Shares of Peruvian silver miner Compania de Minas Buenaventura
) are plunging nearly seven percent today after Credit Suisse
downgraded the stock to Neutral from Outperform. The bank also
slashed its price target on Buenaventura to $27.60 from
Even $27.60 seems far-fetched with Buenaventura currently
trading below $20.
"With no positives in sight, one of the only factors that
could help is a rally in precious metal prices. The stock has
dropped YTD on the back of a change in production profile, and
then followed the adjustment in precious metal prices. We do not
believe BVN has any catalyst in the near future that could
trigger a rally,"
said Credit Suisse in a research note
That prognosis and today's reaction is proving to be bad news
. The Global X Silver Miners ETF (NYSE:
), the largest silver miners ETF by assets with $225.7 million,
is lower by 1.6 percent, though volume is light. Interestingly,
Buenaventura is not even a member of SIL's 31-stock lineup.
SIL's smaller, more lightly traded counterpart, the iShares
MSCI Global Silver Miners Fund (NYSE:
), is down almost two percent. That ETF allocates 7.64 percent of
its weight to Buenaventura.
Silver futures are lower as well. That combined with the
Buenaventura downgrade are proving to be a toxic brew for SLPV
and SIL, which were already off 35 percent and 36.6 percent,
respectively, year-to-date at the start of trading Tuesday.
The Buenaventura news is also having a modest impact on the
iShares MSCI All Peru Capped Index Fund (NYSE:
). That allocates 8.56 percent of its weight to the silver miner,
making the stock the fund's third-largest holding.
To put it mildly, EPU has proven
to be sensitive to gyrations
in mining shares. Not only is Peru a major gold producer, the
country is the world's largest silver producer and the ETF
devotes almost 42.6 percent of its weight to materials
"If gold and silver prices were to rally, we would expect a
positive reaction in BVN, though we would expect it to
underperform its precious metal peers. Despite an interesting
upside potential to our NPV, we are rating it with a Neutral
(from Outperform) on the lack of catalysts despite the 27%
upside," said Credit Suisse.
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