Junior miners poised to reap benefits of surging silver market

By CanadianMiningReport.com Staff Writer / May 21, 2021 / Article Link

Silver price is surging on higher industrial and safe-haven demand. On Friday, silver price edged higher as a reaction to the stagnation of April’s retail sales. Analysts expected a reading of 1.0% compared to March’s 10.7%.  Despite fears over rising inflation in the U.S., silver is gaining strength on the reopening of economies and shift towards the green economy.

The surge in gold prices has analysts believe silver may be next. Silver prices tend to follow gold, which means it is possible to see higher prices in the weeks ahead. Since silver mining stocks typically outperform silver, some analysts are placing Buy ratings on a number of silver stocks.

Silver mining shares tend to outperform during rallies and underperform during price corrections. Investing in the best silver stocks provides leverage when it comes to the metal’s price. Silver ETFs such as the ETFMG Prime Junior Silver Miners ETF product (SILJ) offer way to diversify your portfolio with mining stocks of the leading junior silver mining companies. Such ETFs act as a leveraged product with benefits that other ETF/ETN products that use options and derivatives for gearing do not have.

For individual mining stocks, Kirkland Lake Gold (KL), Hecla Mining (HL), and Eldorado Gold (EGO) are the bet silver stocks to buy at the moment for various reasons.

Eldorado Gold’s Q1 results are in line with its FY2021 guidance and its Lamaque Mine in Quebec continues to perform well and is working towards ramping up to nearly ~190,000 ounces per year by FY2024, up from ~140,000 ounces per annum currently. The approval of a new permit for its Skouries Project has the potential to add a 40% upside from current levels.

The mining stock of Hecla Mining is trading at more than 25x earnings at a share price of $7.30. This is a very expensive valuation for a Tier-1 silver producer, but the company. The silver producer boasts multiple assets out of strictly Tier-1 jurisdictions. The distinction makes the company much more attractive than its peers. Its quarterly results saw ~3.46 million ounces of silver produced at $7.21/oz, translating to more than 70% margins at spot silver prices.

Kirkland Lake Gold, known as the best producer in the gold sector, was able to achieve expected production of ~1.40 million ounces this year at all-in sustaining costs below $825/oz. The solid quarter saw gold production of more than 302,000 ounces and a major upgrade to throughput capacity at its Detour Lake Mine to 32 million tonnes per annum completed. This puts the company on track to deliver annual EPS of $3.67 in FY2021, especially if its continues its aggressive buyback program.

 

 

 

 

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