Many investors' counterpoint is that metals are not correlated with inflation and thus are not a hedge, which is true in high inflationary periods. However, during rapid inflation, metals like gold and silver have been known to perform exceptionally well.
There are a multitude of ways to gain exposure as well. You can buy physical silver bullion in the form of bars or through an ETF, silver futures, or you can buy what we will be going over in this article, which is the top silver stocks in Canada.
Inflation is not the only reason investors are interested in the top silver mining stocks. Despite what most people think, 57% of silver is used in industrial fabrication, while only 17% is jewelry. As we move towards EV vehicles, silver demand is expected to increase by 70% in the automotive sector by 2025, which should help miners generate more free cash flow.
As such, many Canadian investors are looking to learn the best options for top silver stocks here in Canada because they could be somewhat of a safe haven during this volatile time.
Many miners will have some exposure to silver. Still, in this article, we will focus on companies that are essentially silver pure-plays, or in other words the vast majority of revenue comes from silver production and silver-producing mines.
Without further ado, let's get into the top Canadian silver stocks today.
Of note, some runners-up that didn't make this list but could be added to a watchlist include Endeavour Silver (TSE:EDR), Mag Silver Corp (TSE:MAG), and Pan American Silver Corp (TSE:PAAS).
The best silver stocks to be looking at in Canada today
- First Majestic Silver (TSE:FR)
- Silvercorp Metals (TSE:SVM)
- Wheaton Precious Metals (TSE:WPM)
First Majestic Silver (TSE:FR) is one of Canada's largest silver mining companies, with over 51% of its revenue coming from silver and the remaining from gold. At the time of writing, it has a market capitalization of $2.6B.
With operating mines in both Mexico and Nevada, the company mines in relatively safe jurisdictions. Interestingly, Mexico was the number one silver-producing country of 2022 and will likely continue to be moving forward, as it currently has a significant edge over the number 2 producer China.
The company has over 380,000 hectares of mining claims and aims to one day be one of the largest silver producers on the planet.
The company's four primary assets include the San Dimas, La Encantada and Santa Elena mines in Mexico and its single mine, Jerritt Canyon, just outside of Elko Nevada.
However, it also has multiple projects on the go, including La Parrilla, La Guitarra, Del Toro, and San Martin.
With the inclusion of its newest mine, Jerritt Canyon, which it acquired in early 2021, the company is expected to produce 33-37 million silver equivalent ounces in 2023 at all in sustaining costs of $18.47-$19.72.
First Majestic is also investing heavily when it comes to new projects. The company expects to spend $188M in 2023 on development, exploration, PP&E, and corporate projects. This is a slight decrease to its Fiscal 2022 CAPEX but is still significantly above 2020 and 2019 levels.
Please make no mistake about it. This company will rely heavily on the price of silver. It will likely fluctuate in line, or even at a faster pace, than the commodity itself. But with silver making up less of its overall revenue base, gold is also a driving factor.
More diversity for First Majestic is ultimately a good thing.
Silvercorp Metals Inc (TSE:SVM)
Silvercorp Metals (TSE:SVM) might not be as large as First Majestic. However, the company does have a portfolio that adheres more to the investor looking to get pure silver exposure.
In fact, over its 16-year production life (2006-2022), the company has mined over 87 million ounces of silver and 1.2B pounds of lead and zinc.
Silvercorp operates solely in China, with three primary mines—one in the Henan Province, one in the Hunan Province, and one in the Guangdong Province.
If we look at total production, the company is expected to produce 7 million ounces in Fiscal 2023, which would mark a 400k~ increase from the year prior. Remember, First Majestic (the company we discussed above) expects production to be in the 35 million-ounce range. So you can see that although Silvercorp is more directly focused on silver, it does not have the production capacity that a more prominent player like First Majestic does.
For some, the fact that Silvercorp is a China pure-play will be a deal breaker. There is routine turmoil in the country regarding conflicts with Western nations, and many refuse to invest in a company that does business in China.
On a valuation basis, the company looks extremely attractive when compared to its peers. In terms of price to cash flow, price to earnings, and EV/EBITDA, Silvercorp is among the cheapest silver miners.
Its smaller stature and exposure to China likely make investors pay less of a premium to hold the company.
Overall, I'd view this as one of the higher-risk silver stocks on this list. But one that no doubt exposes you to movements in silver prices in the form of a miner.
The company does pay a dividend, but it is relatively minuscule at a forward yield of only 0.7%.
Wheaton Precious Metals (TSE:WPM)
We've gone over a large-cap silver stock and a small-cap higher-risk play. So now it would be appropriate to cover a more reliable option in a precious metals streamer.
One of the best streamers in the country is Wheaton Precious Metals (TSE:WPM). Before we get into the benefits of Wheaton, let's look at what a streamer is.
Precious metal streamers will often loan miners money in exchange for lower prices in the future. This allows the miners to expand exploration efforts to develop new projects. At the same time, the streamers get the benefit of cheaper-than-market prices when it comes to gold, silver, and other precious metals.
As a streamer, it is not saddled with the high costs of exploration and development, permitting, construction, and ongoing mine maintenance. As such, WPM is less volatile than producers and exploration companies in the industry.
Wheaton has been known as a heavy silver play for quite some time now. And although it does still have plenty of exposure to silver (which is why it is on this list), it's diversifying into gold.
The company has 21 mines in operation and another 13 under development with many high-quality partners.
If silver and gold were to rise, Wheaton would likely follow. But the best part about it is as a streamer, the company wouldn't be exposed to the extra risks that a miner is.
Wheaton's dividend approach is also a very unique one. This is a silver stock that does not have a set quarterly dividend. Instead, the dividend is tied to cash flows. The more Wheaton generates, the more it will return to shareholders. This is why Wheaton's dividend is all over the place.
The company aims to distribute 30% of the previous four quarters of operating cash flow as a dividend. As long as Wheaton's cash flows are positive, you will receive a dividend. Which makes it one of the more reliable dividends in the industry.
Overall, these 3 Canadian silver stocks should provide a variety of options
Be aware that when you invest in a silver producer like First Majestic or Silvercorp, you're relying heavily on the price of silver. Not so much Wheaton Precious Metals as with its streaming capability it is likely to be less volatile. But with the other two, they will likely follow if silver dips or rises.
Suppose you're going to invest in silver stocks. In that case, you have to do so with a long-term mentality and withstand the general ebbs and flows of the commodity markets. These stocks are not for the faint of heart and will be subject to large volatility.
If you're looking for alternative options for your research that didn't make this list, have a peek at Fortuna Silver Mines (TSE:FVI), and Pan American Silver (TSE:PAAS).
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