Quality Silver Stocks Have Been Performing – Now It Is Time For The Optionality Plays
Excelsior Prosperity w/ Shad Marquitz (02-14-2025)
With it being Valentines Day, it seemed to be appropriate to write about one of my true loves in the resource investing space – silver stocks. So, let’s get into it…
It’s a bittersweet day though, as Valentines Day often is, because one of the silver stocks I was most passionate about, and could’ve actually married for the longer-term, has been Silvercrest Metals Inc. (NYSE American: SILV) (TSX: SIL).
Unfortunately, for (SILV) longs, hoping for several more years of “the good life,” with fat cash margins and outperformance, it has finally been taken off the streets by a larger company, with the plan of arrangement set to be finalized today on 02/14/25.
Silvercrest was just starting to really come into its own over the last year and half, and I expected to see the trajectory it was on in 2024 continue for several more years into the future… From the intermediate low it put in back at $4.16 in the summer of 2023 through today it was essentially a 3-bagger, and I thought it could still do another 300% from present levels.
For many other silver producers considering accretive acquisitions, this company will likely be “the one that got away…” (Hey, you snooze you loose)
Most people would be hard-pressed to find a company that had demonstrated more fiscal discipline; paying off all their development and construction debt in record time, with lowest quartile all-in sustaining costs / fat margins, that was literally printing money and holding their silver and gold on their balance sheet (putting their money where their mouths were as far as the expected outperformance of PMs over fiat currencies).
What irks me a little bit is that they had huge remaining exploration upside, and they were just starting to reinvest into drilling their property again in the second half of last year, right before a larger company dropped to its knee to propose…
UPDATE: Yes, Silvercrest officially tied-the-knot with Coeur Mining (NYSE: CDE) today. Hopefully it will be a strong union and solid relationship evermore, as the wedding bells ring loudly here on Cupid’s Day. (unfortunately it’s on a crap day in the PM sector and both SILV and CDE are selling off hard on large volume. I expected some of that shuffling around the transaction closing, but it’s a bit turbulent to end the week’s trading)
Coeur Completes Acquisition of SilverCrest
February, 14, 2025
I wrote to readers here when the news first broke about the takeover, that I had eventually decided to sell my Coeur shares, and then held my Silvercrest shares for the full term of the acquisition process to let them convert over to (CDE) shares. This effectively replenishes the Coeur shares in my portfolio, and with precious metals prices climbing like they have been in 2025, then I’m going to keep that position in place for the medium-term. CDE could be a real juggernaut now…
To be clear, I personally wanted to see Silvercrest run on it’s own merits and be the company doing the acquiring for the remainder of this bull market; but, I’m still going to give the new larger pro-forma Couer Mining a chance. Bringing in the strong economics from Las Chispas will greatly enhance the Coeur Mining balance sheet. The new combined company will have one of the larger silver equivalent resources, with big exploration upside, and will be one of the higher quality go-to and big-board-listed names in the space. It will also have good exposure to both silver and gold, and that’s a winning combination at current metals prices.
Speaking of romantic heartbreak in the silver mining sector…. The other big acquisition we saw in the silver space at the end of last year was Gatos Silver Inc (NYSE: GATO) being nabbed by First Majestic (NYSE/TSX: AG). There’s another stock I would have preferred to see keep running solo.
I had quite a wild romance with Gatos Silver, accumulating the lion’s share of my position in the mid-$2s through mid-$4s back in the second half of 2022. Sure, I scaled out of tranches of shares along the journey higher, but did ride the remaining position all the way up to the takeover news.
This was my best precious metals trade over the last couple of years, so when the announcement of the Gatos / First Majestic merger broke, I decided to sell my position into that newsflow… a bit heartbroken… but wishing Gatos well in its new marriage, and trying to remember the good times in our relationship. :-)
These 2 companies received a lot of fanfare due to their high-profile M&A deals with the big boys, and we’ve already discussed them a few times in the past. However, I wanted to kick off this article with a quick refresher of their charts, because I continue to hear comments from people about how “The silver stocks just haven’t performed like the gold stocks on this recent rally.” (Oh really?)
Now, across the whole swath of unwashed “silver” mining stocks… sure that is a fair comment, but come on… it really depends on which companies one has been positioned in. There are always winners and losers in any market sector rally.
