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  • Mining Supply Outpacing Other Sources To Meet Growing Demand 0 comments
    Dec 20, 2012 12:21 AM

    Whether or not Silver touches $200 an ounce or not is hardly a concern. An average investor with an 18-24months outlook will be more than content with arise in spot prices to $90-$110 /ounce price from the current levels of $30-$40/ounce.

    As alluring is the Silver in appearance, the commodity is also a favorite asset class with investors worldwide. It is the news frenzy that is associated with the spot prices of the metal that result in exaggerated press releases and superbly bullish news pieces trying to convince investors for triple digit gains. On the other hand Silver as an asset is not dependant on sugarcoated pitches as the metal enjoys a great gap in supplies and demands and a fact that very little Silver is produced annually in contrast to the demand that is growing at a close to 3% annually.

    The annualized returns between 2001 -2011 stand at +1000%, which is again a testimony of its reputation as one of the highest yielding commodity.

    The excitement surrounding Silver leads to investors ignoring the potential of the Silver Miner stocks and funds that follow them. With only 30 major producers around the globe, almost all major Silver Corporations enjoy a significant first mover's advantage and in wake of a rally in commodity markets, dollars vested with Silver Mining ETFs and equities may produce better returns than the physical metal and the benchmark index itself, of course this equation being directly proportional.

    Let play Silver by the old school ways:

    Investing in silver must begin with a reasonable aspiration and longer the outlook the better! Another reason that makes senior miners attractive is the dividend yield that they churn out.

    Silver Wheaton Corporation [SLW] operates on a unique streaming model and is the biggest Silver Mining Equity in terms of market cap that Americans have access to. With a 14.3 billion market cap and a pay-out ratio of 24%, the stock has produced a 1% dividend yield. Although 1% is small produce for income seeking participants but nevertheless a favorable asset owing to its sheer size.

    Another senior player is Hecla Mining [HL] again delivering a 1% yield. The company being the biggest silver producer in America is more than hundred years old and operates two major mines in Alaska and Idaho. 2011 output was +9 million ounces of Silver at a production cost of $1.15/ounce.

    Rise in Silver prices will make the miner company stocks surge higher having a direct positive impact on the dividend yields as well. Pan American Silver Corp [PAAS] and Silver Corp Metal Inc. deserve attention for the same reasons. The latter is hopeful of a new mining operation by 2013 and is planning expansions in China on indigenous funding basis.

    Investors eyeing a pie of the profit that mining players may generate in future should give a closer look to Silver ETFs. As compared to the varied costs that one incurs in commodity transactions, Silver mining fund charge a flat management fees and more importantly provide exposure that covers all key players' right from the Senior Miners to the Silver Explorers that may result in higher gains in case of a new mine discovery . Silver Miner Funds replicate the performance of the Solactive Global Silver Miners Index, which has 70% dependence on the companies listed in the capital markets of Canada [45.38%], USA[13.68%] and UK [12.40%]. Mexican and Argentine companies account for 11% and 9% respectively and rest of the holdings are shared by Russia [4.44%], Peru [4.01%] and Australia [0.18%].

    Global X Silver Miners ETF [SIL] operates at an expense ratio of 0.65%. Fresnillo PLC, Silver Wheaton Corporation and IndustriasPenoles have a close to 12% allocation each. Pan American Silver and Majestic Silver are other top holdings for SIL.

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