VIDEO: Coeur Mining to grow silver production with $1.7bn acquisition of Silvercrest
Adding Las Chipas makes Coeur a top silver producer in North America, with 21 million ounces of silver and 432,000 ounces of gold annually.
By the reckoning of market watchers, the silver bull has arrived. The Gold Report takes a look at what some of the experts predict for the silver price going forward and for companies poised to benefit from the upswing.
The Outlook
Like gold, the price of silver has surged following Britain’s vote to leave the European Union, with investors purchasing the “safe haven” metals to protect wealth in the event other markets falter. According to an article published on July 19 on INN Daily, the silver price has gone up more than 43% year-to-date, “leap-frogging ahead of gold post-Brexit.”
“Southern Silver Exploration Corp. will be a big winner.“
Frank Holmes of U.S. Global Investors, in a July 11 post, notes that silver tops his “Periodic Table of Commodity Returns” for the first half of 2016. “Silver demand had a phenomenal 2015, with retail investment and jewelry fabrication both reaching all-time highs,” Holmes wrote. Add to that an increase in demand for silver for photovoltaics, and now Brexit, and the first half of the year has “has been highly constructive. . .” Holmes notes that some experts believe the silver price will reach between $25 and $32 per ounce by year-end. The metal currently trades for ~$19.90/ounce.
Though optimism is prevalent, investors can expect some volatility. Because silver is both “currency and commodity,” used in a variety of industrial and other uses, its value is “more highly correlated with stocks” than the value of gold, INN Daily reports.
“Great Panther Silver Ltd. is focused on maintaining low operating costs across its existing asset base.“
The potential for volatility is also reflected in the comments of technical analyst Clive Maund, who declared the silver bull market underway in a Gold Report article on July 11. While his optimism was clear, Maund did note that a correction could come into play. “If you are a long-term investor, you may simply decide to ride out any correction,” the analyst wrote. But short-term investors might want to “take some money off the table here if [they] are long the sector, taking advantage of the comparatively high prices now prevailing.”
The Companies
A number of companies are positioned to benefit as the silver bull continues. As expert David Kranzler explains in the Mining Stock Journal, “. . .mining stocks are a ‘derivative’ of gold/silver, meaning their intrinsic value as companies is derived from the price of gold/silver. They are leveraged plays on the price of the metals.”
As such, any silver company is positioned to benefit from a rise in silver price. Kranzler’s case-in-point is Southern Silver Exploration Corp. (SSV:TSX.V; SSVFF:OTCQB; SEG1:FSE), which he believes is “significantly undervalued relative to the size of its silver reserve. It will be a big winner.” Southern Silver Exploration is a Canada-based explorer with two major projects, one in New Mexico and the other in the Mexican state of Durango.
“Golden Arrow Resources Corp.’s Chinchillas may contain half a billion silver-equivalent ounces.“
Southern Silver has also captured the attention of Vicarage Capital, which noted in a June report that the company has “an experienced board of directors and strong management team with a good track record in project exploration, discovery and development.”
In the wake of Great Panther Silver Ltd.’s (GPR:TSX; GPL:NYSE.MKT) Q2/16 production results, Heiko Ihle of Rodman & Renshaw released a report that outlined the reasons behind a target price increase to $2.25/share, among them a “fully stocked” treasury following a recent bought-deal equity financing, stable production at San Ignacio and the company’s focus on maintaining “low operating costs across its existing asset base while continuing to evaluate strategic external growth opportunities.” Ihle noted that Rodman & Renshaw has not increased its “silver price deck from $17.50. . .any such changes should benefit companies with meaningful silver production such as Great Panther.”
“We view MAG Silver Corp.’s Juanicipio project as, without doubt, the best undeveloped silver asset globally.“
Raymond James resumed coverage of MAG Silver Corp. (MAG:TSX; MAG:NYSE) as of July 11. “We view the Juanicipio project (MAG: 44%) as, without doubt, the best undeveloped silver asset globally. Our thesis for MAG is reinforced, quite simply, by the exploration upside offered at Juanicipio and elsewhere (Cinco de Mayo) and a lack of broader high-quality silver-focused investible opportunities,” analyst Chris Thompson noted in the report. “We see MAG trading at a developer discount to producers, and [primed] to rerate catalyzed by development progress and/or exploration success.” Raymond James also included MAG on its list of preferred silver equities in its July 21 Q2/16 Precious Metals Preview.
Raymond James also covers Endeavour Silver Corp. (EDR:TSX; EXK:NYSE; EJD:FSE); a July 11 report by analyst Chris Thompson noted that Endeavour Silver delivered better-than-expected production results for Q2/16, surpassing Raymond James’ estimates by 13%. The stronger metal price environment is changing investment decisions, leading to increased capital spending. “Capital spending across EDR’s producing assets is budgeted to increase to $17.4 mln (from $11.3 mln) with a focus on development access to new ore sources,” noted Thompson, adding, “At Guanacevi, EDR has made a production decision to develop a new mine at the Santa Cruz Sur orebody for total capital budget of $8.4 mln over 3 years.”
