Newmont Mining (NEM) and Goldcorp’s (GG) deal, the gold space’s latest mega-merger, may suggest miners are getting serious about turning things around for stakeholders.
Of the silver miners (SIL) we’re covering in this series, Hecla Mining (HL) has a higher percentage of “buy” ratings only in comparison to Tahoe Resources (TAHO).
ICBC Standard Bank While ICBC Standard Bank is concerned about gold correcting in the short term due to extremely long inventor positioning, it remains optimistic about its prospects overall in 2018. The bank believes that lower inflation should keep the Fed from raising rates aggressively, thereby supporting gold. It expects gold prices to average $1,312 […]
Coeur Mining’s (CDE) management is focused on generating significant FCF (free cash flow). For 3Q17, however, the company didn’t generate any positive FCF.
The North American gold miners’ results season is slated to begin on October 25. In this series, we’ll see how analysts view their revenues, earnings, and free cash flows.
The performances of precious metal miners with substantial exposure to silver have been disappointing in 2017. As a group, they’ve returned just 0.9% YTD.
Due to the weak performance of Tahoe Resources (TAHO) stock and the uncertainty surrounding the outlook of the Escobal mine, Wall Street analysts have toned down their enthusiasm regarding the stock.
Among the five major silver miners under discussion in this series, only Pan American Silver has given positive stock returns in the trailing-three-month period.
Silver companies try to maintain an optimal level of debt-to-equity to lower their costs of capital and maintain an optimum level of risk-reward for shareholders.
Hecla Mining (HL) reported AISC (all-in sustaining costs) of $9.97 per ounce in 2Q17, an impressive improvement of 22.0% over the same quarter last year.
Coeur Mining (CDE) is trading at a forward EV-to-EBITDA multiple of 6.9x, which is just higher than Tahoe Resources’ (TAHO) multiple in the peer group.
Market sentiment for Coeur Mining Coeur Mining (CDE) is a high-cost producer compared with peers (RING) (SIL). While it has initiated several measures to bring down its costs in the last few years, they remain high. Higher costs make CDE more leveraged to gold and silver prices than other low-cost producers such as Barrick Gold (ABX) […]
It’s important for investors to keep tabs on analysts’ recommendations and ratings, as they are market sentiment indicators. In this series, we’ll look at recommendations and ratings for silver miners.
On May 22, 2017, Huntsman (HUN) and Clariant announced that their respective boards have approved a merger to form a new entity called HuntsmanClariant.
Valuation The EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple is a good measure for capital-intensive industries because it helps investors compare companies with various capital structures. The chart above compares silver miners’ EV-to-forward-EBITDA multiples to their EBITDA margins in 2017. Remember, EV refers to the total market value of a […]
Market sentiment So far in this series, we’ve analyzed silver miners’ key operating and financial metrics. In this part, we’ll look at the market sentiment toward these companies. We’ll also look at analysts’ recommendations, target prices, and potential upsides for silver miners (SIL). Analysts’ favorite Among all primary silver producers (SIL), Tahoe Resources (TAHO) seems […]
Free cash flow The generation of FCF (free cash flow) is important for precious metal mining companies (GDXJ) (SIL). It helps them invest in projects that can drive long-term value, optimize their financial leverage, and provide shareholder returns. Silver mining companies are constantly trying to reduce their costs in order to generate FCF. Hecla Mining (HL) delivered […]
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. Current ratio […]
Leverage ratios Investors in the precious metal mining industry need to know companies’ debt levels. High debt can strain a company’s credit rating. It’s important to know that during an industry downturn, companies with higher leverage usually underperform. However, if metal prices recover, companies with higher leverage ratios can outperform those with lower leverages. This […]
Cost discipline Cost discipline and lower cost assets are critical for silver miners (RING) (SIL). They help miners navigate low metal price environments, while improving margins and free cash flow in times of high metal prices. In a commoditized business such as mining, cost efficiency differentiates miners based on long-term premiums and performance. Improving costs […]
Reserve replacement Precious metal miners (SIL) (GDXJ) face the problem of compensating for every ounce they take out of the ground. While mines have finite lives, companies operating them don’t, so it’s important to look at miners’ reserves and resource estimates and the assumptions used to calculate them. Reserve additions Coeur Mining (CDE) reported a […]
Long-term sustained growth After years of cutting back on sustained capital expenditure, silver miners (SIL) have started to refocus on production growth. Increased exploration and capital expenditure budgets have been the key themes of miners’ earnings in 2016. Sustained growth is one of the prerequisites for sustainable outperformance over the long term. Focus on exploration sharpening […]
Higher guidance for 2017 Hecla Mining (HL) recorded strong silver production growth of 9% and gold production growth of 5% YoY (year-over-year) in 4Q16. For fiscal 2017, the company has guided for silver production of 46.5 million–49.4 million ounces of silver equivalent, which implies YoY growth of 4%. This guidance is due to higher expected […]
Geographic exposure Due to rising taxes, royalties, changes to mining codes, and asset nationalizations in the past few years, many big mining projects have been rendered uneconomical. Investors and miners have become wary of geographic exposure to risky mining jurisdictions. High geopolitical risk The above graph shows the revenue contribution from different geographies for silver miners […]
Commodity exposure In the previous part of this series, we looked at miners’ geographic exposure, which is important to consider due to the geopolitical risks some jurisdictions face. It’s equally important to consider their revenue compositions in terms of commodity exposure. Contribution from silver Silver companies are rarely pure-play miners. For investors considering silver […]
Coeur Mining’s (CDE) management is focused on generating significant FCF. In 4Q16, FCF was -$4.5 million after having positive FCF in the first two quarters.
Raymond James cut its target price for Coeur Mining (CDE) from $16.50 to $11.75 on December 22, 2016. Deutsche Bank cut its target price from $11 to $10.50.
First Majestic Silver is trading at the highest EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple among its peers at 12.3x.
For investors considering silver stocks due to their leveraged exposure to silver prices, the higher the company’s revenues derived from silver, the better.
Given rising taxes, royalties, changes to mining codes, and asset nationalizations in the past few years, many big mining projects have become uneconomical.
On December 9, 2016, Sibanye Gold (SBGL) announced that it has entered into an agreement with Stillwater Mining (SWC) to acquire all its stock for $18 per share in cash.
Precious metals miners with substantial exposures to silver are usually classified as silver miners. Tahoe Resources, Coeur Mining, and Pan American Silver are a few.
So far in this series, we’ve analyzed the key operating and financial metrics for silver miners. Here, we’ll look at market sentiment for these companies.
While precious metal prices have remained buoyant since the start of the year, miners are leaving no stone unturned in their mission to prune their balance sheets wherever possible.
While financial leverage is important in gauging a company’s long-term solvency, short-term liquidity profiles are also important. In a weaker commodity price environment, short-term liquidity might come under more pressure.
In the previous part of this series, we looked at miners’ geographic exposure—which is important to consider, given the geopolitical risks some jurisdictions face.
Due to rising taxes, royalties, changes to mining codes, and asset nationalizations in the last few years, many big mining projects have been rendered uneconomical.
Silver has outperformed gold year-to-date (or YTD). The SPDR Gold Shares ETF (GLD) has risen 17% YTD, while the iShares Silver Trust ETF (SLV) has risen 24%.
