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5 Silver Mining Stocks to Watch Amid Industry Challenges
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In 2023, silver prices witnessed a 1.2% decline due to factors such as rising interest rates, a stronger dollar and weak industrial demand. This impacted the performance of the Zacks Mining - Silver industry. Despite gaining in early 2024, scaled-back expectations of the Federal Reserve's monetary easing and apprehensions of China's economy have been impacting silver prices lately.
Given the circumstances, we recommend considering companies such as Pan American Silver (PAAS - Free Report) , Hecla Mining (HL - Free Report) , Fortuna Silver Mines (FSM - Free Report) , Vizsla Silver (VZLA - Free Report) and Avino Silver Mines (ASM - Free Report) , which will benefit from enhanced operational efficiency, disciplined cost management and solid projects.
About the Industry
The Zacks Mining - Silver industry comprises companies that are engaged in the exploration, development and production of silver. These include big and small players operating mines of widely varying types and scales. Silver-bearing ores are mined by open-pit or underground methods and then crushed and ground. Miners continually look for opportunities to expand their reserves and resources through targeted near-mine exploration and business development. They strive to upgrade and improve the quality of their existing assets, internally and through acquisitions. Only 20% of silver comes from mining activities, wherein silver is the primary revenue source. The balance comes from projects wherein silver is a by-product of mining other metals, such as copper, lead and zinc. Thus, several companies in the silver mining industry are engaged in mining other metals.
What's Shaping the Future of the Mining-Silver Industry
The Volatility in Prices is Concerning: In 2023, silver prices fluctuated between $19.83 and $26.44 per ounce, averaging $23.54. While safe-haven demand from the banking crisis and geopolitical tensions provided some support, higher interest rates and a strong dollar limited price increases. The industrial sector's contraction further pressured silver prices, considering that industrial demand makes up more than half of silver’s demand. Due to these factors, silver prices declined 1.2% in 2023. However, silver prices have gained 5.4% so far in 2024, ranging from $21.94 to a high of $25.80. Until February 2024, the Institute for Supply Management’s (“ISM”) manufacturing index remained in the contraction territory, which weighed on silver prices. However, it was buoyed by growing expectations that the Fed would ease interest rates. In March 2024, the ISM index rose to 50.3%, indicating expansion. This stronger-than-anticipated data prompted traders to readjust their bets on the Fed's interest rate cuts. Markets now anticipate a 55% chance of a Fed interest rate reduction in June 2024, causing silver prices to lose momentum.
Efforts to Combat Inflationary Costs to Aid Margins: Industry players are facing escalating production costs, including electricity, wages, water and materials. Mining companies are major consumers of energy, with around 50% of their production costs closely linked to energy prices. A shortage of skilled workforce spiked wages. With no control over silver prices, the industry must focus on improving its sales volumes, while being cost-effective. Players are investing heavily in R&D and resorting to technological innovations required at almost every level of operation to increase efficiency, sustain growth and rein in costs.
Demand to Remain Strong: Global silver demand is expected to rise 1% year over year and reach 1.2 billion ounces in 2024. If this is achieved, it would be the second-highest level on record. Jewelry demand is expected to rise 6%, with India contributing the bulk of gains this year amid a positive economic backdrop. Industrial demand for silver is expected to grow, as ongoing vehicle electrification, the rising adoption of 5G technologies and the governmental focus on green infrastructure will drive demand. Changes to solar panel technology are accelerating the demand for silver and are expected to make up a major portion of silver consumption. The upside will mainly stem from China, as the country is expected to install more panels. Solid demand in all key sectors amid tight supply is expected to support silver prices.
Zacks Industry Rank Indicates Lackluster Prospects
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates gloomy prospects in the near term. The Zacks Mining – Silver industry, a nine stock group within the broader Zacks Basic Materials sector, currently carries a Zacks Industry Rank #142, which places it in the bottom 40% of 238 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. In the past three months, the industry’s earnings estimates for the current year have moved down 85%.
