Precious metals have come into focus over the past two years amid a historic surge. Geopolitical tensions and industrial demand are driving prices for precious metals, including silver, significantly higher. In the past year, the iShares Silver Trust, which tracks silver prices, has surged 160%.
Investors are flocking into silver at the same time that there has been a multi-year shortage of the precious metal. Over the past five years, demand has outpaced supply, and this is expected to persist into 2026.
The surge in the metal's prices creates an opportunity for the stocks of silver miners, including First Majestic Silver (AG 3.27%) and Wheaton Precious Metals (WPM 1.59%). If you're looking to gain exposure to silver prices through the mining industry, here's what you need to know about these two vastly different businesses.
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First Majestic vs. Wheaton Precious Metals
First Majestic Silver is a traditional mining company that owns, develops, and operates mines in Mexico and the U.S. The company spans exploratory drilling and environmental permitting, up to the excavation of tons of rock.
Last year, the company acquired Gatos Silver, giving it a 70% interest in the high-grade Los Gatos mine in Mexico. It's considered one of the top pure-play silver miners, with 57% of its revenue from the metal as of the third quarter last year.
The company is a leveraged play on silver prices. That's because it has a fixed cost to run its mines, and increases in silver's price hit its bottom line as profit. And the business is largely unhedged against long-term silver prices. But this leverage can cut both ways. If silver drops or mining costs rise, the profit margin can evaporate quickly.
NYSE: AG
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Wheaton Precious Metals operates under a different business model. It doesn't own shovels, trucks, or mines; instead, it acts as a financier for the mining industry. It uses a streaming model, and in a streaming agreement, it provides up-front payment to a mining company that needs capital to build or expand a mine.
This model allows Wheaton to share production and operating risks without bearing the direct risks of operating a mine. In return, the company gets the right to purchase a percentage of the precious metals produced by that mine for the life of the project at a predetermined discounted price. For example, in the third quarter, its average cash cost of silver was $6.35 per ounce, providing it with cost predictability and protection against inflationary pressures that miners could face.
NYSE: WPM
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Which mining stock is right for you?
The mining stock you invest in depends on what your goal is and what your outlook is. If you invest in First Majestic, you believe the company will do a good job of managing its costs, and you hope for further upside in silver prices. As the metal's price rises, First Majestic's profit margins will grow with it (if mining costs don't rise in step).
Wheaton Precious Metals provides investors with a way to collect mining profits through its diversified portfolio of companies it has funded, and it is a better alternative for more-conservative investors seeking exposure to silver without the operational costs of a mining company.
