Investing In Silver Mining Stocks

Miners working at Potosi silver mines, Department of Potosi, Bolivia, South America
••• Matthew Williams-Ellis / Getty Images

One avenue of investing in the silver market is through companies that produce the precious metal. The shares of silver mining companies can be volatile, but they are not as leveraged investment vehicles as silver futures or options on silver futures. However, silver mining equities do provide the buyer with exposure to the silver market as the fortunes of these companies rise and fall with the price of the precious metal. Over recent years, ETF and ETN products that attempt to replicate the price action in silver have also become available to traders and investors. 

When trading silver futures, options on futures or ETF/ETN products that correlate directly with the price of the physical metal, it is only the price of silver that matters. However, there are other exogenous factors that will influence the price of a silver mining stock. At times, silver stocks will move with the overall stock market. If the stock market is moving lower, silver mining stocks could potentially fall, even if the price of silver is moving higher. There are also times when silver equities will outperform the price of silver when it moves higher. However, when investing in silver companies that trade on the stock exchange always remember, the investment position is strictly limited to the performance of the business itself. If management or financial problems arise within the company, the price of its stock could drop regardless of the price direction of silver. Additionally, if there are any output issues with any of the company's producing properties the stock price will reflect those problems.

The larger silver producing companies tend to do a better job reflecting price action in the silver market when it comes to investing in or trading silver mining stocks. The smaller companies with negligible revenues, speculative production levels, or questionable reserves are highly speculative. While these issues attract many speculators because of the chance of explosive returns, the risk is a function of the opportunity for reward. Many, if not most, of the most speculative silver mining companies go out of business before ever producing one ounce of the metal. 

Silver is both an industrial metal as well as a precious metal. Therefore, the price of silver can move higher or lower for economic, political, as well as many other reasons. During periods of fear and uncertainty or increasing inflation, silver is often a refuge for capital. Precious metals like silver and gold often attract capital during times of volatility in the global economic and political landscape.  Silver tends to perform at its best during inflationary periods and silver mining stocks are likely to follow the metal higher at these times

Leading Publicly Traded Silver Producers in the United States and Canada

Silver Wheaton (SLW)—Silver Wheaton is not a silver producer, it is a precious metals streaming company that provides upfront cash to mining companies in return for the right to purchase silver metal at a pre-agreed upon price over a specific time period. When prices are low, SLW is not tied to expensive and volatile exploration for the metal and they are in a position to negotiate attractive prices for future supplies. Production for SLW was around 50 million ounces per year in 2016.

Silver Standard Resources, Inc (SSRI)—Silver Standard Resources is a producer that has its principal projects in Nevada and northern Argentina.

Coeur Mining (CDE)—Coeur Mining is a silver producer with its mines in Nevada, Mexico, Alaska, South Dakoda, Bolivia, and Australia. Coeur also holds royalty interests in Chile, Ecuador, and New Zealand. 

Hecla Mining (HL)—Hecla Mining has producing properties in Idaho, Alaska, Northern Quebec Canada, and Mexico.

Silvercorp Metals (SVMLF)—Silvercorp has mineral deposits containing silver in China.

Pan American Silver Corp. (PAAS)—Pan American Silver owns and operates silver mines in Peru, Mexico, Argentina, and Bolivia. 

Silver ETFs

There are two ETF products that provide liquidity to silver investors. While the iShares Silver Trust (SLV) reflects the price of the metal, the Global X Silver Miners ETF (SIL) invests in a diversified group of silver mining companies including SLW, PAAS, CDE, and HL.

When investing in silver mining equities always remember that there are additional risks aside from the price of the metal.