Despite the bleak near-term prospects, we will present a few Mining-Silver stocks that you can add to your portfolio, given their prospects. But it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Versus Broader Market
The Mining-Silver Industry has underperformed the S&P 500 and its sector in the past year. The stocks have collectively declined 9.7% in the past year compared with the Zacks S&P 500's rise of 27.7%. Meanwhile, the Zacks Basic Material sector has risen 4.6%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing silver-mining companies, we see that the industry is currently trading at 5.88X compared with the S&P 500's 12.55X and the Basic Material sector's forward 12-month EV/EBITDA of 7.10X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) F12M Ratio
Enterprise Value/EBITDA (EV/EBITDA) F12M Ratio
In the past five years, the industry has traded as high as 16.58X and as low as 4.54X, with the median being 7.89X.
5 Mining-Silver Stocks to Keep an Eye on
Pan American Silver: The company’s acquisition of Yamana Gold, which was completed in 2023, is a transformational and strategic transaction that will strengthen its position as the leader in silver and gold production in Latin America. The integration is progressing well and Pan American Silver is on track to realizing the targeted $40-$60 million in annual synergies. This deal added long-life, low-cost assets and boosted the company’s portfolio to 12 operating mines. This was evident in the company’s 2023 results, with production improving 11% for silver and 60% for gold. PAAS seems poised to deliver a further increase in silver and gold production in 2024, with a full-year contribution from the acquisition and higher production at La Colorada following the completion of the new ventilation infrastructure last year. The company has been selling its non-core assets to optimize its portfolio. This will also help lower its annual project development, reclamation, and care and maintenance costs.
The Zacks Consensus Estimate for the company’s fiscal 2024 earnings indicates year-over-year growth of 167%. The estimate has moved up 23% in the past 30 days. PAAS currently carries a Zacks Rank #3 (Hold).
Hecla Mining: For 2023, the company reported the second-largest silver reserves, largest gold resource, and second-highest silver production and revenues in its history. This is commendable, considering that operations at Lucky Friday were halted for five months due to fire. The upside was driven by the strong performance at Greens Creek. Keno Hill produced 1.5 million ounces in 2023, with the Bermingham deposit achieving the highest mined tonnage in December. The Lucky Friday mine has restarted production this year and is expected to produce 5-5.3 million ounces of silver in 2024. Consolidated silver production is expected to increase year over year to 16.5-17.5 million ounces in 2024 and increase 30% from that recorded in 2023 to 18.0-20.0 million ounces by 2026. The company already produces 45% of the U.S. silver, and has the largest and highest-grade silver reserve base in the United States. It is gearing up to be Canada’s largest silver producer by 2024.
The Zacks Consensus Estimate for Coeur d'Alene, ID-based HL’s fiscal 2024 earnings indicates year-over-year growth of 200%. The estimate has been unchanged in the past 30 days. HL currently carries a Zacks Rank #3.
Price & Consensus: HL
Fortuna Silver: In 2023, the company achieved a record gold-equivalent production of 452,389 ounces, marking a 13% increase from 2022. Capital allocation priorities for 2024 aim to enhance balance sheet flexibility through debt reduction and funding aggressive organic growth programs, including approximately 200,000 meters of exploration drilling across the portfolio, with a focus on the Diamba Sud project in Senegal and the Séguéla Mine in Côte d'Ivoire. The company's strategy focuses on maximizing production while maintaining operational efficiencies to lower cash costs. Its disciplined approach to seeking new deposits or pursuing mergers and acquisitions will drive growth.
The Zacks Consensus Estimate for Fortuna Silver's 2024 loss has narrowed over the past 30 days from 36 cents to 12 cents. The company has a trailing four-quarter earnings surprise of 135%, on average. FSM currently carries a Zacks Rank of 3.
