Shares of silver miner Silvercorp Metals (SVM -1.89%) rose 18% in 2020 according to data from S&P Global Market Intelligence. That seems like a pretty good number, but it actually trailed the roughly 47% gain in silver, using iShares Silver Trust as a proxy. It also lagged behind many silver mining peers, some of which saw price gains of 100% or more. What's the story here?
Silvercorp primarily mines silver, lead, and zinc in China. Silver made up nearly two-thirds of revenue in the third quarter of 2020, up from around 50% at the start of 2019. The change there was heavily impacted by rising silver prices. That's pretty good news overall, and helps explain the stock's rise last year. But there are obviously other factors going on, given the relatively weak performance of the stock compared to silver and some of Silvercorp's peers.
Notably, the miner's silver recovery rates have been falling of late, meaning its mines aren't as productive as they had been previously. Silvercorp's silver sales have also been falling, as you might expect given the decline in the productivity of its mines. These aren't good trends. Meanwhile, all-in sustaining costs have been on the rise because of increased production costs and increased spending to maintain its mines. These aren't good trends, either.
High silver prices are helping to cover over some notable headwinds facing Silvercorp Metals today. So while investors have rewarded the stock with a higher price, thanks to silver's gains, they have been less cheery here than at other miners -- for good reason. It's unlikely that Wall Street's outlook on the stock will materially improve until Silvercorp can turn its production and cost trends in a brighter direction.