銀鉱株2019Q3ファンダメンタルズ by Zeal
最後の2段落だけ訳を入れておきます。
Silver Miners’ Q3’19 Fundamentals
Adam Hamilton November 29, 2019 3726 Words
But
silver’s recent upleg was truncated way before silver-stock prices
really started to reflect the miners’ wildly-better fundamentals.
That portends big outsized silver-stock gains during silver’s next
upleg. As long as prevailing silver prices continue advancing on
balance with gold’s secular bull, the silver miners are going to
keep looking better and better fundamentally. Their upside
potential is massive, well worth riding.
しかし、銀行株ラリーが始まる前にシルバー価格上昇が中断してしまった。ということは次のシルバー価格上昇では銀行株の上昇は素晴らしいものになるだろう。ゴールドブル相場に伴いシルバー価格が上昇する限り銀鉱株のファンダメンタルズはどんどん良くなるだろう。銀鉱株の潜在上昇力はすばらしいもので、これに乗らない手はない。
Adam Hamilton, CPA November 29, 2019 Subscribe
Silver Miners’ Q3’19 Fundamentals
Adam Hamilton November 29, 2019 3726 Words
The
silver miners are finally enjoying higher prevailing silver prices,
a great boon for this sector. Silver surged this past summer after
gold’s first new bull-market highs in several years rekindled
enthusiasm for precious metals. The long-neglected silver stocks
rallied strongly with their metal. Their recently-reported Q3’19
results reveal whether those gains are justified, and how much
fundamentals improved on higher silver.
Four
times a year publicly-traded companies release treasure troves of
valuable information in the form of quarterly reports. Required by
the US Securities and Exchange Commission, these 10-Qs and 10-Ks
contain the best fundamental data available to traders. They dispel
all the sentiment distortions inevitably surrounding prevailing
stock-price levels, revealing corporations’ underlying hard
fundamental realities.
The
definitive list of major silver-mining stocks to analyze comes from
the world’s most-popular silver-stock investment vehicle, the SIL
Global X Silver Miners ETF. Launched way back in April 2010, it has
maintained a big first-mover advantage. SIL’s net assets ran $515m
in mid-November near the end of Q3’s earnings season, 4.6x greater
than its next-biggest competitor’s. SIL is the leading
silver-stock benchmark.
In
mid-November SIL included 25 component stocks, which are weighted
somewhat proportionally to their market capitalizations. This list
contains the world’s largest silver miners, including the biggest
primary ones. Every quarter I dive into the latest operating and
financial results from SIL’s top 17 companies. That’s simply an
arbitrary number that fits neatly into the table below, but still a
commanding sample.
As
of mid-November these major silver miners accounted for fully 93.9%
of SIL’s total weighting. In Q3’19 they collectively mined 72.2m
ounces of silver. The latest comprehensive data available for
global silver supply and demand came from the Silver Institute in
April 2019. That covered 2018, when world silver mine production
totaled 855.7m ounces. That equates to a run rate around 213.9m per
quarter.
Assuming that mining pace persisted in Q3’19, SIL’s top 17 silver
miners were responsible for about 34% of world production. That’s
fairly high considering just 26% of 2018’s global silver output was
produced at primary silver mines! 38% came from lead/zinc mines,
23% from copper, and 12% from gold. Nearly 3/4ths of all
silver produced worldwide is just a byproduct. Primary silver mines
and miners are quite rare.
Scarce silver-heavy deposits are required to support primary silver
mines, where over half their revenue comes from silver. They
are increasingly difficult to discover and ever more expensive to
develop. And silver’s challenging economics of recent years argue
against miners even pursuing it. So even traditional major silver
miners have shifted their investment focus into actively
diversifying into far-more-profitable gold.
