SVM- A Canadian-Chinese Miner Set to Ride Precious Metals Prices Higher
Silvercorp Metals (SVM) is a $544 million silver/lead/zinc/gold miner, headquartered in Canada but operating mainly in two precious metals districts in China. It will help you profit because precious metals are perking up on the idea that the Fed is making its last rate hike in this cycle, explains Sean Brodrick, editor of Resource Trader.
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This is because inflation is cooling rapidly, so the market believes the Fed will soon say it is done with rate hikes. In fact, many traders are starting to bet on rate CUTS in 2024. This optimism on an end to rate hikes is sending the US dollar lower, and precious metals higher.
I’m not as convinced as some are in the market that the Fed is done. But I’m happy to ride any rally in metals, and the longer-term (2-year and beyond) cycles point to higher metals prices.
As for why silver over gold … in a precious metals bull market, silver usually leads gold higher. And there are a lot fewer silver miners than gold miners.
I could talk about silver fundamentals quite a bit, but at the present time, the market pays about as much attention to metal fundamentals as a blind squirrel. I’ll talk more about metal fundamentals when they matter again.
On the other hand, fundamentals can matter for individual stocks, and they are looking very good for Silvercorp Metals. This producing miner has high-margin, long-life mines in China. It also has 115 million ounces of silver in the proven and probable (most reliable) category, and 95 million in measured and indicated ounces.
In the most recent quarter, 57% of its revenue came from silver, 38% came from base metals and 5% was gold.
The company closed out its fiscal 2023 year in May. Revenues declined a bit (4%) to $208.1 million. This was due to lower prices for silver, lead and zinc, as well as a 12% decline in zinc production.
However, there were increases in production for silver (+8%), gold (+29%) and lead (+6%). In the next fiscal year, the company expects its zinc production to rise by 18% to 26%.
The company produced 6.6 million ounces of silver in fiscal 2023. By fiscal 2026, it expects to grow production to 8 million ounces.
All-in Sustaining Cost for 2023 came in at $9.73 per ounce, up 11%. That’s pretty good in a year when inflation sent costs for many miners soaring. Silvercorp has $145.7 million in cash, and no debt.
And now, Silvercorp is acquiring Celsius Resources, which is developing a copper-gold project in the Philippines, for $38.2 million.
The project boasts measured and indicated resources of 296 million metric tons grading 0.46% copper and 0.12 grams of gold per metric ton. Celsius is in the final stage of obtaining the mining permit from the Philippine government.
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This gives Silvercorp two advantages: Diversifying out of China and providing exposure to copper, one of the world’s more useful metals, and doubly so for electric vehicles and the green energy revolution.
Recommended Action: Buy SVM.
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