With silver prices joining gold in a fresh round of strength, it's becoming hard to identify a silver investment that is not bound to yield impressive returns for investors through the next phases of this precious metals bull market.
That's not to say that investors are advised to pick their silver plays by placing names in a hat, but the strength of the sector at large certainly makes it easier to pick a winner.
Bobbing for silver
At the brand new 52-week high for Silver Wheaton (NYSE: SLW), those shares have now advanced 700% since I prodded Fools to discover their value in November of 2008. Still my leading stock pick for 2010, its shares' 38% surge year-to-date has not reduced my expectation of further gains to come. Fools can anticipate another wildly strong quarter this week from this fixed-cost cash-flow machine.
Silvercorp Metals (NYSE: SVM) is another silver standout that has launched to a new 52-week high, and there too I expect a highly profitable quarter (boasting some of the lowest production costs in the industry) to justify that move higher when it reports after the close Wednesday.
Hecla Mining (NYSE: HL) is still a strong favorite among Foolish investors, and the miner's incredible first-quarter production cost of negative $3.03 per ounce of silver after by-product credits highlights the source of the community's conviction.
Record production at the aptly named Lucky Friday mine, with associated strength in the production of cost-reducing by-products like lead and zinc, led Hecla to swing from a $12.4 million adjusted loss in the prior-year period to a first-quarter profit of $17.2 million. Hecla is targeting 2010 production of more than 10 million ounces of silver at a still-amazing cost of less than $2.25 per ounce.
Coeur d'Alene Mines (NYSE: CDE) continues to gather strength even as the market banishes the shares within deep-value territory. Coeur's costs for 3.4 million ounces of silver mined during the first quarter came in a little high (at $7.41 per ounce), in part because of the prior restriction of access to a high-grade portion of the San Bartolome mine in Bolivia. With gold production from the new Kensington mine in Alaska set to begin in July, I believe that many investors still underestimate the enormous cash-flow potential of this relative underperformer.
Mining access has now been restored at San Bartolome, 109,000 of gold production is expected from Palmarejo this year, and the looming Kensington start-up places Coeur d'Alene prominently among the top-tier opportunities in a crowded field of standouts.
Basking in the shadows of relative obscurity, Pan American Silver (NYSE: PAAS) is another stock that has yet to recapture its pre-correction glory. The last time silver exhibited this sort of pricing strength, in March of 2008, Pan American shares traded for more than $40. In the meantime, the company has added a world-class development project to the mix with the Navidad project in Argentina. That property alone added 632 million ounces of measured and indicated silver resources to Pan American's massive pipeline of buried treasure.
In the first quarter, the miner raised silver production 13% to 5.5 million ounces, increased gold volumes a full 34% and lowered cash costs 27% to just $4.35 per ounce. Net income surged 189% year-over-year, while mine operating earnings rocketed 252% higher, to $36.9 million.
Despite a noteworthy surge in share prices recently, I still consider Pan American one of the deepest values anywhere for a growth-focused, high-quality silver producer.
Too many winners to choose from
If you can't make up your mind between choices like the fixed-cost beauty of Silver Wheaton's unique silver stream model, the overlooked value of producers like Coeur d'Alene and Pan American, or the insanely low costs of a Hecla or Silvercorp ... then how about just picking them all.
Thanks to a pair of very compelling exchange-traded fund (ETF) offerings that provide convenient exposure to a wide range of high-quality producers, Fools no longer have to buy up shares in multiple stocks (as I have done) to attain the benefit of spreading out operational and geographical risks that are inherent to the mining industry. If you believe, as I do, that the continued ascent of gold and silver prices will serve as a rising tide that carries most mining shares to remarkably higher prices, then these two ETFs may be just the kind of rafts to climb into.
Don't let the name fool you: The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) injects a healthy dose of silver exposure into an exciting basket of potential precious metal highfliers. For the conscientious silver investor, however, a far more targeted vehicle has finally emerged.
With all five of the aforementioned silver standouts firmly entrenched among its primary holdings, the newly launched Global X Silver Miners ETF (NYSE: SIL) is like a one-stop shop for highly prospective names in the silver mining industry (names that this Foolish early bird had to select a la carte). I've been investing in this sector for quite a few years now, and for all my exhaustive research, I've gained little advantage over the late-coming Fool who grabs some shares of this top-notch ETF.
Let's see if I can convey just how strongly I feel about the performance potential of this investment vehicle: Of the 25 stocks presently listed among its holdings, I personally own 16 of them. Accordingly, I have added the ETF to my silverminer CAPS portfolio and marked it as one of my very top picks. I invite you to join me in the CAPS community and let this pick boost your own portfolio's score.
I'll take it one step further and record my bold prediction here and now: This ETF will outperform the benchmark S&P 500 by at least 200% before I close my CAPS pick within the next five years. Please vote in our Motley Poll, and let me know what you think of my prediction in the comments section below.
