Shares of silver miner Coeur Mining (NYSE:CDE) were higher by 19% at 2 p.m. EDT. Following close behind were mining peers First Majestic Silver (NYSE:AG), Pan American Silver (NASDAQ:PAAS), and SSR Mining (NASDAQ:SSRM), up 10%, 11%, and 12%, respectively.
Silvercorp Metals (TSX:SVM) also jumped, peaking at a gain of 10% before pulling back into the high single digits. The main reason for the advance was fairly simple to understand: Silver was up by more than 5%. However, there's just a little bit more to the story here.
Gold and silver are both precious metals, but they don't always trade in tandem. The spread between the two metals, known as the gold-to-silver ratio has been historically wide of late. One of the interesting things about the gold-to-silver ratio is that some investors use it to decide which metal to own. It basically tells you how many silver ounces you can buy for a single ounce of gold. In the last century, the ratio averaged around 50 to 1. It's now more than 100 to 1. That suggests that silver is cheap relative to gold. But this isn't exactly a new trend; the spread has been widening for most of the last decade. Simply put, gold has been the better-performing precious metal.
That helps to explain why many miners that had once focused primarily on silver decided to shift gears in recent years to increase their exposure to gold. As an example, SSR Mining was once known as Silver Standard Resources. It changed its name when gold became more important to its top and bottom lines than silver. The yellow metal now makes up roughly 80% of the company's production, with silver largely accounting for the remainder.
SSR isn't alone. Rounding a bit, Coeur generates around 70% of its revenue from gold, with silver at just under 30% (other metals make up a few percentage points). In 2010 silver was roughly 70% of the tally, so the metals have basically switched places in terms of importance to the top and bottom lines. Pan American Silver, despite its name, is no different, with the larger portion of its revenue coming from gold today. The lone standouts are First Majestic Silver, which gets roughly 60% of revenue from silver with the rest from gold, and Silvercorp Metals. However, Silvercorp just announced plans to buy a miner primarily focused on gold to increase its exposure to that metal, so it's clearly decided to go the way of Coeur, SSR, and Pan American.
That said, compared to most primary gold producers, SSR, Coeur, and Pan American still generate a material amount of silver. First Majestic, without question, has a larger exposure to silver. And at least for now, Silvercorp is still largely a silver miner. To provide some contrast here, precious metals giants Newmont Mining and Barrick Gold both pretty much focus just on gold. Note that gold was up a little on May 15, as were the shares of Newmont and Barrick. But they lagged well behind their smaller peers with more silver exposure.
So the big story for May 15 is that silver had a big rally and investors pushed the shares of miners with notable silver exposure up with it. But it's important to keep in mind the shifting production profiles here, because it changes how you should think about each of these miners. However, there's still more going on. Globally speaking, Latin America is an important producer of silver. COVID-19 has led to some large mine closures in the region, as countries around the world look to slow the spread of the coronavirus by shutting non-essential businesses. Coeur, the stock with the largest gain, announced on May 13 that its Palmarejo Mine in Mexico was restarting. The mine produces both gold and silver, but this news, along with the silver bump, helps explain why its shares got a little more love from investors than its silvery peers. Similar updates from other silver miners could lead investors to take positive views of other individual companies, as well, as mines reopen again.
Precious metals are notoriously volatile, with prices rising just as swiftly as they fall. One day is not enough to make a long-term call on any of the gold or silver mining stocks noted here. That said, if you are looking to add some precious metals exposure to your portfolio to increase your diversification, which is a completely reasonable long-term investment approach, you might want to keep the gold-to-silver ratio in mind before making a final call. However, a streaming company like Wheaton Precious Metals, where silver is a key revenue driver, might still be a better bet than a miner.