Why Silver Miners Are Outshining Their Gold Peers in 2016



Silver miners’ performance

Precious metal miners with substantial exposure to silver are usually classified as silver miners (SIL). Tahoe Resources (TAHO), Coeur Mining (CDE), Hecla Mining (HL), Pan American Silver (PAAS), and First Majestic Silver (AG) make up 6.2% of the VanEck Vectors Gold Miners ETF (GDX).

Precious metal miners with substantial exposure to silver have also performed quite well year-to-date, as silver has outperformed gold. While gold prices have increased by 22% year-to-date (or YTD) until July 25, 2016, silver prices (SLV) have risen by 41%. This has also led the silver miners to outperform their peers with more exposure to gold. To read more about silver miners and their ratings, please read, Which Silver Miners Do Analysts Favor as Silver Outshines Gold?

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Correlation to silver prices

This group has also shown a significant correlation to gold prices and silver prices at 0.88 since the start of 2013 until July 25, 2016. It’s worth noting that silver prices themselves have a strong correlation to gold prices. Silver miners’ correlation to silver prices on a YTD basis is still higher at 0.95.

Leveraged companies outperform

Of these companies, Coeur Mining (CDE) has outperformed its peers. Coeur rose 423% YTD while First Majestic Silver (AG) gained 337%. Hecla Mining (HL), Pan American Silver (PAAS), and Tahoe Resources (TAHO) rose 202%, 158%, and 63%, respectively.

Coeur and First Majestic are highly leveraged operationally compared to their closest peers. They’re also relatively high-cost operators, leading to disproportionate gains. To brush up on Coeur, please read Can Coeur Mining Keep Soaring on the Back of Precious Metals?

Investors should note here that the ProShares Ultra Silver ETF (AGQ) is another way of getting leveraged exposure to silver prices for risk-tolerant investors. AGQ has gained 87% YTD as of July 25.

In the next and final part, let’s take a look at what’s driving South African precious metal miners in 2016.


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