The strong recovery from the Covid-19 economic crisis, driven by record fiscal stimulus measures, has pushed inflation to the highest levels since the 1980s.
On top of this, we have the crisis in Ukraine beginning to complicate the picture, making runaway inflation a much more fearful friend than was assumed just a few weeks ago - so much so that even the European Central Bank (ECB) is seriously considering raising interest rates to counter rising prices for goods and services.
Given that the ECB has been one of the top global monetary authorities least willing to forgo accommodative policies to avoid jeopardizing the economic recovery, this gives us an insight into the seriousness of the problem.
The fact is that high inflation could hamper growth, as could tightening monetary policy, but if inflation is allowed to reach even higher levels, it could seriously weaken future global economic conditions. Many investors fear for their portfolios and are looking for ways to protect the value of their assets.
Silver offers a solution because it is a material with cross-industry applications. It also serves as an excellent hedge against the high uncertainties now being triggered by record inflation.
Silver, which is now trading at $23.50 an ounce (slightly below last week's high of around $24), should therefore trade higher in the coming weeks. Since U.S.-listed silver stocks tend to grow faster when the commodity is trading higher, investors may be interested in capitalizing on the expected rise in silver prices from listed miners.
In the industry, one of my top picks is Alexco Resource Corp. (AXU), the Canadian owner and operator of the Keno Hill silver mining districts in Canada's Yukon Territory, which ranks highly for the quality of mineralization among mineral properties around the world.
On the road to becoming a 4.4-million-ounce annual silver mining company, development activities are focused on identifying the best possible design for each deposit to enable economic production of the grey metal.
Mineral resource development at the Keno Hill Silver District is progressing as anticipated by the company as mining activities are delivering grades, throughput and metallurgical performance in line with estimates. Also, an underground deposit where miners will use a satellite source of silver has started initial ore production in the last quarter of 2021.
Milling activities continue to ramp up as the target of 400 tons per day of throughput needs to be met. It should not be long before the ramp-up target is met as more throughputs will be drawn from the creation of additional resources, the definition of which depends on successful exploration and drilling activities the company also scheduled for completion in the final quarter of 2021.
Last year, Alexco Resource Corp. laid a solid foundation for the rapid transition to a regular silver producer. This status will allow the operation to generate sufficient cash flow for the ongoing development of Keno Hill without leverage. The company could hit that milestone as early as the first quarter of 2022, potentially creating an amazing upside catalyst for higher share prices.
Considering the growth opportunity, the stock is not expensive at the share price of $1.56 at close on Monday, following a 47% decline over the past year. It currently trades below the 50-day moving average of $1.63 and the 200-day moving average of $2.02.
The stock has a market cap of $241.56 million and a 52-week range of $1.34 to $3.34.
The 14-day relative strength index is 46, which means the stock is neither oversold nor overbought.
Wall Street recommends an average buy rating with an average price target of $2.93 for the stock, reflecting 88% upside potential.
This article first appeared on GuruFocus.