Silver price levels are best measured relative to prevailing gold
prices, which
overwhelmingly drive silver price action. In early July the
Silver/Gold Ratio
continued collapsing to its worst levels witnessed in 26.8 years,
since October 1992! Those secular extremes of the worst silver
price levels in over a quarter century sure added to the misery
racking this once-proud sector. So silver’s recent upleg is a
godsend.
The
largest silver miners dominating SIL’s ranks are scattered around
the world. 11 of the top 17 mainly trade in US stock markets, 3 in
the United Kingdom, and 1 each in South Korea, Mexico, and Canada.
SIL’s geopolitical diversity is good for investors, but makes it
difficult to analyze and compare the biggest silver miners’
results. Financial-reporting requirements vary considerably from
country to country.
In
the UK companies report in half-year increments instead of
quarterly. Some silver miners still publish quarterly updates, but
their data is limited. In cases where half-year data is all that
was made available, I split it in half for a Q3 approximation.
Canada has quarterly reporting, but the deadlines are looser than in
the States. Some Canadian miners really drag their feet, delaying
their quarterlies right up to legal limits.
The
big silver companies in South Korea and Mexico present other
problems. Their reporting is naturally done in their own languages,
which I can’t decipher. Some release limited information in
English, but even those translations can be difficult to interpret
due to differing accounting standards and focuses. It is definitely
challenging bringing all the quarterly data together for these
diverse SIL-top-17 silver miners.
But
analyzing them in the aggregate is essential to understand
how they are faring. So each quarter I wade through all available
operational and financial reports and dump the data into a big
spreadsheet for analysis. Some highlights make it into this table.
Blank fields mean a company hadn’t reported that data by
mid-November, as Q3’s earnings season ended. Some of SIL’s
components report in gold-centric terms.
The
first couple columns of this table show each SIL component’s symbol
and weighting within this ETF as of mid-November. While most of
these stocks trade on US exchanges, some symbols are listings from
companies’ primary foreign stock exchanges. That’s followed by each
miner’s Q3’19 silver production in ounces, along with its absolute
year-over-year change. Next comes this same quarter’s gold
production.
Nearly all the major silver miners in SIL also produce
significant-to-large amounts of gold! That’s truly a double-edged
sword. While gold really stabilizes and boosts silver miners’ cash
flows, it also retards their stocks’ sensitivity to silver itself.
So the next column reveals how pure these elite silver miners
are, approximating their percentages of Q3’19 revenues actually
derived from silver. This is calculated one of two ways.
The
large majority of these SIL silver miners reported total Q3
revenues. Quarterly silver production multiplied by silver’s
average price in Q3 can be divided by these sales to yield an
accurate relative-purity gauge. When Q3 sales weren’t reported, I
estimated them by adding silver sales to gold sales based on their
production and average quarterly prices. But that’s less optimal,
as it ignores any base-metals byproducts.
Next
comes the major silver miners’ most-important fundamental data for
investors, cash costs and all-in sustaining costs per ounce
mined. The latter directly drive profitability which ultimately
determines stock prices. These key costs are also followed by YoY
changes. Last but not least the annual changes are shown in
operating cash flows generated and hard GAAP earnings, with a couple
exceptions necessary.
Percentage changes aren’t relevant or meaningful if data shifted
from positive to negative or vice versa, or if derived from two
negative numbers. So in those cases I included raw underlying data
rather than weird or misleading percentage changes. Companies with
symbols highlighted in light-blue have newly climbed into the elite
ranks of SIL’s top 17 over this past year. This entire dataset
together is quite valuable.
It
offers a fantastic high-level read on how the major silver miners
are faring fundamentally as an industry and individually.
Q3’19’s higher prevailing silver prices thanks to
gold’s
bull-breakout rally greatly improved silver miners’
fundamentals. Their revenues and earnings surged higher, despite
lower silver production as they continue diversifying into gold.
Their stock prices aren’t reflecting huge earnings-growth potential.
