Silver Soars, Along With New Miners ETF

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 |  Includes: AG, CZICF, GDX, GDXJ, GLD, SIL, SLV, SLW, USSIF
by: Goombarh

Introduction

Yesterday, September 28th, 2010, silver moved to new highs of $21.70 USD, the highest since the 1980s. Silver has attracted a lot of investors’ attention recently. For example, my “A Silver Bull Recommends Six Silver Stocks” article from September 17th attracted over 100 comments from the Seeking Alpha readership.

In a follow up article on September 24th, about “How To Leverage the Precious Metals Bull”, the author compared the gains of the gold and silver metals and some mining equities. One astute reader “user19178” alerted the author to a relatively new ETF containing primarily silver mining and processing companies, the Global X Silver Miners ETF (NYSEARCA:SIL).

SIL Assets Reach $100 Million

Global X, in anticipating the market interest in silver mining equities, started the new ETF on April 19th 2010. This ETF is based upon the Solactive Global Silver Miners Index. This index is describe by the issuer Structured Solutions as follows:

Solactive Global Silver Miners Index

The Solactive Global Silver Miners includes international companies active in exploration, mining and/or refining of silver. The index includes a minimum of 20 and a maximum of 40 members. The calculation is done in USD as a total return index. Index adjustments are carried out semi-annually.

On September 23rd, 2010, Global X announced that the SIL ETF has reached $100 million in assets. Investor interest in silver has pushed the growth of this fund forward quickly.

Constituents of SIL ETF

There are two main reasons why it is difficult to make a silver fund. One is that miners that only mine silver are rather rare, as silver is usually mined as a by-product of other mining activities such as mining lead zinc and mining copper. The other is that the silver market is relatively small, compared to the gold market. So this Global X ETF extended the definition of silver mining to include companies that work in processing and other activities related to silver. The constituent members of this SIL ETF are listed in the chart following.

Data as of 9/24/2010

% of Net Assets

Name

Market Price($)

Shares Held

Market Value($)

14.66

SILVER WHEATON CORP

26.60

618,000.00

16,438,800.00

14.41

FRESNILLO PLC

19.50

828,690.00

16,156,510.90

11.06

PAN AMERICAN SILVER

29.27

423,600.00

12,398,772.00

10.76

INDUSTRIAS PENOLES CP

24.54

491,400.00

12,059,945.50

5.12

HOCHSCHILD MINING PLC

6.93

828,000.00

5,739,171.72

4.93

POLYMETAL GDR

15.80

350,000.00

5,530,000.00

4.41

COEUR D'ALENE MINES CORP

19.61

252,000.00

4,941,720.00

4.24

SILVERCORP METAL USD

8.39

567,000.00

4,757,130.00

4.06

HECLA MINING COMPANY

6.25

728,400.00

4,552,500.00

3.92

SILVER STANDARD RESOURCES

20.24

217,200.00

4,396,128.00

3.65

GAMMON GOLD INC

7.26

564,000.00

4,094,640.00

3.41

MINEFINDERS CORP

10.63

360,000.00

3,826,800.00

3.00

FIRST MAJESTIC SILVER

6.75

498,000.00

3,361,451.42

1.90

MAG SILVER CORP

7.66

278,400.00

2,132,544.00

1.76

FORTUNA SILVER MINES INC

3.26

606,000.00

1,974,287.94

1.68

BEAR CREEK MINING

5.82

324,000.00

1,886,734.30

1.29

ALEXCO RESOURCE CORP

4.84

300,000.00

1,452,000.00

1.11

ORKO SILVER CORP

1.95

636,000.00

1,240,733.52

1.07

ENDEAVOUR SILVER CORP

4.06

295,200.00

1,198,512.00

1.07

ECU SILVER MINE

0.71

1,680,000.00

1,196,254.39

0.98

EXCELLON RES

0.77

1,423,200.00

1,096,691.38

0.53

GREAT PANTHER SILVER LTD

0.99

606,000.00

597,015.22

0.49

SCORPIO MINING

0.91

600,000.00

544,284.04

0.22

IMPACT SILVER CORP

1.09

228,000.00

249,083.11

0.21

MINES MANAGEMENT INC

2.27

102,000.00

231,540.00

0.10

BROWN BROTHERS SWEEP

1.00

113,943.09

113,943.09

0.00

BRITISH STERLING POUND

1.58

180.18

285.14

Click to enlarge

Holdings subject to change.

Click to enlarge

Source: here

The members companies of the ETF are a mixed bag of four very large silver miners, some smaller silver miners and silver exploration companies. The four large cap miners form almost 50% of the fund. Note that my favorite large cap silver royalty company Silver Wheaton (NYSE:SLW) is on top of this list with a 15% weighting in this fund. Note also that my three favorite silver junior companies, Genco Resources (GGCRF.PK), Canadian Zinc (OTCQB:CZICF) and US Silver Corp (OTC:USSIF) are not to be found on this listing. My stock selections are not large enough or liquid enough to be included in the fund.

Silver Miners ETF SIL’s Performance Since July 28, 2010

The following chart (click to enlarge) displays SIL’s performance this summer following the silver price movement upwards.

Click to enlarge

In keeping with my “Leveraging the Precious Metals Bull” article’s comparison figures, I use the same start date and end dates for measuring the SIL ETF performance. On July 28th , SIL’s price was $14.18. On September 23rd , SIL’s price was $18.41. This works out to a gain of $4.23 or 30%. This is in comparison over the same time frame for the silver metal’s increase of 18% and gold’s metal’s increase of 12%. A comparison table with figures from the previous article is following:

Gain Comparison from Jul 28th to Sep 23rd , 2010

Equity Description

Symbol

Percentage Gain

Gold ETF

GLD

12%

Large Cap Miners Index

HUI

20%

30 Large Miners ETF

GDX

20%

60 Junior Gold Miners ETF

GDXJ

33%

Silver ETF

SLV

18%

Silver Wheaton

SLW

47%

Genco Resources

GGCRF.PK

59%

Canadian Zinc

CZICF.PK

72%

US Silver Corp

USSIF.PK

102%

Silver Miners ETF

SIL

30%

Click to enlarge

Silver ETF SIL Leverages Silver Price

The silver metal’s price is moving higher and has gained 18% in the above table. SIL has leveraged silver’s gain and is soaring with a 30% gain over the same time period. This makes SIL a higher performer than either the HUI or the GDX which have both gained 20%. Both the HUI and GDX contain only large cap gold miners.

To repeat my then:

  1. Silver is moving more than gold.
  2. Mining equities leverage the underlying metals price.
  3. Select junior miners may leverage quite spectacularly.

Disclosure: The author is long silver mining equities.