For Immediate Release
Chicago, IL – December 9, 2024 – Today, Zacks Equity Research Pan American Silver Corp. PAAS, Hecla Mining HL, First Majestic Silver AG, MAG Silver MAG and Avino Silver & Gold MinesLtd. ASM.
Industry: Silver Mining
The prospects for the Zacks Mining - Silverindustry look promising on the back of rising silver prices. Global industrial demand for silver is expected to reach record levels in 2024, driven by photovoltaics. Meanwhile, supply is expected to dip 1%. This suggests a fourth consecutive year of deficit for thesilver market which is likely to bolster prices.
We suggest keeping tabs on companies like Pan American Silver Corp., Hecla Mining, First Majestic Silver, MAG Silver and Avino Silver & Gold MinesLtd., which are poised to benefit from solid projects, improved operational efficiency and disciplined cost management.
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 as well.
What's Shaping the Future of the Mining-Silver Industry
Demand to Remain Strong: Per the Silver Institute, total industrial demand for silver in 2024 is expected to surpass last year’s record of 654.4 million ounces and rise 9% year over year to 710.9 million ounces. Notably, industrial applications account for more than 50% of the total silver demand.
Last year, higher-than-expected photovoltaic demand (which rose 64% year over year) and the faster adoption of new-generation solar cells boosted global electrical and electronics demand by 20%. Other green applications, including power grid construction and automotive electrification, contributed to the improvement.
Riding on the same trends, the demand for electrical and electronics is expected to rise 9% year over year in 2024, fueled by 20% growth in photovoltaics. Demand in jewelry is expected to increase 4% year over year to 211.3 million ounces in 2024 and silverware demand is likely to be up 7% to 58.8 million ounces. Both are expected to gain from higher discretionary spending and recover from the declines seen last year.
Overall, total demand for the metal is projected to grow 2% to 1,219 million ounces in 2024, indicating a recovery from the 7% decline in 2023. India’s silver imports are expected to double this year due to rising demand from the solar panel industry and investment demand. Increased demand from the world’s biggest silver consumer could boost silver prices.
Rising Silver Prices Bode Well: Silver has seen a solid year-to-date performance, gaining 31.5%. The rally has been fueled by geopolitical uncertainties and increasing bets of U.S. interest rate cuts. Solid demand amid expectations of a tight supply will keep supporting prices.
Per the Silver Institute, while demand remains high, mine production is expected to dip 1% year over year in 2024, as increased output from Mexico and the United States is expected to be negated by declines in Peru and China. This sets the stage for a deficit of 215.3 million ounces, the second-largest in more than 20 years. This will likely mark the fourth consecutive year of a deficit.
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.
Zacks Industry Rank Indicates Bright Prospects
The group's Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright prospects in the near term. The Zacks Mining - Silver industry, a nine-stock group within the broader Zacks Basic Materialssector, currently carries a Zacks Industry Rank #81, which places it in the top 32% of 251 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.
Before we present a few Mining-Silver stocks that can be retained in one’s portfolio, it is worth taking a look at the industry’s stock-market performance and valuation picture.
Industry Versus Broader Market
The Mining-Silver Industry has outperformed the sector over the past year and the Zacks S&P 500 composite over the same time frame.
The stocks in this industry have collectively gained 36.7% in the past year compared with the Basic Material sector’s 3.8% rise. Meanwhile, the Zacks S&P 500 composite has risen 32.7%.
Industry's Current Valuation
Based on the trailing 12-month EV/EBITDA ratio, a commonly used multiple for valuing silver-mining companies, we see that the industry is currently trading at 11.68X compared with the S&P 500's 18.91X and the Basic Material sector's trailing 12-month EV/EBITDA of 11.77X.
Over the past five years, the industry has traded as high as 33.55X and as low as 10.28X, the median being 15.89X.
5 Mining-Silver Stocks to Watch
MAG Silver: The company’s principal asset is the high-margin underground silver project Juanicipio in Zacatecas, Mexico. The company holds 44% interest in the project. In the third quarter of 2024, Juanicipio achieved silver and silver-equivalent productions of 4.9 million ounces and 7.1 million ounces, respectively.
