Silver or Gold? Which Is the Best Mineral Stock for Your TFSA?

Mineral stocks are selling low, but should you consider Wheaton Precious Metals Corp (TSX:WPM)(NYSE:WPM) or Imperial Metals Corp (TSX:III) for your portfolio?

| More on:

The great Burl Ives once sang, “Silver and gold, silver and gold, everyone wishes for silver and gold.”

Ives was singing as a snow man to Rudolph the Red-Nosed Reindeer at the time, but he might as well have been crooning to the stock market.

Minerals are a staple that almost every investor considers adding to their portfolio. Like oil and gas, gold, silver and copper will continue to be bought and sold for generations to come.

But in the last year there have been two problems:

  • The United States and China trade war
  • A volatile market

The former has sent silver and gold stocks plunging, as China is the biggest metal consumer. The latter has proven that when the markets are down, people just aren’t as willing to invest in metal companies. That leaves investors with an opportunity to buy cheap, but which company will be worth the investment? Today I’ll compare Wheaton Precious Metals (TSX:WPM)(NYSE:WPM) and Imperial Metals (TSX:III) to see where you should be putting your hard-earned cash this holiday season.

Will Wheaton continue to shine?

Wheaton is a heavy hitter in the precious metals industry. It is the world’s largest pure streaming company, giving mines cash upfront to get started and getting back a percentage of the mine’s metals at a well-below discount. In 2017, for example, Wheaton paid an average of $6.03 per ounce of silver and sold it for $22.83, and paid $530 for gold while selling it for $1,687!

The company doesn’t show any signs of slowing down on this business model. It currently works with 19 mines — some of the biggest miners in the world — and has plans in the works for nine more. By 2022, Wheaton estimates it’ll produce about 385 thousand ounces of gold and 25 million ounces of silver per year.

But share prices have been down as of late. This is partly due to a lawsuit with the Canada Revenue Agency (CRA). The CRA argued Wheaton’s subsidiary, Wheaton International, was subject to tax in Canada. However, the dispute recently settled in court, which sent stocks up 14.2%. Now the company can focus on finding more streaming deals with other mines and hopefully bring attention back to expansion for shareholders.

While the stock is still down about 11% from the highs of summer at the time of writing this article, the stock is still up about 30% from its 52-week low and on target to reach its fair-value estimate of about $28 per share.

The empire has fallen

The once-great Imperial Metals has seen barely any profits in the past five years. They’ve been hit hard by the falling price of copper, with prices falling 15% this year for copper and 63% for the company. In the latest Q3 report, revenues were down to $70.5 million from $90.2 million the same time last year, with debt at $728.4 million. The last few quarters have been brutal, with shares falling from $2.16 to as low as $0.99. This is quite the blow from the all-time high they once had back in 2014 of $17.85.

Yet in the past few months, insiders have invested more than 1.83 million shares. Why? That comes from news that Imperial has hired Bank of Montreal to start the formal process of selling the business, either completely or partially. That could give Imperial much-needed cash of up to $1 billion and a boost in share prices to boot.

Bottom line

It’s really a no brainer in this scenario. While both stocks are undervalued, Imperial is just too risky at this point to invest in unless you know the company and the market. Wheaton, however, has strong finances and is expanding its streaming business regularly. If you want your investments to sing as sweetly as Burl Ives in 2019, the pick just has to be Wheaton Precious Metals, in my opinion.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. Wheaton Precious Metals is a recommendation of Stock Advisor Canada.

More on Metals and Mining Stocks

todder holds a gold bar
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell or Hold?

Investing in quality gold mining stocks that trade at a reasonable valuation could help you beat the TSX index over…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Buy?

Let's dive into whether First Quantum Minerals (TSX:FM) is worth buying at current levels, or if investors should sit this…

Read more »

nugget gold
Metals and Mining Stocks

Competitive? Beat the Market With These 2 Dividend-Paying Growth Gems

Investors looking to beat the market buying dividend stocks right now need to focus on this right sectors. Here are…

Read more »

nugget gold
Metals and Mining Stocks

A Canadian Billionaire Investor Sold Micron Stock and Bought This TSX Company Instead

Prem Watsa focuses on value over short-term growth.

Read more »

Concept of multiple streams of income
Metals and Mining Stocks

Is Franco-Nevada Stock a Buy for Its 1.2% Dividend Yield?

Gold royalty stocks represent a niche in the precious metals industry. They have different dynamics from mining stocks.

Read more »

todder holds a gold bar
Metals and Mining Stocks

The 1 Mining Stock Canadians Should Buy and Hold Forever

Newmont is a gold mining stock that trades at a cheap valuation, making it a top investment choice for those…

Read more »

Metals and Mining Stocks

Top Canadian Gold Stocks to Buy Now

Canadian gold mining stocks such as Barrick Gold and Kinross Gold are two top investments in October 2024.

Read more »

todder holds a gold bar
Stocks for Beginners

Is the Worst Over for SSR Mining Stock?

SRR Mining stock has been rising higher after recent earnings performance that made a bit of a comeback. So is…

Read more »