By: Marco G.
September 28th , 2010
http://goombarhsedge.blogspot.com/
Introduction
Today, September 28th, 2010, Silver has moved to new highs of $21.70 USD, the highest since the 1980’s. Silver investing has attracted a lot of investors’ attention recently. For example, the author’s “A Silver Bull Recommends Six Silver Stocks” article from September 17th attracted over 100 comments from the Seeking Alpha’s readership.
In a follow up article on September 24th about “How To Leverage the Precious Metals Bull”, the author compared the gains of the Gold and Silver metals and some mining equities. One astute reader “user19178” alerted the author to a relatively new ETF containing primarily Silver mining and processing companies, the Global X Silver Miners ETF (SIL).
SIL Assets Reach $100Million
Global X in anticipating the market interest in Silver mining equities started this new ETF on April 19th 2010. This ETF is based upon the Solactive Global Silver Miners Index. This index is describe by the issuer Structured Solutions as follows:
Solactive Global Silver Miners Index
The Solactive Global Silver Miners includes international companies active in exploration, mining and/or refining of silver. The index includes a minimum of 20 and a maximum of 40 members. The calculation is done in USD as a total return index. Index adjustments are carried out semi-annually.
On September 23rd, 2010, Global X announced that the SIL ETF has reached $100 Million in assets. Investor interest in Silver has pushed the growth of this fund forward quickly.
Constituents of SIL ETF
There are two main reasons why it is difficult to make a Silver fund. One is that miners that only mine Silver are rather rare, as Silver is usually mined as a by-product of other mining activities such as mining lead zinc and mining copper. The other is that the Silver market is relatively small, compared to the Gold market. So this Global X ETF extended the definition of Silver mining to include companies that work in processing and other activities related to Silver. The constituent members of this SIL ETF are listed in the chart following.
Data as of 9/24/2010
% of Net Assets Name Market Price($) Shares Held Market Value($)
14.66 SILVER WHEATON CORP 26.60 618,000.00 16,438,800.00
14.41 FRESNILLO PLC 19.50 828,690.00 16,156,510.90
11.06 PAN AMERICAN SILVER 29.27 423,600.00 12,398,772.00
10.76 INDUSTRIAS PENOLES CP 24.54 491,400.00 12,059,945.50
5.12 HOCHSCHILD MINING PLC 6.93 828,000.00 5,739,171.72
4.93 POLYMETAL GDR 15.80 350,000.00 5,530,000.00
4.41 COEUR D'ALENE MINES CORP 19.61 252,000.00 4,941,720.00
4.24 SILVERCORP METAL USD 8.39 567,000.00 4,757,130.00
4.06 HECLA MINING COMPANY 6.25 728,400.00 4,552,500.00
3.92 SILVER STANDARD RESOURCES 20.24 217,200.00 4,396,128.00
3.65 GAMMON GOLD INC 7.26 564,000.00 4,094,640.00
3.41 MINEFINDERS CORP 10.63 360,000.00 3,826,800.00
3.00 FIRST MAJESTIC SILVER 6.75 498,000.00 3,361,451.42
1.90 MAG SILVER CORP 7.66 278,400.00 2,132,544.00
1.76 FORTUNA SILVER MINES INC 3.26 606,000.00 1,974,287.94
1.68 BEAR CREEK MINING 5.82 324,000.00 1,886,734.30
1.29 ALEXCO RESOURCE CORP 4.84 300,000.00 1,452,000.00
1.11 ORKO SILVER CORP 1.95 636,000.00 1,240,733.52
1.07 ENDEAVOUR SILVER CORP 4.06 295,200.00 1,198,512.00
1.07 ECU SILVER MINE 0.71 1,680,000.00 1,196,254.39
0.98 EXCELLON RES 0.77 1,423,200.00 1,096,691.38
0.53 GREAT PANTHER SILVER LTD 0.99 606,000.00 597,015.22
0.49 SCORPIO MINING 0.91 600,000.00 544,284.04
0.22 IMPACT SILVER CORP 1.09 228,000.00 249,083.11
0.21 MINES MANAGEMENT INC 2.27 102,000.00 231,540.00
0.10 BROWN BROTHERS SWEEP 1.00 113,943.09 113,943.09
0.00 BRITISH STERLING POUND 1.58 180.18 285.14
Holdings subject to change.
Source: http://www.globalxfunds.com/fundholdings.php?fundid=18493&catid=0
The members companies of the ETF are a mixed bag of four very large Silver miners, some smaller Silver miners and Silver exploration companies. The four large cap miners form almost 50% of the fund. Note that my favorite large cap Silver royalty company Silver Wheaton is on top of this list with a 15% weighting in this fund. Note also that my three favorite Silver junior companies, Genco Resources (GGCRF.PK), Canadian Zinc (CZICF.PK) and US Silver Corp (USSIF.PK) are not to be found on this listing. The author’s stock selections are not large enough or liquid enough to be included in the fund.
Silver Miners ETF SIL’s Performance Since July 28, 2010
The following chart displays SIL’s performance this Summer following the Silver price movement upwards.
In keeping with my “Leveraging the Precious Metals Bull” article’s comparison figures, I use the same start date and end dates for measuring the SIL ETF performance. On July 28th , SIL’s price was $14.18. On September 23rd , SIL’s price was $18.41. This works out to a gain of $4.23 or 30%. This is in comparison over the same time frame for the Silver metal’s increase of 18% and Gold’s metal’s increase of 12%. A comparison table with figures from the previous article is following:
Gain Comparison from Jul 28th to Sep 23rd , 2010
Equity Description Symbol Percentage Gain
Gold ETF GLD 12%
Large Cap Miners Index HUI 20%
30 Large Miners ETF GDX 20%
60 Junior Gold Miners ETF GDXJ 33%
Silver ETF SLV 18%
Silver Wheaton SLW 47%
Genco Resources GGCRF.PK 59%
Canadian Zinc CZICF.PK 72%
US Silver Corp USSIF.PK 102%
Silver Miners ETF SIL 30%
Silver ETF SIL Leverages Silver Price
The Silver metal’s price is moving higher and has gained 18% in the above table. This new Silver Miners ETF SIL has leveraged Silver’s gain and is soaring with a 30% gain over the same time period. This makes SIL a higher performer than either the HUI or the GDX which have both gained 20%. Both the HUI and GDX contain only large cap Gold miners.
To repeat the author’s thesis’s then:
1. Silver is moving more than Gold.
2. Mining equities leverage the underlying metals price.
3. Select Junior miners may leverage quite spectacularly.
Disclosure: The author is long Silver mining equities.
Important Disclaimer
The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.
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