17. September 2021 | 11:59 CET
First Majestic Silver, Silver Viper, Millennial Lithium - Rally Ahead?
A rally in silver was already predicted at the end of last year. The reason was the corona-related 5.9% drop in production. It is the most significant decline in over 10 years, and thus there was a shortfall in supply. In addition, there is strong physical demand, which you can see well on Reddit if you search for "Silverbugs". There, people proudly present their hoarded silver stocks. Since the panic selling at the beginning of August, the price has already risen by 11%. High inflation could give the silver price a further boost. For lithium, on the other hand, the rally is already in full swing. The lithium carbonate price has more than doubled since the beginning of the year. We analyze three companies from these sectors today.
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ISIN: FIRST MAJESTIC SILVER | CA32076V1031 , SILVER VIPER MINER. CORP. | CA8283341029 , MILLENN.LITHIUM CORP. | CA60040W1059
"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
First Majestic Silver - Record earnings
When silver reached a new multi-year high on February 1, First Majestic Silver could also mark a new high for the year. As we know today, it was a false breakout and the silver price consolidated for the time being. The Company's share price also took a hit. The commodity producer broke new ground by taking over the Jerritt Canyon Gold Mine in Nevada. The reason given by the CEO was that they had not found a suitable silver mine to take over. To put it positively, one could say that the Company has broadened its base.
On August 16, the quarterly figures were presented publicly, and the analysts' expectations regarding the earnings per share could not be reached. On the other hand, production rates increased by 14%, even if the new gold mine is excluded. Of particular note is the average sales price of CAD 27.32, which was higher than the average silver price. As a result, a record revenue result was reported. One problem is the increased costs in production, and it does not look like it will improve quickly as management has forecast high costs due to improvement work at the Jerritt Canyon project.
Shareholders can look forward to a higher quarterly dividend, which has been increased by 33%. The increased Jerritt Canyon project improvement costs are temporary. The share is currently at CAD 16.18 and has again bounced off the important resistance at CAD 15.05. The downward trend line has been broken. If the share now reaches a closing price above CAD 17.09, the trend reversal has succeeded. Below CAD 14.84, the chart picture would cloud significantly.
Silver Viper - Gold and silver deposits exceed market value
Silver Viper is a Canadian silver and gold explorer, pointing to existing silver and gold resources. On June 15, a NI 43-101 report was filed as evidence of 154,300 ounces of gold and just over 6.9 million ounces of silver at the La Virginia project. Management anticipates an additional 246,300 ounces of gold and approximately 12.5 million ounces of silver. The report is based on 288 drill holes, with the Company drilling 100 holes totaling 27,021m last year alone.
Since the report, things have been quiet for the Company, which raised just over CAD 6 million following its private placement in early June. Unlike many other miners that release news as soon as a drill program starts, Silver Viper does not report until there are already results from the drill program. However, there has not been such a long pause in announcements in a long time, so it is safe to assume that news will be coming in here in the foreseeable future. The area is 6,880 hectares and offers so much exploration potential.
The stock returned once again from CAD 0.80 in early July to CAD 0.45. The pressure came from the new shares in the private placement. The investors just wanted to get the warrant and their stake back out with the sale of the shares. The share should not fall any lower since the management holds 23% and institutional investors, including Mr. Sprott, hold 60% of the Company. If one converts the existing gold and silver reserves, the fair value is about CAD 83 million. Currently, the Company is only valued at around CAD 51 million on the stock exchange.
Millennial Lithium - A bidding war
Events are coming to a head at Millennial Lithium. The Company, which produces lithium with a purity of 99.96% in a pilot plant in Argentina, is to be taken over directly by two candidates. On July 16, a bid of CAD 353 million was received from Ganfeng Lithium, the equivalent of CAD 3.60 per share. At the time, this was a good 20% above the current market price of the share. Management and strategic investors were in favor of accepting the offer, and On August 27, the court gave the green light for the takeover.
On September 8, the share was again suspended from trading. Management subsequently announced that it had received a higher offer of CAD 3.85 per share. Behind the offer appears to be Contemporary Amperex Technology Co. Ltd, itself one of the largest manufacturers of electric vehicle batteries. Management has given Ganfeng until September 27 to respond to the new offer. So the bidding war for the 4.12 million tons of lithium carbonate indicated by Millennial Lithium is on.
The share is currently quoted at CAD 4.01. Investors, therefore, assume that the two bidders will fight a battle. At this point, one should no longer invest here. The risk-reward ratio is no longer good enough, as fundamental data no longer play a role, and it is entirely unclear whether Ganfeng will increase its offer again.
While the rally in lithium is already in full swing, as seen in Millennial Lithium, silver is still lagging. Silver is becoming more and more important, especially in industrial processing, as the US, for example, wants to rely more on solar energy, and silver is built into solar panels. First Majestic Silver is an example of how it is no longer easy to find new silver mines. The life of the existing mines continues to decrease. Silver Viper, on the other hand, is at the beginning with its existing deposits. As an investor, one can buy gold and silver here at a significant discount to the current price.