With economic uncertainty high and rising, it may be a great time to invest in precious metals such as silver. We’ve already seen a nice move up in the price, and although it will be a bumpy ride, the longer-term macro-environment for silver remains favorable.
There are numerous ways to gain exposure to silver, and one of the simplest is to buy a silver ETF made up of silver mining companies. Although it is simple and creates a portfolio of diversified silver miners as fast as you can press the buy button, it also presents unknown risks, such as jurisdiction risk. Jurisdiction risk is the political risk associated with where each mine is geographically located.
This article will highlight the iShares MSCI Global Silver and Metals Miner ETF and break down the top 15 holdings within the ETF and their jurisdictions. This breakdown will help to understand what jurisdictions you are investing in when you own the SLVP ETF.
Brief Discussion of The Problem
You may be wondering why some guy somewhere is writing an article about the risk of owning an ETF with various jurisdictions. With the economic climate behaving the way it is, many people are trying to protect their hard-earned wealth with gold and silver. Still, in doing so, they are protecting against one risk but opening themselves up to another risk (jurisdiction).
I’ve written extensively about why now is an especially important time to be thinking about the jurisdictions you’re investing in. Rather than write about it again, I’d prefer that you read the top half of this article to gain a better understanding.
As I’ve said before, whether you agree with it or not is really up to you. I’m putting this out there to help you understand the risk, and then act according to your risk tolerance.
As a disclaimer, some funky colors got used in some of the charts below. There were a lot of different jurisdictions, so I had to get creative with the color choices.
iShares MSCI Global Silver and Metals Miners ETF (SLVP)
Source: Pan American Silver FY2019 Annual Report
#2 – Harmony Gold (HMY) – 8.61%
Source: Harmony Gold FY2019 Annual Report
#3 – SSR Mining (SSRM) – 6.74%
Source: SSR Mining FY2019 Annual Report
#4 – Newmont Mining (NEM) – 6.41%
Source: Newmont Mining FY2019 Annual Report
#5 – Hecla Mining (HL) – 5.95%
Source: Hecla Mining FY2019 Annual Report
#6 – Eldorado Gold Corp. (EGO) – 4.43%
Source: Eldorado Gold FY2019 Annual Report
#7 – First Majestic Silver (AG) – 4.21%
Source: First Majestic Silver FY2019 Annual Report
#8 – Coeur Mining (CDE) – 3.78%
Source: Coeur Mining FY2019 Annual Report
#9 – Industrias Penoles (OTCPK:IPOAF) – 3.65%
Source: Industrias Penoles FY2019 Annual Report
Source: MAG Silver FY2019 Annual Report
#11 – Silvercorp Metals (SVM) – 3.07%
Source: Silvercorp Metals FY2019 Annual Report
#12 – Dundee Precious Metals (OTCPK:DPMLF) – 2.87%
Source: Dundee Precious Metals FY2019 Annual Report
#13 – Fortuna Silver (FSM) – 2.87%
Source: Fortuna Silver FY2019 Annual Report
#14 – New Gold (NGD) – 2.68%
Source: New Gold FY2019 Annual Report
SLVP Top 15 Holdings And Their Jurisdictions – 100%
Source: Each company’s FY2019 Annual Report
The iShares MSCI Global Silver and Metals Miners ETF is a convenient way to diversify your silver mining company holdings. I also recently took a look at the Global X Silver Miners ETF (NYSEARCA:SIL) and thought it would make a helpful comparison to also dissect the jurisdictions for the other silver mining ETF that investors favor. Although these two ETFs are both silver mining ETFs and will track the silver price closely, they turn out to be significantly different when their jurisdictions are broken out.
If you are an ETF investor, it’s good to know the companies as well as the jurisdictions of both ETFs to see which one better suits you. Here are some takeaways from the above analysis:
- Over 50 percent of the ETF’s holdings derive revenue from the United States, Canada, Mexico, and Peru, which are all favorable jurisdictions. Of course, anything can happen that would cause that to change on a dime.
- The 5th and 6th largest jurisdictions currently in the SLVP ETF are South Africa and China at 7.43 percent and 3.07 percent, respectively. These are two jurisdictions that one should research further.
- Polymetals which has holdings in Russia and Kazakhstan only make up .46 percent of the ETF’s holdings as opposed to nearly 13 percent in the SIL ETF. It is not in the list above, as it is the 29th largest holding in the ETF.
- This ETF has a lot of small allocations to lesser-known jurisdictions such as Papua New Guinea, Turkey, Bulgaria, Namibia, Greece, Ghana, and Suriname. Some of these are familiar as jurisdictions to avoid, but others will need further research.
To conclude, seeing all of the different jurisdictions this ETF is invested in may make you hesitant about owning it. In that case, it may make more sense to own some of the individual stocks inside the ETF, such as Pan American Silver or MAG Silver, which have more favorable jurisdictions. But if you insist on owning SLVP, then it’s good to be aware of it, and can open you up to be more selective with your other gold and silver holdings.
Disclosure: I am/we are long PAAS, MAG, AG, WPM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The author of this article is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author of this article expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.