Silver’s Q3’19 performance was interesting, looking impressive on
the surface while also disappointing. Between late May and early
September, silver blasted 36.6% higher. That amplified gold’s big
21.5% gain in that span by 1.7x. Silver peaked the same day gold
did in early September, soaring 28.1% Q3-to-date! But silver also
slumped with gold into quarter-end, rallying 11.2% in Q3 proper
which trounced gold.
That
was 2.5x gold’s 4.4% Q3 advance, excellent silver leverage to gold.
But since silver’s recent surge began near those extreme
quarter-century-plus lows relative to gold, its gains were more
muted. Q3’19’s average silver price of $16.97 was only 13.4%
better than Q3’18’s average. Meanwhile the average gold price
soared 21.7% YoY last quarter. So silver miners’ fundamental boost
considerably lagged the gold miners’.
And
the silver miners desperately needed higher metal prices much more
than the gold miners. In late May nearing Q3, SIL slumped to a
miserable 3.3-year secular low. Meanwhile the leading
GDX gold-stock
ETF had merely retreated to a 4.4-month low in early May.
Silver acts like a gold sentiment gauge, only rallying materially
when traders expect higher gold prices. When they don’t, silver
seriously languishes.
And
when silver is down and out, the silver miners’ stocks are all but
abandoned. That bearish psychology takes some time to reverse, as
reflected in SIL’s performance. While this leading silver-stock ETF
surged 46.6% higher between late May to early September, that was a
measly 1.3x silver’s own advance. The major silver miners need to
amplify silver uplegs by 2x to 3x to be worth the big
additional risks they bear.
Despite the silver stocks’ strong summer rally, much residual
pessimism remained. After SIL surged 20.2% quarter-to-date by that
early-September peak, it plunged 12.8% into quarter-end. That left
this key silver-stock benchmark with a poor 4.8% gain in Q3 proper.
That was absolutely terrible, running just 0.4x silver’s own Q3’19
rally! So the silver-stock-price performance last quarter was
relatively weak.
But
the silver miners’ recently-released Q3’19 results prove the silver
stocks should’ve enjoyed much-bigger gains. They enjoyed a
massive fundamental boost from the higher prevailing silver
prices, despite this metal not performing as well as it ought to
compared to gold. That gives the silver miners’ stocks big upside
potential once traders figure this out, as current silver-stock
levels don’t yet reflect higher silver prices.
Since production is the lifeblood of silver mining, that’s the best
place to start in analyzing how the major silver miners fared in
Q3. The SIL-top-17 silver miners again collectively produced 72.2m
ounces of silver last quarter, which was actually down 4.4% YoY.
Meanwhile their total gold output surged 11.9% higher YoY to 1,619k
ounces. That was the highest SIL-top-17 gold output in the 14
quarters I’ve done this research!
The
major silver miners continued their long-term trend of
increasingly diversifying into gold. As silver wasted away in
recent years, its bombed-out prices heavily impaired silver mines’
ability to generate operating cash flows and profits. The silver
miners were forced to adapt, and shifted their focus and capital
into adding gold production rather than boosting silver output. The
major silver miners are yellowing.
Silver mining is as capital-intensive as gold mining, requiring
similar large expenses to plan, permit, and construct new mines,
mills, and expansions. It needs similar fleets of heavy excavators
and haul trucks to dig and move the silver-bearing ore. Similar
levels of employees are necessary to run silver mines. But at
recent years’ average precious-metals prices, silver mines generate
far lower returns than gold mines.
So
even longtime traditional silver miners have reallocated much of
their capital investments into growing gold mined, at silver’s
expense. According to the Silver Institute’s latest World Silver
Survey, 2018 was the third year in a row of waning global silver
mine production. The mined-silver-supply shrinkage is even
accelerating, running 0.0% in 2016, 1.8% in 2017, and 2.4% in 2018!
Peak silver could really be upon us.
