Leverage Return on Silver Prices
Silver prices are up big time year-to-date. Don’t be shocked if the gray precious metal continues to move higher.
You have to go back to the basics: the demand for the metal is soaring and the supply side is struggling to produce. This is the perfect recipe for higher silver prices ahead.
With this, investors usually ask one question: if silver prices are about to skyrocket, what’s the best place to invest? Often, we are told silver bullion is the best option, but be very careful if you subscribe to that argument.
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Consider this: if silver prices go from $16.00 an ounce to $50.00, you will see an increase of a little more than 212% by owning bullion.
But you can get bigger gains, just look at the silver producers. Let’s assume a producer produces an ounce of silver for $5.00 and the silver price goes to $50.00 an ounce. The miner’s profit would be 900%! See the difference? The producer’s stock price would reflect this.
Below, I have identified five silver producing companies that produce an ounce of silver for a relatively low cash cost. These silver stocks could provide massive returns not only in 2016, but also in 2017 and beyond.
1. Fortuna Silver Mines Inc (NYSE:FSM)
With properties located in Mexico and Peru, Fortuna Silver Mines Inc (NYSE:FSM) produced an ounce of silver at a cash cost (net of byproduct credits) of $1.44 per ounce in the first quarter of 2016. (Source: “Fortuna reports consolidated financial results for the first quarter 2016,” Fortuna Silver Mines Inc, May 9, 2016.)
Just by looking at its cash cost and a silver spot price of approximately $16.00 an ounce, the company’s profit margin is roughly $14.50 an ounce!
2. Avino Silver & Gold Mines Ltd (NYSEMKT:ASM)
Headquartered in Vancouver, Canada, with silver properties located in Mexico and Canada, Avino Silver & Gold Mines Ltd (NYSEMKT:ASM) produced an ounce of silver at a cash cost of $5.64. Here’s what you also need to know: between the first quarter of 2015 and the first quarter of 2016, Avino Silver & Gold reduced its cash costs by 35%. (Source: “Avino Reports Q1 2016 Financial Results,” Avino Silver & Gold Mines Ltd, May 16, 2016.)
3. First Majestic Silver Corp (NYSE:AG)
First Majestic Silver Corp (NYSE:AG) reported its cash cost was $5.00 an ounce in the first quarter of 2016, down roughly 40% year-over-year. (Source: “First Majestic Reports First Quarter Financial Results,” First Majestic Silver Corp, May 10, 2016.) And I wouldn’t be shocked to see its cash cost decline even farther.
As silver prices rise and First Majestic’s cash cost declines, you can imagine what kind of return this company could generate. Obviously, time will tell.
4. Hecla Mining Company (NYSE:HL)
Hecla Mining Company (NYSE:HL) has been in this business for a very long time. It has seen all the cycles in the silver price. This year, the company is celebrating its 125th anniversary.
In the first quarter of 2016, the company produced an ounce of silver at a cash cost of $5.00. In the same period a year ago, it was $6.00. (Source: “Hecla Reports First Quarter 2016 Results,” Hecla Mining Company, May 5, 2016.)
5. Endeavour Silver Corp (NYSE:EXK)
Endeavour Silver Corp (NYSE:EXK) is one of the well-known silver miners. The company’s cash cost was $7.63 in the first quarter of 2016. (Source: “Endeavour Silver Reports First Quarter, 2016 Financial Results,” Endeavour Silver Corp, May 5, 2016.)
Again, take this figure with a grain of salt, as Endeavour Silver’s production price could decline going forward.