As Britain’s Olympians might testify, silver is no substitute for gold.

That sentiment is likely to be echoed by shareholders of Fresnillo, the world’s largest primary silver producer, whose shares have fallen by more than 36 per cent since its debut in May. The fault of Fresnillo - the first Mexican company to float on London’s main market - is that its shares were priced as precious metals peaked. With silver having since fallen by more than a third - significantly worse than gold - its shares have followed suit.

Yesterday’s maiden interims contain nothing untoward. Strong commodity prices helped first-half operating profits to rise 46 per cent to $212 million (£114 million), while the debut dividend was set at an above-forecast 5.9 cents. Total ore resources at Fresnillo I, its eponymous silver mine, which accounted for nearly all last year’s production, rose 28 per cent, with those at Ciénaga, its most advanced late-stage development project, up 20 per cent.

Not that Fresnillo has escaped its sector’s relentless cost pressures. Production costs per tonne at its underground and open-cast mines were up 11.4 per cent and 11.7 per cent respectively - below its sector’s 14 per cent average but significant, nonetheless. The first-half numbers were also freighted with postfloat complexities: notably the burden of a workers’ profit-share agreement previously borne by Peñoles, the industrial conglomerate from which Fresnillo was spun out and which retains a 77 per cent stake.

Fresnillo’s allure is its combination of high-grade assets, relatively low costs and strong organic growth prospects: assisted by Fresnillo II – the world’s largest new silver project - the company is confident of doubling its production within the next ten years. It also boasts a strong balance sheet with no bank debt and should gain a higher profile among European institutional investors on its expected accession to the FTSE 100 next month.

The problem is that, at 353p, or 12 times next year’s earnings, the shares remain susceptible to a short-term weakening of commodity prices and the strengthening of the US dollar.

There will be better times to buy.

Mears Group

It is hard to think of a small-cap stock better suited to uncertain times than Mears Group. It has net cash, sits on a record £1.7 billion order book - more than four times this year’s forecast revenues - and, by virtue of its niche (the repair and maintenance of council housing), draws nearly all of its sales from the public sector. Those attributes provided little protection against profit-takers yesterday, who sent Mears nearly 8 per cent lower after first-half results. Although underlying earnings were up an above-forecast 22 per cent, short-term money switched out of the shares amid disappointment that 2009 forecasts were left on hold. That seems harsh.

Since Bob Holt, the chief executive, reassumed day-to-day control last year, Mears has regained a momentum that latterly it had lost: £430 million of new work has already been won this year, against £500 million for 2007 as a whole. Underlying sales in social housing were up 34 per cent at no detriment to operating margins, steady at 5.6 per cent. The concern is that Mears’s foray into domiciliary care - which began with last year’s purchase of Careforce at a hefty 19-times earnings - has yet to pay. Even on next year’s forecast £4 million operating profits, the division’s return on investment is modest. Recent noises from Nestor, Claimar and Supporta also suggest that trading may get tougher.

Those who have ridden the 17-fold rise in the shares since the float must trust that Mr Holt, who is heavily incentivised, has not lost his touch. That faith, and tracker fund support from next month’s entry to the FTSE all-share index, give grounds to buy at 296p.

Wellstream

BG Group, which last week unveiled its sixth consecutive deepwater discovery in Brazil, is not the only way to play the offshore oil and gas potential of Latin America’s largest economy.

Wellstream Holdings, the Tyneside oilfield equipment supplier, is a reasonable bet, too - and one less prone to short-term movements in energy prices. Yesterday, the £1.1 billion company signed a four-year deal to provide the state-backed Petrobras with at least £600 million worth of flexible pipes to connect undersea wells with floating production platforms. Given that the contract had been expected for the past six months, Wellstream’s recent silence had stoked fears that talks with Petrobras, already its biggest customer, were in difficulties. The shares rallied 6 per cent yesterday on confirmation of the deal.

There was relief, as well, at the terms. At an implied 10 per cent higher than the levels achieved last year, the pricing, if not spectacular, provided comfort on Wellstream’s bargaining power (alongside Technip, of France, it dominates the supply of flexible pipelines). Furthermore, cost indexation clauses should protect the company against any rise in the price of raw materials.

Yet the biggest reassurance is that Wellstream’s £1 billion order book - three times bigger than at the start of this year – means that two thirds of its expanded production capacity in Brazil has guaranteed work for the next four years. Yesterday’s deal also excludes any demand for pipes for depths of 2,000 metres and below - the area in which most of Brazil’s recent high-profile discoveries have been made - leaving scope for additional contracts as such projects move towards production.

Tempus recommended readers to “buy on weakness” last November at 995p. With the shares having since fallen back from £14 to £11.10 yesterday (where they sit at 13 times 2009 earnings) and next week’s first-half figures unlikely to disappoint, that advice holds good.

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