Over
this past year Pan American Silver has most exemplified the
traditional major silver miners moving into gold. Back in
mid-November 2018, PAAS acquired troubled silver miner Tahoe
Resources. Tahoe had owned what was once the world’s largest
primary silver mine, Escobal in Guatemala. That behemoth produced
5.7m ounces of silver in Q1’17, the last quarter before that
country’s government
unjustly shut it
down.
That
was in response to a frivolous lawsuit brought against Guatemala’s
mining regulator, not Tahoe or Escobal, for a trivial
bureaucratic misstep! Pan American hoped to work through all the
red tape to win approval to restart that huge silver mine. But the
real prize in that fire-sale buyout was Tahoe’s gold production from
other mines. Q3’19 is only the second quarter that acquisition is
fully reflected in PAAS’s results.
While its silver output climbed a solid 6.6% YoY to 6.7m ounces, Pan
American’s gold production soared 256.8% YoY to 150k ounces!
Interestingly that huge jump in PAAS’s gold accounted for nearly
2/3rds of the total gold increase across the entire SIL-top-17
silver miners. PAAS is forecasting full-year-2019 production of
575k ounces of gold, which makes it a sizable mid-tier gold miner,
and 25.8m ounces of silver.
Last
quarter only 32.1% of Pan American’s revenues came from silver, so
its days as a primary silver miner running over 50% are long gone.
I wonder if Pan American Silver will follow in Wheaton Precious
Metals’ footsteps and change its name and symbol to reflect its new
gold-dominated future. Prior to May 2017 WPM, SIL’s largest
component, used to be a pure silver-streaming play known as Silver
Wheaton.
SIL’s second-largest component in mid-November was the
Russian-founded but UK-listed Polymetal. In Q3’19 its silver output
plunged 19.4% YoY to 5.4m ounces, yet its gold production surged
12.9% YoY to hit a massive 402k ounces. That annualizes to way over
1m ounces per year, making POLY a major gold miner. Last
quarter just 14.0% of its sales were derived from silver, the lowest
silver purity in the SIL top 17.
Other elite SIL-component silver miners had gold output rising
faster than silver production, like Coeur Mining. Its 3.5% YoY
silver-production growth in Q3 was dwarfed by its 14.1% YoY
gold-production growth. Unfortunately the major primary
silver miners are a dying breed, since the economics of silver
mining are far inferior to gold mining. SIL’s managers can’t even
find enough silver miners to fill out their ETF.
Inexplicably Korea Zinc remains SIL’s third-largest component, which
is a base-metals smelter that has nothing to do with silver
mining! While its financial reporting in English is atrocious, it
smelted about 64.0m ounces of silver in 2018 which approximated
roughly 17% of its full-year revenue. It ought to be kicked out of
SIL posthaste, as its presence and big 1/11th weighting really
retards SIL’s sensitivity to silver.
Global X was really scraping the bottom of the barrel to include a
company like Korea Zinc in SIL. I’m sure there’s not a single SIL
investor who wants base-metals-smelting exposure in what is
advertised as a “Silver Miners ETF”. The weighting and capital
wasted in Korea Zinc should be reallocated and spread proportionally
across the other SIL stocks. The ranks of major silver miners are
becoming more rarefied.
Despite their shifting-into-gold trend, the SIL-top-17 silver miners
averaged 40.4% of their sales from silver in Q3’19! That was a big
improvement over Q3’18’s 36.9%, and SIL’s highest overall silver
purity since Q4’16. I was certainly surprised to see that given
silver’s relative underperformance compared to gold in Q3, and the
SIL top 17’s lower silver production. But higher silver prices
really boosted silver revenues.
SIL’s upper ranks still include just 3 primary silver miners, with
their silver-purity percentages highlighted in blue in this table.
They are First Majestic Silver at 82.6%, Silvercorp Metals at 64.4%,
and Fortuna Silver Mines at 53.6%. The individual stocks of these
silver-centric miners will be far more responsive to silver prices
than SIL as a whole. Despite their inclusion, SIL essentially
remains another gold miners’ ETF.
