The silver price has exploded higher over the past 12 months, more than doubling in value during the period.
This means that miners with exposure to silver are printing money every time they pull an ounce of the precious metal out of the ground.
But how can investors position their portfolio to benefit from this? Let's find out what Morgans is saying about one ASX silver stock.
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Broker tips ASX silver stock as a buy
Morgans has been running the rule over BMC Minerals Ltd (ASX: BMC) shares following its IPO last month.
BMC is the 100% owner of the Kudz Ze Kayah (KZK) Project. It is an advanced polymetallic development project located in Canada's Yukon territory. It comprises 372km2 of under-explored, resource rich tenure and is host to two deposits. It will produce three concentrates: silver/gold, copper, and zinc.
Morgans, which helped with the ASX silver stock's IPO, believes its shares are still significantly undervalued despite rising over 40% since listing.
According to a note, the broker has initiated coverage on BMC Minerals' shares with a speculative buy rating and $4.90 price target.
Based on its current share price of $2.82, this implies potential upside of 74% for investors over the next 12 months.
Morgans believes the company is positioned to generate significant EBITDA from its KZK project once it reaches steady state production. It commented:
We initiate coverage of BMC Minerals with a SPECULATIVE BUY rating and a target price of A$4.90ps. The Kudz Ze Kayah (KZK) project is a high grade undeveloped polymetallic deposit, with high silver equivalent reserve grades of 597g/t AgEq and an indicative ~32Moz Ag per annum production profile. Indicative economics of KZK are solid.
We model steady state average annual financials of US$780m revenue, US$435m EBITDA at a 52% EBITDA margin, US$287m FCF and FCF yields of 29% based on precious and base metals price assumptions well below current spot prices. With BMC, we see parallels to past prolific polymetallic/base metals assets which generated strong returns for shareholders: Vares for Adriatic, Nova-Bollinger for Sirius and De Grussa for Sandfire.
How else can you gain exposure to the booming silver price?
There are other ways for investors to get access to the silver boom.
One way is through the Global X Physical Silver Structured (ASX: ETPMAG).
Global X notes that this fund offers a low-cost and secure way to access physical silver via the stock exchange. This means investors can avoid the need to personally store their own bullion.