Silvercrest has been a 3-bagger from low to high (over 1.5 years), and Gatos has been a 10-bagger from low to high (over 2.5 years). Isn’t that outperformance?
These were not just quick flashes in the pan from a lucky drill hole either… These were quality companies, with solid operations, that gave investors plenty of time to accumulate and have winning trades catching the meat of the moves.
These are not just 2 isolated success stories either, because we’ve seen plenty of silver producers and developers perform handsomely in the most recent leg of this bull market.
The problem many investors have is they are in penny dreadful explorers, or in sluggish majors, or only track the ETFs. None of those strategies are the best places to be positioned for overall outperformance during turns or bullish impulse legs higher in the PM sector. You want to be in the small and mid-tier growth-oriented producers and quality advanced explorers and developers that have defined resources in the ground. There needs to be known ounces in the ground that can actually rerate with higher metals prices.
Here is a chart of Silvercorp Metals Inc. (NYSE American: SVM) (TSX: SVM): You can see what a really nice move higher it made from this time last year, bottoming in February 2024 at $2.20, and then climbing up to its intermediate peak to $5.30 in October (for a 241% gain in 8 months), when silver surged up to $35.
That is great outperformance! (and just as good as most gold producers did). However, that was when the sentiment was at the back of silver stock investors.
We can see what happened in Nov/Dec of last year when the sentiment soured and reversed back down swiftly. The question though should be: Where do you anticipate that pricing is going to go in SVM when silver gets back up to $35 again…? How about at $40 silver pricing? The assets are just as good as last year.
I really wish there was more room in these Substack articles to just post a ton of charts in rapid-fire sequence, but here is a 1-year candle-glance chart of a dozen quality silver stocks in my personal portfolio. (for economy of space)
Featured stocks: Coeur Mining, Avino Silver & Gold, Americas Gold & Silver, Sierra Madre Gold & Silver, Santacruz Silver, GoGold Resources, Silvercorp Metals, Dolly Varden Silver, Vizsla Silver, Aftermath Silver, AbraSilver Resource, Silver Tiger Metals.
(Yes, there are other silver stocks that have also done well, but I’m “talking my book” on purpose here, because these are the stocks I own and follow, where I know why they ran higher)
(you can click on this image above to expand it and zoom in if you want to see it larger).
Even if you just look at these dirty dozen silver stocks in their shrunken form, you can clearly see that most of them either doubled or tripled at one point over the last year, even though the silver price did not go up 200% or 300%.
Isn’t that outperformance in the silver stocks? (Yes, it clearly is)
Isn’t that just as good as most of the gold producers or developers fared? (Yep)
Be careful just blindly accepting comments from “experts” suggesting that silver stocks haven’t performed well in the most recent leg of this bull market.
It has been a stock pickers market, and the quality stocks with margin growth, growth in production, growth in economic studies, or growth in resources have done great. Granted many of the lower quality stocks still haven’t moved yet.
OK. We have cleared the air and demonstrated how the quality silver stocks have outperformed, if they have been showing some element of growth over the last year or two. Now, let’s now dial in to the next group of companies, which are set to run higher… The silver optionality plays.
There are 2 types of optionality plays, and both are offering compelling value propositions at the present:
Higher cost producers, that will have optionality to rising metals prices through larger percentage increases in their margins relative to other producers.
Developers with large defined ounces in the ground, that will have improving project economics as metals prices continue to rise.
These are the very same perceived “lower quality” companies that many investors snub their noses at, because they are not currently the “best-in-class.” Some investors only want the “best quality companies” in the here and now. Fair enough. There is safety in picking the leaders of the pack (ie… Pan American Silver, Fresnillo, SSR Mining, First Majestic, MAG, Aya, Hecla, etc…); but they are also more widely followed by analysts and more fairly valued because of that.
The truth is that many times, when the bull market really gets going, then the “best returns” come from the companies that show the most improvement.
Are you in it to get married to a stock, or in it to make money? Personally, I want the best percentage gains, because as an investor, my goal is to make outsized returns. You don’t have to stay in a stock forever or get married to it.
