Why Silver Miners Are Underperforming Silver Prices in 2017



Silver versus gold

On a YTD (year-to-date) basis, gold has outperformed silver. While the SPDR Gold Shares (GLD), which tracks gold prices, has gained 13.8%, the iShares Silver Trust (SLV), which tracks silver prices, has risen 9.2% so far this year.

While silver prices often act as a leveraged play on gold, this hasn’t happened in 2017 so far. Most likely, industrial attributes of silver are playing a larger role, leading to its underperformance.

Article continues below advertisement

Silver miners’ 2Q17 results and price performances

The performances of silver and silver miners’ stocks have diverged significantly in 2017 YTD. Among miners, only Pan American Silver (PAAS) has achieved significant positive returns, with a YTD gain of 23.2% as of August 28, 2017. Hecla Mining (HL) has gained 1.3%.

Other silver miners have seen negative returns in 2017. Coeur Mining (CDE) and First Majestic Silver (AG) have lost 3.7% and 8.4%, respectively, while Tahoe Resources (TAHO) stock has fallen 52.4%.

Tahoe stock has been under tremendous pressure since the Gautemalan government suspended the license of its flagship mine, Escobal, citing environmental issues. The company has suspended its guidance until it achieves certainty on this issue.

Company-specific issues are impacting stock prices more than the prices of the precious metals themselves.

What’s in this series?

Now that silver miners’ 2Q17 results season has ended, we’ll look at the factors that are affecting precious metal miners, including production growth and outlook, cost profiles, debt metrics, and analysts’ estimates. We’ll also assess how these factors have affected stock performances. We’ll end the series by looking at relative valuations.

Continue to the next part for a look at silver miners’ production growth and outlook.


More From Market Realist