This Could Be the Best Play on Silver Prices
Silver prices increased roughly 15% in 2016, and the fundamentals suggest that much bigger gains could be ahead in 2017.
What to do when silver prices are setting up to soar?
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The easiest way for investors to benefit is to go buy silver bullion, be it coins or bars. But understand that the returns may not be as lucrative as other types of investments.
Here’s what investors must know: if they believe that silver prices could soar in the coming years, they should pay attention to silver mining companies. Silver mining stocks could provide five to ten times the return over silver prices. The idea behind this is very simple: if silver prices go up by 50%, bullion will go up by that amount, most likely.
For mining companies, it could be different. If a mining company produces an ounce of silver for $10.00 and silver prices increase, its profitability improves immensely. Its stock price will reflect this as well.
One mining company that investors might want to pay attention to is Pan American Silver Corp. (NASDAQ:PAAS). It is one of the largest primary silver producers in the world.
Why Pan American Silver Could Be the Best Play on Silver Prices…
You see, when it comes to picking mining companies, usually companies with low production costs, cash on hand, solid reserves and resources in the ground, and strong management do well when silver prices move higher.
Pan American Silver has got it all. But before going into any details, know this: as silver prices went up about 15% in 2016, PAAS stock increased over 140%.
The company’s production costs are declining. In the first nine months of 2016, Pan American Silver’s all-in sustaining cost per silver ounce was $10.10. In the same period a year ago, it was $14.99. This represents a decline of 32% year-over-year. (Source: “Pan American Silver announces net earnings of $0.28 per share in the third quarter, and revises 2016 outlook for silver production and costs,” Pan American Silver Corp., November 14, 2016.)
As for cash on hand, at the end of the third quarter, cash and cash equivalents and short-term investments at Pan American Silver amounted to $245.3 million. Working capital was $434.2 million, and total debt was $47.0 million.
Silver reserves and resources are simply astonishing as well. Pan American Silver’s reserves amounted to 280.1 million ounces of silver. Its resources amounted to 721 million ounces of silver. (Source: “Pan American Silver Corporation Mineral Reserves and Resources As of December 31, 2015,” Pan American Silver Corp., last accessed December 30, 2016.)
The leadership of the company is solid, too. It’s led by big names like Ross J. Beaty and others who are very well versed in the mining industry, and who have significant experience in areas where the company has its properties.
If silver prices see a bull run in 2017, it wouldn’t be shocking to see PAAS stock surge in value.
Please note: The above content is not a recommendation to buy; rather, it is information about what kinds of opportunities exist for investors.
