9m 2024 Silver Miners – Cashed up High Margin Juniors Leave Bigger Companies Looking Overvalued

This article is part of a quarterly series that assesses the economic performance silver silver-focused mining companies.

Changes to the peer group

As part of our ongoing commitment to developing this peer group with reader input, in this quarter's silver miner update, we added three more companies to our peer group analysis: Guanajuato Silver Company Ltd , IMPACT Silver Corp. , and Silver X Mining This increases our silver focused mining peer group to 11 companies.

Guanajuato Silver is a Mexican-focused silver miner that operates a series of three underground silver mines in Guanajuato State and the silver-rich polymetallic Topia Mine in Durango State.

Impact Silver Corp., is another Mexican-focused silver mine. Impact has two operations, the Royal Mines of Zacualpan and the Plomosas zinc-silver mine, located in Chihuahua State.

Silver X Mining Corp. operates the Tangana Mining Unit within the district-scale land package known as the Nueva Recuperada Silver District, located in Central Peru.

We continue to welcome all comments from our readers to help us refine this list of silver-focused mining companies, that earn the majority of their income from the sale of silver, allowing us to give the best possible quarterly insights into what is going on with silver miners.

Production Levels

During the first nine months of 2024, the 11 silver miners in our peer group experienced a 5.6% decrease in silver equivalent production levels compared to the same period in 2023, falling to 68.47 million ounces (Moz).

Hecla Mining Company continues to be the largest silver-focused producer, producing 24.23Moz of silver equivalent (Ag Eq.), accounting for 35.4% of the peer group's production (Figure 1). Hecla experienced a 0.9% increase in silver equivalent production levels in 9m 24 compared to 9m 23, due to a strong third quarter.

First Majestic Silver Corp. remains the second largest silver-focused producer, accounting for 20.8% of the peer group’s production, 14.26 Moz, despite a 24.8% reduction in year-on-year Ag Eq. production. This was the largest fall in silver equivalent production levels of any silver miner within the peer group and results from the suspension of mining at the Jerritt Canyon operation.

MAG Silver Corp. continues to see the largest relative rise in year-on-year Ag Eq. production, up 32.9% reaching 2.49 Moz, accounting for 3.6% of the peer group’s total production for the year to date.  The continued rise in MAG Silver’s production levels has been driven by Juanicipio Mine, a joint venture with Fresnillo plc in Mexico, with ongoing operational enhancements and circuit optimisations at the plant having a positive impact.

New entrant, Silver X Mining Corp. also experienced a large increase in production levels, up 25.6% to 0.71Moz Ag Eq. on the same period the previous year, as operations at the Tangana Mine accessed new ore shoots, expanding mining operations both horizontally and at depth.

Figure 1: 9m 2024 and 2023 Silver Equivalent Production Levels

Source: Data Collected by Mining and Metals Research Corp.

Revenues and EBITDAs

Silver-focused miners continued to see a Revenue/EBITDA disconnect in the first nine months of the year.

Hecla continues to have the highest revenue during the period, US$680.3 million, but returned an EBITDA of US$65.6 million (Figure 2). While First Majestic generated the second-highest revenue during the period of US$388.3 million but only generated a mid-peer group EBITDA of US$33.1 million.

SilverCrest Metals Inc. and Silvercorp Metals Inc. returned the highest levels of EBITDA, US$132.3 million and US$110.9m respectively, from mid-peer group revenue levels (Figure 2).

Figure 2: 9m 2024 Revenue and EBITDA of Silver Miners

Source: Data Collected by Mining and Metals Research Corp.

The EBITDA margin assesses the silver miners within the peer group that are the most profitable on relative terms, at the 9-month interval there was a huge gap between those silver miners with high margins and those that have very thin margins (Figure 3).

MAG Silver (84.1%), SilverCrest Metals Inc. (61.0%), Silvercorp Metals Inc. (60.7%) and Aya Gold & Silver (59.05) all have EBITDA margins above the average of 30.7% (Figure 3). Endeavour Silver Corp (3.2%), Guanajuato Silver (0.8%) and Impact Silver Corp. (NEG) sit at the bottom end of the peer group.

Figure 3: 9m 2024 EBITDA margin of Silver Miners

Source: Data Collected by Mining and Metals Research Corp.

Market Cap and Net Cash Positions

Silver miners' market cap and net cash position during the first 9 months of the year also displayed a clear disconnect with the market value of these companies. Hecla and First Majestic had moderate to large net debt positions, US$-510 million and US$-52 million, respectively (Figure 4). While lower-valued companies such as Silvercorp SilverCrest and MAG Silver have the highest net cash positions, US$210 million, US$158 million and US$113 million, respectively.

Figure 4: 9m 2024 Market Cap and Net cash/(debt) of Silver Miners

Source: Data Collected by Mining and Metals Research Corp.  Priced 16.12.2024

EV/EBITDA Ratios

The enterprise value (EV) to EBITDA ratio indicates the range in profitability, market values and balance sheet strength of these companies. The EV is the market value of a company plus any debt the company has, minus any cash in the business.

The lower the EV/EBITDA ratio the more profit the company makes per dollar of market value - undervalued. The higher the ratio the less profit the company makes per dollar of market value -overvalued.

For the first nine months of the year, our peer group of silver miners had a large range in the EV/EBITDA ratio from 6.7 times for Silvercorp to 184.3 times for Endeavour (Figure 5) with an average of 60 for the peer group.

Endeavour, Guanajuato Silver, and Aya Gold & Silver all sit above the average and appear overvalued by the market relative to their EBITDA, while Silvercorp, SilverCrest, MAG, GoGold Resources Inc. and Silver X all appear undervalued.

Figure 5: 9m 2024 EV/EBITDA ratios of Silver Miners

Source: Data Collected by Mining and Metals Research Corp. Priced 16.12.2024

Some of the highest EBITDA generating and highest EBITDA margin operations also have the strongest balance sheets with the largest net cash positions of all the silver miners, yet these businesses remained at the bottom of the EV/EBITDA ratio, compared to their peers.

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