Price & Consensus: FSM
Vizsla Silver: The company recently entered an agreement to acquire the La Garra-Metates district located in the silver-gold-rich Panuco-San Dimas corridor. Studies conducted by Vizsla Silver’s geologists indicate the presence of at least two vein systems with respective strike lengths of 2.6 km and 1.8 km carrying significant silver and gold grades. VZLA is, meanwhile, advancing its flagship, 100%-owned high-grade Panuco silver-gold project in Sinaloa, Mexico, which is one of the highest-grade silver primary discoveries in the world. Vizsla Silver has already completed more than 350,000 meters of drilling at Panuco, leading to the discovery of several high-grade veins. In 2024, VZLA allocated funds for more than 60,000 meters of resource/discovery-based drilling aimed at upgrading and expanding the mineral resource and exploring other high-priority targets in the region.
The Zacks Consensus Estimate for this Vancouver, Canada-based player’s 2024 bottom line is pegged at a loss of 5 cents per share, which indicates a slight improvement from the loss of 6 cents reported in fiscal 2023. The estimate has been unchanged over the past 30 days. The company has a trailing four-quarter earnings surprise of 12.50%, on average. VZLA currently carries a Zacks Rank of 3.
Price & Consensus: VZLA
Avino Silver Mines: The company recently signed a long-term land-use agreement with a local community for the development of La Preciosa in Durango, Mexico. La Preciosa hosts one of the largest undeveloped primary silver resources in Mexico. Also, La Preciosa’s proximity to the Avino mine and infrastructure could yield numerous financial and operational synergies. This project is expected to play a significant role in ASM’s target to become an intermediate silver producer in Mexico. ASM recently announced the completion of the Pre-Feasibility Study for its Oxide Tailings Project at the Avino Mine Operations. This is a milestone in its growth trajectory, as the Oxide Tailings Project is considered one of the growth catalysts. At its flagship Avino mine, the company witnessed a noticeable increase in grade and recovery lately and this trend is expected to continue. The company’s strong cost-control measures are expected to continue to aid its margins.
The Zacks Consensus Estimate for this Vancouver, Canada-based player’s 2024 earnings has moved up 50% over the past 30 days. ASM currently carries a Zacks Rank #3.
Price & Consensus: ASM
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5 Silver Mining Stocks to Watch Amid Industry Challenges
In 2023, silver prices witnessed a 1.2% decline due to factors such as rising interest rates, a stronger dollar and weak industrial demand. This impacted the performance of the Zacks Mining - Silver industry. Despite gaining in early 2024, scaled-back expectations of the Federal Reserve's monetary easing and apprehensions of China's economy have been impacting silver prices lately.
Given the circumstances, we recommend considering companies such as Pan American Silver (PAAS - Free Report) , Hecla Mining (HL - Free Report) , Fortuna Silver Mines (FSM - Free Report) , Vizsla Silver (VZLA - Free Report) and Avino Silver Mines (ASM - Free Report) , which will benefit from enhanced operational efficiency, disciplined cost management and solid projects.
About the Industry
The Zacks Mining - Silver industry comprises companies that are engaged in the exploration, development and production of silver. These include big and small players operating mines of widely varying types and scales. Silver-bearing ores are mined by open-pit or underground methods and then crushed and ground. Miners continually look for opportunities to expand their reserves and resources through targeted near-mine exploration and business development. They strive to upgrade and improve the quality of their existing assets, internally and through acquisitions. Only 20% of silver comes from mining activities, wherein silver is the primary revenue source. The balance comes from projects wherein silver is a by-product of mining other metals, such as copper, lead and zinc. Thus, several companies in the silver mining industry are engaged in mining other metals.
What's Shaping the Future of the Mining-Silver Industry
The Volatility in Prices is Concerning: In 2023, silver prices fluctuated between $19.83 and $26.44 per ounce, averaging $23.54. While safe-haven demand from the banking crisis and geopolitical tensions provided some support, higher interest rates and a strong dollar limited price increases. The industrial sector's contraction further pressured silver prices, considering that industrial demand makes up more than half of silver’s demand. Due to these factors, silver prices declined 1.2% in 2023. However, silver prices have gained 5.4% so far in 2024, ranging from $21.94 to a high of $25.80. Until February 2024, the Institute for Supply Management’s (“ISM”) manufacturing index remained in the contraction territory, which weighed on silver prices. However, it was buoyed by growing expectations that the Fed would ease interest rates. In March 2024, the ISM index rose to 50.3%, indicating expansion. This stronger-than-anticipated data prompted traders to readjust their bets on the Fed's interest rate cuts. Markets now anticipate a 55% chance of a Fed interest rate reduction in June 2024, causing silver prices to lose momentum.
