I received compensation to research Netco Silver (NTCEF.PK) from a 3rd party. This fact does not impact my thesis. I took on this opportunity because of my strong belief in the company and its assets. The views expressed are purely my own.
Silver companies have taken a dive recently as prices for the metal have been sluggish. However, there are still a number of drivers in play that should help support silver prices. First, silver demand is very sensitive to macroeconomic conditions. And notably, the economy now is continuing to strengthen after the brutal conditions in 2008 and 2009. Second, the US is continuing to print money so silver serves as an inflation hedge for investors.
Silver is attractive to end market users for a number of reasons. Its superiority in heat transfer, conductivity and light reflectivity make it unique, and it boasts anti-microbial properties that make it ideal for surgical instruments, clothing materials and certain medical applications.
Silver has many uses. In traditional ways, it is used for coinage, photography, jewelry, and silverware and table settings. In industrial purposes, it has use in batteries, bearings, brazing and soldering, catalysts, and electronics. It also has a number of emerging uses, which may raise demand for the metal if it really picks up, in medical applications, mirrors and coatings, solar energy, and water purification.
Silver Wheaton (SLW) is the largest silver streaming company in the world. Based upon its current agreements, forecast 2012 attributable production is approximately 27 million silver equivalent ounces, including 16,500 ounces of gold. By 2016, annual attributable production is anticipated to increase significantly to approximately 43 million silver equivalent ounces, including 35,000 ounces of gold. This growth is driven by the company's portfolio of world-class assets, including silver streams on Goldcorp's (GG) Peñasquito mine and Barrick's (ABX) Pascua-Lama project.
The stock is down more than 30% over the past year as silver has taken a hit. Still, market participants are extremely bullish on the company. The consensus analyst price target for the stock is $46, suggesting upside of 48% in the shares. Furthermore, in a recent Seeking Alpha article the author stated that his price target for the stock remains at $100, which suggests upside of over 200% in the stock.
Netco Silver (TSX.V: NEI) is a publically-traded precious metals company committed to optimizing shareholder value through the acquisition, exploration and development of pure play silver opportunities in Latin America. The company's primary asset is the high-potential silver Toruel Property in the Rio Negro Province of Argentina which hosts bonanza grade results in drilling and on surface. It covers 5,736 hectares and is within 25 kilometers southeast of the village of Los Menucos, which hosts a major rail line and improved roads for access.
The project is situated approximately 100 kms from Pan American's (PAAS) Calcatreau deposit and approximately 100 kms from Pan American Silver's massive Navidad project, one of the world's largest undeveloped silver deposits. The project represents a world class, high-grade silver target with low exploration cost, solid nearby infrastructure and access, and a potentially rapid timeline to a conceptual resource definition and development.
Netco stands out among its peers for a number of reasons. First, is its property. The Toruel Property has produced very high-grade drill results, with assays showing 6.7 meters (22 feet) @ 1998 g/t (64.24 oz) silver and 5.34% copper. Another is its performance on the Toronto exchange over the past year. Netco's shares actually managed to stay flat compared to other silver companies' shares that have lost a significant chunk of their value over the past 52 weeks
Hecla Mining (HL) is the largest and the lowest cash cost, primary silver producer in the U.S., with exploration properties and operating mines in four world-class silver mining districts in the U.S. and Mexico. Hecla operates the Greens Creek mine in Alaska and Lucky Friday mine in Idaho, and owns district-sized land packages in the Silver Valley in northern Idaho; San Juan Silver in Creede, Colorado; and San Sebastian in Durango, Mexico. Hecla has developed a solid base with long-life, low-cost mines; organic growth opportunities; exploration upside; an excellent cash position with no debt; and has recently introduced new common stock dividends.
The stock is down over 50% over the past year as lower silver prices and worries about the Lucky Friday mine have hit the stock. In January, the Mine Safety and Health Administration ordered the Silver Shaft at the Lucky Friday mine in Mullan, Idaho closed for removal of built-up material in the shaft. This order is pursuant to the investigation following the December 14, 2011 rock burst. Compliance with the order is expected to take through year-end. Despite the market worries, analysts are still bullish with a consensus price target of over $6 for the shares suggesting upside of 50%.
Silvercorp Metals (SVM) is engaged in the acquisition, exploration, development and mining of high-grade silver-related mineral properties in China and Canada. Silvercorp is the largest primary silver producer in China through the operation of the four silver-lead-zinc mines at the Ying Mining District in the Henan Province of China. Silvercorp recently acquired the XBG and XHP silver-gold-lead-zinc mines nearby the Ying Mining District in Henan Province, further consolidating the region.
SVM is down nearly 60% over the past year but it is also the company with very high bullishness among analysts. With a consensus price target of over $10 a share, the suggested upside in SVM is over 60% based on current prices. It pays a dividend of 10 cents a year for an annual yield of 1.6% to keep an investor company while prices for silver and the stock recover.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
