Endeavour Silver Corp. Pops as Global Demand to Remain Strong

Michael Teague  |

The bonanza for equities that ran for most of 2013 has met with an abrupt end in the new year. Uncertainty over the Federal Reserve’s plans for stimulus spending in the months ahead, especially with renewed doubts about the US economy, have been fueling a downturn in stocks that has become particularly aggravated in recent weeks.

With this rather abrupt shift in momentum, last year’s heady claims about the end of gold and other precious metals as safe-haven investments are beginning to look patently absurd. This is not to say that investors will be rushing back into yellow and white metals with the same amount of urgency as they did stocks in 2013, but a look at the early performance of junior miners through February would seem to indicate that a healthy appetite for precious metals is growing all the same.

On the Equities.com Small-Cap Stars index, for instance, there is Endeavour Silver Corp. (EXK) . The Vancouver, Canada-based explorer and producer was trading about 4 percent higher on above average volume in Monday’s session, pushing 2014 the stock’s gains in 2014 to some 31 percent.

Most silver companies have enjoyed a great year so far, but this doesn’t mean that every junior stock is a winner. Indeed, there is still a good bit of deadweight in the exploration sector left over from the salad days that were the first decade of the new millenium. Endeavour stands out however because it is sitting on a number of promising fundamentals, including the silver industry’s only positive profit margin (15 percent) and low debt/equity and long-term debt/equity ratios.

Furthermore, it is one of three pure silver plays out of 11 that offers earnings, and with a P/E of 11.85 is perhaps more realistically valued than Fortuna Silver Mines (FSM) at 103.75, and First Majestic Silver ($AS) at 19.14.

Despite the rough year that we just saw for precious metals, there is plenty of evidence that 2013’s bloodbath was one primarily driven by an exodus of fund cash. The fundamentals of the market itself have remained strong, as was recently highlighted by a video produced by Endeavour about Silver and the demand for it in India. With the Indian government trying to clamp down on gold buying, 2013 saw the world’s tenth-largest economy more than double silver imports from the previous year to 5,400 tons. India accounts for over one-fifth of the world’s silver consumption on a yearly basis.

Ahead of the closing bell, shares for the $487 million company were up 3.3 percent to $4.90 a piece.

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