3 Stocks for a Silver-Studded Portfolio
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
"Too many people miss the silver lining because they're expecting gold."
Silver often plays a secondary role to its more illuminating sibling – gold – in the precious metals family. However, the potential for returns for investors exists with companies aggressively advancing their silver programs in diverse regions of the globe. The following are some silver expectations to examine from three enterprises operating in this industry:
First Majestic Silver (NYSE: AG) is a silver producing company concentrating on silver production in Mexico. The company is expecting silver production to increase in 2013 from 2012 levels. Investors performing due diligence should consider some of the company's reasoning for these expectations.
First Majestic has their producing Del Toro Silver Mine, which they own 100%. This mine is in the Municipality of Chalchihuites, Zacatecas, Mexico. The project consists of 399 hectares of mining rights within 22 titled concessions. Production from the 1,000-tpd (tons per day) flotation circuit started in January 2013. The expectation is that construction of the 1,000-tpd cyanidation circuit will start production in the third quarter of 2013.
The company also has their La Guitarra producing silver mine. This project is 100% owned and operated by First Majestic Silver. They acquired the project in 2012 because of their acquisition of Silvermex Resources. A new ball mill and flotation cells will increase capacity at La Guitarra from 350 tpd to 500 tpd during March 2013. The La Guitarra property consists of 39,714 hectares located within the Temascaltepec Mining District in Mexico.
Another producing silver mine of the company is San Martin (100% owned by First Majestic Silver). This mine consists of approximately 7,841 hectares of mineral rights, including 1,454 hectares of surface rights. The San Martin Silver Mine is 250 km north of Guadalajara city in Jalisco State, Mexico. The cyanidation plant is undergoing expansion. This will increase capacity from 950 tpd to 1,300 tpd in the second quarter of 2013.
What can investors consider going forward with First Majestic Silver? The company continued to follow a forceful growth plan in 2012. They re-invested $175.1 million in the development and exploration of their mineral properties, construction of new processing plants, and acquisition of new mining equipment. Capital growth requirements budgeted for 2013 total $192.2 million.
Coeur d'Alene Mines (NYSE: CDE) is the largest U.S.-based primary silver producer, as well as a growing gold producer. The company expects to produce 18.0 - 19.5 million ounces of silver in 2013. They expect to invest $40 million in exploration. Their objective is to increase estimated mineral reserves and resources at year-end 2013. Coeur d'Alene's silver production in 2012 was 18 million ounces. This represented a 6% decrease from 2011.
Mr. Mitchell J. Krebs, President and CEO, said, "We expect 2013 to be a strong year for Coeur, supported by significant expected growth at Rochester, a full year of steady state operations at Kensington, and stable production at Palmarejo and San Bartolomé." He further said, “Production at Rochester is expected to increase 35% - 50% this year versus 2012 levels, which we anticipate will drive cash operating costs down and significantly increase the mine's cash flow."
What can investors consider going forward with Coeur d'Alene Mines? Concerning silver, for 2013, Coeur d'Alene plans a major crusher and heap leach capacity expansion at Rochester, Nevada. Their goal is to increase production to 4.5 - 4.9 million ounces of silver. Furthermore, engineering and permitting are taking place for 40 million tons of additional pad capacity. The company expects initial production in 2016 to further extend the mine life, and increase production rates from historic stockpiles.
Moreover, in February, Coeur d'Alene Mines announced that they are entering into a definitive agreement. With this agreement, the company will agree to acquire all of the issued and outstanding common shares of Orko Silver. Therefore, acquisitions are another avenue of growth for Coeur d'Alene.
Silver Standard Resources (NASDAQ: SSRI) engages in the acquisition, exploration, development, and operation of silver-dominant resource properties. Their Pirquitas Mine (Argentina) achieved commercial production in December of 2009.
Silver Mineral Reserves at the Pirquitas Mine are Proven Mineral Reserves of 57.2 million ounces of silver, at a grade of 180.8 g/t. and Probable Mineral Reserves of 26.9 million ounces of silver at a grade of 168.4 g/t. The company exceeded the 8.2 –8.5 million ounces guidance range for 2012, producing 8.6 million ounces of silver at Pirquitas.
The company's production guidance for 2013 is to produce and sell between 8.2 and 8.5 million ounces of silver, the same as the prior year's guidance range. Investors can note that their expectation is to maintain their production. Could they possibly surpass it as they did in 2012?
What can investors consider going forward with Silver Standard Resources? Investors should consider the company's expected production for the years 2014 – 2018. At full production, Silver Standard expects the Pirquitas Mine to produce an average of 8 to 10 million ounces of silver and 10 to 12 million pounds of zinc each year. This ranks the Pirquitas Mine amongst the largest primary silver mines globally.
The above-mentioned companies are confidently advancing their plans. For investors, silver is relatively economical, and there is industrial demand for this precious metal (electronics, jewelry, superconductivity, and more). An analysis of the silver expectations of First Majestic Silver, Coeur d'Alene Mines, Silver Standard Resources, and others could be another route for investors to stock portfolio diversification.
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