As precious metals prices continue to outpace inflation, mining company profit margins have soared. Like most other companies, silver and gold miners have become the most profitable they've been in years. In fact, several are ranked among the world's most profitable publicly traded companies.
The majority of the world's most profitable companies mine silver and/or gold, as either a primary resource or by-product. Two primary silver companies top the list, edging out all of the technology, pharmaceutical and financial giants:
| Rank | Company | Industry | Operating Margin |
| 1. | Silver Wheaton (SLW) | Silver | 73% |
| 2. | Silvercorp Metals (SVM) | Silver | 62% |
| 3. | Changyou.com (CYOU) | Tech | 62% |
| 4. | China Yida Holding (CNYD) | Tech | 60% |
| 5. | Fresnillo PLC (FNLPF) | Silver | 59% |
| 6. | Visa Inc. (V) | Finance | 58% |
| 7. | Giant Interactive Group (GA) | Tech | 57% |
| 8. | Bullion Monarch Mining (BULM) | Gold | 56% |
| 9. | Mastercard Incorporated (MA) | Finance | 51% |
| 10. | Baidu, Inc. (BIDU) | Tech | 51% |
| 11. | Royal Gold, Inc. (RGLD) | Gold | 51% |
| 12. | Southern Copper (SCCO) | Copper/Silver | 50% |
| 13. | Nevsun Resources (NSU) | Gold | 50% |
| 14. | Freeport-McMoran Copper & Gold (FCX) | Copper/Gold/Silver | 49% |
| 15. | Questcor Pharmaceuticals (QCOR) | Pharmaceuticals | 47% |
| 16. | Majestic Silver (AG; FR.TO) | Silver | 45% |
| 17. | Lorillard, Inc. (LO) | Tobacco | 45% |
| 18. | Barrick Gold (ABX) | Gold | 44% |
| 19. | Newmont Mining Corporation (NEM) | Gold | 44% |
| 20. | IMPACT Silver Corp. (IPT.V) | Silver | 43% |
| 21. | Alamos Gold Inc. (AGI.TO) | Gold | 43% |
| 22. | China Biotics (CHBT) | Tech | 43% |
| 23. | Newcrest Mining (NCM.AX) | Gold | 42% |
| 24. | Philip Morris International Inc (PM) | Tobacco | 42% |
| 25. | AstraZeneca PLC (AZN) | Pharmaceuticals | 42% |
Since silver is up 100% since July 2010, having vastly outperformed gold, it should come as no surprise to see so many of the world's few pure silver companies in the rankings. If silver prices continue to outperform, we can expect to see even higher margins moving forward.
Unprofitable over a year ago, Silvercorp Metals' (SVM) operating margin jumped to a staggering 62% thanks to negative cash costs from silver production. Over the same period of time, SVM has significantly increased its net income by 500% and its total estimated silver resource by 3100%. Yet its market value is only up about 40%, leading us to believe that the company has become sorely undervalued -- much like other junior silver miners.
As such, 5 of our top 10 undervalued junior mining companies are primary silver producers, including Revett Minerals (RVM), which may not be nearly as profitable as Silvercorp, but is just as undervalued. With immediate plans to increase silver production by more than 25% at half the cash costs of the previous year and longer term plans of moving its massive 229 M oz. resource at Rock Creek to production, Revett has extraordinary potential to one day become one of the most profitable companies in the world.
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