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Introduction
Silvercorp Metals (NYSE:SVM)(TSX:SVM:CA) is China’s major producer of silver. Gold, lead, and zinc are also derived from their mining operations. Given that I am firmly of the opinion that we are in the early stages of a Bull Market in precious metals, then this producer is of interest to me, and I am long this stock as I expect it to perform very well going forward.
Fundamentals
Silvercorp Metals Inc. is headquartered in Vancouver, Canada. However, its income is largely derived from mining interests in the Henan Province, Guangdong Province, and Hunan Province in China.
Financials
Silvercorp recently published their financial report for Q1 Fiscal 2025, so I have selected some of the highlights which are noteworthy to me, but I do recommend that you read these reports in order to satisfy yourself as to whether or not this stock fits your unique requirements as an investor.
“Mined 343,847 tonnes of ore, milled 307,696 tonnes of ore, and produced approximately 1,146 ounces of gold, 1.7 million ounces of silver, or approximately 1.8 million ounces of silver equivalent, plus 15.6 million pounds of lead and 6.4 million pounds of zinc;
Sold approximately 998 ounces of gold, 1.7 million ounces of silver, 15.7 million pounds of lead, and 6.5 million pounds of zinc, for revenue of $72.2 million”
So far, so good in terms of production, they also have $40.0 million from operating activities and have a balance sheet of $215.7 million in cash and cash equivalents and short-term investments.
A table of the Consolidated Financial Results follows, and from it, we can glean there are a number of positives for the three months ending 30 June 2024 when compared to the same period in 2023. The positives include revenue being up 20%, net income up 138%, adjusted earnings per share up 71%, etc.
However, also worthy of note on the negative side is that the number of Metals sold was lower, ounces of gold sold were down by 33%, Silver down 4%, Lead down 10% and Zinc down 6%. This tells us that the increase in revenue etc., is due to the higher metals prices which makes up for the lower output. The explanation for this shortfall is due to mill capacity constraints, which has led to a stockpile of 59,293 tonnes of ore still to be milled. This stockpile will be processed when the new mill capable of processing 1,500 tonne per day becomes operational in November 2024.
Silvercorp Consolidated Financial Results (Silvercorp Metals Inc)
So all is not lost, in fact, by then they may get a higher price for their metals if this precious metals Bull Market continues to unfold with higher price levels, or maybe this is just wishful thinking on my part? It’s your hard-earned cash that is on the line, so please do your own due diligence, as they say.
Silvercorp has a market capitalization of $783.734M, a 52-week trading range of $2.08 - $4.39, a P/E Ratio (TTM) of 13.41 and an EPS (TTM) of 0.27.
For a forward projection, we take a look at Seeking Alpha's Quants figures, who have forward projections of P/E (FWD) 13.16 and an EPS (FWD) of 0.28, and they give this stock a "Strong Buy" rating. As for Seeking Alpha's Quant Ranking, Silvercorp is ranked in Industry at 2 out of 9 with a score of 4.67 which places Silvercorp highly when compared with other silver producers. Wall Street scores Silvercorp at 4.50 with a Strong Buy rating, and SA Analysts score is 3.00 with a Hold rating
The liquidity is good with an average volume of 1,530.979, so short-term traders can enter and exit out of this stock comfortably.
Silvercorp currently trades on the TSX and NYSE American under the symbol SVM.
A Quick Look At The Chart Of Silvercorp Metals Inc
Silvercorp almost doubled in price between March and June 2024 and a correction duly followed, taking the stock back down to $3.00. Having landed in the oversold zone, a bounce is now in play, as the chart below indicates:
A One Year Progress Chart The Chart Of Silvercorp Metals Inc (Stockcharts)
The bounce started when the RSI dropped to '30' Also note the positive crossover on the MACD, at a low level too, so it has plenty of headroom above it, suggesting that the stock price can rally with some gusto.
The following table compares Silvercorp to four of its peers
The table below compares Silvercorp to four of its peers on a one-year basis. Silvercorp has generated a capital gain of 43.65% which will please investors, however, some of the other silver producers have done even better, notably Avino Silver & Gold Mines Limited (ASM) putting on a terrific 68.25% gain. The use of differing time periods and other stocks will give us different results, and this is a random selection on my part.
A table compares Silvercorp to four of its peers (Google Finance)
As a precious metals bug at heart, I must say it is nice to see such gains being made across the board after years of head fakes, false starts, and sudden sell-offs, and long may it continue.
A Quick Look At The Chart Of Silver Prices
The price of silver has sprung into life this year as it rallied from March to June 2024 before running out of steam and surrendering some of its gains as depicted on the following chart:
A One Year Progress Chart Of Silver Prices (Stockcharts)
Silver appears to have support at the $26.50/Oz, as it has returned to test that level and bounced to close at $28.85/Oz last week. I am also encouraged by the MACD which has formed its own crossover as it turns north with room to move much higher.
One of the important drivers for the precious metals sector will be the next meeting of the FOMC on the 17-18 September 2024, when we could see the first reduction in U.S. interest rates in more than four years. There is much discussion about such an event, and the size of the cut is also important for the economy. However, even if the Feds decide to go with just a 25bps cut, it could be viewed as a pivot point and that more rate reductions could follow in the ensuing months. My expectation, and that’s all it is, is that we will get a rate cut and the US Dollar will start to fall. Given that it has an inverse relationship with gold, I would expect gold to continue in its bullish mood and head to higher ground, dragging silver prices along with it, ready or not.
The beneficiaries of a change in monetary policy will be physical gold and silver and their associated stocks, including Silvercorp Inc.
Conclusion
Some investors may be uneasy about the geopolitical risk, real or perceived, when investing in China, if it makes you uncomfortable, then give this stock a wide berth.
I am Long on this company and have high expectations for Silvercorp’s future performance in terms of operating ability and capital growth.
My readers are aware that I am Long both physical silver and gold and that I own a portfolio of gold, silver and uranium mining stocks in the precious metals space, including but not limited:
Mega Uranium Limited [MGA]
Laramide Resources [LAM]
Wheaton Precious Metals Corp. (WPM)
Agnico Eagle Mines Limited (AEM)
Fortuna Silver Mines Inc (FSM)
First Majestic Silver Corp. (AG)
IMPACT Silver Corp. (IPT:CA)
Pan American Silver Corp. (PAAS)
Due diligence on your part is vital to ensure that you are making the right trades for your own unique criteria, financial objectives, aversion to risk etc.
If you can spare the time, your opinion and comments are very much appreciated by our readers and me as they add some semblance of balance to these publications, thanks, Bob K