What is your risk tolerance? Some people are not equipped mentally or emotionally to take on the kinds of risks that are present in optionality plays.
Many investors are not willing to skate where the puck is heading, because it is not immediately obvious to them or most people in the present.
Speculating on optionality plays is betting on turnaround stories. These are companies set to go from underwater financially to parity and then the profit zone in just a few quarters, or see their economics go from “meh” to “yeah.”
These are companies that are going to transform from Ugly Ducklings to Beautiful Swans as far as share price performance, but it is predicated upon metals prices continuing to keep heading higher and expanding metrics.
These are bad bets and chronic underperformers when metals prices are in corrective phases, and get disproportionately punished during those time periods.
So, with all of those points in mind, I’m going to lay out some silver optionality stocks, currently held in my portfolio, that I think will eventually get their ships turned around. These stocks will likely raise a few eyebrows when we see a sustained move higher in silver prices into the mid-$30s to high-$30s; and especially if we see silver blast through the $40 threshold. Currently they are unloved and picked upon.
Let’s start with the higher cost silver producers, that will have improving margins in 2025. Frankly, I was a bit too early in positioning into a few of these companies last year, because they continued struggling in 2024, both with limited operational hiccups (but ones that are fixable) and higher costs. Most of that is behind them…
To be clear, I’m still not expecting any fireworks from their Q4 financials or full year 2024 metrics. Some may think, well then what is the rush to get into them?
Well, I am expecting to see a turnaround when their Q1 and Q2 2025 numbers come to market in about 3-6 months. As a result, I’m continuing to add to these positions in front of that coming change in tenor that I expect to see this spring and summer. Their valuations are still low compared to many peer silver producers, because they’ve had challenges. Once their turnarounds are more obvious, then junior producers like these can have sudden reratings to the upside. So, I’d still rather be a bit too early than late to the coming party. (This is simply my personal investing thesis, and definitely not investing advice).
1) Guanajuato Silver (TSX.V:GSVR) (OTCQX:GSVRF)
Opportunities In Growth-Oriented Silver Producers – Part 2
https://excelsiorprosperity.substack.com/p/opportunities-in-growth-oriented-235
On February 3rd, over at the KE Report, James Anderson, CEO of Guanajuato Silver, joined us for a higher-level discussion on his macro outlook for both gold and silver, and how recent price trends will influence the mining equities. Additionally, we also review how political developments within the new administration in Mexico are impacting the mining sector in this jurisdiction.
Guanajuato Silver – Gold & Silver Outlook, Political Developments Impacting Mexican Mining Stocks
2) Impact Silver (TSX.V:IPT) (OTCQB:ISVLF)
Opportunities In Growth-Oriented Silver Producers – Part 4
https://excelsiorprosperity.substack.com/p/opportunities-in-growth-oriented-b09
I caught up briefly with the CEO, Fred Davidson, and CFO, Jerry Huang, at their Impact Silver booth at VRIC, and still believe it is just a matter of time in this PM bull market before they get their time to shine in the sun. I really like their optionality to rising silver prices for their production margins, and what those increased revenues will allow them to achieve with the drill bit across their district scale property. I see their production as a means to fuel expanded exploration for silver, and gold, zinc, and copper. At present, they still have a more heavily weighted exposure to silver than most other producers do.
Impact Silver Corporate Presentation: VRIC 2025
3) Silver X Mining (TSX.V:AGX – OTCQB:AGXPF)
I’ve not yet done a full write-up of Silver X Mining in the series “Opportunities In Growth Oriented Silver Producers,” because I’ve been watching patiently to see all the personnel changes and operational work that the team has been doing in the background start to turn their operations around and lower their costs.
I initiated a position in Silver X after the Beaver Creek Conference last year, but will be pressing my bets and adding more once I see more indications of their turnaround strategy paying off. Q3 was still a struggle for the company, but many metrics did start to improve.
I had José M. García, CEO and Director of Silver X Mining, join me over at the KE Report on December 11th to review their Q3 2024 financials and operations from the Tangana Mine at the Nueva Recuperada Project, located in central Peru. We also looked ahead to Q4 operations thus far, and the plans to expand the mill capacity to grow production, in tandem with exploration success raising the grade profile and factoring into an updated Resource Estimate in Q1.