With
SIL-top-17 silver production sliding 4.4% YoY in Q3’19, the
per-ounce mining costs should’ve risen proportionally.
Silver-mining costs are largely fixed quarter after quarter, with
actual mining requiring the same levels of infrastructure,
equipment, and employees. So the lower production, the fewer ounces
to spread mining’s big fixed costs across. Yet impressively the
SIL-top-17 silver miners’ costs fell sharply in Q3.
There are two major ways to measure silver-mining costs, classic
cash costs per ounce and the superior all-in sustaining costs. Both
are useful metrics. Cash costs are the acid test of silver-miner
survivability in lower-silver-price environments, revealing the
worst-case silver levels necessary to keep the mines running.
All-in sustaining costs show where silver needs to trade to maintain
current mining tempos indefinitely.
Cash
costs naturally encompass all cash expenses necessary to
produce each ounce of silver, including all direct production costs,
mine-level administration, smelting, refining, transport,
regulatory, royalty, and tax expenses. In Q3’19 these SIL-top-17
silver miners reported cash costs averaging $6.61 per ounce, up a
trivial 0.5% YoY. SVM was a major contributor, reporting negative
cash costs due to big byproduct credits.
Way
more important than cash costs are the far-superior all-in
sustaining costs. They were introduced by the World Gold Council in
June 2013 to give investors a much-better understanding of what it
really costs to maintain silver mines as ongoing concerns. AISCs
include all direct cash costs, but then add on everything else that
is necessary to maintain and replenish operations at current
silver-production levels.
These additional expenses include exploration for new silver to mine
to replace depleting deposits, mine-development and construction
expenses, remediation, and mine reclamation. They also include the
corporate-level administration expenses necessary to oversee silver
mines. All-in sustaining costs are the most-important silver-mining
cost metric by far for investors, revealing silver miners’ true
operating profitability.
The
SIL-top-17 silver miners reporting AISCs in Q3’19 averaged just
$10.74 per ounce, which was down a massive 20.6% YoY! That was
really impressive considering their waning silver production. SVM’s
huge byproduct credits again played a role, driving super-low
best-in-sector AISCs of only $4.15. But most of the other major
silver miners also saw sharply-lower AISCs last quarter, including
SSR Mining.
SSRM’s 16.7%-lower AISCs compared to Q3’18 were a big factor in the
SIL top 17’s plunging AISCs, as that came from anomalously-high
levels. SSR Mining was winding down an old silver mine a year ago,
leading to soaring unit costs as production dwindled. But last
December SSRM spun up a new silver mine near that old mine site, and
is trucking the ore to its existing processing facilities. So
silver output soared.
That
is forcing SSRM’s high AISCs back down, really improving the
SIL-top-17 average. Interestingly if SSRM’s new silver mine hadn’t
come online, the SIL top 17’s total silver output would’ve declined
5.9% YoY. Lower AISCs are good news anytime, but greatly boost the
implied profitability of major silver miners when silver itself is
rallying. Silver’s $16.97 average price in Q3’19 made for hefty
profit margins.
That
less the SIL top 17’s average $10.74 AISCs yielded big earnings of
$6.23 per ounce. That was up a stupendous 335.7% YoY
compared to Q3’18’s mere $1.43! Silver averaged just $14.96 in that
year-ago comparable quarter, while SIL-top-17 average AISCs were
much higher at $13.53. The sequential profits growth from Q2’19 was
epic too, soaring 84.9% QoQ from implied profit margins of $3.37
before silver surged.
This
incredible gargantuan earnings growth among the major silver
miners certainly isn’t anywhere near yet reflected in their stock
prices. So the silver stocks have to soar far higher during their
metal’s next upleg, which will again be driven by gold. Even though
silver’s advance straddling Q3’19 lagged gold’s relatively, the
combination of higher prevailing silver prices and lower costs was
still a potent earnings multiplier.
