The G7 Summit did little to assuage investor anxieties over mounting economic risks. Brazil rebuffed a helping hand to stamp out forest fires in the Amazon rainforest, while analysts didn't find it any easier to predict the next steps in the trade war between the United States and China. There may have been only one clear winner: precious metals.
Consider that the price of silver has risen from $14.61 per ounce in late May to $18.20 per ounce today. That's a pretty spectacular run for the precious metal, which is now trading at its highest level since a brief period in early 2017.
At the end of trading Tuesday, shares of Silvercorp Metals (NYSEMKT: SVMLF) had settled to an 11.8% gain. Shares of Coeur Mining (NYSE: CDE) were up 9.8%, while shares of Alexco Resource (NYSEMKT: AXU) had gained 15%.
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The price of gold and silver tends to rise during times of economic tumult, as investors look to escape depreciating currencies and volatile stocks. That's worked out pretty well for silver stocks lately, especially those that investors think are already on the rise.
For example, Silvercorp Metals turned in a solid fiscal first quarter 2020. Total silver sales volumes jumped 27% from the year-ago period, although lower average selling prices (ASPs) in the most recent period sapped some of the gains. Silver revenue increased "only" 19% year over year. That could change if current silver prices hold up.
Coeur Mining, which can be considered a silver stock and a gold stock, is also benefiting from rising precious metals prices. The business generated 28% of total revenue in Q2 2019 from sales of silver, although total silver sales slipped 15% from the year-ago period. On the second-quarter 2019 earnings conference call, management said that half of the decline could be explained by lower sales volumes, while the other half stemmed from lower ASPs, which slumped to just $14.75 per ounce in the most recent period. Current selling prices would help to tack on considerable revenue in the second half of 2019.
Meanwhile, Alexco Resource is working to bring the Keno Hill asset online after years of feasibility studies and preparatory work. The company thinks four deposits within the acreage could support roughly 4 million ounces of silver production per year -- not bad for a pre-production business.
Alexco Resource still needs to renew its water use license for the asset -- that's expected to happen before the end of 2019 -- and continues to explore the acreage in deeper detail. But if silver prices remain at elevated levels as Keno Hill begins production, then the company would find the start-up that much easier.
The price of gold and silver tends to rise during times of economic tumult as investors look to escape depreciating currencies and volatile stocks. That's worked out pretty well for silver stocks lately. That said, investors with a long-term mindset should understand the risks of investing in gold stocks and silver stocks alike, as they tend to underperform the S&P 500 over the long haul.
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