By John Feneck
Mining Portfolio Manager
Feneck Consulting Group
A crisis of confidence in the financial system has set the stage for a major move by investors away from government bonds and select bank stocks, and toward precious metals.
The recent high-profile failures of Silvergate, Silicon Valley Bank, Signature Bank, Credit Suisse and First Republic Bank cast a giant shadow over the banking system. The situation has gone from bad to worse with the daily barrage of headlines citing economic chaos that could come from the U.S.’s precarious debt situation.
Discussion of the U.S. possibly defaulting on its financial obligations has dealt a devastating blow to investors’ faith in the beleaguered banking system. Even if Congress manages to get through the current impasse with some sort of work-around, the effect on the minds of investors may be long lasting.
Many will prudently see this as an opportunity to consider precious metals and related investments for a portion of their investment portfolio.
With its rich history as a safe haven in troubled economic times, gold will be the life raft of choice for many. However, those looking to really cash in on current conditions would be wise to consider investing in silver and its increasingly important role in technology and the global energy transition.
As of today (May 25, 2023), gold is trading at an illogical 85.30 times multiple of silver. This is not a knock against gold but rather a simple statement that silver may be substantially underpriced.
Silver is a staple all over the globe in jewelry, coins, and, of course, silverware. More importantly, it is the world’s best electric and thermal conductor. That is why we have silver in our smartphones, electric vehicle batteries, and solar panels, to name just a few.
It’s that practical functionality that will drive demand for silver in the greening of the economy – which will send the price of silver higher.
I foresee silver – priced at $22.82 per ounce as I write this article – breaking through the $28/ounce level within the next 12 months. Almost every time since the 1980’s when the gold to silver ratio exceeded 90:1, silver was an attractive investment, in retrospect.
If you are looking for a silver stock that has a proven track record, I am putting my money where my mouth is and investing in Silvercorp Metals Inc. (TSX/NYSE-A: SVM)
Based in Vancouver, Canada, and operating in China, Silvercorp has a proven leadership team, led by Chairman and CEO Dr. Rui Feng.
Dr. Feng has a sterling record of operating mines profitably and with great integrity.
The company started working in China 17 years ago, and now boasts several low-cost, long-life silver mines. Silvercorp reacted quickly to China’s Mineral Resource Law and is capitalizing on the country’s vast unexplored geological potential.
While some competitors typically have great challenges and costs getting their product to market from remote mining locations with sketchy infrastructure, Silvercorp’s properties are perfectly positioned close to the big markets in China, where so much of the silver is put into use.
Since 2006, Silvercorp has produced more than 85 million ounces of silver and 1 billion pounds of lead and zinc. Silver production in fiscal 2023 alone was 6.6 million ounces. The company projects around 7 million ounces of silver production for fiscal 2024.
Measured and indicated silver resources are at 210.2 million ounces, including proven and probable reserves of 114.9 million ounces. There are also 126.3 million ounces inferred.
Silvercorp also boasts an excellent cash position and zero debt.
Silvercorp took a step toward putting their cash to work with an announcement this month that they have made a non-binding offer to acquire Celsius Resources Limited. With a world-class copper-gold resource in the Philippines, Celsius could be an excellent addition to Silvercorp’s exceptional property portfolio, which includes a 28.2% stake in New Pacific Metals Corp. (TSX: NUAG, NYSE-A: NEWP), up over 2.5x since 2017 to over US$100 million. New Pacific plans to release a pre-feasibility study (PFS) on its Silver Sand project in 2023.
For more information and updates about Silvercorp, please visit www.silvercorpmetals.com/welcome
About the Author
John began his career in 1992 as an equity analyst on the Merrill Lynch global allocation fund (MALOX). From 1993-2019, John was a senior executive for Mutual Fund and ETF providers, spending most of his career at Merrill Lynch Funds (now Blackrock), JP Morgan Funds and Sprott Asset Management. He has contributed articles to Kitco since 2017 and was asked to be a regular contributor to Kitco in June 2021, when he started his newsletter “The Feneck Commodities Report.” John has owned shares of SVM since 2016 and can be reached at www.feneckconsulting.com
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