- When the chips were down, these stocks outperformed the market
- These stocks offer capital protection along with modest returns
- The expected rise in demand for silver could drive great future growth for these companies
Most of the asset classes have been volatile across the capital markets in the recent times, due to the economic impact of the coronavirus pandemic. A lot of wealth has been eroded from the stock markets since the pandemic washed up the shores of the countries across the world. Investors across the globe are now chalking out plans to restructure their investment portfolio and redevise their strategy, given the current macro-economic factors prevalent in the economy.
Investments always come with a lot of risks, uncertainties, and opportunity costs. In these pressing times, investors are being vary of protecting their capital. Reaping modest returns out of safer investments could be the icing on the cake in these testing times.
From centuries, Gold and Silver care considered as safer investments by the investors. Investments in these metals is considered relatively safe because they tend to hold the value, which can be redeemed when the going gets tough. People look up to these investments for the safety of their capital. Investments in these asset classes do come with some risks and it is imperative for investors to do a comprehensive research before putting their money into it. In addition, these investments tend to provide a hedge against inflation.
The economic activity came to a screeching halt as the lockdown was imposed. This pushed the consumer demand of oil to an all-time low. This resulted in an oil prices crash. UK’s economy remains vulnerable to uncertainties with respect to Brexit and coronavirus pandemic. Unemployment and Inflation is expected to grow by the end of the year. These sorts of economic pressures tend to help silver and the other precious metal. Since the lockdown in March 2020, gold has risen sharply and is currently trading at an 8-year high. Similarly, the price of silver was up by more than 65 per cent since the lockdown began in March 2020.
The investors bought silver in the form of bars and coins traditionally. New age investors do not find it convenient to invest in these physical commodities due to storage and theft issues. Another way of reaping benefit from the commodity is by looking forward to silver mining stocks, which are listed on the London Stock Exchange. Most of the times, the prices of these stocks resonate with the prices of silver as a commodity.
Silver investments have plenty of advantages. They are cheaper in comparison to other precious commodities. Silver has a wide area of applications other than just locking a value. For instance, silver is used in several industrial and healthcare applications such as batteries, superconductors, and microcircuits. In the present scenario, where innovation is one of the key growth drivers, silver would continue to witness stable demand. In the post pandemic era, the overall demand for silver is expected to rise substantially.
Investments in silver mining companies during these unprecedented times can help the investors in balancing out their portfolio as these stocks tend to perform better when the overall market volatile and uncertain. In this article, we would put our lens through some LSE-listed silver mining companies, which have performed well during the unprecedented crisis.
- Fresnillo Plc
Fresnillo Plc (LON: FRES) is a Mexico-headquartered precious metal group, which conducts mining and exploration activities and holds one of the largest precious metals land reserves in Mexico. It is the leading silver producer in the world and the largest gold producer in Mexico. During the first quarter of 2020, the production of silver slightly dipped against the previous quarter, was broadly in line with the expectations. The company has enough cash reserves to withstand any temporary disruption of economic activities. The Company witnessed a decent production performance during the first quarter of 2020 and delivered solid results in terms of gold and silver production, which were in line with the management’s expectations.
The stock has delivered a price return of 70.34 per cent on YTD basis. During the last twelve months, the stock has delivered a price return of 38.44 per cent. While writing on 21 July, at GMT 11:11 AM+1 before the market close, FRES shares were trading at GBX 1,080.00, marginally low from previous day closing price.
- Hochschild Mining Plc
South America based Hochschild Mining Plc (LON: HOC) deals in processing of precious metals such as gold and silver. The company managed to produce 4.1 million ounces of silver during the first half of 2020. By the year end, the company expects to complete its brownfield exploration programme. The company has put in place all the Covid-19 protocols. The company had cash reserves of $162 million as of 30 June 2020, to withstand the current crisis.
The stock has delivered a price return of 42.74 per cent on YTD basis. During the last twelve months, the stock has delivered a price return of 16.04 per cent. While writing on 21 July, at GMT 11:11 AM+1 before the market close, HOC shares were trading at GBX 257.00, marginally up by 2.07 per cent from previous day closing price.
- Polymetal International Plc
Polymetal International Plc (LON: POLY) is a Cyprus based organisation and a worldwide leader in valuable metal mining. The production of silver was at similar levels during the first quarter of 2020 in comparison to the same period previous year. The company’s revenue was up by 9 per cent Year-on-Year to US$ 494 million. Despite the economic impact of Covid-19, the company made a solid start in the first quarter 2020.
The stock has delivered a price return of 38.90 per cent on YTD basis. During the last twelve months, the stock has delivered a price return of 65.25 per cent. While writing on 21 July, at GMT 11:24 AM+1 before the market close, POLY shares were trading at GBX 1,655.50, marginally up by 0.03 per cent from previous day closing price.
- Petropavlovsk Plc
FTSE 250 listed Petropavlovsk Plc (LON: POG) mining company has delivered resilient performance in a challenging environment. The Company has witnessed a decent financial performance in the fiscal year 2019 followed by decent operational highlights in the first quarter of 2020.
The stock has delivered a price return of 127.56 per cent on YTD basis. During the last twelve months, the stock has delivered a price return of 176.82 per cent. While writing on 21 July, at GMT 11:45 AM+1 before the market close, POG shares were trading at GBX 29.35, marginally up by 1.56 per cent from previous day closing price.
- Newmont Corporation
Silver mining company, Newmont Corporation (LON:0R28) witnessed surge of 43 per cent(Q-o-Q) to $2,581 million, according to the first quarter earnings release. The company has a generated a Free Cash Flow of $611 million and $939 million of cash from continuing operations. The company has a good amount of liquidity to weather the current crisis. In these pressing times, the company managed to declare a dividend of $0.25 per share during Q1 2020.
While writing on 21 July, at GMT 11:58 AM+1 before the market close, Newmont shares were trading at USD 63.80, marginally down by 0.01 per cent from previous day closing price. During the last twelve months, the stock has delivered a price return of 62.13 per cent.
Most of these businesses have delivered double-digit returns during the current crisis. These businesses could be looked upon by the investors for diversification of portfolio. Investors can look at these stocks to balance their portfolio as they are reasonably priced and could provide with some amount of hedge in the volatile markets. In addition, in the post pandemic era, demand of silver is expected to rise manifolds, as the world is looking to make a transition to greener and cleaner technologies.