and have always had style, both for different cultures and as assets in investment portfolios. And in 2020, investors in both precious metals were richly rewarded.
The first half of 2020 saw significant rallies in both gold and silver. Amid the initial chaos of the pandemic, both precious metals recovered and hit multi-year highs. With August came profit taking. However, the upward movement has started again since December. The bullish movement in the shiny commodities has also translated into hefty profits for miners.
So today we will discuss member, Fresnillo (LON :), (OTC :), one of the top performers on the UK's leading stock index. In the past year, FRES shares yielded more than 87%. On January 12, the stock closed at 1,130p ($ 15.4 for US stocks).
By comparison, the FTSE 100 is still down about 11% over the past 52 weeks.
Mexico-based Fresnillo is one of the foremost silver miners in the world. 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. Market capitalization is currently £ 8.7 billion (or $ 11.9 billion).
Investors blinded by the potentially brilliant prospects for both metals – but especially silver – could consider further investigating FRES. Here's why:
How recent revenues came in
Fresnillo currently has seven operational mines, three development projects and six reconnaissance capabilities. Silver accounts for more than 15% of the miner's total adjusted earnings.
In July, it was announced for the six-month period ending June 30. Gross profit was $ 321.2 million, up 56.3% year-over-year (year-over-year). Pre-tax profit of $ 127.9 million was up 136.6% year on year. Adjusted EPS was 11.8 cents per share, an increase of 40.5%. Free cash flow for the first half of the year was $ 242.6 million. The board also announced an interim dividend of 2.3 cents per share.
On October 21, Fresnillo released his Q3 production report. CEO Octavio Alvidrez said:
“ Our silver mines are performing in line with forecasts we made at the start of the year and our outlook for silver production remains unchanged despite the disruption of this pandemic. As we explained in our half year results, we have seen some impact from the additional work restrictions in the opencast mines and this is affecting our gold production, so we slightly lowered our full year outlook for gold.
We are optimistic about silver for the long haul and we love Fresnillo with its well-established tradition of mining and low production costs.
However, given the price increase in 2020, it is likely that profits will be taken in the short term. Forward P / E and P / S ratios are 18.90 and 5.41, making the stock's price frothy. A possible drop of 5% -7% from current levels would improve the margin of safety. We could see a period of consolidation and a sideways movement in the stock price.
On January 27, the company is expected to publish its production report for Q4, and preliminary results for FY20 will be announced on March 2. Potential investors may want to study the reports first before investing capital in FRES shares.
Bottom Line
Precious metals have always been a safe haven for investors, and 2020 has not proven them wrong. However, it is too early to say what 2021 could look like. Nonetheless, economists argue about the possible effects of extreme monetary policy, negative real interest 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 prefer to invest in a basket of silver or gold miners may also consider investing in an exchange-traded fund (ETF) that focuses on miners. Examples are the ETFMG Prime Junior Silver Miners ETF (NYSE :), the Global X Silver Miners ETF (NYSE :), the iShares MSCI Global Gold Miners ETF (NASDAQ :), the iShares MSCI Global Silver and Metals Miners ETF (NYSE :), and the VanEck Vectors Gold Miners ETF (NYSE :).
Over the past 52 weeks, these four ETFs have returned 33.7%, 42.2%, 27.1%, and 24.7%, respectively.
Other mining names that would provide these funds include Barrick Gold (NYSE :), First Majestic Silver Corp (NYSE :), Franco-Nevada (NYSE :), Newmont Goldcorp Corp (NYSE :), Pan American Silver (NASDAQ :), Polymetal International (OTC :), Wheaton Precious Metals (NYSE 🙂 and Yamana Gold (NYSE :).
