Speculators in precious metals know that silver stocks have been on a tear. A number of these stocks have actually done so well over the last 18 months that several have been real fortune-making situations. Ten baggers at least. The action in these stocks is still pronounced and, while the gains going forward are incremental, the momentum is definitely there.
One absolute standout in the silver business has been Silver Wheaton Corp. (NYSE/SLW), which is up more than tenfold since its low set in November 2008. This company is worth over $12.0 billion now and Street analysts continue to increase their earnings estimates. In my view, Silver Wheaton should be a required case study at all business schools. The company has done a fantastic job executing its business plan.
Another very interesting player in the industry is Silvercorp Metals Inc. (NYSE/SVM), a much smaller company that’s been attracting a lot of attention recently.
Silvercorp Metals is the largest primary silver producer in China through its operation of four silver-lead-zinc mines in the Henan Province of China. The company is in the process of applying for more mining permits in other Chinese provinces as well in British Columbia, Canada.
Recently, the company sold 9.2 million common shares at $12.70 per share, raising total proceeds of about 111 million dollars to complete an acquisition in China and develop its Silvertip property in British Columbia.
Silvercorp just announced that it produced record silver production of 1.52 million ounces, representing a 25% increase over comparable quarterly production of 1.22 million ounces. Total sales for the latest quarter grew 66% to 51.8 million dollars. Net income came in at a record 29.7 million dollars, or $0.18 per share, for a 140% increase over the comparable quarter. That’s outstanding profitability and no surprise with the current strength in silver prices.
During the first nine months of fiscal year 2011, Silvercorp produced 4.25 million ounces of silver. The company also produced 54.6 million pounds of lead and 13.1 million pounds of zinc. Going forward, Silvercorp expects to meet or exceed its forecast to produce 5.3 million ounces of silver for its fiscal year ending March 31, 2011.
As I’ve been writing consistently, the mining business is in its prime and the cash is tumbling in. You can expect major consolidation within all aspects of the industry this year. There’s going to be major profitability and companies will have the unique problem of trying to figure out how to invest all their excess cash. That’s why we’re going to see dividend increases and a lot of mergers and acquisitions within the industry.
As silver continues to be one of the hottest specific metals within the group, silver stocks are poised to experience continued positive trading action. I wouldn’t have a speculative portfolio that didn’t include one growing silver producer this year.