Which Silver Miner Needs to Work on Its Liquidity?



Financial liquidity

Previously in this series, we analyzed the financial leverage of five silver mining companies. Financial leverage only considers the long-term[1. more than one year] solvency of a company, whereas financial liquidity checks short-term[2. less than one year] cash outflow and inflow. Amid weak commodity prices, short-term liquidity could come under more pressure.

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Current ratio

The current ratio is one way to estimate a company’s liquidity, by showing a company’s ability to pay its short-term obligations using short-term assets. The above graph shows silver miners’ current ratios.

Company positions

The higher a company’s ratio, the better it can service short-term liabilities, and vice versa. While Coeur Mining (CDE) has higher debt than most of its peers, its liquidity position seems comfortable, standing at a ratio of 3.5x.

First Majestic Silver (AG) and Pan American Silver (PAAS) also seem comfortable, with ratios of 3.6x and 3.3x, respectively. Tahoe Resources (TAHO) is doing the worst, with a ratio of 2.4x. However, in absolute terms, this ratio is not that bad. Moreover, as we saw in the previous part of this series, Tahoe is a net-cash company with most of its short-term needs covered.

Together, Tahoe Resources and Hecla Mining make up 17% of the Global X Silver Miners ETF (SIL). Investors can access the precious metals industry by investing in the SPDR Gold Trust ETF (GLD) and the iShares Silver Trust ETF (SLV).


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