The Top 5 Silver Stocks for 2013http://www.fool.com/investing/general/2012/12/31/the-top-5-silver-stocks-for.aspx Christopher Barker
December 31, 2012
After analyzing the gold and silver markets in great detail over the course of this secular bull market, I see silver surging higher than most folks may imagine as our simultaneous debt and currency crises continue to unfold on the world's stage.
Embarking upon my annual exercise to identify the greatest investment opportunities for the coming year among the miners of silver, I was struck anew this year by the astoundingly small number of primary silver producers to select from that stand above my $200 million minimum market capitalization requirement. I own shares in a bunch of micro-cap silver names that I fully expect to yield dramatic multibagger returns as the silver price trends much, much higher. For discussions of those sorts of higher-octane micro-cap plays, Fools will find helping hands within the Motley Fool CAPS community from such frequent contributors as skypilot2005 and SN3165.
For purposes of the present list of top silver picks for 2013, however, only companies valued above $200 million were considered to emphasize established producers that are more suited to a wide range of investment objectives and styles. This year, I will begin with a list of my top five picks below, and follow up with my preceding five selections (picks 10 through six) early in the New Year. Because I have plenty to share regarding each of these selections below, let's jump right in with my no. 5 pick for 2013 and count down the list from there.
5. Aurcana (NASDAQOTH: AUNFF) (Ticker "AUN" on the Toronto Venture Exchange)
While recognizing some of the logistical challenges that could intervene -- including the ongoing process of hiring and training mine personnel -- my strong impression of Lenic Rodriguez is that he possesses an uncanny knack for generating excitement internally around each of the company's successive near-term priorities. Even allowing for a minor hiccup or two along the way, I conservatively envision an advance of 30% to 50% during 2013 from this stock's 2012 year-end close.
4. Endeavour Silver (NYSE: EXK )
Only this time, they've taken on a far bigger challenge than they've ever faced before, and so naturally the investment gains that would result from the completion of an effective and timely turnaround of the El Cubo complex are multiplied accordingly. Knowing this management team as well as I do, following a pair of visits to Endeavour's Guanajuato area operations, I am extremely comfortable investing in a successful outcome at El Cubo.
I had the opportunity to visit the El Cubo mine for myself just a short time after Endeavour had taken the reins, and I found the company already making important progress in mine productivity, safety, and profitability. Ultimately, I believe that the ongoing turnaround at El Cubo could help propel Endeavour's shares beyond $20 apiece, while for the year 2013 I'm looking for a return of 40% to nearly $11.
3. SilverCrest Mines (NYSEMKT: SVLC )
Weighing in with an impressive inferred resource of 51 million silver ounces with very substantial gold and copper by-products , the low-grade La Joya project in Durango state will reach an important milestone during the first half of 2013 with the release of a preliminary economic assessment. A related update to the resource estimate is a touch behind schedule, but I take that as a good sign. With recent exploration results, including a thick 80-meter interval of mineralization at above-average grades for the deposit , I suspect the company is eager to hold the revised estimate back to include more results from the 2012 drilling campaign.
Because I anticipate sustained long-term pricing strength from all three metals targeted at La Joya, I am eager to see where the economics stand on a conceptual open pit operation at La Joya based upon trailing average metal prices.
I believe this stock has the potential to double during 2013 if growth initiatives progress well and precious metal prices surge as I suspect they will. More conservatively, I'll be surprised if we close the year 2013 with anything less than a 50% advance from the current price.
2. Alexco Resource (NYSEMKT: AXU )
This hybrid mining company combines a massive district-scale land position controlling the legendary Keno Hill silver district in Canada's Yukon province, with a fascinating environmental remediation services unit that grants the company a unique competitive niche within the silver industry. Alexco's inaugural Bellekeno mine complex has begun to correct some early operating challenges during its second full year in operation in 2012, and now looks to the addition of two new mine sites in 2013: high-grade silver deposits nearby called Lucky Queen and Onek.
By progressing through a long succession of high-quality deposits in varying stages of exploration and development, Alexco is poised to launch organically into the silver industry's coveted mid-tier space.
In addition to the looming mine start-ups at Lucky Queen and Onek, major catalyst potential for Alexco's shares during 2013 may be found in the anticipated resource updates for the next major development priorities in Alexco's well-stocked pipeline: the Flame & Moth deposit and the Bermingham deposit. Additionally, I am confident that Alexco will demonstrate positive economics for the processing of historical at-surface tailings material (the Elsa Tailings project) and move quickly to incorporate that low-cost source of pre-ground ore into the district's combined mill feed.
Alexco is a fascinating developing story, and a terrific long-term investment opportunity. I believe that 2013 will see an appropriate repricing of the shares to reflect the low-risk nature of the company's organic growth potential, while my longer-term price objective calls for a major multibagger performance in the making. For 2013, provided the above-listed catalysts play out according to plan, I'm looking for at least a 60% gain to $5.50 or better.
1. First Majestic Silver (NYSE: AG )
Particularly following the mar