What kind of investor gets mixed up with primary silver stocks?

What kind of investor gets mixed up with primary silver stocks, a global equities subsector that over time experiences some of the wildest gyrations in global markets? Take Hecla Mining, one of the top stocks in the group. During 2008, silver bullion traded above USD 20.00 an ounce early in the year, before falling, eventually, by about half towards the end of the year, after the bankruptcy of Lehman Bros. on Wall Street.

US-listed Hecla, the biggest silver producer in that country, and 119 years young, traded across 2008 from nearly USD 13.00 a share to as little as USD 1.33. Silver bullion recovered during 2009, making it above the USD 18.00 an ounce barrier, but has since retreated to a few cents above USD 15.00 an ounce. Investors, or more likely speculators, have fled in droves, leaving only puffs on the horizon.

In the latest rampage, silver stocks have taken an absolute beating. In this expression, there are essentially two types of listed silver producers. First, those producing silver amid a mix of other metals and minerals. BHP Billiton, the world's biggest diversified resources enterprise, ranks No 1 in global silver production, but the metal is hardly mentioned by the company. Buying the stock offers little, if any, leverage hinging from action in silver bullion markets.

Then there are those companies which consciously present themselves as primary silver producers, but even the biggest of those, London-listed Mexican miner Fresnillo, also produces other metals. By its own advertisements, Fresnillo ranks as Mexico's No 2 gold producer; it also produces lead and zinc. But primary silver it is for Fresnillo, on the upside, and now, on the painful downside.

Fresnillo has a relatively short trading history, especially compared to a stock like Hecla, but it moved from around GBP 1.00 a share late in 2008 to above GBP 9.00 in the latter parts of 2009. Across the space of roughly one year, Fresnillo nearly made it into the rankings of "ten baggers". The stock price peaked out just after mid-November 2009 and has since taken a pounding, and is now close to having surrendered a third of its value in less than three months; it's 29% down.

Fresnillo's stock price decline is in line with the weighted average decline of other primary silver produces, of which some 44 can be counted, with an aggregate market value of USD 25.4bn. The weighted average decline is 29.2%, indicating an amazing consistency across the group, and a comprehensively negative attitude to each and every stock in the sector. Individual declines range from 13% for the illiquid S. Métallurgique d'Imiter to 55% for Australia's Cobar.

When seen alongside the stock price performance of more than 1,000 mining companies listed around the world, listed primary silver miners, developers and explorers have taken the most severe beating of all over the past year, in percentage terms. Predictably enough, perhaps, the next classification one up from the bottom of the performance log comes in the form of listed gold stocks, where there is a far higher aggregate market value of about USD 280bn.

The relatively high beta associated by a number of specialist investors with dollar silver bullion, and also listed primary silver miners, may be determined to prove itself all over again. The beta factor in markets refers generally to a security that tends to overshoot an underlying benchmark during positive moods, and, on the slip side, to amplify falls. For investors with the nerves to dabble in primary silver stocks, it seems to be a case of "who blinks first". In due course, a new floor would no doubt be established, and the sector would be off on another wild upside rollercoaster.

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