With continued operational outperformance, silver grades in 2024 are expected to be at the top end of the revised grade guided range of 420 - 460 grams per ton. An expanded exploration program is in place for Juanicipio to look for multiple highly prospective targets. MAG is also executing multi-phase exploration programs at the 100% earn-in Deer Trail Project in Utah and the 100% owned Larder Project, located in the historically prolific Abitibi region of Canada.
The Zacks Consensus Estimate for this Vancouver, Canada-based company’s 2024 earnings indicates around 60% growth from the year-ago figure. The estimate has moved 12% north over the past 90 days. MAG has a trailing four-quarter earnings surprise of 17.1%, on average. The company currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Avino Silver Mines: The Avino mine delivered a 13% year-over-year improvement to 670,887 silver equivalent ounces in the third quarter of 2024, resulting from overall mill performance and availability. ASM remains on track to likely achieve its targeted production range of 2.5 - 2.8 million silver equivalent ounces in 2024.
Following the signing of a long-term land-use agreement with a local community for the La Preciosa project in Durango, Mexico, ASM’s operations team is in the final stages for approval to move forward with the underground development. 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 also completed 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. 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 remained unchanged over the past 90 days. ASM has a trailing four-quarter earnings surprise of 75%, on average and currently carries a Zacks Rank of 2.
First Majestic Silver: The company recently inked a deal to acquire Gatos Silver, Inc. Through the deal, which is expected to close in early 2025, AG will gain 70% interest in the high-quality and long-life Cerro Los Gatos underground mine. It will solidify First Majestic’s position as an intermediate primary silver producer with a strong balance sheet and margins. The acquisition is expected to immediately boost its free cash flow and lead to meaningful synergies.
In the third quarter of 2024, First Majestic’s total production reached 5.5 million silver-equivalent ounces, which consisted of around 1.97 million silver ounces and 41,761 gold ounces. On a sequential basis, silver equivalent production grew 4%. AG maintains production guidance at 21.4 - 22.6 million silver-equivalent ounces for 2024.
The Zacks Consensus Estimate for this Vancouver Canada-based company’s current-year earnings has increased 55% in the past 90 days. First Majestic currently carries a Zacks Rank #3 (Hold).
Hecla Mining: The company produced 3.6 million ounces of silver in the third quarter of 2024, up 3% year over year. Lucky Friday had a strong quarter as the mill achieved the second-highest throughput in its 80-year history. HL expects silver production to be in the range of 16-17 million ounces in 2024, whereas it produced 14.3 million ounces in 2023. The company intends to take this up to 20 million ounces of silver by 2026.
Driven by its relentless focus on continuous improvement and innovation, Hecla Mining has achieved a 25% increase in silver reserves, a 38% rise in silver production and 27% growth in revenues in the past five years. HL currently mines nearly 50% of silver in the United States, which makes it the largest silver producer in the country. Once Keno Hill reaches full production, the company will be the largest silver producer in Canada as well.
The Coeur d'Alene, ID-based company has a trailing four-quarter earnings surprise of 50%, on average. The Zacks Consensus Estimate for HL’s fiscal 2024 earnings indicates year-over-year growth of 700%. The estimate has moved up 50% in the past 90 days. HL currently carries a Zacks Rank of 3.
Pan American Silver: The company’s acquisition of Yamana Gold in 2023 was a transformational and strategic transaction that strengthened its position as a leader in silver and gold production in Latin America. This deal added long-life, low-cost assets and boosted the company’s portfolio to 12 operating mines. PAAS is on track to drive growth 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 a ventilation infrastructure in mid-2024.
The company recently completed the sale of the La Arena to Zijin for $245 million in cash consideration. PAAS was also granted a life-of-mine gold net smelter return royalty of 1.5% for the La Arena II project.
The Zacks Consensus Estimate for the company’s fiscal 2024 earnings indicates a year-over-year surge of 525%. The estimate has moved up 32% in the past 90 days. PAAS currently carries a Zacks Rank of 3.
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