3 Silver Stocks Ready to Shine
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are two different types of silver mining companies: those that produce and those that explore. Production companies produce silver and have cash flow while exploration companies are still trying to find silver and have no cash flow. Prudent investors looking for value and safety will select those production mining companies that have a proven financial track record.
The following three silver production mining stocks share the same traits: they make a profit, have low production costs and are trading around their lows. Their stock prices have dropped not from material negative changes in the company but in response to the overall economic slowdown.
Coeur D’Alene (NYSE: CDE), located in Idaho, is the largest U.S.-based primary silver producer. The stock’s 52-week trading range is $16.21 - $30.99, and the stock currently trades around $17.50.
The company operates mines in the U.S., Mexico, Bolivia, Argentina and Australia. The company incorporated in 1928 and has been in operation ever since. The company’s flagship mine, Palmarejo, is located in Chihuahua, Mexico. Palmarejo accounted for $513 million in metal sales in 2011, or about half of the companies’ total sales. In 2011, silver and gold production exceeded 9.0 million ounces and 125,071 ounces respectively. Silver production costs run between $6.50 - $7.50 per ounce.
Coeur D’Alene has a market cap of $1.57 billion. The company’s revenue was $1.02 billion in 2011 as compared to $515.5 million in 2012. Net income for 2011 and 2010 was $93.5 million and -$91.4 million respectively. The company has operating cash of $397.4 million. The price to earnings growth ratio is .22, and the price to book is .73. The return on equity is 4.05% and the company has a current ratio of 1.77.
Silvercorp Resources (NYSE: SVM) is headquartered in Vancouver, Canada, and operates silver mines in China and Canada. The stock’s 52-week trading range is $4.89 - $12.12, and currently trades around $6.50 per share.
The company’s focus is in China and they have one particularly outstanding mine located in the Henan Province. The Ying Mine has an unusually high concentration of silver, lead and zinc. Every ton of ore yields approximately 11 ounces of silver, 160 pounds of lead and 24 pounds of zinc. The profit made from the lead and zinc mined pays for the cost of silver production and adds an additional $7.00 of profit per ounce. For 2011, 5.3 million ounces of silver and 1800 ounces of gold were mined. Silver production costs ran $3.25 per ounce in 2011.
Silvercorp has a $1.11 billion market cap and saw a 42% increase in 2012 revenue over 2011 from $167.3 million to $238 million. (Silvercorp’s 2012 fiscal year ended March 31, 2012). Net income rose from $67.7 million or $0.40 per share in 2011, to $73.8 million, or $0.43 per share, in 2012. The company has a price to earnings growth ratio of 2.78, a price to book of 2.55, a generous return on equity of 20.99%, and a current ratio of 4.48. Silvercorp pays a $0.10 dividend and has a 1.50% dividend yield. The next dividend date is set for July 19, 2012.
Pan American Silver (NASDAQ: PAAS), headquartered in Vancouver, British Columbia, Canada, operates mines in Mexico, Bolivia, Peru and Argentina. The 52-week trading range is $14.80 - $34.49, and the stock currently trades around $18-$19 per share.
Pan American Silver is the 2nd largest primary silver mine in the world. The companies’ largest mine, Alama Dorado, is located in Sonora, Mexico and accounted for 24% of their total silver production for 2011. Alama Dorado mined 21,853,582 ounces of silver and 78,426 ounces of gold, and had silver production costs of $4.80 per ounce in 2011.
Pan American has a market cap of $2.89 billion. The company reported 2011 revenue of $855 million as compared to $647 million in 2010. Net income for 2011 was $352 million and $14 million in 2010. The company has a price to earnings growth ratio of 3.81 and a price to book ratio of 1.03. Pan American sports a 3.81 debt-to-equity ratio and a current ratio of 5.49. The company pays a dividend of $0.15 with a dividend yield of 0.80%.
Silver prices have been beaten up because of the global slowdown and the never ending problems in Europe. Long term investors looking for growth and income opportunities may want to consider adding these three silver stocks to their portfolio.
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