After vastly underperforming the market over the past two years, gold and silver have staged big comebacks over the last month. Both the iShares Silver Trust (SLV) and the SPDR Gold Shares (GLD) have made nice moves during August and vastly trounced the S&P's decline for the month (See Chart). Gold & Silver miners have similarly been bid up as sentiment on precious metals has started to reverse.
Given how far the miners have fallen over the last 18-24 months, we could be in the early stages of a significant rebound. In today's column we will look at a couple of smaller silver & gold miners that still look like they have value here.
Hecla Mining (HL) develops and produces unrefined gold and silver bullion bars to precious metals traders. Its primary productive assets are in Alaska and Idaho. The company has been in existence for over a hundred years. The company recently upped its second half gold & silver production guidance as output at its Lucky Friday silver mine in Idaho returns to normal and as the company continues to ramp up output at a recently acquired gold mine in Quebec.
The stock is cheap selling for 90% of book value. The company should post a small loss in FY2013 but is projected to be back in the black in FY2014. The company has maintained positive operating cash flow despite negative earnings. Revenues are tracking to almost 30% growth this fiscal year and analysts expect over 45% gains in 2014 driven by additional sales of a recent acquisition.
The company only received $16.27/oz. for its silver production last quarter, with silver now selling above $23/oz.; that should improve in coming quarters. I would also expect upward earnings revisions if gold & silver can hold their recent rise in prices. A year ago, the stock was roughly double its current price of $3.50 a share so HL could have considerable upside if metals prices continue to stabilize/rise.
Endeavour Silver (EXK) is a Canadian based miner that produces silver & gold from its underground mines primarily in geopolitical stable Mexico. The stock has had a big move going from $3 a share to ~$5 a share in the last couple of months. However, EXK is still trading at half its level from a year ago. The company's has relatively low production costs averaging less than $11/oz. for its overall silver production.
The company has a solid balance sheet and due to its low cost of production still manage to produce profits even when gold & silver prices slumped over the last year prior to their recent rise. Endeavour has consistently delivered production increases over the last decade and is tracking to revenue gains of ~12% this fiscal year. Sales should increase in the high single digits in 2014.