Silver, Gold Mining Stocks Remain Cheap

September 18th, 2015 by

A brief period of particularly sharp downturns for precious metals prices earlier this summer were all it took for investors to bolt for the exits in the various mining stocks. While the metals prices gradually recovered, many of the major miners have remained at bargain share prices, nearly across the entire mining industry.

While leading gold mining firms like Glencore (LON:GLEN), Goldcorp (NYSE:GG; TSX, SWX:G), Barrick Gold (NYSE, TSX:ABX), and Kinross Gold Corp. (NYSE:KGC; TSX:K; SWX:KG) saw their share prices sink in tandem with gold prices during the second quarter, they have since become attractive again, especially since spot gold rallied following no interest rate change from the Federal Reserve.


While silver has also gained in the wake of the decision to leave rates near-zero for the time being, the stock prices for some of the leading silver producers have yet to respond with the same zeal as their gold counterparts. These firms have been tested over the last several months, though many have the benefit of dealing in more than extracting silver, as so much of the world’s supply of silver comes from secondary sources (i.e. it is recovered from other, larger mining operations for gold, copper, lead). This may allow them to remain afloat even as their margins on silver shrink.

There are, in fact, only 5 silver mining companies have a billion-dollar market capitalization: Silver Wheaton, Fresnillo, Buenaventura (NYSE, SWX:BVN), Pan American Silver (NASDAQ:PAAS; TSX, SWX:PAA), and Tahoe Resources (NYSE:TAHO; TSX, SWX:THO). These firms each suffered mightily during the summer, when silver prices were sliding quickly and enduring single-day swings of nearly $1 per ounceā€”a huge movement in either direction when we’re talking about spot silver prices that have averaged around $15/oz.

Silver Miner Recovery?

In addition to Silver Wheaton Corp. (NYSE, TSX:SLW), whose precipitous downturn has left its share prices at value-buy levels (50% below where they started the year), there are a handful of other firms in the silver sector that seem poised to rebound.


Fresnillo, PLC (LON:FRES) is one company that the financial media has been keeping its collective eye trained on. The firm is in the somewhat uncommon position of being a leading silver miner as well as a fairly significant gold miner. Fresnillo has averaged roughly 700,000 ounces of gold yielded from its mines each year in addition to the 50 million ounces of silver it produces.

After the company saw its gold production surge nearly 17% during the second quarter, quarter-over-quarter, the same bargain-price buzz surrounding Silver Wheaton is now being applied to Fresnillo, whose mines are located primarily in Mexico. Fresnillo revised its own annual production projections higher for gold, from 715,000 oz to 730,000 oz, while Q2 silver output remained solid (over 11 million oz), rising 2.7% over the first quarter.

Considering the encouraging data, Fresnillo may indeed be poised for a rebound, as it’s currently one-third below its 52-week high stock price. HSBC has even revised (and reiterated) its outlook for Fresnillo to a “Buy” rating. Shares were over 3% higher during trading on Friday.