zealllc.com / By Scott Wright / December 28, 2012
Silver mine production is expected to come in at nearly 800m ounces in 2012, an all-time record and the seventh consecutive year of growth (per the U.S. Geological Survey). At 2012’s average silver price, this total represents a value of nearly $25b. There’s a lot of money to be made mining this shiny-white metal!
With a massive capital carrot supported by structural fundamentals that are still great, there ought to be a ton of mining companies targeting silver in their exploration endeavors. So in my latest silver-stock research project I took a close look at the companies on the ground floor of silver exploration, the juniors.
By its simplest definition, a silver junior is a non-producer that considers its primary business the exploration for and/or development of silver-centric projects. Regardless of market capitalization and asset base, a silver junior doesn’t generate revenue.
While juniors don’t directly contribute to mine supply, their role in the greater supply chain is invaluable. The successful ones are making discoveries and proving up deposits that will eventually feed the supply chain. They’ll either develop their discoveries into mining operations on their own, or be acquired by the big boys.
These juniors that find success can also deliver legendary returns, which is what makes them so appealing to investors. But since mineral exploration is inherently a risky business, the odds of success are greatly stacked against these companies. Sadly, most juniors will fail. And this is why it is important for investors to be prudent in their selection process.
In my search for these junior-level companies I pulled from the universe of silver stocks that list in the US and Canada. And surprisingly I found there to be very few that actually qualified as silver juniors. By my count, there are just under 100 juniors that consider silver their primary metal of focus.
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