The Flying Frisby - money, markets and more Unveiling the Potential: A Special Situation in the Silver Mining Industry
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I am going to do something I don’t often do today, and that is tell you about a silver mining company. The reason? I think it could rally by 50%, and quickly.
I make no secret of my ambivalence towards silver. On the one hand, there is no metal with as much potential. It’s a monetary metal and we are in an inflationary environment that wiser heads than me are comparing to the 1970s. Silver was the “bitcoin of the 1970s” going from below $2 to $50, with the silver mining companies rising thousands of times over.
Then there are silver’s multiple industrial uses. Silver is to modern technology as sugar and salt are to modern food: it is in just about everything. If ever there was a metal that had so many uses, I’d like to know what it is. I could write a tome about uses of silver. It might not be that readable, but it would be long. From medical equipment to electrical appliances, it’s almost harder to find things that don’t contain silver than things that do. Every smartphone has silver in it; every computer; every jet engine; every solar panel. The best batteries contain silver; it’s used in detergent, deodorant, wart treatment, antimicrobial lab coats, 3D printing, plastics, jewellery, wood preservation, water purification. It’s like a “picks-and-shovels” play on new tech and the growing middle class of the developing world.
There is 15 times as much silver in the earth’s crust as there is gold. So silver “should” be 1/15th the gold price. That is the historical norm. But silver, at $24/oz with gold at $1,970/oz, is 1/82nd the gold price. If it were to revert to anything like the historical mean, and gold were to stay at its current price, then silver would be $130.
But if there is one thing you can rely on in this fickle world, it is that silver will not deliver on its potential. One day it might, but I dare say we will be waiting a long time.
However, there is something of a “special situation” to the company I am going to cover today. Obviously, if silver goes to $130, or even $50, or even just $30, the company will soar. But we don’t need that to happen.
The company in question has acquired a past-producing silver mine and is putting it back into production. The mine was only recently put into care and maintenance, the equipment is all there, as are the workers. The capital is in place. To get it producing again, should take less than two years. But the stock was halted for almost a year pending completion of the transaction, and various regulatory approvals in Mexico where the mine is located. I’ve never known a stock to be halted for as long.
The company has just resumed trading and so there is a torrent of selling pressure - almost a year’s worth - from people who have not been able to trade the stock. The result is that the company is now trading some 20% below its IPO price.
This situation will not last. The company knew that as soon as trading resumed a plethora of stock would hit the bid, so it has done very little to defend the share price. Once the stock is properly cleaned out, however, then the company will start marketing itself again and the stock price will rise. But there is no point doing that until the selling is done. I’d say we are a couple of weeks from when the marketing starts.
So, if you want to buy an imminent silver producer that will soon enjoy mid-tier status, at beaten down exploration-discovery play prices, here is your chance.
This my biggest silver position. I think there is 50% upside to be had before the summer is out. It could quite easily double within a year with some help from the silver price. If silver itself ever even remotely delivers on its potential, we will make out like bandits. We are talking Mexico here, so perhaps I should say, “banditos”?