SILVER STOCKS NEWS - Silver stocks rallied Tuesday as the silver price advanced $0.30, or 1.7%, to $18.26 per ounce. The Philadelphia Gold & Silver Index (XAU), which contains a basket of the world’s largest gold and silver stocks, rose 1.2% to 175.88. The iShares Silver Trust ETF (SLV), which acts as a proxy for the silver price, climbed 1.6% to $17.90 per share.
While the XAU has advanced 33.0% over the past 52 weeks, many silver stocks have outperformed the index and provided investors with out-sized leverage to the silver price. A prime example is Fortuna Silver Mines (FVI.TSX), whose shares have surged 153% during the past year. Not only has Fortuna outpaced the XAU, but also most mid- and large-cap silver stocks - including Pan American Silver Corp. (PAAS) and Silver Standard Resources (SSRI) - which have posted returns of 39.3% and -3.8%, respectively.
Fortuna Silver Mines has progressed from a relatively small silver explorer into an emerging mid-tier silver mining producer, a noteworthy accomplishment given the dearth of mining companies in the industry that are able to achieve commercial success mining precious metals. CEO Jorge Ganoza and his team have continued to execute on their goal of providing investors with leverage to the price of silver by focusing on generating positive cash flow.
This morning, Fortuna Silver announced second quarter production figures. Silver production from its Caylloma Mine in Arequipa, Peru came in at 470,310 ounces, a 5% rise over the second quarter of 2009 and 12% ahead of the company’s budget for the period. During the quarter Fortuna also produced 6.3 million, 5.0 million, and 266,331 pounds of zinc, lead, and copper, respectively.
As for its San Jose silver-gold project in Oaxaca, Mexico, the Canadian-based silver miner noted that it plans to release an update on the ongoing construction activities at the project in the upcoming days. In mid-day trading, shares of FVI.TSX were higher by 3% at C$2.11 per share.
As a result of its continued progress, Fortuna Silver has begun to receive increased institutional investor interest. The latest firm to initiate coverage on the silver producer was BMO Capital Markets, which started Fortuna with an “Outperform” rating and a 12-month target price of C$3.20 - a 56.9% premium to yesterday’s closing price of C$2.04 per share. BMO stated that the rating and price target reflect Fortuna’s “attractive valuation and favorable production growth profile through 2012.”
In its report, BMO noted that Fortuna has “demonstrated sound operational capabilities” as it has increased its production rate at Caylloma. The report went on to note that results of recent exploration activities have illustrated the potential for new discoveries, and the execution of development at San Jose serves as a “potential catalyst for revision.” Accordingly, BMO named Fortuna one of its preferred names in the silver stocks sector.
