Precious metals have long attracted investors in times of economic and political uncertainty. A new, more contagious, strain of coronavirus has recently caused new anxiety among investors, driving the prices of gold and silver higher. Moreover, the market suspects the policies of the incoming U.S. government may be inflationary. Because precious metals are considered a hedge against inflation, the commodity could see increased demand from investors. The stocks of precious metal miners traditionally rise when the price of the underlying commodity rises.
Gold and silver have different characteristics and their performance differs based on several factors. While gold is mostly used for investment purposes, silver is used for industrial and medical purposes too. Because silver is a more versatile metal than gold, silver-mining stocks are well-positioned to benefit from its upside potential. Rising demand for silver from the booming solar sector is another factor supporting the metal’s price increase.
There are many smaller players in the mining space that primarily focus on silver and are fundamentally strong. Fortuna Silver Mines Inc. (FSM), SilverCrest Metals Inc. (SILV), and Endeavour Silver Corporation (EXK) are three such stocks that we think are well-positioned to benefit from silver’s bull run.
Fortuna Silver Mines Inc. (FSM)
FSM is a miner of precious and base metal deposits that include silver, gold, lead, and zinc deposits in Latin America. Some of FSM’s principal properties re Caylloma silver, lead, and zinc mine in southern Peru; the San Jose silver-gold mine in southern Mexico; and the Lindero gold project in Argentina.
FSM, with its subsidiary Compania Minera Cuzcatlan (CMC), has signed an option agreement to earn up to an 80% interest in the Taviche silver project, in Oaxaca, Mexico, from Gold79 Mines. FSM also entered a definitive option agreement with Medgold Resources Corp to acquire Fortuna’s 51% interest in the Tlamino Project, located in Serbia.
During the three months ended September 30, 2020, FSM’s revenue climbed 36.1% year-over-year to $83.4 million. Its EPS for the quarter was $0.07 compared to a loss per share of $0.05 posted in the same period last year. The company’s silver and gold production during the quarter was 2.1 million ounces and 12,791 ounces, respectively.
The Street estimates FSM’s revenue for the full year ending 2021 to be $547.4 million, representing a 152.5% year-over-year increase. Meanwhile, its EPS is likely to surge 422.2% to $0.94.
FSM has surged 125.8% in the past year to close yesterday’s trading session at $8.58. The has stock rallied 70.6% over the past six months.
How does FSM stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Peer Grade
A for overall POWR Rating
The stock is also ranked #2 stock in the 17-stock Miners – Silver industry.
SilverCrest Metals Inc. (SILV)
SILV explores primarily for silver and gold properties in Mexico. The Las Chispas project, comprising 28 concessions spanning over 1400.96 hectares located in Sonora, is the company’s primary property.
SILV recently announced a $120 million project financing facility and $76.5 million fixed-price EPC contract for construction of the process plant at Las Chispas Project. Simultaneously, SILV’s Mexican subsidiaries has entered a fixed-price EPC contract with Ausenco Engineering Canada to also finance construction at its Las Chispas Project.
SILV ended the third quarter ended September 30, 2020 with cash and cash equivalents of $188.3 million. The company’s loss per share expanded to $0.18 from $0.17 posted in the same period last year. During the nine months ended September 30, 2020, SILV’s exploration team completed 146,000 meters of in-fill and expansion drilling at its Las Chispas Project.
Analysts expect SILV’s loss per share for the quarter ended December 31, 2020 to contract 35.3% year-over-year to $0.11. SILV ended yesterday’s trading session at $10.68, surging 67.7% over the past year. Over the past six months, the stock surged 17.9%.
The company is rated “Buy” in our POWR Rating system. It also has an “A” for Trade Grade and a “B” for Peer Grade. In the 17 stock Miners – Silver industry, it is ranked #6.
Endeavour Silver Corporation (EXK)
EXK is a precious metals miner that owns and operates high-grade, underground, silver-gold mines in Mexico and Chile. The Guanacevi mine in Durango; the Bolañitos mine in Guanajuato; and the El Cubo mine in Guanajuato are its three silver-gold mines in Mexico. It also owns the Paloma gold and the Cerro Marquez copper-molybdenum-gold projects located in Chile.
EXK has announced that its exploration and drilling will continue to intersect high-grade gold-silver mineralization in the Melladito and San Bernabe vein systems at the Bolanitos mine in Guanajuato, Mexico. The company further indicated that it had drilled 22 holes, of which 11 holes and 22 mineralized intervals returned high grades over mineable widths.
During the third quarter ended September 2020, EXK’s revenue climbed 28.7% year-over-year to $35.6 million, driven by the sale of 741,262 oz of silver and 8,997 oz gold at average realized prices of $25.08 per oz silver and $1,952 per oz gold. Net income during the quarter was $0.5 million or EPS of $0, compared to a loss per share of $0.05 posted in the same period last year.
Analysts expect revenue for the quarter ended December 30, 2020 to be $49.9 million, representing a 44.1% year-over-year increase. EPS is likely to grow 153.9 to $0.07 during the period.
EXK ended yesterday’s trading session at $4.69, surging 118.1% over the past year. Over the past six months, the stock climbed 79.7%.
We support the positive outlook with a Buy in the POWR Ratings. EXK holds “A” in Trade Grade and a “B” for Peer Grade. It is also the #7 ranked stock in the 17-stock Miners – Silver industry.
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FSM shares were trading at $8.36 per share on Wednesday morning, down $0.22 (-2.56%). Year-to-date, FSM has gained 1.46%, versus a 1.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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