SILVER STOCKS NEWS – Silver stocks tumbled Monday morning as the Global X Silver Miners ETF (SIL) fell $0.66, or 2.4%, to $27.25 per share. Weakness in silver stocks and the SIL was fueled by broad-based selling in the commodities complex amid escalating sovereign debt concerns in Europe. COMEX silver futures retreated $0.97, or 2.3%, to $40.65 per ounce. Also helping to pressure silver stocks was the stronger U.S. dollar, which advanced 0.3% against a basket of foreign currencies.
With today’s move lower in silver stocks, the SIL has now appreciated a mere 0.4% thus far in 2011. Silver stocks as a whole have significantly underperformed the price of silver, which has surged 31.3% this year. The SIL, a relatively new silver ETF comprised of many of the world’s largest silver stocks, reached an all-time high of $31.34 on April 8, 2011. Since then, it has fallen 13.1% – compared to only a 0.2% dip for the white metal.
Three of the SIL’s largest components – Pan American Silver (PAAS), Silver Standard Resources (SSRI), and Silver Wheaton (SLW) – have been a large reason for the underperformance of the silver stocks ETF in 2011. On a year-to-date basis, shares of PAAS and SSRI have declined 19.4% and 3.5%, respectively, while SLW has risen just 5.6%.
Commenting on the outlook for silver stocks, Michael Churchill of Churchill Research recently presented his bullish case for small-cap silver explorers, as opposed to the aforementioned large-cap silver stocks. “I do think the market is wrong in how it is valuing silver explorers,” he contended. “My targets are generally around $1.50-$1.75 per eventual ounce in the ground, and most of the stocks are trading for about a third of that.”
Churchill went on to write that “Why are so few acquisitions of silver explorers being done? The main reason, I think, is that the silver rally is a recent phenomenon. For 25 years the silver price was so low that silver-only mines weren’t economical to plan or build. As such, the pipeline of silver-only projects today only dates back a few years – and it takes a few years to get projects up to acquisition-level standards. Some of the companies I cover are getting close to being takeout-worthy, and I think we’ll start to see acquisitions over the next 12 months. That will set benchmarks and hopefully light a fire under some of those 50-cents-per-ounce names.”
While Churchill did not provide commentary on specific silver stocks, another investment firm recently did. Last week Roth Capital initiated coverage of Mines Management (MGN) with a Buy rating and $5.00 target price – a 184% premium to its current share price. Mines Management is an emerging silver explorer whose flagship Montanore silver-copper project in northwestern Montana is one of the ten largest undeveloped silver resources in the world.
On Monday, notable silver stocks moving lower included SIL components Coeur d’Alene Mines (CDE), First Majestic Silver (AG), and Hecla Mining (HL). In morning trading, CDE, AG, and HL declined 1.5%, 6.2%, and 1.5%, respectively.
Mines Management Makes “Significant Progress” at Montanore
- During the quarter, the Company raised $15.2 million through a common stock offering, the proceeds of which will be used for advancement of the Montanore project.
- Mines Management anticipates completion of the Supplemental Draft Environmental Impact Study in the near term and the start of the final phase of permitting following shortly thereafter.
- The Company’s exploration and corporate development team continues to examine and evaluate additional opportunities in North America and Latin America.