Market analysts and investors often eye silver stocks as low-cost investments in precious metals, particularly as they seek relief from volatile equity markets. Silver benefits from having a widespread variety of industrial uses – including use in dentistry, electrical contacts, water filtration, solar panels and medical instruments – that supplement the demand for silver in the form of jewelry or as an investment. American Silver Eagle coins have become one of the most popular precious metals investments since the turn of the century.
Successful silver mining companies are those that not only have the largest or most promising silver resources but also do the best job of controlling production costs. The following are five of the top-rated silver mining companies in the best position to see their revenues, profits and stock prices climb in the event of rising silver prices.
1) Wheaton Precious Metals Corp.
Wheaton Precious Metals Corp. (NYSE: SLW) has a unique business model that has made it one of the most successful silver companies. As a silver streaming company, it is not directly engaged in the exploration and development of silver mines. That means it invests in the production of other silver mining companies through long-term purchase agreements that enable it to lock in future silver production at advantageous prices. This business model has resulted in it becoming the silver mining company with the largest amount of proven and probable silver reserves in the world, with over 200 million more ounces of silver than second-place Fresnillo plc.
Silver Wheaton is not burdened with all the overhead costs associated with digging silver out of the ground. The company's operating margin is in the neighborhood of 35%, and with 18 long-term purchase agreements for silver priced as low as $4.55 per ounce, the company is likely to show excellent profit margins for years to come. It also has a low debt-to-equity ratio of 0.15.
Silver Wheaton stock has rebounded from its 2015 low at $11.03 per share and is heading into 2018 trading above $19 per share. With a 2011 high near $47 per share, the company has tremendous upside potential, since even a 50% retracement back to the upside would more than double its current share price.
2) First Majestic Silver Corp.
First Majestic Silver Corp. (NYSE: AG) is engaged in the exploration, development and production of silver, and also in the acquisition of existing silver mines. The company is relatively small, with a market cap of over $900 million, compared to Wheaton's over $9 billion market cap. However, First Majestic holds excellent growth prospects. As of December 2017, it owns and operates six mines and the company's annual pure silver production has grown rapidly since 2006, increasing from approximately 2 million ounces to approximately 12 million ounces as of 2018.
Precisely because it is one of the smaller silver mining companies, First Majestic's stock has been one of the hardest hit in the wake of declining silver prices. Since making a 2011 high near $25 per share, the company's stock has tumbled as far as $2.66 per share and currently sits above $5. However, this gives it one of the less-expensive silver stocks available. Its 10-year track record of production growth and its virtually non-existent long-term debt argue for First Majestic as a top-ranked growth investing prospect among silver miners.
3) Pan American Silver Corp.
Pan American Silver Corp. (NASDAQ: PAAS) is engaged in the exploration, development and production of silver mining properties throughout Mexico and South America. Although it maintains an exclusive focus on silver production, it also sells the gold, copper and zinc it discovers along the way. The company is the sixth-largest silver producer worldwide and holds the fourth-largest silver reserves.
Based on a number of organic growth projects, Pan American expects to continue boosting production well past 2019. The company has lowered cash costs by approximately 28% in 2017 from the prior year. In addition, it has $7.5 million in total debt balanced against a cash flow of over $486 million. The company's stock has rebounded from a 2015 low of $5.85 per share and is trading close to $16.00 per share as of February 2018.
4) Endeavour Silver Corp.
Endeavour Silver Corp. (NYSE: EXK) is a small-cap silver mining company that, like First Majestic, has good potential as a growth stock. Based in Canada, the company acquires, explores, develops and produces silver and gold mining properties located in Chile and Mexico. Two expansion programs at operating mines are projected to catapult the company onto the list of top worldwide silver producers in the near future.
Main advantages for Endeavour Silver include strong organic growth potential for its primary mining projects, the extremely high grade of its silver production and substantial upside potential for several of its current mining projects. Endeavour has only $1.5 million in total debt, and an operating cash flow of $9.9 million. It's currently trading at approximately $2.25 per share with a price-to-book ratio of 2.00 and market cap of over $280 million.
5) Hecla Mining
Hecla Mining Company (NYSE: HL) is the oldest silver and gold mining company in North America, established in 1891 in Coeur d'Alene, Idaho. It is ranked as one of the leading low-cost silver mining companies in the U.S. The company has operating silver mines in Idaho and Alaska, and is rapidly becoming a significant gold producer thanks to its mining operation in Quebec. It has very promising exploration and development projects in five additional gold and silver mining operations in the U.S., Canada and Mexico. The company ranks seventh in world silver reserves with just under 200 million ounces. Its 2017 silver production was 12.5 million ounces.
Hecla's stock has slowly risen to $3.70 since its $1.93 per share price, which neared its 2015 low. The company's solidly established base, diversified revenue stream and promising current development projects have provided a strong environment for the turnaround in recent years.