Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fool’s Silver: Why Most “Silver Miners” Don’t Live Up to Their Name

Commodities / Gold & Silver 2019 Aug 14, 2019 - 04:58 PM GMT

By: MoneyMetals

Commodities

If you buy shares in a silver mining company, you will have to assume additional market risks compared to ownership of silver bullion. You may wish to do so in order to potentially gain leveraged exposure to silver prices.

What you may not realize, however, is that most of the publicly traded “silver” stocks out there are primarily in the business of mining other metals – sometimes gold, often copper, zinc, lead, and other base metals.

Consider Pan American Silver (NYSE:PAAS), a $3.6 billion company that makes up the largest weighting (13.5%) in the Global X Silver Miners ETF (NYSE:SIL).


While Pan American is indeed a producer of silver, its business comes mainly from other metals. According to BMO estimates, only 33% of Pan American Silver’s revenue in 2019 will come from silver production.

Rare is the silver miner that actually derives most of its revenue from silver mining. There are both geological and philosophical reasons behind the paucity of pure silver producers.

Since silver deposits tend to accumulate around other metals, valuable byproducts will be extracted during the mining process. Most silver is produced as a byproduct of mining for base metals, so primary silver mines are few and far between.

Mining company CEOs generally prefer to diversify their revenue streams beyond a single metal to manage risk and become more appealing to Wall Street analysts, bankers, and institutional investors.

Gold and silver bugs who expect mining industry executives to share their bullishness about prices or their commitment to sound money principles will be sorely disappointed. Very few of them are allies to the broader precious metals community.

These companies also tend to be run by geologists, engineers, and accountants who, by their nature, often don’t see the big picture.

A recent and obnoxious example of this problem is Hecla Mining (NYSE:HL), the Idaho-based company that repeatedly refused to support legislative efforts in its home state that nearly ended income taxation on gold and silver.

Add Hecla management’s refusal to reinforce the public policy importance of its own products (to the very state in which it operates) to the reasons this miner’s stock price has gone nowhere but down in recent years, including during silver’s recent rally.

One exception is First Majestic CEO Keith Neumeyer. He is enthusiastic about silver and tuned in to the values and concerns of physical bullion holders. First Majestic Silver (NYSE:AG) is the purest major producer, with 62% of its revenue attributable to its namesake metal.

Of course, you will never find a purer silver play than actual .999 pure silver bullion products.

The further your silver-related investments get from the underlying metal, the more they will be driven by other factors you may not necessarily understand or believe in.

When silver starts becoming a hot commodity again, Wall Street will surely supply a bevy of new “silver” equities and exchange-traded derivative products – most of which will serve to divert casual investors away from investing in silver itself.

Right now one of the easiest – and least efficient – ways for the public to invest in the silver industry is through SIL.

This “Silver Miners” ETF is top heavy with majors that mine mostly other metals. It is also populated with royalty/streaming/exploration companies that do little to no mining. SIL carries an annual expense ratio of 0.65%, which is quite high compared to other passively managed funds.

If your aim is to invest in silver producers, you’re better off focusing on particular companies that deliver the goods. If you lack the time or know-how to pick quality mining stocks, you won’t go wrong by simply owning what they produce via physical bullion.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in