated to reach record levels in the year ahead and therefor could outstrip demand.
If you’re feeling bullish on silver over the longer term, you might want to invest in earlier-stage operations which could offer impressive returns. Two companies which fall into this category are Dolly Varden Silver Corp (OTCMKTS: DOLLF) and Southern Silver Exploration Corp (OTCMKTS: SSVFF). The former has seen its share price leap by around 90% over the last 12 months and says it offers investors exposure to both high-grade silver deposits and under-explored targets. Meanwhile, the latter has strong financial support and has showcased positive drilling results from its diverse portfolio of assets. Investing in projects like these, which might be pre-production or early in their production cycle, can require patience as their operations may take years to come online. Additionally, these investments involve significant risk due to the challenging nature of locating a deposit which can be successfully exploited.
Now let’s examine some more general intel. The top trending equities from Reddit at the tail-end of last week are:
Tesla (NASDAQ: TSLA)
C3.ai (NYSE: AI)
NVIDIA (NASDAQ: NVDA)
Spirit AeroSystems (NYSE: SPR)
World Wrestling Entertainment (NYSE: WWE)
The standout entrants on this week’s list are the last two. Spirit AeroSystems appears to have attracted investor attention due to news surrounding its efforts to develop a vertical takeoff aircraft, with this sending its share price up by almost 15% across the past week. Meanwhile, WWE is in the frame following the announcement that it will merge with UFC parent company Endeavour Group in a deal which valued the wrestling media giant at over $9bn.
Fear & Greed
The Fear and Greed Index is a measure of stock market sentiment calculated by CNN Business using seven measures including market momentum, market volatility, and safe haven demand. It’s meant to shed light on the emotions currently driving the market, giving you insight into how traders are making decisions. Remember, traders are humans, not robots.
Last week saw the Fear and Greed swing sharply to the latter as investors speculate that the conditions are shifting to those of a new Bull Market. It appears traders are optimistic that the banking sector hiccups of recent weeks are now largely behind us.
More Hot Content from ValueTheMarkets
This week's potential NASDAQ and NYSEAMERICAN IPOs include a construction equipment specialist, an expanding paper-based packaging manufacturer and a metaverse marketing outfit.
This week’s company earnings preview includes Acuity Brands (NYSE: AYI), Conagra Brands (NYSE: CAG), Schnitzer Steel Industries (NASDAQ: SCHN), Lamb Weston Holdings (NYSE: LW) and RPM International (NYSE: RPM).
Dates in the Diary
Monday 3rd – Markit PMI Manufacturing Data (Mar) / US Construction Spending Data (Feb)
Tuesday 4th – US Job Openings Data (Feb) / US Factory and Durable Orders (Feb)
Wednesday 5th – Markit PMI Services Data (Mar)
Friday 7th – US Unemployment Rate (Mar) / US Payroll Data (Mar)
Fun Fact – That Rings a Bell
As even the greenest investor knows, the New York Stock Exchange opens at 9:30 AM on each day of trading. This commencement of the madness of equities trading is signalled by the ringing of a bell, though initially a Chinese gong was used (something we quite like the idea of).
The NYSE’s four trading areas each have their own bell, with the design of these being rather singular.
So singular, in fact, that when the organisation opted to replace them in 1980 they encountered some difficulties due to their size. NYSE tracked down G. S. Edwards Company, makers of the original bells, and the company brought back some retired employees to handle the project.
But another bell was found during these refurbishments. This older, larger and louder bell had been tucked away and forgotten about in a crawl space above the main trading floor. Constructed in 1903, this piece of history has been reconditioned and sits ready to take over ringing duties should the need ever arise.
Until Next Time
Many thanks for taking the time to enjoy Investing Intel today, we hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
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