Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Silver Bulls, Here’s A Global Miner That Returned 87% On The FTSE In 2020

By Investing.com (Tezcan Gecgil/Investing.com )Stock MarketsJan 13, 2021 04:27AM ET
www.investing.com/analysis/silver-bulls-heres-a-global-miner-that-returned-87-on-the-ftse-in-2020-200555699
Silver Bulls, Here’s A Global Miner That Returned 87% On The FTSE In 2020
By Investing.com (Tezcan Gecgil/Investing.com )   |  Jan 13, 2021 04:27AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Gold and silver have always had an allure, for both a variety of cultures and as assets in investment portfolios. And in 2020, investors in either precious metal were handsomely rewarded.

The first half of 2020 saw substantial rallies in both gold and silver. In the midst of the initial chaos of the pandemic, both precious metals rallied and reached multi-year highs. With August came profit-taking. However, since December, the up move has started again. The bullish move in the shiny commodities has also translated into robust gains for miners.

Therefore today, we will discuss FTSE 100 member, Fresnillo (LON:FRES), (OTC:FNLPF), one of the best performers on the UK's leading equity index. In the past year, FRES shares returned more than 87%. On Jan. 12, the stock closed at 1,130p ($15.4 for U.S.-based shares).

Fresnillo Weekly.
Fresnillo Weekly.

By comparison the FTSE 100 is still down about 11% over the past 52 weeks.

FTSE 100 Weekly.
FTSE 100 Weekly.

Mexico-based Fresnillo is one of the most important silver miners worldwide. According to the company, “the Fresnillo mine has been producing silver for more than five centuries.” The mining heavyweight is also the country’s largest gold producer. Its market cap currently stands at £8.7 billion (or $11.9 billion).

Investors dazzled by the potentially lusterous outlook for either metal—but especially silver—could consider researching FRES further. Here's why:

How Recent Earnings Came

Fresnillo currently has seven operating mines, three development projects and six exploration prospects. Silver accounts for more than 15% of total adjusted revenue for the miner.

In July, it announced interim results for the six-month period ending June 30. Gross profit was $321.2 million, up 56.3% year-on-year (YoY). Profit before income tax of $127.9 million increased 136.6% YoY. Adjusted EPS was11.8 cents per share, up 40.5%. Free cash flow in the first half the year stood at $242.6 million. The board also declared an interim dividend of 2.3 cents per share.

On Oct. 21, Fresnillo released its Q3 production report. CEO Octavio Alvidrez said:

Our silver mines are performing in line with the forecasts we set out at the beginning of the year and our silver production outlook is unchanged, despite the disruption of this pandemic. As we set out at our half-year results, we have seen some impact as a result of the additional working restrictions in place at the open-pit mines and this has affected our gold production, so we have marginally reduced our full-year guidance for gold.”

We are bullish on silver in the long run and we like Fresnillo with its established tradition of mining and low production costs.

However, given its run-up in price in 2020, short-term profit-taking could be likely. Forward P/E and P/S ratios are 18.90 and 5.41, making the stock's price frothy. A potential decline of 5%-7% from the current levels would improve the margin of safety. We could see a period of consolidation and a sideways move in the share price.

On Jan. 27, the company is expected to release its production report for Q4, and on Mar. 2 its FY20 preliminary results should be be announced. Potential investors may want to study the reports before committing capital into FRES shares.

Bottom Line

Precious metals have always been a safe haven for investors, and 2020 did not prove them wrong. However, it's too soon to tell how 2021 could shape up. Nevertheless, economists debate the potential effects of extreme monetary policies, negative real rates and unsustainable debt levels on the shiny commodities. In the long run, these factors could easily support higher gold and silver prices.

Investors who would rather invest in a basket of silver or gold miners could also consider investing in an exchange-traded fund (ETF) that focuses on miners. Examples are the ETFMG Prime Junior Silver Miners ETF (NYSE:SILJ), the Global X Silver Miners ETF (NYSE:SIL), the iShares MSCI Global Gold Miners ETF (NASDAQ:RING), the iShares MSCI Global Silver and Metals Miners ETF (NYSE:SLVP) and the VanEck Vectors Gold Miners ETF (NYSE:GDX).

Over the past 52 weeks, these four ETFs have returned 33.7%, 42.2%, 27.1%, and 24.7%, respectively.

Other mining names these funds would provide exposure to include Barrick Gold (NYSE:GOLD), First Majestic Silver Corp (NYSE:AG), Franco-Nevada (NYSE:FNV), Newmont Goldcorp Corp (NYSE:NEM), Pan American Silver (NASDAQ:PAAS), Polymetal International (OTC:POYYF), Wheaton Precious Metals (NYSE:WPM) and Yamana Gold (NYSE:AUY).

Silver Bulls, Here’s A Global Miner That Returned 87% On The FTSE In 2020
 

Related Articles

Silver Bulls, Here’s A Global Miner That Returned 87% On The FTSE In 2020

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Arda Igci
Arda Igci Jan 20, 2021 3:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very helpful piece..
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email