As these 2 lists of
silver companies published in 2007 and 2009 have become the most-read blog posts, here is a an extended update for the year 2010.
Compiling a list of silver companies is controversial as there are only very few pure silver plays.
The white metal is mostly mined in combination with gold or base metals which can dramatically change the bottom line of silver miners. In some cases the mining of base metals and gold can lead to negative cash costs for every ounce of silver produced.
Silver is primarily used in industrial applications as it is the best metallic electric conductor, and jewellery.
Expecting silver prices to multiply in the next 5 years these companies give extra leverage - if their plans come true.
All silver stocks got hammered in 2008 in the biggest crash in the mining sector in the last 80 years and most have not yet recovered to 2007 levels despite the recentrecovery in silver prices. Do your own research as some companies are trading at less than the cash they have in the till.
While the IPO train on Wall Street has become a train wreck due to the hesitancy of investment banks when underwriting new issues, junior miners are not dependent on investment banks to raise capital.
They (better) know how to attract investors with a long term horizon directly, as I was able to witness myself when living in Vancouver in 2007.
Vancouver stock exchange is the primary market for junior miners for all kinds of resources. The market had had a shady reputation in the 1980s but has cleared up his act by establishing mandatory reporting rules for junior miners. Its most important improvement was the introduction of standards for reporting new metals reserves.
GRAPH: Silver is a lot more volatile than gold while physical demand is unprecedented. The Austrian Mint produces silver Philharmonics 24/7 since introducing this bullion coin in 2008. The US Mint spits them at record rates too since 2009. Silver currently trades at a ratio of 1:60 to gold. In the long term this ratio has been closer to 1:15, leaving enormous upside potential for silver that could easily lead to a price around $40 next year. Chart courtesy of stockcharts.com. (Click to enlarge)
I consider investments in exploration companies as very risky and build up positions very slowly. But they come with a notable exception to the golden rule that for every percentage point of possible reward there is an equal risk.
In the case of explorers/developers there is a nice and profitable exception to the rule: As long as one invests without leverage there is a risk of 100% but a multiple of that in possible gains when an explorer hits silver indeed. When researching risky investments like this very small sector with only a few billions in market capitalization I look mainly for the following:
- Quality of management. Check the track record of management in past mining ventures.
- Management's stake in the company. If they don't sell or even buy more it is usually a good sign.
- Delays. Are there any delays in realizing the company's ventures ?
- Cost per ounce. What are the company's cash costs per ounce produced? How much do I pay per ounce when I buy their shares?
- Institutional shareholders. Which funds own the company, which analysts cover the stock?
- Proximity to production. Potential gains are higher with explorers in the early stages, but so are the risks. I like companies in the process of finalizing the feasibility study for financing or - at a later stage - companies that are close to production.
- Political risk. Your due diligence has to include the respective stability of the country where your miner digs the money out of the ground.
In respect of the political risk I also shun US based silver miners as there exists a possibility that the government can nationalize virtually any company under the Trading With the Enemy Act, which became law in 1917 during World War I and applies during declared wars, and from 1977's International Emergency Economic Powers Act, which can be applied without declared wars. Read more on this issue on
GATA's website.
Marc Courtenay has penned a story at SeekingAlpha that deals with the
possibility of another confiscation of gold and silver and mining shares by the US government. Seeing all the current nationalizations of car makers, banks and the health sector in the USA I don't rule out anything anymore.
List of Silver Explorers, Developers and Miners
Here comes the list of more than 100 silver companies (click the name for the company's website and the ticker symbol for price information):