Silver X Mining – Q3 Financials and Looking Ahead To Growing Throughput And Grades At The Tangana Mine, An Upcoming Resource Update, And Exploration Upside
José was quite candid about both the areas of strength and the areas that needed to be improved, and outlined some of the key takeaways from the Third Quarter 2024 financials and operations announced to the market on November 28th. He pointed out that the mine performed well, despite having challenges and interrupting some production in September, and that the All-In Sustaining Costs were affected by capital invested into Tangana in Q3. I appreciated that honesty, and am curious to see how things went in Q4; but again, am really more interested in how things will be improving in Q1 and beyond.
Now with regards to the silver advanced explorers and developers: I see a number of optionality plays with solid ounces in the ground that already deserve much higher valuations. I picked the 3 companies below to feature, from my portfolio, because they are paired with compelling exploration programs.
1) Blackrock Silver (TSX.V:BRC) (OTCQX:BKRRF)
Opportunities in Silver Explorers and Developers – Part 3
https://excelsiorprosperity.substack.com/p/opportunities-in-silver-explorers-c50
Blackrock Silver is a wild market disconnect to me, because of how high-grade their ounces in the ground are in Nevada. With 100+ million ounces of silver equivalent and growing, and the positive PEA economics, this stock should be valued so much higher. It really shouldn’t even be an optionality play, but with the way it is being valued at present, I have it in that category until it gets the much overdue rerating it deserves.
My thesis is that their current exploration program will continue to expand their resource growth and confidence in the continuity of mineralization, expanding the overall grade even further, and then this will further improve the economics. This should really be an alpha play, more so than a beta play, but rising silver prices will make these silver and gold ounces in the ground too attractive to ignore.
Blackrock Silver – Recapping The Key Initiatives From 2024 Leading Into Growth Catalysts For 2025
2) Kootenay Silver (TSX.V:KTN) (OTC:KOOYF) – Future write-up is coming on this stock
What I’ll briefly say about Kootenay is that they spent over a decade defining a lot of lower-grade bulk tonnage style silver equivalent ounces at 3 projects, La Cigarra, Promontorio, and La Negra. All these ounces still provide an underlying “optionality” component in a rising silver price environment. The market went to sleep on them a few years back though, and these projects are all but forgotten (at least for now) in investors minds. However, will those projects and ounces stay forgotten at $35-$40 silver…? (I think not…)
The big change in the company has been ever since they started drilling out their newer Columba Project over the last 2 years, where it has become a very interesting alpha value creation story in my mind. At Columba they are finding both high-grade silver and it is over wide widths, which is a winning combination for massing up resources quickly. They seem to have a good handle on how things are trending at multiple veins, but they keep finding more and more silver. Honestly, I’m surprised that this stock has been as subdued as it has been, but don’t expect that to continue when silver really starts running.
Kootenay Silver - Drill Results From The Columba Project: F-Vein, D-Vein and B-Vein Corridor
3) Apollo Silver (TSX.V:APGO) (OTCQB:APGOF) – Future write-up is coming on this stock
This one is a unique silver stock, in that it has 2 types of optionality. The first is from the ounces defined in the ground at its Calico Project in California. The more compelling optionality comes from the call option on their second massive world-class Cinco de Mayo Project, that they acquired from MAG Silver last year. This value will be unlocked if they can obtain the social license to proceed (where others have been unable to do so). These are the same guys that were behind Prime Mining when they were able to obtain the social license at the Los Reyes project in Mexico, and so I’m taking a flyer here that they are going to be able to do something similar at Cinco de Mayo. The potential payoff is worth the punt.
Apollo Silver - Project Catalyst Overview: Calico Project, Cinco de Mayo Project
Wrapping up, I thought it would be nice to include an interview from Dave Erfle, who joined us over at the KE Report earlier this week on a podcast. Later in the discussion we got into silver, it’s coming leverage to gold, and why Dave is bullish on the silver stocks. {The link below should jump you to that part of the conversation.}
Dave Erfle – Opportunities And Investable Trends In The Junior Precious Metals Stocks – Feb 11, 2025
That wraps us up for this Valentines Day tribute to the silver stocks!
Thanks for reading and may you have prosperity in your trading and in life!
Shad