SILVER STOCKS NEWS – Silver stocks tumbled Monday as the Global X Silver Miners ETF (SIL) dropped $1.18, or 5.3%, to $21.17 per share in morning trading. The sell-off in silver stocks and the SIL was fueled by a sharp move lower in COMEX silver futures, which retreated $1.57, or 4.9%, to $30.85 per ounce. Silver declined alongside the broader commodities complex as European sovereign debt worries and the failure of the U.S. “super committee” to reach an agreement led to widespread liquidation in financial markets.
With today’s decline in silver stocks, the SIL extended its year-to-date loss to 22.0%. Silver stocks as a group have significantly underperformed the price of silver, which is lower by only 0.3% in 2011. Two of the worst performing silver stocks this year have been Pan American Silver (PAAS) and Silver Standard Resources (SSRI) – which have plunged 43.2% and 53.3%, respectively – due in large part to operational challenges at their various silver mines.
Commenting on the outlook for silver prices, J.P. Morgan analyst John Bridges asserted in a recent report that “With the macro scenario deteriorating and the more industrial nature of silver demand, we believe in the near term the metal could underperform its more investment-focused sister metal, gold.”
Last week Bridges also reiterated his Underweight rating and $34 price target on Pan American Silver. In a note to clients, he wrote that “The transition from contract workers to mine employees at Morococha and Huaron and a slower-than-expected ramp up at Manantial Espejo negatively affected production and costs in Q3. As a result, PAAS lowered its production guidance and increased its cost guidance to 22.5moz of Ag and $8.75/oz…PAAS continued its work at Navidad and spent $10.6m preparing for a feasibility study, although the company is still waiting for a change in the Chubut province mining law allowing PAAS to build the mine. We believe PAAS remains a binary call. The stock looks expensive without the project and looks inexpensive with it.”
Another member of the silver stocks sector in the news of late has been Hecla Mining (HL), which last week announced the suspension of operations at its Lucky Friday silver mine in northern Idaho after the death of a contractor at the mine. This morning, Hecla announced that the suspension “is not expected to impact” the Company’s 2011 full-year production forecast of 9-10 million ounces at cash costs of approximately $1.00 per ounce, net of by-products.
Following the announcement, UBS analyst Chris Lichtenheldt reiterated his Buy rating and $10.00 price target on HL. In a note to clients, he wrote that “The company’s Lucky Friday mine accounts for 42% of our NAV and 35% of our forecast 2011 silver production. While we are making no changes to our estimates at this time, we will be watching the situation and contemplate forecast adjustments as information becomes available.”
HL sunk 6.2% to $5.60 this morning, while PAAS fell 2.3% to $23.45 per share. Other notable silver stocks moving lower included SIL components Coeur d’Alene Mines (CDE) and Silver Wheaton (SLW) – which dropped 4.7% and 4.3%, respectively.
Mines Management’s Montanore Project Receives Safety Award
- 7,200 feet of underground rehabilitation and dewatering in the Libby Evaluation Adit has been completed at Montanore, as well as construction of infrastructure and surface facilities at the site
- A Supplemental Draft Environmental Impact Statement (SDEIS) was recently completed by the U.S. Forest Service for the Montanore Project, a significant step forward in the final phase of the permitting process
- Montanore is one of the ten largest undeveloped silver resources in the world. The Project contains in-situ mineralization estimated at more than 230 million silver ounces and nearly 2 billion copper pounds