Silver Margin Hike Triggers Selloff in Mining Shares

Coeur Mining US1921085049

A sharp increase in collateral requirements for silver futures has sent shockwaves through the precious metals mining sector, with Coeur Mining shares among those caught in the downdraft. The CME Group's second substantial margin hike in a fortnight forced highly leveraged traders to liquidate positions, causing silver prices to plummet from $84 to below $74 per ounce. In response, Coeur Mining's stock declined by approximately 4.3%.

Despite the recent market-driven weakness, the company's underlying business fundamentals present a robust picture. Coeur Mining reported strong third-quarter 2025 results, with revenue reaching $554.6 million and net profit standing at $266.8 million. The firm's gross margin remains impressive at 78.6%.

This operational strength is attributed to several key factors:
* The successful ramp-up of the expanded Rochester mine in Nevada
* Increased production volumes across its operations
* Benefiting from higher realized metals prices prior to the recent drop

Such a solid operational foundation offers a degree of insulation against the current volatility in commodity markets.

Understanding the Market Mechanism Behind the Drop

The catalyst for the sector-wide pressure was a regulatory move by the U.S. derivatives exchange. The CME raised the initial margin requirement for the March 2026 silver futures contract by $3,000 to roughly $25,000 per contract. This action precipitated a wave of selling that weighed on the entire precious metals complex. Other miners affected included Hecla Mining and First Majestic Silver.

This intervention occurred during a period of notable market volatility. Silver had previously rallied to highs near $84 per ounce before the forced liquidations began. The new margin rules essentially require traders to commit significantly more capital to maintain their positions or close them out entirely.

A Major Merger on the Horizon

In parallel to navigating market turbulence, Coeur is progressing with a significant acquisition. The company is working to complete its all-stock takeover of New Gold, a transaction valued at around $7 billion. Shareholders are scheduled to vote on the deal at the end of January 2026. If approved, the merger is projected to create a leading North American precious metals producer with an estimated EBITDA of $3 billion by 2026.

Some market analysts maintain a constructive long-term view despite recent price action. Research firm Roth MKM, for instance, has reiterated a price target of $23 for Coeur Mining, suggesting a potential upside of over 25% from current levels. Their optimism is based on the company's improving balance sheet and favorable long-term prospects for precious metals.

Near-Term Outlook Tied to Silver's Path

In the short term, the stock's trajectory is likely to remain correlated with the price of silver itself. Market participants are now closely monitoring a key support zone between $70 and $73 per ounce. A stabilization of the metal's price above this level could alleviate selling pressure on mining equities. However, until the market fully absorbs and adjusts to the new margin environment, periods of heightened volatility are expected to continue.