What are Silver Mining Stocks and why do They Matter?

JP Buntinx
July 11, 2020

Diversifying a portfolio through precious metals can be done in many different ways. Investing in the metals themselves, or products derived from them, is one option to explore. Silver mining stocks, for examples, can yield some good money as well.

The Appeal of Silver Mining Stocks

Given the current price rise of precious metals, the industry appears to be firing on all cylinders. Noting such strong gains would not be possible without the companies providing core services. Mining firms are the lifeblood of gold and silver, and a fair few of them can be traded publicly. 

Finding the right silver stocks to invest in, however, is a bit more complex than one would imagine at first. Before making any financial commitment, it is pertinent to note which types of stocks there are and what they represent. Investing blindly is never a smart idea, thus doing research is crucial. 

Major Silver Mining Stocks

As the name would suggest, these particular types of stocks are tied to bigger silver mining operations or exploration firms, often spanning multiple active mining locations. More specifically, there aren’t that many firms that fit this category at this time. 

While investing in these stocks will often yield positive results, the buy-in price may be relatively steep as well. Given the track record of major silver stocks, the room for potential profit may also be slightly smaller. 

Mid-tier Producers

Any company capable of producing silver is worth looking into. In virtually all cases, these companies will have active mines, with potentially more in development. Depending on how much metal they can produce on a yearly basis, their market cap will be adjusted accordingly. 

One thing to look out for with mid-tier producers is whether they have any outstanding debt. If the debt vastly outweighs cash reserves or yearly production, the investment becomes a lot riskier. Thankfully, most mid-tier producers will have a healthy ratio, but digging into their public finances may be worth one’s while. 

Junior Silver Mining Stocks

Junior companies are the up-and-coming investment segment everyone is going crazy about. Given the current conditions surrounding the silver market, these are the companies likely to benefit the most. That trend can reflect favorably upon their stock price as well, although it is never a guarantee for success. 

There are many different types of junior silver stocks to explore. This particular market segment goes well beyond the concept of producing gold. Companies currently developing their first mine(s), exploring new locations, or being labeled as “project generators” can all yield significant returns if they turn out to be successful. 

The main appeal of junior silver stocks is how they are often cheaper to buy. These are also primarily companies with a market cap well below the $100 million mark. In some cases, new companies can be valued at just $2 million, with major potential for future growth. Every investment carries risks, however, including silver mining stocks.

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