So far this year silver prices appear to be range trading at around the $30.00/oz level. The charts below present silver's monthly price since 1970, the prices adjusted for inflation were calculated by using U.S. CPI data.
On February 13, Major bullion bank HSBC raised its forecasts for 2013 and 2014 silver prices, citing growing industrial demand and investor appetite for the metal. The bank raised its 2013 average silver price forecast to $33 per ounce from $32 and its 2014 view to $31 from $28 an ounce.
In this article, I recommend three silver stocks that have compelling valuation metrics and big upside potential based on their consensus mean target price. These stocks also pay a solid dividend. All the data for this article were taken from Yahoo Finance and finviz.com on February 27, before the market open.
Hecla Mining Co. (HL)
Hecla Mining Company, together with its subsidiaries, discovers, acquires, develops, produces, and markets precious and base metals worldwide.
Hecla Mining has almost no debt at all (total debt to equity is only 0.01), and it has a very low forward P/E of 12.64. The forward annual dividend yield is at 1.83%, and the payout ratio is at 54.5%.
The company is trading 28.65% below its 52-week high and has 26.4% upside potential based on the consensus mean target price of $6.23.
On February 25, Hecla Mining reported its results for the fourth quarter and full year of 2012, which met expectations on EPS and beat expectations on revenues.
Fourth-quarter 2012 Highlights
- Net income applicable to common shareholders of $0.6 million, or $0.00 per basic share, and earnings after adjustments applicable to common shareholders of $10.2 million, or $0.04 per basic share.
- Silver production of 2.1 million ounces at a total cash cost of $3.45 per ounce, net of by-products.
- Completed cleaning and upgrading of Lucky Friday Silver Shaft. Production has resumed in Q1 2013.
- Declared quarterly common stock dividend of $0.0125 per share of common stock, which includes a regular quarterly common stock dividend of $0.0025 per share and a special dividend of $0.01 per share.
In the report, Phillips S. Baker, Jr., president and chief executive officer, said:
This past year, with the Lucky Friday down, Greens Creek generated strong silver production and cash flow to allow record capital investments that are expected to generate not only higher silver production in 2013, but expected organic growth well into the future. For the full year, the Company produced 6.4 million ounces of silver at a cash cost of $2.70 per ounce, still among the lowest costs and highest margins of the major primary silver producers. In 2013, we are expecting silver production levels to increase more than 25% to approximately 8 to 9 million ounces.
The cheap valuation metrics, the solid dividend, the good fourth-quarter 2012 financial results, and the 26.4% upside potential based on the consensus mean target price of $6.23, are all factors that make HL stock quite attractive.
Pan American Silver Corp. (PAAS)
Pan American Silver Corp. explores, develops, and operates silver producing properties and assets.
Pan American Silver has almost no debt at all (total debt to equity is only 0.03), it has a very low trailing P/E of 9.89 and even a lower forward P/E of 9.51. The forward annual dividend yield is quite high at 2.91%, and the payout ratio is only 10.3%.
The company is trading 35.9% below its 52-week high and has 38.3% upside potential based on the consensus mean target price of $23.80.
On February 21, Pan American Silver reported its results for the fourth quarter and full year of 2012, which were in-line on EPS and missed expectations on revenues.
Fourth-quarter 2012 Highlights
- Silver production of 6.9 million ounces, an increase of 29%.
- Gold production of 32,400 ounces, an increase of 88%.
- Consolidated cash costs of $11.75 per ounce of silver, net of by-product credits.
- Mine operating earnings of $85 million.
- Recorded a $100 million non-cash impairment charge on the carrying value of the Navidad project.
- Net loss of ($29.4) million or ($0.19) per share.
- Adjusted earnings of $55.8 million or $0.37 per share.
- Operating cash flows before changes in non-cash operating working capital of $86.1 million or $0.57 per share.
- Revenue of $247.3 million.
In the report, Geoff Burns, president & CEO commented on the fourth quarter and fiscal 2012 results:
As I said when we released our production results several weeks ago, 2012 was an excellent production year. We met our targets for silver production and cash costs during the fourth quarter for the full year, and in the process we set new quarterly and annual production records for silver and gold. It is rewarding to deliver financial results that echo our production performance. Adjusted earnings for the year were a very healthy $1.26 per share and operating cash flow was also robust at $1.53 per share. As a consequence of our expected continued excellent financial performance, the Board has agreed to decisively increase our quarterly dividend from $0.05 to $0.125 per share, a clear testament to the strength and profitability of Pan American. We are expecting 2013 to be even better, as we are forecasting increases in both our silver and gold production, while our cash costs per ounce should remain basically unchanged.
The cheap valuation metrics, the solid dividend, the very high dividend growth record and the 38.3% upside potential based on the consensus mean target price of $23.80, make PAAS stock quite attractive.
Silvercorp Metals Inc. (SVM)
Silvercorp Metals Inc., together with its subsidiaries, engages in the acquisition, exploration, development and mining of precious and base metal properties in China and Canada.
Silvercorp Metals has no debt at all, and it has a trailing P/E of 15.65 and a very low forward P/E of 8.14. The forward annual dividend yield is at 2.46%, and the payout ratio is only 38.5%.
The SVM stock is trading 48.47% below its 52-week high, and has 90.4% upside potential based on the consensus mean target price of $7.75.
On February 13, Silvercorp Metals reported its unaudited financial and operating results for the third quarter of fiscal 2013.
- Silver production of 1.52 million ounces;
- Gold production of 5,676 ounces;
- Sales of $58.7 million;
- Adjusted net income of $14.9 million, or $0.09 per share;
- Cash flow from operations of $27.8 million, or $0.16 per share;
- Cash cost of negative $0.17 per ounce of silver at the Ying Mining District;
- Payment of $4.3 million, or CAD$0.025 per share, in quarterly dividends to shareholders;
- Reported high grade silver-lead-zinc intercepts from the SGX mine and the GC project.
The compelling valuation metrics, the solid dividend, the good third quarter fiscal 2013 financial results, and the 90.4% upside potential based on the consensus mean target price of $7.75, are all factors that make SVM stock quite attractive.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SVM over the next 72 hours.