3 Silver Stocks You Must Buy: Pan American Silver Corp. (USA) (PAAS) and More

Pan American Silver Corp. (USA) (NASDAQ:PAAS)

This Canadian mining company, and the second largest primary silver producer in the world, Pan American Silver Corp. (USA) (NASDAQ:PAAS) has mines and projects in most of South America and the United States. The company produced a record 6.9 million ounces of silver in 4Q12. As a result, the company was able to produce 25.1 million ounces of silver last year, and expects to produce 25 to 26 million ounces of silver next year. In 2013, the company expects a cost of $11.80 to $12.80 per ounce of silver produced.

Pan American Silver is trading at a forward P/E (1yr) of 10.45x, and has a dividend yield of 1.10%. It has a PEG of 1.65 and a growth rate of 6.4%. Incorporating its dividend yield into its PEG, we get to a PEGY of 1.4. A mean target price of $24 on the sell side depicts that it has an upside potential of almost 39%, making it a must buy.

Conclusion

The United States still dominates the global silver industrial market, but China’s contribution over the last ten years has been staggering—its production has risen from 11% in 2002 to 18% in 2012. One of the key features of silver production in China has been its ability to produce silver at negative costs per ounce. Silvercorp metals has been benefiting from this for a couple of years and will continue to do so in the future as well. With the silver prices expected to increase at snail’s pace in 2013, low production costs would be the way to higher margins. In short, 2013 would be the year where silver giants would have to concentrate heavily on lowering production costs.

After the demand of industrial silver dropping in 2012, it’s expected to be back on track in 2013. However, it still needs more time before it starts to give silver prices a significant impetus. 2014 would be the year where this precious metal will start to shine once again. As of now, silver’s low price makes it a great bargain and these three giants are the way to go.

The article 3 Silver Stocks You Must Buy originally appeared on Fool.com and is written by Waqar Saif.

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