Will Silver's Price Fall in the Near Future?

Masam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

My readers must be noticing this fact that I am covering Canadian stocks in detail nowadays. I believe these stocks do not get the attention that they deserve. Recently, the silver stocks were falling.


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They have been falling because of a sharp decline in global silver prices. However, the last quarter was a strong one for the silver stocks and silver prices. In fact, silver and the PGM were the best performing metals, which saw a surge of 6% on a sequential basis. What effect will that have on 4Q results? Let’s have a quick look at earnings previews for three Canadian silver stocks:

Pan American Silver Corp. (NASDAQ: PAAS)

The Street forecasts 4Q12 silver production/sales of 6.3/6Moz at an average cash cost of $13/oz.

PASC previously announced a normal course issuer bid effective from Sept. 4 2012 to Sept. 3 2013 to purchase up to 7.6 million PASC common shares, representing up to 5% of its issued and outstanding shares. During 3Q12, the company purchased and canceled 0.51 million shares.

The company is expected to report on Feb. 20. The Street expects the company to make EPS of 33 cents and revenue of $274.72 million in 4Q.

Silver Wheaton Corp. (NYSE: SLW)

The Street forecasts 4Q12 attributable silver production/sales of 6.1/7.2Moz.

This company has a bit of a different business model than its peers. The company is a streaming silver company. A streaming company generates its profits by providing up front financing for mining companies looking to expand and drill for precious metals. In exchange for the up-front financing of these companies, the streaming company acquires the right to purchase a portion of production generated from the mines at a fixed cost.

The company gets its silver from all around the world:

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The company has 15 long-term silver agreements all over the world. One of its major partners is Goldcorp. Goldcorp's Peñasquito mine accounts for ~25% of Silver Wheaton’s attributable silver production. Therefore, Goldcorp's Q4 results (expected on Feb. 14) should provide a read through to Silver Wheaton’s 4Q12 results.

Silver Standard Resources (NASDAQ: SSRI)

SSR previously announced 4Q12 production of 2.27Moz silver, and sales of 3.2Moz (142% of production). Milling rates (4,531tpd), silver grades (212g/t), and recoveries (79.9%) were all largely in-line. On an annual basis, mill throughput averaged 111% of design rates. The Street estimates that the cash costs will come in at $25/oz.

Following the release of the Pitarrilla feasibility study, the Street expects a construction decision for the project this year. The Pitarrilla FS study contemplates a 32-year project life producing an average 10Moz silver per year (14Moz during the first nine years) at an average cash cost of $10/oz. Initial CapEx is expected to total $741 million. SSR noted that further discussions with financial institutions and potential partners are ongoing. In terms of financing, SSR has a current cash balance of $353 million, plus $313 million (market value) in Pretium Resources shares. SSR is likely to seek a strategic partner to take a 20-40% stake in the project.

Foolish Bottom Line

With silver prices falling mercilessly in the last week, investors will be keen to hear about the future of silver prices and equities in the conference calls in the ongoing earnings season. 

AnalystX has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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