Efforts to Combat Inflationary Costs to Aid Margins: Industry players are facing escalating production costs, including electricity, wages, water and materials. Mining companies are major consumers of energy, with around 50% of their production costs closely linked to energy prices. A shortage of skilled workforce spiked wages. With no control over silver prices, the industry must focus on improving its sales volumes, while being cost-effective. Players are investing heavily in R&D and resorting to technological innovations required at almost every level of operation to increase efficiency, sustain growth and rein in costs.
Demand to Remain Strong: Global silver demand is expected to rise 1% year over year and reach 1.2 billion ounces in 2024. If this is achieved, it would be the second-highest level on record. Jewelry demand is expected to rise 6%, with India contributing the bulk of gains this year amid a positive economic backdrop. Industrial demand for silver is expected to grow, as ongoing vehicle electrification, the rising adoption of 5G technologies and the governmental focus on green infrastructure will drive demand. Changes to solar panel technology are accelerating the demand for silver and are expected to make up a major portion of silver consumption. The upside will mainly stem from China, as the country is expected to install more panels. Solid demand in all key sectors amid tight supply is expected to support silver prices.
Zacks Industry Rank Indicates Lackluster Prospects
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates gloomy prospects in the near term. The Zacks Mining – Silver industry, a nine stock group within the broader Zacks Basic Materials sector, currently carries a Zacks Industry Rank #142, which places it in the bottom 40% of 238 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. In the past three months, the industry’s earnings estimates for the current year have moved down 85%.
Despite the bleak near-term prospects, we will present a few Mining-Silver stocks that you can add to your portfolio, given their prospects. But it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Versus Broader Market
The Mining-Silver Industry has underperformed the S&P 500 and its sector in the past year. The stocks have collectively declined 9.7% in the past year compared with the Zacks S&P 500's rise of 27.7%. Meanwhile, the Zacks Basic Material sector has risen 4.6%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing silver-mining companies, we see that the industry is currently trading at 5.88X compared with the S&P 500's 12.55X and the Basic Material sector's forward 12-month EV/EBITDA of 7.10X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) F12M Ratio
Enterprise Value/EBITDA (EV/EBITDA) F12M Ratio
In the past five years, the industry has traded as high as 16.58X and as low as 4.54X, with the median being 7.89X.
5 Mining-Silver Stocks to Keep an Eye on
Pan American Silver: The company’s acquisition of Yamana Gold, which was completed in 2023, is a transformational and strategic transaction that will strengthen its position as the leader in silver and gold production in Latin America. The integration is progressing well and Pan American Silver is on track to realizing the targeted $40-$60 million in annual synergies. This deal added long-life, low-cost assets and boosted the company’s portfolio to 12 operating mines. This was evident in the company’s 2023 results, with production improving 11% for silver and 60% for gold. PAAS seems poised to deliver a further increase in silver and gold production in 2024, with a full-year contribution from the acquisition and higher production at La Colorada following the completion of the new ventilation infrastructure last year. The company has been selling its non-core assets to optimize its portfolio. This will also help lower its annual project development, reclamation, and care and maintenance costs.
