Desert Gold, First Majestic, Pan American, Endeavour Silver - Bet on the Gold & Silver Squeeze!

First Majestic Silver - What a squeeze means here

Up until January 27, First Majestic Silver's stock price was moving along quietly. The Reddit move means that some dedicated truffle seekers discovered another stock with a relatively high short ratio. #silversqueeze - the hashtag that the Reddit community put out into the world ad hoc, is now making its way into the world of commodities. More precisely, it primarily affects silver. Gold and platinum ran behind the silver development of +10% with 3 and 4% respectively.

On the platforms, it is claimed that we are facing the largest short squeeze in history, which should drive the silver price from currently USD 27.3 to a staggering USD 1,000. Consequently, the silver price was already quoted above USD 30 at the peak, but technically, it was over and a violent consolidation began. Yesterday, the sell-off continued and ran to below USD 27.

Fundamentally, a lot has changed for the good at First Majestic, but an increase of 50% in only 5 hours does not seem justified and is certainly not in the interest of the Company, which has been able to demonstrate a high consistency in the figures for years. What we have seen with minus 70% at GameStop for 2 days can also happen quickly at First Majestic. At some point, the short-coverings will be completed and the interest of the Reddit community will abruptly decrease again. Then it gets frosty on the trading floor. Nevertheless, those who like to invest in silver should take a long-term look at First Majestic Silver. After all, they produced a full 11.6 million ounces of silver in 2020 and are expected to produce over 13.5 million ounces in 2021. If the silver price then also picks up, the rally can even fundamentally start again.

Desert Gold - New drilling right at the beginning of the year

There is no need to fear irrational price movements with the Canadian gold explorer Desert Gold. The Company was able to refinance extensively in 2020 and continues its very promising SMSZ and Djimbala projects unhindered in 2021. The greater the investment community's involvement in commodities, the greater the pressure to bring about physical cover for the many derivative transactions in London, New York and Singapore. The precious metal is traded in paper form on these exchanges, but if it cannot be delivered when prices rise, it tends to become even more expensive in derivatives. Mines are already running at full capacity.

Many explorers and mining companies are flocking to the African continent. For a good 20 years now, China has also been securing raw material deposits on the wild continent. American and Canadian companies have long recognized the advantages of the location for themselves. Low development and operating costs lower the average production prices downwards, and the margin becomes more interesting.

Desert Gold is surrounded by many majors such as B2Gold, Barrick Gold and AngloGold Ashanti in its 410 square kilometer prospecting area. With economic grades of 3.5 and 6.3 g/t AU, results that make sense for volume exploitation have already been achieved. However, what seems vital for Desert Gold shareholders is the revaluation when the ounces in the Desert sands are compared to the rising precious metal prices. When Desert has its discoveries valued in 2021, we expect to see a flurry of numbers and prices beyond CAD 0.30.

Pan American Silver - Doing very well in the year of the pandemic

Things are going splendidly for Pan American Silver at the moment. The Company reported its preliminary full-year 2020 production results on January 19, with a consolidated silver production of 17.3 million ounces, compared with a forecast range of 18.0 million to 19.0 million ounces. Gold and nonferrous metals were also slightly below forecasts. Production and accrued costs in 2020 were further impacted by operations running below normal capacity limits.

Due to government actions in response to the Covid-19 pandemic, all of Pan American's Latin American operations were placed on care and maintenance for an average period of approximately two months during the first half of 2020. The Timmins, Canada operation also operated at reduced rates throughout 2020 to appropriately comply with Covid-19 related regulations.

However, the outlook for the current year reads well. Management expects silver production to increase 35% over 2020 and record gold production in 2021, although Covid-19 is expected to continue to impact operations. Cash flow will remain very robust, allowing the La Colorada Skarn project to be advanced. During 2020, Pan American repaid the remaining USD 275 million under its credit facility and paid out a total of USD 46.2 million in dividends, while cash and short-term investments increased to approximately USD 279 million. Well Done - Pan American!

Endeavour Silver - 23% more production in 2021

There is similarly positive news to report at Endeavour Silver. In 2021, silver production is expected to be between 3.6 million and 4.3 million ounces, while gold production is estimated to be between 31,000 and 35,500 ounces. Silver equivalent production is expected to be 6.1 to 7.1 million ounces, assuming a silver-to-gold ratio of 80:1. This number would be almost a quarter more than in the 2020 pandemic year. Endeavour's calculated production costs have been in the mid-range for years. On the cash cost side, these are USD 7 to USD 8, while total sustaining costs are estimated at USD 19 to USD 20 per ounce of silver. Expenses are also anticipated to be higher than in 2020 due to higher royalty and mining tax payments expected in 2021.

For its planning, Endeavour expects market prices of USD 22 and USD 1,760 per ounce of silver or gold, respectively. Again, this quickly becomes apparent - if spot prices go through the roof, Endeavour is just as capable as First Majestic and Pan American of generating real free cash flow. Of course, the leverage is with Desert Gold, where the market price acts as an engine based on the properties' calculated present value. Adding to the holdings seems sensible in this environment, as the share price recently consolidated to CAD 0.15 per share.