If you do not have enough experience investing in precious metals, you may be curious to find out what possibilities there are to trade silver mining stocks. There are different factors to take into account, including the time to buy mining stocks, the risks associated with buying stocks of a particular company, and others.
To begin with, the value of silver mining stocks goes up during a bull market, raising quicker than the value of the explored mine. Keep in mind that mining companies rarely mine only one metal, be it silver, gold, or others. Oftentimes, silver is a by-product of producing another metal, including copper and gold.
When looking into various miners, potential investors consider their financial statements, along with the proven reserves of metal on the mining site. The quality of reserves is another important factor and so are the prospects of lengthening the mining sites’ life.
Silver mining stocks are a good investment option, offering a leverage opportunity, but there are some risks associated with hyperinflation and nationalization of mining sites . First, the risk of governments confiscating physical silver is quite negligible. Not many people hold gold and silver bullion today. However, governments can nationalize mining companies by presidential decrees or simple executive orders. Mining stocks lose their value for investors if a government declares mining companies a national asset. In times of hyperinflation, owning mining stocks can also affect the financial well-being of investors. How is this possible?
If a trader has shares of some mining company and would like to sell them to get cash, the funds will be normally available in three working days, with brokerage companies processing and clearing payments. The funds can be withdrawn in two days, which makes a total of 5 days to access the money. However, in times of hyperinflation cash is devalued much quicker than this.
Keeping these risks in mind, here is how to go about investing in mining silver stocks. Investors evaluate the profitability of various mining companies by looking at their operations. The amount of silver they extract on a yearly basis will help you assess their potential earnings. Check how much mining companies spend on materials, labor, and on expenses, required to extract one ounce. You can evaluate the profitability of companies by knowing the present spot price and proven reserves. This information can be found in the financial statements of miners which can be accessed at their websites.
Upon considering what miners to invest in, investors focus on their management practices, as well as the political climate in the region or area they operate (whether there are strikes or civil unrest), dividend policy, level of indebtedness, and competence of the management. These and other factors determine the risk – reward ratio. Pan American Silver, Barrick Gold, and Coeur d Alene are some of the mining companies investors look into.