Portfolio Update: Adding to My Silver Position (August 31, 2016)

Alexco

These days, the most common question I get asked from readers and friends is this — “Is now a good time to add shares of gold/silver mining stocks?

Obviously, I have no crystal ball, so my guess is as good as yours… With that said, in general, my own preference is to buy merchandise after it has pulled back rather significantly, as opposed to dollar cost averaging (DCA) on the rise up.

With these gold/silver mining stocks, most recently, the share prices have been taking a beating, so of course I have been paying attention! For the most part, I feel like my overall allocation in precious metals stocks is sufficient, but when I sit back and try to analyze things objectively, I will freely admit that the biggest mistake I made in 2015 was that when I was building up my positions, I didn’t allocate enough funds to silver stocks.

As everyone now knows, in a bull market, silver (both the mining stocks and the underlying physical metal) will greatly outperform gold… I don’t care what anyone else says, to me it’s not debatable whether or not silver is an industrial metal or a precious metal; as Brexit demonstrated, when everything else sold off that day of immense fear, silver shares were up right alongside gold shares…

In any case, in a commodities bull market, silver will rise up with gold (silver takes the elevator up while gold catches the escalator)! Consequently, when prices decline, silver will also spike down much more harshly than gold…

Silver is just that insanely volatile! That’s just the way things work…

But regardless, in an upmarket, you’ll be hard pressed to find any asset class out there that can outperform silver stocks. While many gold stocks are currently up over 100% year to date (YTD), the majority of high quality silver stocks are up anywhere between 200% to 1,000%… or better.

SIL.V_AG_EXK_DEF.V_AXU_BCM.V_chart

Silvercrest Metals (SIL.V) is currently up 1,660% YTD!

Nuff said!

Anyway, I’m convinced that the precious metals are consolidating right now (that’s healthy), but the long-term trend is still up… So, if (when) silver rebounds again and we start the next leg up, I really want to make sure that I’m well situated (as much as possible) to capture more of the upside returns.

Earlier today (US/Canada time), I started a new position, adding 5,000 shares of Alexco Resource (AXU) at $1.69/share.

To help accommodate the purchase, I sold out of all 51,500 shares of Galaxy Resources (GALXF), which is a lithium producer, for about $0.30/share. When all was said and done, I profited just under $50 with my GALXF trade. So, break even in my book…

No, I don’t think there’s anything wrong with GALXF, and I am still a big fan of the company and lithium stocks, but at this time, I feel like my portfolio is most deficient in silver stocks, so I used this most recent pullback in silver to add to my positions.

Why did I choose AXU?

Well, there are lots of high quality silver stocks out there… In my own case, I already owned a good amount of Endeavour Silver (EXK), Bear Creek Mining (BCM.V), and Defiance Silver (DEF.V). With AXU, I am most attracted to the high-grade nature of their deposits (I’m a huge sucker for high grade!), the fact that the company can most likely re-commence production in the near future (if silver can manage to hold up over ~$20/oz), safe jurisdiction (Yukon), pre-existing infrastructure already in place, the exploration potential upside at Bermingham, decent cash in the bank, and to a much lesser degree the company’s environmental services division (AEG) that provides an alternative source of income generation.

Most recent slides from Alexco Resource Corporate Presentation.

Alexco Screen

Alexco Screen 2

By no means is AXU a perfect stock… but how often do you stumble upon anything that is? There is a Silver Wheaton (SLW) streaming component that needs to be sorted out, which is probably the biggest overhang currently facing the stock.

From Investing News.

Finally, the CEO spoke about Alexco’s streaming agreement with Silver Wheaton’s (TSX:SLW), which applies to 25 percent of all payable silver produced at Keno Hill. While he stated that the company “would not be here without Silver Wheaton,” he explained that the influence of the stream had grown to the point that it was eating into the free cash flow of the property. However, Nauman seemed confident that both parties would come to a more pragmatic agreement.

 

I guess over time we will all learn what the nature of any type of “pragmatic agreement” is…

Anyway, I look at my purchase of AXU shares as quite simply a way of buying a call option on a rising silver price… I’m not trying to make things out to be more complicated than that… Point blank, that’s why I made this most recent purchase.

So, if readers have been wondering about my current thoughts on the precious metals space, well there you have it!

Actions speak louder than words.

I’m still bullish long-term, and you gotta love dips if you’re a buyer. Many of these silver stocks (and even gold to a lesser degree) are now down -30%+ from their most recent highs…

 

If you’re gonna buy, well, buying low(er) is usually a more preferable way to accumulate shares, right?

 

Fight On!

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Portfolio Update: Adding to My Best Ideas (November 28, 2016)Mining Portfolio – Reshuffling the Deck (October 12, 2016)Portfolio Update: Adding to My Silver Position (September 20, 2016)SriniInvestment Hunting Recent comment authors
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Jan
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Jan

Thanks fi fighter.
Are you interested in purchasing (SLW)? Also I was wondering if you are interested in the oil/energy sector – will you be a buyer if they retest their lows?

Sean
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Sean

Hi jay,
Alexco seems like a good one. I have been buying some great panther and first majestic in to the weakness and continue to own exk.
In the gold space I don’t to accumulate ngd, Auy,and Kgc, pvg and sandstorm on any weakness.
Re streamers, take a look at sandstorm it is treated like a junior miner but well positioned to do well. I think they will be revalued more like Franco and silver Wheaton when gold starts increasing.
Appreciate all your advice and wisdom.

Investment Hunting
Guest

Great buy FI Fighter. I’m holding on to my Galaxy shares, but I may buy some of these silver shares. I agree there’s a lot of upside here.

Investment Hunting
Guest

I just put in a few limit orders. Order 1 – 2,000 shares at $1.25, just in case a big drop happens. Order 2 – 1,500 shares at $1.60, only a small dip is needed to get these shares. We’ll see what happens this week 😉

Srini
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Srini

Jay, Good to see your article on AXU. As i indicated before AXU is my version of Bear Creak. but needs guts to add at 1.7-1.9 levels. AXU is my single largest holding at avg of 0.35.

I just couldn’t pull the plug on Bear Creak yet . May be its just me who can never buy once it has run up 5 times.

all the best.
Srini

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[…] Here are more thoughts about AXU. […]

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[…] Alexco Resource have already been discussed in greater detail, which can be found here and here. In short, I’m long-term very bullish on silver and right now these stocks appear to offer […]

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[…] I proceeded to use the capital from my IVPAF sale to buy some more silver shares… Alexco Resource (AXU) is a name I like a lot, and a company that I’ve discussed in detail before in the past. […]

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