Mining For Value At Silvercorp

Photo by Anne Nygård on Unsplash

The markets are already beginning to sniff out the end of the Fed’s rate-hiking campaign, and they aren’t wrong, suggests Brien Lundin, junior mining specialist and editor of Gold Newsletter.


The more-pessimistic outlooks are calling for only two more hikes (one in November and one in December) before the FOMC pauses, and events may force them to stop even sooner. There are basically two developments that could force the Fed to turn course:

  1. Something “breaks” in the financial system or asset markets, and/or...
  2. The cost of financing the federal debt at current interest rates soars to unmanageable levels.

The hard truth is that, with the federal debt at these levels (and headed higher), we simply can’t tolerate interest rates at current levels or higher.

Recent experience argues that the reaction to a shift in Fed policy will be explosive. Which brings me to an important point: If we pick the absolute bottom, it will be only due to luck. So we can’t count on hitting it exactly, and should instead focus on buying value when it’s truly irresistible. And that time frankly is now.

Silvercorp (SVM) announced operating results for its Q2 fiscal 2023. For its most recent quarter, the company’s mines generated 1.8 million ounces silver, 1,200 ounces gold, 18.0 million pounds lead and 6.0 million pounds zinc.

The totals for silver, gold and lead represented increases of 6%, 50% and 2%, respectively, from the same quarter last year. The zinc total was a 20% decrease from Q2 Fiscal 2022.

In addition, Silvercorp has completed 56,803 meters of drilling in 416 holes on the LMW mine within the company’s flagship Ying Mining District in China. The company has now received assays for 378 of those holes.

Key takeaways from this work include:

  • Discovery of high-grade silver-lead-zinc veins to the west of LMW’s current mining areas
  • Improved continuity of mineralization for low-angle gold-copper-silver veins
  • High-grade intercepts in drilling above and beneath previously mined stopes
  • Intersection of high-grade silver-lead-zinc veins and a new gold structure on the east side of the re-source area

This aggressive exploration work is typical of Silvercorp, which despite strong production from Ying, continues to plumb the district for more silver-lead-zinc and gold resources. Given my long-term bullishness for silver, Silvercorp Metals remains a strong buy.


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