Silver miners "imploding" ?
Watched another John Howell vid today... In yesterdays installment he was touting S&P to the moon... "all clear"... new highs coming. Today... not so much.
But, as silver and gold charts aren't cooperating with his constant predictions of doom for the metals and miners... today he switched gears from charting gold and silver... [he did show a chart... but said "its not doing anything"... which is correct] and instead today he charted the SILJ... saying look, its broken through resistance... and therefore... without a strong rally in SILJ... its all over for the miners.
So... I went and looked at the SILJ to see why it's doing that...
First, when I charted SILJ on a monthly... I got the resistance at $11.08... exactly where it is today... but, if you only look at shorter term charts ? The last two candles can be charted as below the line. On the weekly, SILJ just broke through the 200MA...
So, what's going on there ?
Yahoo lists the holdings... I've added the column on market cap...
Top Holdings
NameSymbol% Assets Market Cap
|
| First Majestic Silver Corp | FR.TO | 13.01% [$3.29 billion]
| | Pan American Silver Corp | PAAS.TO | 10.86% [$4.46 billion]
| | MAG Silver Corp | MAG.TO | 9.65% [$1.7 billion]
| | Yamana Gold Inc | YRI.TO | 6.40% [$4.9 billion]
| | Hecla Mining Co | HL | 4.61% [2.58 billion]
| | SilverCrest Metals Inc | SIL.TO | 4.11% [$1.35 billion]
| | SSR Mining Inc | SSRM.TO | 3.71% [$4.35 billion]
| | Turquoise Hill Resources Ltd | TRQ.TO | 3.63% [$4.52 billion]
| | Gatos Silver Inc Ordinary Shares | GATO | 3.44% [$246 million vs $1.03 billion]
| | Endeavour Silver Corp | EXK.TO | 3.28% [$741.5 million]
|
Wow. What a crap list.
First, should note... two of the companies aren't even silver miners... Yamana a gold miner... and TRQ a troubled copper miner that I know quite well... and have never seen it mentioned as having silver at all ? I suspect its on the list to provide upside and stability (?) that the silver miners intrinsically lack. Second... most of them aren't "juniors"... by silver market standards, at least... PAAS and SSR are two of the biggest silver miners out there... hardly juniors... while HL has been successful at mining since... forever.
EXK.TO is now EDR.TO... but, even their own write up on the Yahoo page notes them as a "mid-tier" ?
GATO ? Suddenly the smallest of them... and the only one that really qualifies as a "junior" ? I posted its chart earlier today. It's down 70% this week because of discovering they have "reporting issues" in some of their NI43-101 work. "On Sale"... is probably how to look at it... but I haven't studied it again to delimit the risks...
and
Normally, an "index" would remove "problem stocks" like GATO and many of the others that populate this list. But, SILJ isn't actually an "index" but a "managed" fund of miners listing as an ETF. They can't "fix" the index for a broken stock without actually selling and taking the loss... and probably don't want to do that. There's a hole in the market... as there's really NOT a decent "index" for silver miners ?
Hmmm.
First Majestic was recently shut down by Mexican authorities over some local disputes... Now they are trying to diversify into gold by refurbishing the Jerritt Canyon mine... which is OK... its just, a gold mine, first... and a sudden big weight on the shoulders of a once thriving company. They've got things running again... but its been a costly year for them. Another that has no place on a "silver miners index"...
PAAS... has had difficulties of its own absorbing acquisitions... and, again, is a Mexican and Central American focused issue... that have also had "operating difficulties" under Covid restrictions.
MAG... one I've followed here closely. It's only got one asset... and that's a carried interest in a mine that's being operated by... Fresnillo... who I reported earlier today is having Covid issues that are reducing their numbers... which has them trading down from ~$12 to ~$8... I'd guess Mag doesn't win any exemptions from the same problems in the same mine... ?
SilverCrest is worth owning. Very solid. But, they're developing a mine and being punished for that... as the market tends to do to all mine developers. They've under-performed the market for the last two years... and will continue to under-perform until they get the mine going and have de-risked the operations. But, that's going well, at least:
SilverCrest's Las Chispas Construction Update - Tracking Ahead of Schedule and On Budget
So, I think there are a couple of obvious takeaways...
First is the danger of reporting on "miners imploding" on the basis of a single data point... when its pretty clear that reporting "miners imploding" by including GATO's recent performances is... ahhh... yeah...
Dishonest.
SILJ is an ETF... composed of share issues... so its a snapshot of one portfolio... not a representation of "the best of the industry"... as indexes tend to try to be ?
Second... there ARE a lot of troubled miners in the silver space... and a lot of that is due to a lot of wild and crazy risks faced in the geopolitical issues including both government "regulatory" risks and Covid problems, etc. That's often bad news for particular stocks... or for companies in particular countries or regions... but, it isn't generally an intrinsically useful thing to "lump them all together" or "paint with too broad a brush". That might be less true in silver... because there is enormous concentration in Mexico and South America...
Third... HELLO... That there are so many difficulties in mining silver... IS a problem... and one that's going to get worse for a host of known reasons... as byproduct from copper and zinc mining is in decline, and primary silver producers are increasingly going to become far more critical to supply than they have been historically. But, there's a bit of opposite-land thinking at work... if you think pairing declines in byproduct production with having the primary producers struggling to provide supply... is indicating that prices are about to crash ?
The SILJ components in an one day RRG with a list follows... and a monthly graph after shows rotation and relationship over time better....
 
 |
