28. June 2021 | 12:57 CET
Alibaba, Blackrock Silver, First Majestic Silver - Why July 1 is so important
What is so special about July 1? On that day, the Chinese Communist Party will celebrate its 100th anniversary. It is common knowledge that the Chinese government plays by its rules. If someone violates these rules, appropriate measures are taken. The ever-increasing price of raw materials is not at all to the taste of the Chinese, who are known to have a great need for raw materials. Without further ado, the Chinese announced that they would soon release strategic state reserves of various metals, which initially led to the consolidation of some commodities. Chinese companies are also currently very cautious, as no one wants to disrupt the July 1 celebration. After the celebration, the reins could loosen a bit.
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ISIN: ALIBABA GR.HLDG SP.ADR 8 | US01609W1027 , Blackrock Silver | CA09261Q1072 , FIRST MAJESTIC SILVER | CA32076V1031
"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
Alibaba - All signs are green
Like so many tech companies, Alibaba already had a dispute with the government and collected a fine of EUR 2.3 million for it. Since then, the Company has kept a low profile and has opened up new business areas instead of suing. It continues to work on dovetailing online and offline purchases. In addition to the Freshippo supermarkets, 3 Store-X stores have been opened. These offer membership and are attracting large crowds with all kinds of extras such as free delivery, car washes, optician services, etc. The concept is aimed at the upper-middle class, which is growing particularly fast in China. You go shopping in a relaxed way, scan the goods you want to buy via an app, and everything is packaged for you. The first of the Store-X stores was already profitable after 2 months. This year, 8 more stores are planned.
In addition to new business areas, the old business areas are generating more and more profit. In the cloud sector, in particular, the Group has now taken the lead. Digitalization is advancing everywhere in China. There was a 55% growth in cloud infrastructure services in the first quarter alone. By 2028, the Chinese economy is expected to be the largest in the world. According to McKinsey, the middle class will grow to 550 million people by the end of 2022. With all these growth rates, investors will be more engaged there. If we compare Alibaba's valuation with those of Amazon and Google, the stock is significantly undervalued. Of course, this is related to the uncertainty caused by the Chinese government.
In the long run, an investment in Alibaba will pay off. The stock seems to have found a bottom because, after the double bottom, the breakout above the EUR 185 mark has been successful. A setback may still occur, but it should not go below EUR 169.70.
Blackrock Silver - Strategic partner won
Shortly after my last analysis on Blackrock Silver, the Company announced outstanding silver and gold deposits in Tonopah West, Nevada, on May 5. Up to 3,075 grams of gold per ton, 1,722 grams of silver per ton and 3,322 grams of silver equivalent per ton were found. 53,000 meters of drilling have been completed and 17,000m remain to be drilled. Already 10 high-grade veins ranging from 400m to 1.5km have been identified.
Since May 18, the silver rally has taken a breather and the silver price corrected by USD 2.70, or a good 10%. Management timed the May 17 financing round of ultimately CAD 10 million perfectly. Shares were issued at CAD 0.75, and a strategic partner was acquired in the form of First Majestic Silver, which participated with a total of CAD 2 million. The Company is now sufficiently capitalized to complete exploration as planned by the end of the year and provide a resource estimate.
The stock, which has risen 50% since the beginning of May, has also come back in the wake of the weakening silver price and is trading at CAD 0.95. The breakout level is located here and should serve as support. Should this mark fall, the next target would be the 200 moving average at CAD 0.84. Those who are bullish on silver invest their money well here.
First Majestic Silver - Must reinvent itself
Anyone who has been paying attention to First Majestic Silver for a while, but has lost sight of it a bit in recent months, will be surprised to hear the news about its investment in Blackrock Silver. That is because the Company has only ever been active in Mexico before. One of the reasons could be the acquisition of the Jerritt Canyon Mine on April 30. Since it was difficult to find an exciting silver mine, they decided to go for a gold mine outside Mexico, in Nevada.
The weakness of the silver producer lies in the life of its existing mines. The reserves are coming to an end and the remaining life is expected to be about 6 years. Against this background, the move to Nevada and the investment in Blackrock Silver makes sense. Blackrock had announced considerable gold and silver discoveries only shortly before and is also working in Nevada. If the resource estimate is of a magnitude that First Majestic Silver agrees with, the Company already has a foot in the door for a takeover.
The stock is currently trading at CAD 19.38 and trying to form a bottom. As long as there is no closing price below CAD 18.20, the sideways phase remains. Above CAD 22.75, it would be significantly more bullish. One should wait until the silver price turns again and then see whether the share runs accordingly.