The Shiniest Catch in Silver

To borrow a phrase from fishing folk: this is why they call it mining, and not producing. Mining for metals is an unforgiving challenge, but miners chase their quarry like fishermen in pursuit of the perfect haul.

Coeur d'Alene Mines (NYSE: CDE  ) turned in the kind of quarter that could inspire sea shanties. The miner once again topped its own record for quarterly revenue, reeling in $89.8 million for a 146% increase over prior-year levels. Silver production increased 86% to 5.2 million ounces -- alongside a 222% surge in gold volumes -- as the Palmarejo mine in Mexico continued to ramp up toward design capacity. Palmarejo's silver output increased an incredible 117% sequentially over strong second-quarter production.

Meanwhile, the biggest catch of Coeur's season is the 40% expansion of Palmarejo's mineral wealth, achieved through exploration of the nearby Guadalupe deposit. The upgrade brings proven and probable reserves to 88.6 million ounces of silver and 1.1 million ounces of gold, and substantially enhances life-of-mine cash flow expectations. At $8.76 per ounce, costs remain high, but by 2010 each ounce of silver could cost as little as $1.50 to mine as annual production reaches 9 million ounces. Each deck hand will receive ... oh wait, wrong show. This is the shiniest catch.

What's the catch?
Celebrations for fishermen are short-lived, as thoughts quickly return to all that can potentially go wrong. Precious metal investors are similarly aware that operational snags like those reported by Kinross Gold (NYSE: KGC  ) and Agnico-Eagle Mines (NYSE: AEM  ) can strike at any time. The Bolivian government's move to cease mining on that portion of San Bartolome that lies above 4,400 meters of elevation -- reportedly relating to stability concerns in underground works mined by other parties -- forced the company to reduce fourth quarter production guidance by 500,000 silver ounces.

Also, while rival Hecla Mining (NYSE: HL  ) turned in a profitable quarter on the strength of very low cash costs of $0.85 per ounce, Coeur recorded a $17.3 million loss as the company works through royalties and lease agreements initiated during the company's darkest hour.

The shiniest catch in silver?
Despite the San Bartolome glitch and quarterly loss, I consider Coeur d'Alene Mines a serious silver standout. Hecla has the upper hand in operating costs, Pan American Silver (Nasdaq: PAAS  ) boasts a pending acquisition, and Silvercorp Metals' (NYSE: SVM  ) just moved to the illustrious big board. The competition is fierce, but I view Silver Wheaton (NYSE: SLW  ) as the undisputed star of the silver screen. Which silver producer do you consider the shiniest catch? Please vote in our Motley Poll and share your views in the comments section below. You won't hurt my feelings ... I own them all.

Fool contributor Christopher Barker carries a silver coin that reads: "Honest value never fails." He can be found blogging actively and acting Foolishly in the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Agnico-Eagle Mines, Coeur d'Alene Mines, Hecla Mining, Kinross Gold, Pan American Silver, Silvercorp Metals, and Silver Wheaton. The Motley Fool's disclosure policy is 0.999 pure.


Read/Post Comments (11) | Recommend This Article (20)

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  • Report this Comment On November 06, 2009, at 5:50 PM, ndfaninsb wrote:

    I love silver wheaton but on a cost per oz basis, silvercorp is producing at NEGATIVE $$'s per oz!

  • Report this Comment On November 06, 2009, at 6:41 PM, jesusfreakinco wrote:

    Sincy,

    Who am I am to argue with you... SLW it is!

    Although... I am more weighted in CDE for some darn reason...

    I just wish I bought more TGB and NG awhile back. They have stood out this year.

    JFC

  • Report this Comment On November 07, 2009, at 3:13 AM, TimoDOZ wrote:

    I found value in the HL-C, the near term convert with it's 4 qtrs of "!!!SUSPENDED DISTRIBUTIONS!!!". Some times there is value in the trash heap. I started a position before the company came up with the $38 million to pay down debt. All the signals were there based on their cost/ohzee , and the value of the product(s) they produce soaring YTD. A thinly traded issue so I was able to pick up one partial position on a wish limit order of $48.54. My total investment for 4 weeks was less than $6050 and I sold in two partials for a +$1300 gain. Something about "CUMULATIVE" distributions and a $1 billion market cap company becoming a 1.25 Billion market cap company most likely not turning out to be a dead beat on the $650 in distributions now due in the the next 8 weeks on the shares. Of course there is/was risk as against the conversion ratio. A sell off in silver back to just below $16 might make for an opportunity to dip in a toe again. When do the PMs become a bubble? HL from below $4 to a $5.31 handle intra-day on 11/6, in just a couple of weeks. So $3.98 is probably not likely after the earnings report and several analyast's up-grades, but a $4.49 looks like a very good chance to enter. Franco -Nevada reports on Monday or Tues? We shall see what it looks like. Three miners died in the Quebec gold mines this past week. The danger of this enterprise is not limited just to places like Indonesia and West Africa. As far as those places go...the NIB has come in nicely to near a 1 month low. A near but better than a 1:10 ratio on an exchange into NIB from HL. Supply could eventually increase but in places like West Africa they find killing each other more satisfying than prudent forestry management. If the product has indeed reached a peak oil scenario and there is always less production of something that unlike Pm's is not recycled but consumed like oil ....

