On the Ground With Silver Projects

Commentary: Bull market in small end still going. US critical metals, gold... and how about silver this week.

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The bull market in small ASX stocks feels well and truly back...

Almost 12 weeks in... and few signs of slowing down.

The US critical metals theme keeps roaring along.

After the success of the US critical metals “first movers” on the ASX, a few US critical metals “copy cats” are starting to pop up to try and absorb some of the inflows of capital.

(Sort of like Temu US critical metals exploration stocks)

Gold keeps hitting new all time highs - a few smaller gold stocks are finally starting to catch some of the wind now too.

But the performer of the week was without a doubt silver - up a whopping 7% this week.

Just look at this silver price move for the week (on a ~5 year chart):

(The past performance is not an indicator of future performance)

This is one week AFTER we “rapid fire added” two new silver stocks to our Portfolio - AVM and RCM.

Genius? or just luck?

(its 100% luck - no one can predict commodity prices)

We think silver is going a lot higher, and a rising silver price will lift the very few silver stocks available on the ASX.

(and likely usher in a sudden wave of Temu silver stocks too)

But of course, we could be completely wrong too...

After this week the silver price run looks like it could be happening faster than we expected - silver closed above US$46 per ounce for the week a couple of hours ago.

Silver has never been above US$50 - it almost got there in 1980, then tried again in 2011.

(prices not adjusted for inflation)

IF silver goes above US$50 in the next few weeks, it will be uncharted territory for the metal and anything could happen...

Looking at the 50 year chart, it looks like it plans to have a crack at US$50 very soon:

(The past performance is not an indicator of future performance)

So what happens if (or after...) silver trades above its 2011 and 1980 all time highs?

Nobody knows...

But we do know that technical chartists and traders will be losing their minds about it from a charting perspective.

(completion of the generational 50 year cup and handle formation and all that)

So what is our plan to play silver if it moves to say US$70... US$100... US$150 per ounce?

Taking lessons learned from the battery metals bull market a few years ago (too overweight in exploration), this time we have focused on later stage projects which already have a discovery and a JORC (or other) silver resource.

In silver we now hold SS1, MTH, WCE, AVM and RCM (and sorta TTM, they are more a gold company with some silver).

The ASX generally lags behind in its understanding, valuations and general care factor of silver stocks compared to overseas markets.

We think there are still real projects out there on the ASX, with proven ounces in the ground, that are undervalued or unknown.

But a US$100 silver price will likely change that... if it happens of course.

Nothing like a commodity price surge to get markets focused and paying attention.

Big dogs coming to the small end?

We have seen some early signs of bigger funds coming to play in the small end of the ASX.

We said the following in one of our notes during the week:

After that note, we saw two deals where this exact thing happened...

We saw Tribeca Investment Partners (whose funds under management is in the billions) make TWO “unsolicited investments” in companies that are very much considered micro caps.

One in US critical metals early mover Trigg Metals (we do not hold shares):

And again in gold developer Great Boulder Resources (we do not hold shares):

Tribeca is one of the most well known resources funds in Australia and have been backers of some big resources success stories.

The fact that they are willing to come down into the micro cap end is a clear sign they see opportunities in the space - and they look like a first and early mover.

Tribeca is also in a few of our Investments including RCM, LKY and TTM..

It isn’t just Tribeca either...

Jupiter Asset Management (who manage over $1BN) has come into two of our Investments now - MTH and RCM.

Billionaire investor Eric Sprott came into RCM (where he is now a substantial shareholder):

(Source)

And US based fund, Nokomis Capital, into SS1.

These funds are just some of the first, and fastest movers to move down to the small/micro cap space.

There are thousands of funds out there, some of which may eventually see it too...

We think that there will be a lot more funds and institutional money entering higher-risk companies before we get to the end of this bull cycle.

Remember lithium a few years ago when Ford, GM, Stellantis, pension funds, super funds (like Aus Super) were coming into battery metals stocks directly...

We can definitely see a scenario where the same is happening in gold/silver and even US critical minerals...

What we know for sure is that institutional ownership across all of those sectors is underweight after years of ignoring those sectors AND a rising tide should lift all boats.

Bull market signal we are noticing a lot more these days

One bull market signal we noticed this week was more micro cap explorers trying to mirror a winning story...

What we mean by that is a small company with no core direction acquires an asset or makes an organic move into a region/area/industry where one company is having a lot of success.

Let’s illustrate.

IF a company makes a gold/silver discovery in Nevada, USA and moves 500% higher.

THEN, a number of sub-$5M capped companies quickly go and acquire assets close to or in the same region as that company, looking to trade off the back of the attention in the region.

