Are We There Yet?

Yes, Grok does excellent AI cartoons…

A little over a month ago I did a substack on precious metals prices, “Gold, Silver…to the Moon?” When I wrote it gold had kissed $2600 for a second and silver was trading at $30 an ounce. As I write this, gold is at $2750 and silver is at $34.86.

Which raises the question, is this the moon? Precious metals never lack for pundits and the consensus seems to be that we are actually still on the launch pad. For once the consensus may be right. But for weary junior resource stock investors hanging on long enough to enjoy the ride is becoming difficult.

The GDX which tracks larger gold producers is up about 10% from September as is the GDX-J. But compared to the increase in the price of gold these indexes are lagging.

Senior gold producers are raking in the profits. But their share prices are surprisingly stagnant. Back in April, one of my favorite commentators, Lobo Tiggre asked and considered the question, “Are Gold Stocks Broken?”. Tiggre’s bullet is that gold stocks were broken for a while with gold prices divorced from gold producers' share prices. But Tiggre is optimistic that the senior producers at least are repairing themselves and that the outlook is bullish. Tiggre may well be right, but the indexes are fairly slow to catch up with the actual price of gold.

Shares in silver majors like First Majestic (AG.T) have been up sharply in response to the quick rise in the price of silver. Pan American Silver (PAAS.T) and Wheaton Precious Metals (WPM.T) are tracking the silver price pretty consistently. More consistently, by and large, than the gold producers shares have. Silver stocks in Tiggre’s terms may be less broken than gold stocks.

On the junior exploration and development side of the market in both gold and silver the surge in metals prices tends to take a while to filter down. After all, by definition, junior resource companies are not actually producing gold or silver for sale this week. In terms of share prices, for the most part the juniors have enjoyed modest bumps and a general firming of what has been a very jittery market.

However, the rapid rise in the price of silver has demonstrated the virtue of microcap volatility in a few cases already. After a year of decline, Metalic Minerals (MMG.V) woke up all of a sudden.

Keno Hill in the Yukon is stuffed full of silver and Metallic has a significant presence. Greg Johnson, CEO, is one of the most knowledgeable guys in the business and, in a rising market, experience is critical.

I lost a bomb on Mexican silver explorer GR Silver Mining (GRSL.V) but it has a lot of highly prospective ground in Mexico and is managing a first-class exploration drilling program.

If silver continues upwards, GRSL may very well come back from the dead.

Right now, my two favourite silver plays, Bayhorse Silver (BHS.V) and Eloro (ELO.T) are both in a holding pattern as they fill private placements.

The rise in the price of silver will make it easier for my pal Graeme O’Neill to fill the Bayhorse private placement. And Tom Larsen, CEO of ELO has increased the size of his private placement.

Private placements act as effective share price anchors. Why buy in the market when you can get a share and a warrant (or in ELO’s case, half a warrant) for less than the shares are trading at? But both private placements will close shortly and the companies, cashed up, will be able to join the fun in the silver market.

The key thing about the junior resource market is that it can be asleep for years at a time and then wake up with a start. Pundits will talk about catalysts and, again, they are not wrong. There are triggering events when, all of a sudden, lots of money wants to own companies with “gold” or “silver” in their names. It is not a rational calculation, it is pure fear of missing out. FOMO for the win.

But there is another, rather more sensible, element in play. As the larger and mid-level producers do well with rising metals prices, they are scanning the horizon for potential takeover targets. Buying reserves to replace the reserves they are selling into the rising market.

Eloro’s huge Bolivian silver, zinc and tin discovery at Iska Iska is on a scale which could keep a major operating profitably for years. In fact, it is so large that the project might make sense to split between two majors with one going after the silver zinc and the other focusing on the tin.

Now that the political situation in Mexico is a little less fraught, GR Silver’s discoveries in the Rosario Mining District may be quite attractive for a company looking to expand near surface silver and gold reserves

Up at Keno Hill in the Yukon, a single map tells most of the potential acquisition story for Metallic Minerals:

With rising silver prices it is a decent bet that Hecla will look to consolidate the Keno Hill silver district.

The Bayhorse path is a bit different. Until last year, Bayhorse was entirely focussed on bringing its Bayhorse mine back into production. Then Hercules Metals made its big copper discovery on a suture of the Izee and Olds Ferry terranes at Cuddy Mountain in Idaho. Bayhorse occupies a similar suture. Barrick jumped in on the BIG discovery and staked all the way from Cuddy Mountain to what came to be called the Pegasus Project, Bayhorse’s staking on the Idaho side of the Snake River, across from the Bayhorse mine.

O’Neill should soon have a drill turning, underground, on the Oregon side to find out what the low resistivity anomaly under the Bayhorse mine is made of. Results, visual and XRF, will not take long. Assays, a bit longer. But with any luck, BHS will know by Christmas if it too has a BIG style copper porphyry on the Oregon side.

The moon is coming closer.

[Disclaimer: I own shares in GRSL, ELO and BHS and may buy or sell at any time. This is not investment advice.

Do your own due diligence. Call the CEO.]