  • Report this Comment On November 07, 2009, at 4:05 AM, zandpan wrote:

    which cde or slw will the best performer in 2010 ? Idon't care ! I have bouth .I'm only VERY disappointed aotthe loss CDE has posted .While they have an exellent profit with their mining activities , they throw evrything away with the loss on derivates , the stupid basterds .

  • Report this Comment On November 07, 2009, at 1:03 PM, silverminer wrote:

    Very interesting to see HL outperforming SLW in the poll. I must say I didn't expect that.

    I hope Fools are paying proper attention to relative scales of reserves. HL is well-endowed at 132 million ounces silver and 870,000 ounces gold in P&P reserves, while CDE holds 247 million ounces silver and 2.27 million ounces of gold. That's no small gap.

    As for Silver Wheaton ... fagetaboudit! :) Attributable P&P reserves of 861 million ounces of silver at low fixed cost. Over the long haul, I think SLW will undoubtedly deliver the most effective leverage to price gains in silver. But that's just my opinion. As I said above, I own them all, so if another operator surprises me, that's great, but SLW remains my largest allocation among silver equities by a wide margin.

    Thanks for voting and opining, all. Fool on!

  • Report this Comment On November 07, 2009, at 2:55 PM, djdesmoore wrote:

    I have profited several times with SLW, so cannot argue with a winning performance. However, it always irks me that with their Cayman Islands set-up and virtually zero tax base, they have never paid a dividend. I therefore prefer HL and also feel it is a much better buy at this time, plus it might even be bought out! Even if not, the shares should zoom....!

    Thanks and cheers

    D.J. de S. Moore

  • Report this Comment On November 08, 2009, at 12:27 PM, AmateurTraderGuy wrote:

    I got into SLW at an avg cost of $4.98 a share, so I gotta go with SLW for the best performance thus far. However, I am getting more long term bullish on Hecla Mining. Less than $1/oz cost, and just re paid their debt; things are looking pretty good for them. Might even make a decent acquistion to the proper suitor.

  • Report this Comment On November 08, 2009, at 4:04 PM, Compwiz4u wrote:

    I like SVM the best since it is the lowest cost producer of silver among its industry peers by having a negative $5.09 per ounce production costs plus its mines are in China who is now telling its citizens to buy Silver. So there is minimal costs to get its product to market, too. Finally, it was just moved up to the NYSE.

    I do not trust CDE as they have issued new shares almost every time the stock was starting to take off.

    HL pays its managers way too much rather than paying a dividend.

    SLW has a good business model but gets no compensation if the producers do not produce as expected. Also, their contracts are indexed to inflation.

    I like PAAS but it has been an underperformer in this latest leg up.

    Finally, go to stockcharts dot com and plug these 5 stocks into the performance chart and you will see that SVM now has the best relative strength.

  • Report this Comment On November 09, 2009, at 10:55 AM, GlaeWitch wrote:

    I bought Hecla at 2.41. So far I have more than doubled my money. I like the way they do business, and they are affordable! I'm sticking with them through this roller-coaster ride, and will add to my holdings when I can.

  • Report this Comment On November 09, 2009, at 1:04 PM, gooptom wrote:

    I've been involved in these stocks all my life. I've worked for several of these companies above and below ground, and follow them closely. I have had all these stocks at one time or another. I sold CDE due to its terrible management. I had HL many times as a short term play and always have been able to make money with them on trades. I recently sold it due to my concerns with it's debt issues and credit squeeze over the purchase of Green's Creek, although I think they have turned that corner and long term I think it's a hold... I'm not in love with HL's management, but it's better than CDE! As for PAAS I never felt it would move % wise compared to the others. SLW has by far the best and brightest management minds in the industry, and way far superior than the rest in this lot! It's the long term hold as far as I'm concern. If you’re looking for 2 up and coming Jr's to invest in, the pick of the lot is Bear creek (BCEKF) and Fortuna (FVI.V). Bear Creek has 250 million oz in reserves and is just starting its transition from exploration to production. Fortuna is a JR. producer with great balance sheet, good management and really good assets. AS

  • Report this Comment On November 09, 2009, at 1:08 PM, gooptom wrote:

    I've been involved in these stocks all my life. I've worked for several of these companies, and follow them closely. I have had all these stocks at one time or another. I sold CDE due to its terrible management. I had HL many times as a short term play and always have been able to make money with them on trades, and sold it due to its debt issues and credit squeeze over the purchase of Green's Creek, although long term I think it's a hold... I'm not in love with their management, but it's better than CDE! PAAS I never felt would move % wise compared to the others. SLW has by far the best and brightest management minds in the industry, and way far superior than the rest in this lot! It's the long term hold as far as I'm concern. If you’re looking for 2 up and coming Jr's to invest in, the pick of the lot is Bear creek (BCEKF) and Fortuna (FVI.V). Bear Creek has 250 million oz in reserves and is just starting its transition from exploration to production. Fortuna is a JR. producer with great balance sheet, management and assets.

    FOR THE BIGGEST POSSIBLE % MOVES THE LIST WOULD RANK AS THIS, BEAR CREEK , HL, SLW. SAFTEY WISE IT WOULD BE SLW, PAAS, SLV

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