Who’s Making Money When Silver, Gold and Copper Prices Don’t Move

Metals and mining is one of my favorite industries. This week we're looking at three pure mining plays. Each company has a different strategy to overcome the common pitfalls of the sector.

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This week we’re taking a look at the metals and mining sector. All three companies we’re looking at this week are straight-forward mining plays. Each focus on its unique strategy and combination of silver, gold and copper extraction.

When looking at miners, it is important to look at the strategy. It’s not as simple as pulling metals out of the ground and expecting the price of it to keep going up.

The spot price of gold hasn’t done anything over the past five years. Over that time, it’s traveled from $1,318 to now $1,289. The only way to make money from holding physical gold over that time would be to time the markets just right.

Copper shows the exact same story…$3.00 to $2.94. And silver has actually done worse. Five years ago, it was trading around $20 and now its somewhere around $15.

The ones making the money from the metals are those that can pull it out of the ground for less than what it’s selling for. So, let’s check out the strategies that our three companies have…

First up we’ve got McEwen Mining Inc (MUX). The management proudly says their goal is to qualify for inclusion in the S&P 500 and create optimal alignment for investor success.

McEwan has multiple projects in Ontario, Nevada, Argentina and Mexico. The company has a portfolio of assets that is diversified…and not just by the location.

If we take a closer look at the production sites, we also see that all the mines are in different stages of usefulness. The company has sites actively in production which it’s making revenues from right now. But what happens when that site is no longer producing?

Well McEwan also has a Nevada site nearing the end of construction, a Mexico site in development, an Argentina site in advanced exploration for copper… you see our point.

The management plays a big part in this strategy. Chairman and Chief Owner Rob McEwan, the founder and former Chairman/CEO of Goldcorp (one of the largest gold producers in the world.) During his 13 years as CEO of Goldcorp, the company saw market cap grow from $50 million to over $8 billion. That’s his plan for McEwan as well.

Shares opened last Monday at $1.57 and closed on Friday at $1.38. That’s a loss of 12.1% for the past trading week. It could be time for that to turn around…

Next up, we’ve got Silvercorp Metals Inc. (SVM). Silvercorp is a Canadian company that is the premier silver producer in China. It also produces gold, zinc and lead.

The company’s flagship asset is the Ying Mining District in Henan China. This site consists of over 200 veins within a 68-kilometer area. These veins have been producing for over 12 years and it is predicted there is another 15 years of life left. But no company is going to put all its gold in one basket…

The company has a mine just south of that. Its BYP mine suspended production in 2014 due to capital requirements needed to upgrade the mine. The management is now looking into upgrading and updating the permits it needs to bring that mine back online.

Shares opened last Monday at $2.56 and closed on Friday at $2.41. That’s a loss of 5.8% for the past week.

Finally, we’ve got Endeavour Silver Corp (EXK). Endeavour is headquartered in Vancouver and has active mines in Mexico and Chile.

The interesting this about this company is its acquisition strategy. Endeavour likes to focus on buying old struggling or dormant mines. Then it uses the infrastructure to find orebodies hiding below the surface. It’s a fast track to expanding each operation and making the site useful again.

It first used this strategy in 2004 in Mexico. But it also did this again in 2012 in Chile. More specifically in areas in line with a well-known silver-lead-zinc-tin belt running from Peru through Bolivia to northern Argentina and Chile. And then another site along a trending gold belt.

It was a success the first time, and investors are about to see if it paid off this second time around. 2019 will be the first commercial production year for the sites identified in 2012.

Shares opened on Monday at $2.54 and closed on Friday at $2.30. That’s a loss of 9.4% for the past trading week.

All three of our companies had a rough week last week. We’ll be back Wednesday to see what’s happened in the first 48 hours of our contest and break down the financials.

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