The highest inflation numbers since 1982 and Russia on the brink of taking Ukraine have traders on edge. The S&P 500, Dow Jones, Nasdaq are taking a hit and it seems the only market index doing well is the Vix. Tech stocks are speculative at the best of times, derivatives are slim on safety and currencies, including crypto, are in flux.
Despite the previous official narrative, nothing will prevent the oncoming storm of market volatility, the Fed can’t even establish a unified front when it comes to raising rates. Investors need to strategically change tack and leave the babbling meme stock masses behind, but where do they go besides screaming into the hills?
Commodities like silver and gold have stood the test of time, surviving both recessional and inflationary periods since the dawn of commerce. Both have real world presence, use cases and natural scarcity. As such, examining 30-year charts for each of the precious minerals reveals a relatively steady line of increasing value.
Silver has always been gold’s poor cousin and only moved in a trailing unison with its richer relative. However, this subordinate relationship is beginning to change.
With the emerging new energy market and digital world, silver becomes the main mover and foundation for our necessary transition to a greener and more connected world.
According to the Silver Institute, a non-profit international association of silver industry players, global demand for silver is expected to grow year-over-year by 8% to 1.112 billion ounces while a 20-million-ounce shortfall in supply comes into play.
“The increase will be driven by record silver industrial fabrication, which is forecast to improve by 5%, as silver’s use expands in both traditional and critical green technologies. Physical silver investment demand (consisting of silver bar and bullion coin purchases) is projected to jump 13% in 2022, achieving a 7-year high. Silver’s use in jewellery and silverware is also expected to strengthen in 2022 by 11% and 21%, respectively.”
So how do you as an investor get involved in silver? Leave paper behind, futures contracts aren’t a good answer as JP Morgan seems to be the only one making money from them. This leaves the commodity itself and those that dig it up.
It’s easy to get an ingot, you can go done to your local bouillon exchange and snap up a few ounces each month. This is a retirement play, slow and secure, and very usual as a fungible ‘token’ if everything goes to pot, the lights go out and the government collapses.
If you’re looking for growth, albeit with a sliding scale of risk, you can get involved with the companies exploring and developing silver deposits.
Junior Greenfield Silver Exploration
This is where the risk is greatest, but growth potential is highest. Either nothing has been found yet or the historical data has never been confirmed. This is literally a guy standing in a hole screaming “There’s something here, I feel it in my bones!”
Silver Grail Resources (SVG.V)
Silver Grail, led by geologist, president and CEO, Dino Cremonese, holds land packages in British Columbia’s famed Golden Triangle. The company also has three cobalt and copper projects in the province.
Cremonese is especially excited about Silver Grail’s Red Mountain and Treaty Creek-Goldstorm properties in Northern BC as he figures they will become major gold-silver discoveries.
Illustrating the risk involved with early exploration, the company put out a news release at the end of November that a small drill program conducted by the junior came up dry. Admittedly is was an comparatively small program with only four holes, but still, it shows that exploration may not produce expected results.
That said, the company did get $250,000 CAD from Sprott, an internationally recognized mining finance institution, but only further drilling in 2022 with positive results will push this company further.
Silver Grail traded at $0.13 per share on Friday for a market cap of $4.47 million.
Junior Brownfield Silver Exploration
Risk is less and typically growth potential is too, but these are companies have solid historical data, may have already found something, have ready infrastructure and are just growing their resource numbers with NI 43-101 compliant drill programs.
Klondike’s flagship project is its 100%-owned Silvana Mine Project located in the West Kootenay region of southeastern British Columbia, Canada.
The property is a 120-square kilometre claim block with multiple exploration targets, a permitted 100-tonne-per-day flotation mill and multiple past producing silver mines including the Silvana, Wonderful and Hinckley Mines.
68 of 173 past-producing mines in Klondike’s Slocan Land package processed 2.1 million tons of ore, including 40.4 million ounces of silver, 349 million pounds of lead and 159 million pounds of zinc.
Klondike had an active 2021 where it continued to upgrade the existing Silvana Mine Tailings Management Facility and is currently developing a 3D model of the deposit based on historical data to assist in identifying and prioritizing future underground drill targets.
The company traded at $0.055 per share on Friday for a market cap of $13.22 million.
Silver Focused Royalty Streamers
This is the least risky one of the lot as you are investing in a company that has already done the due diligence and invested in silver producers for a piece of the profits. This is definitely a retirement play and like purchasing ingots, you buy a little more each more, but unlike ingots, you also benefit from a steady dividend payment.
Metalla Royalty & Streaming (MTA.V)
Metalla has focused on acquiring third-party royalties on assets owned by major mining companies. The Vancouver based venture is a pure silver and gold royalty play with guaranteed margins, topline cashflow.
An investor in the Metalla faces no exploration risk, mining risk and/or project risk while having exposure to top major operators and assets in perpetuity.
The royalty streamer has five producing gold and silver projects in its portfolio with ~24 more projects in development and ~35 projects in exploration stages.
Metalla traded at $8.93 per share on Friday with a market cap of $394.15 million.
The upshot?
While meme stocks pit and their respective sectors struggle to find a footing, silver presents a promising investment opportunity for investments with various risk profiles searching to weather the oncoming economic tsunami. Please remember to do your due diligence before making any investment decision. After you’ve done that, pick your winners and live to trade another day. Good luck to all!
If you want a technical analysis on the metal and the sector, check out Vishal’s breakdown here.
If you’re looking for video of said analysis, Vishal has that as well here.
If strong opinions are more your style, there’s plenty in our Silver Sector Investor Roundtable Video.
–Gaalen Engen
