Thursday, 25 February 2016

Canadian gold and silver miner performance: an update

Back in November 2010 as I started monitoring the Canadian gold and silver miner performance, I used the mining stocks covered by the GoldMinerPulse database. This source contains resource and reserve information on nearly 100 gold or silver miners, explorers and developers. It has become subscription based from this year onward: as such our 'miner universe' will gradually diverge.

Since bottoming near 100 on Jan 19, the HUI index started an impressive recovery rally. A weekly updated gold miner pulse blog page provides a short term trend on HUI relative to Gold and on the Global X Silver miners ETF: SIL relative to silver. Moreover the mining indexes based on the gold-miner-pulse database are also included, as is a performance disparity graph.

How individual miners went down with the herd during a four year gold miner bear market or miraculously resisted the trend, is shown on the gold miners performance blog page.

Miners are sorted into 5 performance quintiles. These quintiles contain 19 miners/explorers (only 18 in the last quintile). Despite the ongoing recovery, barely half of the miners (10/19) of the top performers quintile is advancing over the long haul. The median (the middle ranking performance) still makes a stiff loss of over 73%: a quadruple is needed to break even here.

The rising tide lifting all boats(?)

As the HUI bottomed after mid January, long term advances in the top quintile were down to two (Klondex and MAG silver). By now gains have extended to 10 miners out of 19 in the top quintile.
The performance among the top picks is quite varying. We also notice mining stocks sliding away from the top performance quintile, while others are re-appearing. Two well reputed miners rose into the top quintile: Agnico Eagle Mines (AEM) and First Majestic Silver (FR.TO / AG).
In the mid-range quintile, you find that the median loss was reduced from a very cumbersome 81% to a still worrysome 73%. In the former case the stock needs to rise more than fivefold to break even. By now quadrupling would do the job.  Still the median rose by 42% relative to the trough level. That 'median stock' varies according to different individual miner performances. The 'median miner(s)' therefore frequently change(s). Since the number of components in the list is even, the median is calculated as the average of the central couple.
In the bottom quintile adequately called 'investor's nightmare' you find 16 stocks down over 95% and three have slid to less than 1% of their value less than 6 years ago. These really are the basket cases: all of them have become illiquid penny stocks. Stock price swings may be high, but it's increasingly difficult to take advantage of any paper gain because of the bid-ask spread and the thin order book. Why take that risk if the uptrend among decent performers is quite solid?

Graphs section (update as of March 18, 2016)

Fig. 1 The miner recovery seems is getting traction. Advances near the top are increasing,
while near the bottom of this top quintile, miners are cutting their loss.

Fig. 2 Subtop quintile: declines still are substantial
Fig 3: Mid-range, you find the median in this quintile
Fig 4: Underperformers

Fig 5:  In the bottom quintile  all miners or explorers are posting a loss over 90% with 11 of them down over 95%. Those still are the basket cases

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