The Mining Stock Report

Silver recently broke their 30 year-old all-time high record, and many silver stocks are benefiting from silver's recent run. But investors need to be weary of the pretenders when looking for contenders. This is a short list of Silver Stocks that investors should begin looking at when they start their due diligence process.

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The stocks selected at this stage of the silver boom are larger, more established silver companies. There are a number of opportunities in the micro-cap and nano-cap stocks for silver, but the due diligence to uncover those rare gems are outside the scope of this article. The criterion for the silver stocks selected is a minimum market capitalization of $1 billion USD and price per share of $10. The benchmarks eliminated a number of smaller silver producers and near-term producers from the discussion, but this was done in the interest of capital preservation as it helps to insulate investors from the price volatility typical of lower cap / penny stocks.

First up is Silver Wheaton, a unique company which is not an actual silver miner but rather gains exposure to the silver market through the purchase of already excavated ore from miners and then extracting silver from the ore. The company has 15 silver purchase agreements currently in place with miners such as Barrick and Gold Corp. In 2010, Silver Wheaton had production of 23.5 million ounces of silver equivalent, and looks to grow exposure to 40 million ounces by 2013 [Cited Source] . The unique business approach of Silver Wheaton has created a more stable environment by eliminating exploration risks.

One company which has evolved from an exploration stage to a production stage is Silver Standard. The company currently has one mine in production, with a number of other projects either in the development stage or pre-feasibility. It is the quality of Silver Standards assets which account for the companies potential. With projects either in production or nearing production in Argentina, Peru and Mexico, Silver Standard represents a silver stock that investors should take a close look when doing their due diligence. The companies flagship property is in Argentina, the Pirquitas Mine, which produced over 6 million ounces of silver in 2010, and is expected to hit between 8 – 10 million ounces once the mine reaches full production.

Pan American is another company which has a variety of silver assets based in Mexico and South America. Pan American Silver is the world’s second largest primary silver producer, and has a stated mission to create value through consistently increasing production and increasing reserves. The crown jewel of Pan American is the Navidad project in Argentina, which if approved, would double the companies annual production. Investors should beware though, while Navidad boast 632 million ounces of silver reserves, it also faces government obstacles to bring into production. Pan American remains confident that they will gain government approval to open-pit the Navidad in the near future, which would address a huge question mark hanging over the companies head. But the potential in Pan American Silver can not be ignored by investors who are looking for opportunities amongst the myriad of silver stocks.

Mexico is home to some of the world’s largest and lowest cost silver mines, which brings us to First Majestic Silver. First Majestic has three mines in production, all of which are based in Mexico. The company produced 7.5 million ounces of silver last year, and has plan to significantly increase that production number over the next 4 years. With large reserve and resource numbers spread over their production mines and exploration projects, First Majestic has excellent exposure to a pure silver market.

Another company for investors to watch is Minefinders, which operates the Dolores silver mine in Mexico. The smallest company profiled, Minefinders also represents the most volatile risk to investors due its relative size. The company operates the Dolores Mine, which produces 4 million ounces of silver and 100,000 of gold annually. The company boasts silver reserves of 131.1 million ounces proven & probable, and a further silver resource of 161 million ounces of measured and indicated.

The last company profiled is Silvercorp Metals, and it is the only one with an operating mine in China. Silvercorp is the largest primary silver producer in China due to its exceptionally high-grade Ying deposit. With 2010 production of approximately 4.7 million ounces of silver, Silvercorp is projecting estimated silver production of 10.6 million ounces by 2014. The company has grown revenues annually from US$39.8 million in 2007 to US$107.2 million in 2010. With no long-term debt, and plenty of cash on hand, Silvercorp is a company silver investors need to keep on their watch list.

One thing investors should be note, is that while silver has definitely been the performer of the 'year-so-far’ challenging the $50 barrier, there is potential for an equally steep decline should silver lose momentum. While there are many bulls and bears in the silver market, a decline in the price of silver may very well have a dramatic effect on the price of silver stocks.

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Please keep in mind our disclaimer, Mining Stock Report, nor the writer is a registered investment advisor This article is NOT a recommendation to buy or sell any security mentioned. The writer and Mining Stock Report recommends discussing any investment decisions with a professional investment advisor before investing money. The writer may hold a position in the securities mentioned either directly or through a fund.