Our view is that the first movers in these situations ALWAYS have a massive first mover advantage.

Usually the people who were in a region early get the pick of the best ground.

Two obvious current examples in our Portfolio are Locksley Resources (ASX:LKY) and Resolution Minerals (ASX:RML).

Both were early into their respective areas...

LKY picked up its project next to MP Materials back in 2023 well BEFORE the US Department of War and Apple deals MP signed.

And RML was the first mover of any ASX listed company to pick up ground next to Perpetua Resources.

(RML’s chief geologist Bill Breen who we recently met on a site visit actually pegged the original ground for the project back in 2012, and is extremely familiar with the region).

This week we saw two ASX companies pick up ground next to RML...

We think RML and LKY, being early, are now the best positions in their respective areas to get things done and attract the best people.

We were on site for both those companies over the last 10 days and it’s easy to see why other micro caps are trying to attach themselves to RML and LKY’s re-rates.

LKY: What we saw at LKY’s antimony and rare earths projects right next door to $20B MP Materials

RML: $25.1M raised... and we just got back from a site visit - here’s what we learnt

And a quick special mention for the other companies we did site visits to across North America this year:

MTH - Silver price breakout during our MTH Silver and Gold Site visit

JBY - JBY is surrounded by the one of the world’s biggest gold mines - here’s what we saw on site

HAR - Richest section of the California gold rush Mother Lode and fully permitted processing plant.... and we saw it.

Visiting the project site is an important part of the investment process, getting an understanding of the project as well as spending valuable one-on-one time with both management and project operators.

Each new site visit that we do, we come away with a much better understanding of the Investment, and appreciation for the hard work that goes into building these companies.

We also did the rounds at the RIU Resources Investor Roadshow in Melbourne

We were at the RIU Resources Investor Roadshow in Melbourne on Wednesday.

We got to see one of the best performers in our Portfolio over the last few months St George Mining (ASX:SGQ) present.

SGQ’s project is the largest and highest-grade carbonatite-hosted rare earth deposit in South America...

And the second highest grade REE deposit globally in the Western world.

And no surprise, the US interest in rare earths is starting to mean attention and capital inflows to SGQ...

SGQ is now up 380% from our Initial Entry Price of 2.5c.

(The past performance is not an indicator of future performance)

We had a good catch up with Executive Chair John Prineas after his presentation and he mentioned that multiple rigs were running on site and there was still so much drilling newsflow to come.

He talked about the potential for a big resource upgrade on the project (which SGQ has forecast to happen before the end of the year).

SGQ has run hard lately and is now capped at ~$350M...

BUT there is so much that can still happen.

SGQ is still in the middle of a drill campaign, and its peers are trading at higher market caps right now(Arafura at $550M and Lindian at $426m) we think SGQ has more room to run into.

Not to mention SGQ’s project also has a JORC niobium resource estimate- where SGQ’s peer WA1 trades at $1.4BN.

We think SGQ’s higher market cap now is a big advantage for the company...

The higher market cap should mean bigger institutional funds and deeper pocketed organisations willing to engage with the company.

(i.e a fund who has a minimum investment size of $50M couldn’t touch SGQ when it was capped at $50M... but now at $350M, they can come to the table).

Check out SGQ’s presentation here.

We also met with Mitch Thomas (CEO) and Kevin Wilson (Chairman) from our Investment Solis Minerals (ASX:SLM).

SLM is currently drilling for copper in Peru.

SLM just drilled two holes into the first of its targets at our favourite of its four projects (Ilo Este).

Drilling had visual mineralisation, and we are expecting to see assay results out from SLM in the coming weeks.

SLM is about to drill southern target which we think is the most prospective of the targets (and we’ve been waiting months to see drilled):

We also noticed a small spike in the copper price after one of the world’s biggest producers had bad news out of one of its mega assets.

(Source)

The short term spike could make for a good backdrop for SLM to deliver drill results.

(We remember what happened in January where AusQuest moved up 700%+ off the back of some very solid copper drill results in Peru.)

(the past performance is not an indicator of future performance)

The main reason why we like SLM’s southern target is that all of the old drilling missed the big IP anomaly that SLM defined in 2022.

(IP surveys send down electrical currents and look for rocks that are conductive... if it finds the right type of rocks it produces those bright coloured “chargeability” anomalies in the image below).

The previous drilling on this asset was done “blind” without any of that geophysical data - which meant most of the old drillholes completely missed where the geophysics would have suggested are the best drilling locations.

SLM said in its presentation at the conference that it would be drilling that southern target next.

Have a great weekend,

Next Investors