The Zacks Consensus Estimate for the company’s fiscal 2024 earnings indicates year-over-year growth of 167%. The estimate has moved up 23% in the past 30 days. PAAS currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: PAAS
Hecla Mining: For 2023, the company reported the second-largest silver reserves, largest gold resource, and second-highest silver production and revenues in its history. This is commendable, considering that operations at Lucky Friday were halted for five months due to fire. The upside was driven by the strong performance at Greens Creek. Keno Hill produced 1.5 million ounces in 2023, with the Bermingham deposit achieving the highest mined tonnage in December. The Lucky Friday mine has restarted production this year and is expected to produce 5-5.3 million ounces of silver in 2024. Consolidated silver production is expected to increase year over year to 16.5-17.5 million ounces in 2024 and increase 30% from that recorded in 2023 to 18.0-20.0 million ounces by 2026. The company already produces 45% of the U.S. silver, and has the largest and highest-grade silver reserve base in the United States. It is gearing up to be Canada’s largest silver producer by 2024.
The Zacks Consensus Estimate for Coeur d'Alene, ID-based HL’s fiscal 2024 earnings indicates year-over-year growth of 200%. The estimate has been unchanged in the past 30 days. HL currently carries a Zacks Rank #3.
Price & Consensus: HL
Fortuna Silver: In 2023, the company achieved a record gold-equivalent production of 452,389 ounces, marking a 13% increase from 2022. Capital allocation priorities for 2024 aim to enhance balance sheet flexibility through debt reduction and funding aggressive organic growth programs, including approximately 200,000 meters of exploration drilling across the portfolio, with a focus on the Diamba Sud project in Senegal and the Séguéla Mine in Côte d'Ivoire. The company's strategy focuses on maximizing production while maintaining operational efficiencies to lower cash costs. Its disciplined approach to seeking new deposits or pursuing mergers and acquisitions will drive growth.
The Zacks Consensus Estimate for Fortuna Silver's 2024 loss has narrowed over the past 30 days from 36 cents to 12 cents. The company has a trailing four-quarter earnings surprise of 135%, on average. FSM currently carries a Zacks Rank of 3.
Price & Consensus: FSM
Vizsla Silver: The company recently entered an agreement to acquire the La Garra-Metates district located in the silver-gold-rich Panuco-San Dimas corridor. Studies conducted by Vizsla Silver’s geologists indicate the presence of at least two vein systems with respective strike lengths of 2.6 km and 1.8 km carrying significant silver and gold grades. VZLA is, meanwhile, advancing its flagship, 100%-owned high-grade Panuco silver-gold project in Sinaloa, Mexico, which is one of the highest-grade silver primary discoveries in the world. Vizsla Silver has already completed more than 350,000 meters of drilling at Panuco, leading to the discovery of several high-grade veins. In 2024, VZLA allocated funds for more than 60,000 meters of resource/discovery-based drilling aimed at upgrading and expanding the mineral resource and exploring other high-priority targets in the region.
The Zacks Consensus Estimate for this Vancouver, Canada-based player’s 2024 bottom line is pegged at a loss of 5 cents per share, which indicates a slight improvement from the loss of 6 cents reported in fiscal 2023. The estimate has been unchanged over the past 30 days. The company has a trailing four-quarter earnings surprise of 12.50%, on average. VZLA currently carries a Zacks Rank of 3.
Price & Consensus: VZLA
Avino Silver Mines: The company recently signed a long-term land-use agreement with a local community for the development of La Preciosa in Durango, Mexico. La Preciosa hosts one of the largest undeveloped primary silver resources in Mexico. Also, La Preciosa’s proximity to the Avino mine and infrastructure could yield numerous financial and operational synergies. This project is expected to play a significant role in ASM’s target to become an intermediate silver producer in Mexico. ASM recently announced the completion of the Pre-Feasibility Study for its Oxide Tailings Project at the Avino Mine Operations. This is a milestone in its growth trajectory, as the Oxide Tailings Project is considered one of the growth catalysts. At its flagship Avino mine, the company witnessed a noticeable increase in grade and recovery lately and this trend is expected to continue. The company’s strong cost-control measures are expected to continue to aid its margins.
The Zacks Consensus Estimate for this Vancouver, Canada-based player’s 2024 earnings has moved up 50% over the past 30 days. ASM currently carries a Zacks Rank #3.
Price & Consensus: ASM