Silver Miners’ Q1’21 Fundamentals

The silver miners’ stocks have mostly been consolidating high since last summer. While they’ve enjoyed some sharp rallies, those have been within that sideways-grind trend. That lack of overall upside progress has left this tiny contrarian sector out of favor, with apathy reigning. But as their recently-reported Q1’21 operating and financial results revealed, silver stocks’ fundamentals and upside potential remain good.

There aren’t many major silver miners in the world, and only a handful are primary silver producers that derive over half their revenues from silver. With such a small population, there are only a few silver-stock ETFs. The leading one is still the SIL, Global X Silver Miners ETF, which is also this tiny sector’s best benchmark. But nearing the end of Q1’21’s earnings season in mid-May, it only held $1.3b in net assets.

Following a mighty upleg that peaked in early August at SIL $51.53, the silver stocks have largely drifted laterally since. But their high trading range has been wide, encompassing both corrections and attempts at new uplegs. Plenty of speculators and investors are still interested in this obscure sector, as evidenced by an amazing episode in late January. That catapulted SIL a blistering 23.9% higher in just three trading days!

Bullion, Silver, Bars, Silver Bars, Metal, Old, Gray

Image Source: Pixabay

That was when Reddit’s famous wallstreetbets forum appeared to be starting to discuss engineering a silver short squeeze with massive retail buying. At the time I wrote a whole essay analyzing that. For our purposes today, that fascinating event proved that the right catalyst can still ignite big inflows into silver and its miners’ stocks. Unfortunately SIL resumed correcting after that, slumping on balance into late March.

But since then it has recovered, mirroring gold stocks’ march higher in a young upleg. By mid-May as last quarter’s earnings season was wrapping up, SIL had rebounded 18.7% in six weeks to $45.97. While that lagged gold stocks, it still made for a technically-sound upleg carving series of higher lows and higher highs. But back in Q1 SIL actually fell 12.5% despite that Reddit spike, fueling much bearish sentiment.

How were the major silver miners actually faring fundamentally while their stocks corrected with silver? Their weak stock-price performance was reasonable, as silver was dragged 7.4% lower that quarter by gold’s own 10.0% slide. The silver stocks normally amplify material gold and silver moves due to their inherent profits leverage to those precious metals. But SIL’s Q1 slide wasn’t fundamentally-justified.

For 20 quarters in a row now, soon after earnings seasons I’ve painstakingly analyzed the latest operating and financial results from the top 15 SIL component companies. These rarefied ranks include some of the biggest silver miners on the planet, and command fully 87.0% of SIL’s total weightings. While it takes a lot of time, effort, and expertise to digest these quarterly reports, the fundamental insights are well worth it.

This table summarizes the operational and financial highlights from the SIL top 15 during Q1’21. These major silver miners’ stock symbols aren’t all US listings, and are preceded by their rankings changes within SIL over the past year. The shuffling in their ETF weightings reflect changing market caps, which reveal both outperformers and underperformers since Q1’20. The symbols are followed by current SIL weightings.

Next comes these miners’ Q1’21 silver and gold production in ounces, along with their year-over-year changes from the comparable Q1’20. Output is the lifeblood of this industry, with investors generally prizing production growth above everything else. After that is a measure of silver miners’ relative purity, their percentage of quarterly sales actually derived from silver. Most silver miners also produce gold or base metals.

Generally, the more silver-centric a miner, the more responsive its stock price is to changing silver prices. So traders looking for leveraged silver exposure via its miners’ stocks should stick to the purer producers. Then the costs of wresting that silver from the bowels of the earth are shown in per-ounce terms, both cash costs and all-in sustaining costs. The latter subtracted from silver prices help illuminate profitability.

That is followed by these miners’ hard quarterly revenues and earnings reported to securities regulators. Blank data fields mean companies hadn’t reported that particular data as of mid-May when Q1’s earnings season was winding down. And annual percentage changes are also excluded if they would prove misleading, like comparing two negative numbers or data shifting from positive to negative or vice versa.

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