SilverCrest Metals - An Explosive Move
Jun. 6, 2020
Andrew Hecht
Hecht Commodity Report
Seeking ALpha
Summary
Silver is rallying, but SILV is doing far better.
A Canadian producer with exploration in Mexico.
A bump in the road in March leads to a new high- 2008-2011 all over again?
Exploration restarts after a COVID-19 shutdown.
SILV has been silver on steroids- Will it continue?
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The silver market can remain quiet for extended periods, and then all of a sudden, the price action can become wild. We are not even halfway through 2020, and the price of silver has already traded in a $7.21 range from high to low. The last time silver traded in a wider range was in 2016 when the price hit a high of $21.095 in the aftermath of the Brexit referendum.
Silver got down to a low of $11.74 per ounce in mid-March as risk-off conditions sent prices of markets across all asset classes lower. Since then, the price has come screaming back. On June 1, two and one-half months since the price was below $12; silver rose to a new high for 2020 at $18.95 per ounce.
Shares of SilverCrest Metals Inc. (SILV) had been rallying since 2017. The selling in late February and March caused the stock to decline with the price of silver, but over the past two and one-half months, SILV has outperformed the price action in the silver market on a percentage basis.
Silver is rallying, but SILV is doing far better
The silver market has been on a one-way street higher since the March low.
Source: CQG
As the daily chart of July futures highlights, the move from $11.68 on March 18 to $18.95 on May 29 took silver 62.2% higher.
Source: Barchart
SILV shares reached a high of $8.30 on February 24 and fell to a low of $3.28 on March 24 as silver crashed, and the stock market took an elevator shaft ride to the downside. The stock then soared to a high of $9.69 on June 2, above the February peak. Silver has moved significantly higher, but SILV shares have exploded to the upside. On Friday, June 2 July silver was back at the $17.50 level and SILV was at just over $8.40 per share.
A Canadian producer with exploration in Mexico
SilverCrest Metals Inc. has a market cap of $1.132 billion at just below $9 per share. An average of almost 1.29 million SILV shares changes hands each day, making it a highly liquid stock.
The company’s profile states:
Source: Yahoo Finance
SilverCrest is an exploration company with properties in Mexico.
A bump in the road in March leads to a new high- 2008-2011 all over again?
Before the global economy came to a halt in late February, SILV announced a high-grade discovery at its Las Chispas site, which sent the stock to over $8 for the first time.
March was a bump in the road for both the silver market and the exploration company. However, the tidal wave of monetary and fiscal stimulus over the past months could light a fire under the silver market, and SILV shares if 2008 is a guide. The record levels of central bank stimulus pouring into markets are highly inflationary as it reduces the purchasing power of the dollar and other fiat currencies. After trading to a low of $8.40 in the immediate aftermath of the 2008 crisis, silver took off on the upside reaching $49.82 per ounce in 2011. A similar move and success on the exploration side could mean that SILV shares are heading even higher than silver on a percentage basis in a trend that began since the March low in the stock.
Exploration restarts after a COVID-19 shutdown
On May 12, SILV said t would restart its exploration and development activities at its Las Chispas Project. The company instituted protocols to protect workers from COVID-19 at its sites, even though Mexico has experienced a rising number of infections. The drill results from the Babi Vista Vein have been impressive, leading to more buying in SILV shares. The company believes that its discoveries can add further high-grade veins to its portfolio over the coming months and years.
Almost 51% of SILV shares are held by institutions that own 58.67% of the float. Insiders own 13.21% of the shares. It does not appear that insiders have been selling the shares of the company.
SILV has been silver on steroids- Will it continue?
The silver market has been on a tear since the March low. As of the end of May, the price was over $6.80 per ounce higher than two and one-half months ago. The ten-week move to the upside resulted in a gain that was higher than the entire trading range from 2017-2019.
The first critical level for silver, from a long-term perspective, stands at the 2016 high of $21.095. Above that price, the precious metal could fly to the upside as it did in 1979-1980 and from 2009-2011.
SILV’s discoveries of high-grade ores in Mexico could lead to a previously untapped potential for the company. Silver bulls that believe the price is heading for a technical break to the upside could find value in SILV shares at below $10 per ounce.
The Hecht Commodity Report is one of the most comprehensive commodities reports available today from the #2 ranked author in both commodities and precious metals. My weekly report covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. I just reworked the report to make it very actionable!
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.
The author is long silver
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