The junior silver stocks we’ve dug up have a lot of leverage to a rising silver price
SmallCapPower | July 28, 2020: The gold price hit a new record high Monday, yet silver gained about 8% on the day. Up until the most recent quarter, silver had been lagging gold’s performance but that seems to be changing. Given that the silver price would need to double to reach its all-time high, precious metals investors could argue that silver should have a greater percentage upside going forward. That being said, today we have identified three junior silver stocks with big leverage to a rising price of silver.
*Returns are based on closing stock prices as of July 27, 2020
Fortuna Silver Mines Inc. (TSX:FVI) – $9.64
Fortuna Silver Mines is a precious metals producer with assets that include the Caylloma silver mine in Peru, the San Jose silver-gold mine in Mexico and the Lindero Gold Project, currently under construction, in Argentina. On May 14, 2020, Fortuna Silver reported a six-fold increase year over year in its first-quarter free cash flow to US$14.2 million. The Company added that it plans opex and capex reductions of US$23 million for 2020 in response to the new COVID-19 business environment. Significant upside for this stock could come from the start of production at the Lindero open pit heap leach gold mine, in which Fortuna said its construction was about 94% complete as of March 31, 2020. The Argentine mine is expected to be one of the most profitable mining operations.
- Year-to-Date Return: 82%
MAG Silver Corp. (TSX:MAG) – $23.74
MAG Silver is a development and exploration company focused on becoming a top-tier primary silver mining company. Its principal asset is its 44% stake in the Juanicipio Project in Mexico, being developed in a Joint Venture with Fresnillo. Underground production at Juanicipio is scheduled for Q3 2020 and it is expected to become one of the world’s largest silver mines. A 2017 resource estimate at Juanicipio showed 176 million Indicated silver ounces at 427 grams per tonne. In April, Eric Sprott invested C$60 million into MAG Silver via a non-brokered private placement.
- Year-to-Date Return: 55%
Discovery Metals Corp. (TSXV:DSV) – $1.97
Discovery Metals is developing its flagship 100%-owned Cordero silver project in Mexico, which the Company claims is the world’s fourth-largest undeveloped silver resource. On Friday, Discovery Metals announced a $15 million investment from Eric Sprott via a non-brokered private placement at a price of C$1.35 per unit, as part of a $35 million financing that will see the Company have C$75 million in cash for future exploration and project development upon closing. Mr. Sprott called Discovery Metals “one of my largest investments in the silver space.”
- Year-to-Date Return: 199%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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