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Silver Stocks Continue Their Run

Silver stocks have been performing well recently thanks to a run-up in silver spot prices, which have risen about 5.1% on the New York Mercantile Exchange over the past month. In comparison, gold spot prices have increased only by about 2% over this period.

Silver is currently trading at $18.12 an ounce for spot delivery on Nymex. Some metal experts believe that $16.50 is a good support level and expect silver prices to touch $20 in the near future. Silver spot prices on Nymex are expected to reach $19.22 an ounce by the end of 2010, according to analysts polled by Bloomberg.

Our preferred silver stocks Silver Wheaton (SLW - Get Report), and Pan American Silver (PAAS - Get Report) registered handsome gains of 12.2% and 9.5%, respectively, over the past month. On the other hand, the other major silver producers, Hecla Mining TICKER TYPE=''EQUITY" SYMBOL="HL"/> (HL - Get Report) and Silver Standard Resources (SSRI - Get Report) gained 7.1% and 10.2%, respectively.

Over the past month, small-cap silver producers, Mag Silver (MVG) and Alexco Resource (AXU - Get Report) jumped 12.4% and 18%, respectively. The appreciation in these silver stocks compares favorably with the NYSE composite index, which advanced 3.5% over the past month.

The only exception was Endeavour Silver (EXK - Get Report) which declined 4.2% after the company missed earnings consensus last month when it announced fourth-quarter earnings. The lower earnings were mainly attributed to higher total cash costs at Guanajuato mines, one of the company's two proven silver reserves. The company plans to invest $29 million in these mines during the first half of 2010. During the second half of 2010, the Guanacevi and Guanajuato mines are anticipated to unfold their full production capabilities.

Silver Wheaton Remains Our Top Pick

Analysts estimate that Silver Wheaton's targeted annual production of more than 40 million ounces by 2013, after the Pasuca Lama mine acquired from Barrick Gold (ABX) starts production-- will place the company among the world's top silver producers. BHP Billiton (BHP) is the world's leading silver producer with 42.3 million ounces of output in 2008, as reported by the Silver Institute.

At $17.33, Silver Wheaton is trading at a price-to-earnings ratio of 23.7. Sales are projected to soar 79.7% to $437 million during 2010 from $243 million in 2009, according to analysts polled by Bloomberg, while earnings before interest, taxes, depreciation and amortization is likely to zoom 104.5% to $247.3 million from $162.7 million during this period. Silver production is expected to increase 35% this year, led by the acquisitions of Silverstone Resources' and Barrick Gold's silver mines in May and September 2009, respectively.
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AXU $0.49 6.15%
EXK $1.58 17.04%
HL $2.24 2.28%
MVG $7.80 5.98%
PAAS $8.55 1.30%


Chart of I:DJI
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S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

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