Silver (SIK24) has been shining bright lately, and commodity analysts at ANZ believe that prices could hit $31 per ounce or higher by the end of 2024. The optimism comes from slower production growth at mines and robust industrial demand, notably from the solar sector, creating a supply squeeze. Plus, stubbornly high inflation and interest rates are boosting silver's status as a safe-haven asset.
Moreover, industry group the Silver Institute now reports that the global silver deficit is expected to increase by 17% to 215.3 million ounces in 2024, driven by a 2% demand rise - mainly due to robust industrial usage - while total supply dips by 1%.
Given this forecast for higher commodity prices, here’s a closer look at two buy-rated silver mining stocks that could benefit from a supply crunch in the silver market.
Mining Stock #1: Hecla Mining
Hecla Mining Company (HL), founded in 1891 and based in Coeur d'Alene, Idaho, is the largest primary silver producer in the U.S., and owns the only primary silver producer in Canada. With a market cap of $3.3 billion, it mines silver, gold, lead, and zinc concentrates, notably through its flagship project, the Greens Creek mine in southeast Alaska.
Hecla Mining stock has returned 5.2% on a YTD basis, roughly in line with the S&P 500 Index's ($SPX) 5% returns over the same time frame. The company offers an annualized dividend of $0.03 per share, resulting in a dividend yield of 0.47%.
HL stock trades at 4.52 times sales, higher than its peers like First Majestic Silver (AG), which trades at 3.39x.
Hecla Mining reported Q4 revenue of $160.7 million on Feb. 14, exceeding Wall Street's estimates by 6.1%. The company achieved notable milestones, with silver reserves reaching 238 million ounces, silver production hitting 14.3 million ounces, and total sales reaching $720.2 million, marking the second-highest figures in the company's history.
As per the fiscal Q1 preliminary production report on April 8, Hecla Mining's silver production surged 43% sequentially to 4.2 million ounces, with the Greens Creek mine producing 2.5 million ounces, Lucky Friday mine producing 1.1 million ounces, and Keno Hill producing 646,312 ounces.
Management provided a three-year production outlook, expecting consolidated silver production to range between 16.5 million and 17.5 million ounces in fiscal 2024, growing further to range between 18 million and 20 million ounces by 2026.
Analysts tracking Hecla Mining expect the company to swing to a profit of $0.02 per share in fiscal 2024, with EPS growing to $0.06 in fiscal 2025. The company is expected to announce fiscal Q1 earnings results on May 8.
Hecla Mining stock has a consensus “Strong Buy” rating. Out of the eight analysts offering recommendations for the stock, seven give a “Strong Buy,” and one advises a “Moderate Buy” rating.
The average analyst price target of $6.69 indicates upside potential of around 32.2% from current levels. The Street-high price target of $10.25 suggests that the stock could rally as much as 102.5%.
Mining Stock #2: Fortuna Silver Mines
Based in Vancouver, Canada, Fortuna Silver Mines (FSM) is a key player in precious metals and base metal mining across Latin America and West Africa. With a market cap of $1.4 billion, it focuses on extracting silver, lead, zinc, and gold, notably through projects like the San Jose mine in Mexico.
Fortuna Silver stock has surged 16.3% on a YTD basis, easily surpassing the SPX's returns over the same time frame. The stock trades about 9% below its 52-week highs.
FSM stock currently trades at 1.64 times sales – lower than its own five-year average of 2.58x, as well as its peers.
Fortuna Silver reported Q4 2023 adjusted net income of $20.6 billion, or $0.07 per share, on Mar. 6, on revenue of $265.3 billion – which beat consensus estimates by 3.1%. It produced 1.35 million ounces of silver in the quarter and a total of 5.88 million ounces for the fiscal 2023.
The company also reported Q1 silver production of 1.07 million ounces on April 8, with the San Jose mine producing 759,111 ounces and the Caylloma, Peru mine producing 315,460 ounces. The company anticipates its silver production to range between 4.0 million and 4.7 million ounces in fiscal 2024.
Analysts tracking Fortuna Silver expect its revenue to increase by 28.7% year over year to $226 million in fiscal Q1, while EPS is projected to be $0.03.
Fortuna Silver stock has a consensus “Moderate Buy” rating overall. Out of four analysts covering the stock, one rates it a "Strong Buy," and four advise a "Hold."
The average analyst price target of $5.23 indicates an upside potential of approximately 16.5% from current levels. The Street-high price target of $5.80 suggests that the stock could rally as much as 29%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
