27. April 2021 | 07:00 CET
First Majestic, Blackrock Silver, Steinhoff: This penny stock is more than a gamble
Sometimes it pays to take a look at the second tier. Silver has always been in the shadow of gold. But from time to time, the lesser precious metal catches up with gold. Currently, the reasons lie primarily in the importance of silver as an industrial metal, especially in electrical engineering and RFID chips. Although the gold-silver ratio fell significantly in the past year, the long-term trend shows that silver was valued higher than gold several times in the past. We highlight silver companies and compare them to other popular stocks.
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ISIN: CA32076V1031 , CA09261Q1072 , NL0011375019
"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
First Majestic Silver: Problems ahead!
First Majestic Silver is one of the few pure silver players and is benefiting from increased demand from the auto industry in the wake of the e-car boom. First Majestic Silver operates three projects in Mexico and is already worth more than EUR 3 billion on the stock market. The Company is also developing smaller projects and expects growth from this. This growth is also urgently needed. In 2020, First Majestic Silver's reserves dwindled significantly - the Company took about a quarter of its silver deposits out of the ground and did not replace them. Also, the existing reserves are ambitiously valued in terms of cost. As a result, the calculated buffer is low - as soon as silver goes down, the Company would have to adjust its calculation. Those who plan defensively, on the other hand, can surprise. The First Majestic Silver share no longer has this potential.
Although the share price still offers a return of almost 90% on a one-year horizon, it has recently been moving increasingly sideways. This trend is likely to continue. The remaining life of First Majestic Silver's mines can soon be counted on one hand. As the future is traded on the stock exchange, the Company should soon be under pressure. Critical shareholders want more production facilities in the portfolio. The stock is not very interesting at the moment - e-car boom or not.
Blackrock Silver: Clear targets by the end of the year
The investment story of Blackrock Silver is more exciting. The Company is not yet in production but is advancing a promising project in the silver state of Nevada with Tonopah West. 40,000 meters are to be drilled in 2021 to be able to carry out a resource estimate at the end of the year. Blackrock Silver recently consolidated its property by entering into a land swap agreement with additional landowners around Tonopah West. The result ensures that Blackrock is closing a gap and can now explore an even larger contiguous area.
Blackrock Silver's shares were trading at over EUR 1 as recently as last summer and have since halved in value. The value has been stable for months and could have found a bottom at the current level. The continuous news flow and the need for small and medium-sized producers to increase their reserves also indicate that the focus is now more on the upside. Blackrock Silver is currently valued at EUR 61 million and could soon pick up speed in the event of a successful drilling program.
Steinhoff: How sexy can furniture be?
While Blackrock Silver shares stand for a company that has a clear plan and will consistently pursue it through to the end of the year, other companies are pawns of external circumstances - such as the penny stock Steinhoff. The furniture group is fighting for survival after an accounting scandal. A legal dispute will decide what happens next at Steinhoff. Numerous private investors have been pouncing on the stock for weeks. Their idea: As soon as a settlement is reached and the legal dispute is settled, Steinhoff can breathe a sigh of relief. But that is not the case: Almost any solution is likely to challenge the Company. Also, the furniture business is anything but sexy.
Instead of betting on legal battles, investors can participate in a clear trend with Blackrock Silver. Inflation is picking up worldwide, even though the extensive post-pandemic easing has not even happened yet. Blackrock Silver offers a promising silver play that should soon appeal to larger companies. While Blackrock Silver has its success in its own hands, investors in Steinhoff are dependent on other influencing factors. Those looking for speculative investments without wanting to gamble are better off looking at Blackrock Silver.