Silver is used more than any other precious metals in industrial and manufacturing processes, which indicates its attraction to investors. Silver demand is expected to rise substantially this year owing to its myriad industrial and manufacturing uses. Global silver demand is set to reach 1.29 billion ounces for the year, exceeding 1 billion ounces for the first time since 2015.
Yesterday, silver prices rallied for the third consecutive trading day as the Bureau of Labor Statistics posted the Consumer Price Index (CPI), which reflected headline inflation of 7% year-over-year at the consumer level. Furthermore, analysts have predicted that silver might outperform gold once bearish sentiments subside and the anticipated bull market kicks off in 2022.
Given this setting, Wall Street analysts expect silver mining stocks of Fortuna Silver Mines Inc. (FSM) and Silvercorp Metals Inc. (SVM) to rally by more than 60% in price. Hence, we think these stocks might be solid additions to one’s watchlist.
Fortuna Silver Mines Inc. (FSM)
FSM explores, extracts, and processes precious and base metal deposits in Latin America. The company’s principal properties include the Caylloma silver, lead, and zinc mine in Southern Peru and the San Jose gold and silver mine in Southern Mexico. The company is based in Vancouver, Canada.
On December 20, FSM announced that it had been granted a 12-year extension of the environmental impact authorization (EIA) at its San Jose mine in Mexico. The mine has been the subject of 13 environmental audits and has never been cited for pollution or environmental damage. The company works with several neighboring communities to deploy sustainable development initiatives.
On September 29, FSM announced that it had decided to construct an open-pit mine at the Séguéla gold Project in Côte d’Ivoire. Regarding this development, Jorge A. Ganoza, President and CEO of FSM, said, “With a nine-year mine life in reserves, 130,000 ounces of annual gold production in the initial six years, and compelling economics, Séguéla is planned to become our fifth operating mine with first gold by mid-2023.”
For its fiscal third quarter, ended September 30, FSM’s sales increased 95% year-over-year to $162.60 million. Its adjusted net income improved 39.8% from the prior-year quarter to $22.50 million, while its adjusted EBITDA rose 78.4% from the same period prior year to $75.30 million.
The $0.61 consensus EPS estimate for its fiscal year 2022 indicates a 32.6% year-over-year increase. And the $728.40 million consensus revenue estimate for the same period reflects a 25.3% increase from the prior year.
The stock has gained 18.2% in price over the past month and 7.9% over the past five days to close yesterday’s trading session at $3.83.
One of the three Wall Street analysts have rated the stock as Buy. The $6.22 12-month median price target indicates a 62.4% potential upside. The price targets range from a low of $5.20 to a high of $7.25.
Silvercorp Metals Inc. (SVM)
SVM engages in acquiring, exploring, and developing mineral properties in China and Mexico and operates primarily mining silver, gold, lead, and zinc. The company is based in Vancouver, Canada.
On January 12, SVM reported additional high-grade intercepts from its 2021 exploration program in its HPG mine. The company announced that it has nine rigs drilling the mine currently.
On Nov. 16, SVM announced that its majority-owned subsidiary, Henan Found Mining Co. Ltd., initiated construction of a 3,000 ton per day flotation mill and tailings storage facility. The facilities are to increase the company’s operative capacity and enhance its mining operations at the Ying Mining District.
SVM’s revenue increased 3.7% year-over-year to $58.44 million in its second fiscal quarter, ended Sept.30. Its net cash generated from operating activities rose 4.2% from the same period last year to $30.85 million, while working capital went up 14.2% from the prior-year quarter to $193.31 million.
The Street expects SVM’s revenue to come in at $210.13 million for the fiscal year 2023.
SVM’s stock has gained 4% in price over the past month to close yesterday’s trading session at $3.68. It has gained 8% over the past five days.
Two of the four Wall Street analysts rating SVM have rated it Buy. The 12-month median price target of $6.04 indicates a 64.1% potential upside. The price targets range from a low of $5.60 to a high of $6.50.
FSM shares were trading at $3.81 per share on Thursday afternoon, down $0.02 (-0.52%). Year-to-date, FSM has declined -2.31%, versus a -1.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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