The stronger price environment also led Endeavour Silver to reverse a planned production reduction. “Given the improved metal price environment, management has elected to sustain production levels at 1,500 tpd and no longer ramp down to care and maintenance [at El Cubo] by year-end,” Thompson commented.
Another company positioned to benefit from an uptick in silver price is Golden Arrow Resources Corp. (GRG:TSX.V; GAC:FSE; GARWF:OTCPK), which recently released an updated resource estimate for its Chinchillas project in Argentina. “The updated resource estimate now also contains a maiden measured resource estimate of 17 million silver-equivalent ounces, bringing the total M&I resources to 155 million [silver-equivalent ounces],” expert Thibaut Lepouttre noted in Caesars Report in June. Lepouttre expects Chinchillas may contain “half a billion silver-equivalent ounces.”
“Credit Suisse upgraded Silver Wheaton Corp. to Outperform.“
Silver Wheaton Corp. (SLW:TSX; SLW:NYSE) is also levered to the silver price. In Raymond James’ July 21 Q2/16 Precious Metals Preview report, the firm named Silver Wheaton a top pick both as a silver equity and a streamer. Credit Suisse upgraded Silver Wheaton at the end of June from Neutral to Outperform. Analyst Ralph Profit noted, “While CRA tax risk likely continues as an overhang, SLW’s business model still provides investors with a highly levered play on precious metals prices and SLW should still command a multiple in-line with royalty valuations and a premium to precious metals miners based on its leverage to underlying prices, free cash flow, and strong balance sheet.”
Read what other experts are saying about:
Source: The Gold Report
http://www.theaureport.com/cs/user/print/na/17049
Disclosure:
1) Tracy Salcedo and Patrice Fusillo compiled this article for Streetwise Reports LLC. Tracy Salcedo provides services to Streetwise Reports as an independent contractor. She owns, or her family owns, shares of the following companies mentioned in this article: None. Patrice Fusillo provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this article: None.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: Southern Silver Exploration Corp., Great Panther Ltd., MAG Silver Corp., Golden Arrow Resources Corp. and Silver Wheaton Corp. The companies mentioned in this article were not involved in any aspect of the article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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Additional Disclosures for this Content
Mining Stock Journal, July 9, 2016
David Kranzler: “The fund I co-manage owns stock in Southern Silver Exploration Corp.”
Vicarage Capital Ltd., Southern Silver Exploration Corp., June 9, 2016
Compiled by: Martin Wood& James Smith
This document has been supplied by Vicarage Capital Ltd. for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This document has no regard for the specific investment objectives, financial situation or needs of any specific entity. The information contained herein is based on materials and sources that we believe to be reliable; however, Vicarage Capital Ltd makes no warranty either express or implied, in relation to the accuracy, completeness or reliability of the information contained herein.
Rodman & Renshaw, Great Panther Silver Ltd., July 18, 2016
–Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its affiliates or subsidiaries within the past 12 months.
–Heiko F. Ihle, CFA and Jake Sekelsky certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
–None of the research analysts or the research analyst’s household has a financial interest in the securities of (including, without limitation, any option, right, warrant, future, long or short position).
–As of June 30, 2016 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Great Panther Silver Ltd..
–Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
–The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
–The Firm or its affiliates did receive compensation from Great Panther Silver Ltd. for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
–The Firm does not make a market in Great Panther Silver Ltd. as of the date of this research report.
Raymond James, MAG Silver, July 11, 2016
–Raymond James Ltd. or its affiliates expects to receive or intends to seek compensation for investment banking services from all companies under research coverage within the next three months.
–Raymond James Ltd – the analyst and/or associate has viewed the material operations of MAG.
–Raymond James Ltd – within the last 12 months, MAG has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.
–Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to MAG.
–Raymond James Ltd. has provided investment banking services within the last 12 months with respect to MAG.
–Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to MAG.
–Raymond James Ltd. makes a market in the securities of MAG.
Raymond James, Endeavour Silver Corp., July 11, 2016
–Raymond James Ltd. or its affiliates expects to receive or intends to seek compensation for investment banking services from all companies under research coverage within the next three months.
–Raymond James Ltd. – the analyst and/or associate has viewed the material operations of EDR.
Caesars Report, “Golden Arrow increases the Chinchillas resource once again,” June 2, 2016
Thibaut Lepouttre: “The author has a small long position in Golden Arrow Resources.”
Raymond James, 2Q16 Precious Metals Preview, July 21, 2016
–The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject securities. No part of said person’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. In addition, said analyst has not received compensation from any subject company in the last 12 months.
—Raymong James Ltd. or its affiliates expects to receive or intends to seek compensation for investment banking services from all companies under coverage withing the next three months.
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