This is the second installment of our two-part Silver Stocks to Buy series. As stated in part one, silver is the “poor mans gold” and normally benefits from the same “safe haven” status as gold and helps to inflation proof a portfolio. With its industrial usage component silver can sometimes be more volatile and provide better percentage gains than gold. Also as explained earlier, we feel that with the latest “agreement” or “plan for a plan” in Europe, now may be an opportune time to venture back into the silver stocks. To that end we selected ten silver miners/explorers with market caps under $3 billion that we think should participate in a resurgence of interest in silver. Here are our final five choices:
Great Panther Silver Mines, Inc. (GPL)
Great Panther is a $337 million market cap company with an average daily trading volume of 1.7 million shares. GPL's headquarters is in Vancouver. It operates two mines in Mexico and has another in development. The company had a strong cash position of $38 million at mid year. Production last year was 2,255,000 silver equivalent ounces and should be flat this year at 2.2 million ounces. The stock is down 48% from its 52-week high.
Mag Silver Corporation (MVG)
Mag Silver is a $4546 million market cap company with headquarters in Vancouver, that trades 104,000 shares per day. The company operates in Mexico. The main asset here is its 44% interest in the Juanicipio Joint venture (with industry leader Fresnillo). An updated PEA should be available later this year. The existing scoping study from 2009 has Mag’s share of production at 6.2 million ounces of silver per year with a two year payback based upon $15 silver. Mag’s share of the CAPEX was estimated at $95.5 million. Current cash stands at $30 million. The exploration/drilling budget this year is $5.5 million. We would note that Fresnillo owns 17.6% of the stock and that Sprott Asset is also involved with almost 5%. The stock is down 34% from its 52-week high.
MineFinders Corp. Ltd. (MFN)
MineFinders is a $1.2 billion market cap company with an average trading volume of 780,000 shares. The company's headquarters is in Vancouver, and it operates in Mexico. The company’s Dolores Mine in northern Mexico is an open pit heap leach operation with reserves of 114 million ounces of silver and 2 million ounces of gold. Production this year should be 3.3-3.5 million ounces of silver and 65,000-70,000 ounces of gold. Production is un-hedged. TheLa Bolsa project is nearing a construction decision and could result in company production increasing 80-90% by 2015. Current cash at mid year is a very healthy $221 million making MineFinders fully funded. The stock is down 24% from its 52-week high.
Silver Standard Resources, Inc. (SSRI)
Silver Standard is a 1.56 billion dollar market cap company with an average daily trading volume of 1.3 million shares. The company's headquarters is in Vancouver. It offers geographic diversification with its principal projects in Argentina, Mexico, Peru, and the United States. Silver production this year should be 7.3-7.6 million ounces of silver from the mine in Argentina. SSRI has three additional mines under development – one each in Mexico, Peru, and Argentina. The Mexican project has a resource M&I of 644 million ounces of silver. According to CIBC World Markets, SSRI has a P/NAV of only 0.3 as of October 14, 2011. Cash in the bank and short-term investments equal $700 million. Companywide M&I silver resources are 913.8 million ounces of silver. The stock is down 46% from its 52-week high.
Silvercorp Metals, Inc. (SVM)
Silvercorp is a $1.73 billion market cap company with an average daily trading volume of 6.7 million shares. The company headquarters is in Vancouver, but it operates principally in China. Silvercorp is the largest primary silver producer in China. Silvercorp has an exciting portfolio of projects that should provide it with a low cost growth profile over the next ten years. The “China Advantage” actually resulted in the production of silver having a negative cash cost last year. Cash at mid year was $230 million. According to CIBC World Markets as of October 14, 2011, Silvercorp had P/NAV of only 0.8. Everything about Silvercorp looks promising but we would be remiss not to point out that the company has been the subject of rumors and allegations about the Chinese operations. The company has attempted to forcibly respond to the allegations by engaging KMPG Forensic, Inc., which recently issued a report clearing the company. The stock is down 43% from its 52-week high.
In conclusion, we feel now may be an opportune time to venture back into the silver stocks.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.