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.
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.
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).