Fresh Capital Flows Into Silver Market

Commentary: Two new Portfolio additions, both silver, both this week - then silver hits a new record. US critical metals update.

A few weeks ago...

We said that if the silver price went above US$40 per ounce we would add more silver stocks to our Portfolio.

(in anticipation that silver would keep going up even more)

It did - closing above US$43 this morning.

And we did, adding two new silver stocks to our Portfolio this week - RCM and AVM.

We generally make a new Portfolio addition every 6 or so weeks.

Sometimes we wait many months when nothing fits our Investment criteria.

After attending the Beaver Creek Precious Metals Summit last week, we saw with our own eyes the growing interest in precious metals like gold and silver.

(and inhaled a nice dose of confirmation bias, along with some high altitude air cannisters)

We think the silver price is going even higher - and it’s going to take ASX listed silver stocks with it if it does.

A key part of this thesis is that there just aren’t many silver stocks on the ASX. Those that are on the ASX trade at lower multiples than their overseas listed peers...

Until (hopefully) the silver price runs hard and a large amount of capital tries to cram into the few available ASX listed silver companies.

(silver closed the week at NEW 14 year highs this morning)

Hence why the two rapid fire new silver Portfolio additions this week.

Yesterday we added Advance Metals (ASX:AVM) to our Portfolio.

AVM has an estimated 100M ounces of silver equivalent foreign resources in Mexico PLUS a Victoria, Australia, gold exploration asset.

At our Initial Entry Price, we think AVM’s gold asset alone justifies AVM’s market cap, and the silver assets could end up being company makers...

Read our full AVM initiation note here.

We said based on AVM’s projects and peer comparisons it was one of the most undervalued stocks we have seen in a while at $16M market cap at the time of initiation.

AVM traded for just 7 minutes and was up over 60% on record volume yesterday morning, before the ASX paused trading for an ASX “please explain this trading volume and share price rise”.

AVM didn't trade again till ~2:30pm later that day, so it really only had ~97 minutes of trading - we are looking forward to see what happens on Monday.

(AVM’s query response also noted potential assay results in the coming days which should also make for an interesting week for AVM holders)

On Wednesday we added Rapid Critical Metals (ASX:RCM) to our Portfolio.

RCM has an estimated 67M ounces of high grade silver equivalent resource (at around 400 g/t AgEq) in NSW, Australia, across three projects.

RCM just attracted Jupiter Asset Management, Tribeca Investment Partners and billionaire Eric Sprott to its register in a $14M capital raise at 3.5c.

RCM wants to drill out its assets to achieve a total JORC resource estimate of over 100M+ ounces silver equivalent.

Read our full RCM initiation note here.

RCM went from 4c to 5.5c on Wednesday - then yesterday delivered another leg up from 5.5c to 6.5c on large volumes (over $2M)..

And with the silver price closing up 3% overnight at a new 14 year high this (Saturday) morning, it should be a grand Monday for silver stocks:

The key take away is that we think the silver price is going a lot higher in the near to medium term, so we have gone hard into silver stocks.

In 6 months we will either look like geniuses OR be eating large amounts of humble pie (and paper losses).

Now with silver at fresh 14 year highs and closing at record recent highs of $43 last night, we think it's firmly inside stage 3 of our chart which is the time to add exposure (like we did this week):

Both AVM and RCM had been trading sideways, despite silver breaking out above US$40 per ounce and hitting new 14 year highs.

We are just about where we want to be with silver exposure now (maybe one more...)

Before what we think (hope) is a big run coming for the silver price.

Silver is in some way correlated to gold - usually when gold goes on a big run, silver follows not long after.

It hasn’t happened yet BUT...

... Our view is that we will see a gold style rally in the silver price between now and the end of 2026.

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The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Here is why:

(bear with us here, this all relates to silver)

Gold’s first rally leg up started back in late 2019 when the gold price doubled to ~US$2,000 per ounce (a psychological barrier for gold investors).

That triggered some buying in gold equities but it was pretty short lived and gold stocks went back into bear market mode while the gold price consolidated for a few years.

Then gold started its run to new all time highs in early 2024 and gold equities finally started permanently re-rating.

The distinct things we noticed when that run started was: :

1. First the major producers started to see their valuations re-rate.
2. Then the majors started doing M&A
3. Then capital started flowing down into the mid cap developers - the really good ones got taken over, and the ones who were in the late feasibility study stage started to pull off mega cap raises.
4. Now we are finally starting to see new gold IPOs and the junior explorers are finally able to raise cash to drill greenfield targets...

We haven’t quite hit peak bull market mode in gold yet (where explorers are seen trading at $50-100M market caps), but we are slowly getting there.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Before the end of this precious metals cycle we need to see all of those steps happen in the silver space.

