The majority may be bullish on stocks and bearish on silver, but silver prices are set to rise. Many catalysts may soon send the price of silver upward, and silver stocks are set to profit. Below are three silver stocks to watch in 2015.
Silver Stocks an Investment Opportunity Right Now?
The bull market recently celebrated its six-year anniversary and many are saying there’s still lots of running room. Silver, on the other hand, is expected to drop for a record fourth year in a row. Despite the pessimism, there are a number of reasons why silver prices could rebound—and why it’s better to strike when the iron—or in this case, silver stock—is cold.
For long-term silver investors, current prices and long-term metrics signal another great entry point.
Catalysts to Send Silver Prices Higher
Between 2001 and 2011, the price of silver skyrocketed to a 30-plus-year high, from around $4.50 to almost $50.00 per ounce. Silver’s strong price growth came as investors sought to hedge against economic uncertainty and a weak dollar, strong physical demand in Asia, and increased industrial demand.
But then silver prices began to slide for many reasons. Here at home, the U.S. economy began to (slowly) pick up steam, positive jobs data began to dribble in, and the dollar strengthened. Investors shunned precious metals like silver and gold and poured their money into the stock market.
With silver trading at around $17.00 per ounce, silver prices are currently down roughly 70% from the 2011 highs. With most silver mines extracting silver at an average all-in cost near that number, many mines are unprofitable at today’s prices.
If you listen to silver bears, prices in 2015 could average just $13.00 per ounce. But there are a number of catalysts that suggest low silver prices may be a thing of the past. Namely, mine production is on the decline; with prices so low, miners have less incentive to produce high volumes.
At the same time, demand for silver remains robust in India and China, the world’s two largest consumers. In the U.S., sales of American Eagle silver coins set a record in 2014. In fact, sales of silver coins outpaced demand for gold and platinum coins.
With the U.S. and other major developing countries showing signs of sustained growth, silver demand for manufacturing could be on the rise. Whereas gold has little to no industrial use, silver has many uses, including medicine, nanotechnology, batteries, electronics, catalysts, and the automotive industry. It is also used in green technologies, such as solar energy and water purification, and in windows and glass.
For these reasons, I think adding undervalued silver stocks is a great way to diversify your investing portfolio. Keep in mind that silver prices are down; to find the best silver stocks in 2015, look for those with strong balance sheets and manageable cash costs.
Best Silver Stocks to Watch in 2015
Silver Stock #1: Fortuna Silver Mines Inc. (NYSE/FSM)
Fortuna Silver Mines Inc. is a growing silver producer with two low-cost operating mines in Peru and Mexico. In 2014, silver and gold production increased for the eighth consecutive year, reaching 6.59 million ounces of silver and 35,316 ounces of gold at an all-in sustaining cash cost per ounce of silver of $14.48, a 29% decrease from 2013. (Source: Fortuna Silver Mines Inc., March 12, 2105.)
Fortuna Silver Mines Inc. is currently trading near $3.85, has a market cap of roughly $500 million, and has no long-term debt. Most significantly, the company’s cash flow has been increasing. In 2013, it had $48.8 million in cash; at the end of 2014, Fortuna had $63.3 million in cash.
For the year ended December 31, 2014, the company’s adjusted net income was $15.7 million compared to $9.4 million in 2013. The company’s production forecast for 2015 is 6.5 million ounces of silver at a consolidated all-in sustaining cash cost of $16.61 per ounce of silver. (Source: Fortuna Silver Mines Inc. web site, last accessed April 2, 2015.)
Silver Stock #2: Avino Silver & Gold Mines Ltd. (NYSE/ASM)
Established in 1968, Avino has operations in Canada and Mexico, with two producing precious metal projects and another one in trial production. With the exception of the Avino mine (Durango State Mexico), which is 99.28% owned, all the company’s properties are owned 100%.
In Mexico, Avino Silver & Gold has total measured and indicated silver resources of 13.63 million ounces and 90,758 ounces of gold. It has total inferred reserves of 21.88 million ounces of silver and 164,937 ounces of gold. (Source: Avino Silver & Gold Mines Ltd. web site, last accessed April 2, 2015.)
In 2014, the company delivered its third consecutive year of production growth. Full-year revenue increased 20% to $19.3 million, while net income increased by $1.66 million to $2.51 million, or $0.08 per share. Cash flow from operations was $4.3 million for 2014, compared to $5.2 million the previous year. (Source: Avino Silver & Gold Mines Ltd., March 23, 2015.)
Silver production for 2014 increased 39% year-over-year to 969,524 ounces. Gold production for 2014 increased to 5,180 ounces, up 60% compared to 2013. Avino Silver & Gold’s consolidated all-in sustaining cash cost per ounce of silver equivalent was $12.24 in 2014, compared to $14.39 in 2013.
Silver Stock #3: SilverCrest Mines Inc. (NYSE/SVLC)
Headquartered in Vancouver, British Columbia, Canada, SilverCrest Mines is a silver and gold producer with its flagship mine, the Santa Elena, in Mexico. The company also has two projects (La Joya and Ermitano-Cumobabi) in the exploration and development stage.
At the Santa Elena property, SilverCrest has probable reserves of 19.73 million ounces of silver and 327,430 ounces of gold. The Santa Elena also has 7.9 million ounces of silver and 116,000 ounces of gold in its indicated resources. Inferred resources at the Santa Elena mine include 7.4 million ounces of silver and 72,000 ounces of gold. (Source: SilverCrest Mines Inc. web site, last accessed April 2, 2015.)
In 2014, SilverCrest produced a record 1.17 million ounces of silver and 28,678 ounces of gold. Total silver and gold revenue for the year came in at $45.13 million. The company also reported an all-in sustaining cash cost per ounce of silver equivalent of $14.35 compared to $13.05 in 2013. (Source: SilverCrest Mines Inc., March 25, 2015.)
In 2015, SilverCrest expects annual production for 2015 of 4.0–4.4 million ounces of silver equivalent, a significant increase over its 2014 production of 2.81 million ounces. SilverCrest continues to have a strong balance sheet, with $31.3 million in cash and undrawn credit facility of $15.0 million.
Also Read: 3 Top Silver Stocks to Watch in 2016