Q3’s
13.4%-higher average silver prices and 20.6%-lower SIL-top-17
average all-in sustaining costs were certainly reflected in the hard
accounting numbers too. These elite silver miners’ collective sales
jumped 21.1% YoY to $3,289m last quarter. That generated operating
cash flows of $771m, which was down 7.1% YoY. Mexico’s Industrias
Peñoles was solely responsible, with OCFs collapsing 46.9% YoY or
$258m!
Still the SIL top 17’s total cash hoard grew 5.9% YoY to $2,561m.
And the hard GAAP earnings were radically better as implied
by that big spread between prevailing silver prices and AISCs.
These SIL-top-17 miners’ total profits ran $66m in Q3’19, compared
to a $243m loss in the year-ago comparable quarter. So these higher
prevailing silver prices are indeed turning things around for the
long-stressed silver miners.
While the silver miners’ stocks have massive pent-up rallying to do
to reflect these radically-improving fundamentals, that’s not going
to happen until
gold’s correction runs its course. Silver rarely advances
materially if gold isn’t powering higher in its own upleg. But once
gold turns north decisively and gives the green light to silver, the
silver stocks should catch really-strong bids. Unfortunately SIL
isn’t the way to play them.
While it is the world’s leading “Silver Miners ETF”, it is
increasingly burdened with primary gold miners with waning silver
exposure. The smaller the fractions of revenues miners derive from
silver, the less responsive their stock prices are to silver-price
moves. And having 1/11th of SIL’s capital squandered in Korea Zinc
is madness. It’s far better to avoid SIL and deploy capital in
smaller purer primary silver miners.
Silver’s previous major upleg erupted in essentially H1’16, when
silver soared 50.2% higher on a parallel 29.9% gold upleg. SIL
blasted 247.8% higher in just 6.9 months, a heck of a gain for major
silver stocks. But the purer primary silver miners did far better.
The purest major silver miner First Majestic’s stock was a moonshot,
skyrocketing a staggering 633.9% higher in that same short span!
SIL’s gains are relatively muted.
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The
bottom line is the major silver miners had an incredible Q3, despite
silver’s anemic rally straddling that quarter compared to gold’s.
The higher prevailing silver prices combined with lower costs still
worked wonders for silver miners’ profitability, both implied as an
industry and actual per GAAP earnings. That drove radical
fundamental improvements in the silver miners, even as they
continued diversifying into gold.
要約すると、大手銀鉱会社のQ3決算は素晴らしかった、ゴールドに比べてシルバー価格ラリーは弱々しいにも関わらずだ。シルバー価格上昇とコスト低減で銀鉱会社の利益は素晴らしかった、合わせてこのセクター全体のGAAP収益も素晴らしかった。というわけで銀鉱セクターのファンダメンタルズ改善は顕著だ、たとえゴールドへの分散を続けていてもだ。
要約すると、大手銀鉱会社のQ3決算は素晴らしかった、ゴールドに比べてシルバー価格ラリーは弱々しいにも関わらずだ。シルバー価格上昇とコスト低減で銀鉱会社の利益は素晴らしかった、合わせてこのセクター全体のGAAP収益も素晴らしかった。というわけで銀鉱セクターのファンダメンタルズ改善は顕著だ、たとえゴールドへの分散を続けていてもだ。
しかし、銀行株ラリーが始まる前にシルバー価格上昇が中断してしまった。ということは次のシルバー価格上昇では銀行株の上昇は素晴らしいものになるだろう。ゴールドブル相場に伴いシルバー価格が上昇する限り銀鉱株のファンダメンタルズはどんどん良くなるだろう。銀鉱株の潜在上昇力はすばらしいもので、これに乗らない手はない。
Adam Hamilton, CPA November 29, 2019 Subscribe