And so far we are only seeing evidence of phases #1 and #2 for silver:

1. The majors have seen their valuations re-rate

Silver producer Coeur Mining’s share price for example has tripled this year and is now capped at ~$16BN.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

2. The major silver producers have started doing M&A

$15BN Coeur Mining bought Silvercrest in a deal worth US$1.7BN. $7.3BN First Majestic bought Gatos Silver for US$970M, and most recently, $22BN Pan American Silver took over MAG Silver for $2.1 billion.

What we haven’t seen yet is:

3. Capital flowing down into mid cap developers (where we have gone overweight)

So far market/corporate interest has been exclusively at the big end of town. The mid cap developers, especially on the ASX are still not seeing major capital inflows.

4. New IPOs and explorers being re-rated -

We think the silver space is nowhere near this at the moment. We haven’t seen any “shell stuffings” or new IPOs YET... and the silver explorers are seeing very little in terms of love at the moment.

We think both of those phases will happen, but it might need the silver price to start running above previous all time highs for it to happen.

We think silver needs to run to new all-time highs - above US$45-50 per ounce, and maybe spend a few months or a year at that level.

(noting this all time high number is not adjusted for inflation since 2011 - back when a petrol station paddlepop icecream cost 90c... not $4 like they do now)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

At the Beaver Creek Precious Metals Summit last week we noticed a lot of the gold bulls who cashed in on the gold bull run now starting to talk up the silver space too.

This is the third time we are sharing Florian Grummes’ keynote speech from the conference, but it really stood out to us because he was brave enough to call a short term pullback in gold (at a gold conference...)

He even said he wouldn't be buying gold up here.

As for silver...well we have referenced what he said a few times this week.

He thought it's going to US$100 per ounce as a minimum and even said US$500 per ounce isn’t off the table:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Check out Florian’s full key note here.

We hope he is right, but one thing we have conviction on (rightly or wrongly) is that before this cycle ends, silver will have to have its “parabolic” moment.

Just like it has happened in every other precious metals cycle - gold runs first, then silver follows...

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

So we are officially fully loaded on ASX silver stocks - lets see what happens next week...

This week was all about silver for us, but a lot also happened on our other favourite Macro theme - US critical metals.

US critical minerals macro is heating up

The big news for US critical minerals this week was the proposed US$5BN critical minerals fund the US government was considering.

Check out the media reports here:

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IF the US$5BN fund gets set up and is deployed it would mark a step change above the US$400M direct investment the Pentagon did into MP Materials.

It also adds to the US$1BN allocated to the critical minerals industry from the Department of Energy.

The news also triggered another step up in interest and momentum in US critical minerals stocks.

Our Investment Locksley Resources (ASX:LKY) hit new all time highs this week at 66c.

We also saw rap video rap video released (by someone?) which gained a lot of attention (good and bad):

(Source)

For us Aussie investors, it's an unconventional way to get investor interest, but it sure looks like it worked, the video had more than 50,000 views on X across different posts, and more than 20 retweets... which is a lot for a small cap stock on the ASX.

For us, the video is an early signal LKY has really started capturing hearts and minds of US investors.

Anyone who was around to see the AMC and Gamestop era will remember videos like LKY’s are just the start of how wild things can get when the US gets behind a company in a big way.

For those who weren't around during the 2021 mania - here were some of the most absurd things we saw back then:

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One Reddit trader (Roaring Kitty) became a US retail cult figure for making hundreds of millions of dollars in that Gamestop mania.

It feels like it's still early days here, and once a few of these companies get US main exchange listings, things could really start to take off (in terms of outrageousness of social media coverage at the very least).

We also noticed the first grants by the US Department of Energy have been issued for research into domestic gallium processing:

(Source)

There is still US$496M to be issued for critical minerals and recycling processing technology by the DoE...

Ones to watch in our Portfolio are:

• LKY, developing a processing technology with Rice University for antimony
• ION, developing deep solvent extraction recycling technology for various critical minerals including rare earths.

Our other US gold-critical minerals Investment Resolution Minerals (ASX:RML) also had big news this week.

RML closed a $25.1M capital raise at 5c which is a serious amount of cash to raise for a pre-discovery US based critical minerals explorer.

RML can now finally shake off the “cum-raise” perception and will have a big cash runway to drill out its project.

We Increased our position in RML in the cap raise.

We also had one of our analysts on site last week, for those who missed it check out our site visit note here: $25.1M raised... and we just got back from a site visit - here’s what we learnt

RML’s project is next door to $3BN Perpetua Resources - who just overnight held the grand opening for its gold-antimony project with US government officials in attendance.

That event was the talk of the town while our analyst was on site:

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Check out the video from the ribbon cutting ceremony here:

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Have a great weekend,

Next Investors