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August 23, 2024
Talks of a U.S. recession are back.
The country’s job market grew slower than expected in July, and the unemployment rate is up.
Inflation is cooling, too. In July, the annual rate of inflation fell to 2.9%. It was the first sub-3% reading since 2021.
Even though lower inflation is good for households, it may also mean that the world’s largest economy is weakening.
These warnings have already triggered a global market selloff.
Volatility (or “fear”) metrics such as the CBOE Volatility Index, or VIX, spiked to early pandemic levels. As of writing, it’s up 17% year-to-date.
And more panic selling could be coming this year as investors brace for a “hard landing.”
Even though the early August selloff is over and markets are calmer, more volatility could lie ahead.
Since the selloff, gold is up 5% and silver is up 10.5%.
It’s easy to understand why. Even though the August crash is over, investors have all the reasons to worry… and protect their capital.
But they are running out of options.
The U.S. dollar could get weaker as the Federal Reserve lowers interest rates…
Other central banks have either started cutting interest rates or are preparing to do so. So there’s no refuge in Forex markets for investors looking for safety…
Bonds won’t yield as much after the Fed starts cutting, too…
This is why investors have been turning to gold and silver as their preferred hedges.
Gold is up 21% year-to-date, and silver is up 24%.
In other words, silver has started to outperform gold.
Silver tends to rise more than gold does in bull markets. And we’re in the middle of one.
Silver could become investors’ go-to alternative asset as market volatility continues.
And we’re not alone in this forecast.
The experts at FXStreet point out that recently, silver has approached a key technical support level. From here (as of writing, silver trades at $27.59), they see silver price targeting $35-$50.
And here’s how you could use this upside potential to your advantage…
Holding gold and silver is never a bad idea.
But their upside is limited… to leverage it and potentially realize higher returns, investors should look at some of the most prominent yet undervalued companies in the space.
One of the companies that we started following here at the Canadian Mining Report is New Pacific Metals Corp. (TSX:NUAG, NYSE-American:NEWP).
Here’s why…
First, it’s an emerging silver play. The company started working in Bolivia in 2016, made its first discovery back in 2019, and since then has made progress not only in terms of exploration but also in terms of developing an economic study for its Silver Sand project. (More on Silver Sand below.)
Second, its projects are located in one of the best silver mining jurisdictions in the world: Bolivia. It’s the world’s 5th-largest silver producer, with mining having a 47% share of the country’s exports.
Third, it’s well-financed with US$24 million in cash and strategic backup from some of the largest companies in the silver space (Silvercorp and Pan American Silver).
Fourth, it has a massive potential catalyst coming later this year. More on this in a moment…
In other words, New Pacific Metals Corp. (TSX:NUAG, NYSE-American:NEWP) is one of our favorite plays in the junior mining space.
First, it’s the location. Bolivia is often dubbed “the land of silver elephants” due to the number of world-class silver projects and mines developed there.
One of the world’s oldest mines, Cerro Rico, which was in production for over 500 years, is within a 30-minute drive from New Pacific’s Silver Sand project.
Bolivia’s geology is similar to those of Chile, Argentina, and Peru, but the country has been massively under-explored over the past decades. Which means that it could potentially offer more success stories than other Latin American jurisdictions.
Second, it’s the company’s assets.
Silver Sand, which is a 100%-owned New Pacific property, hosts 200 million ounces of silver.
Better yet, most of the highest-grade material is close to the surface. Which means that if Silver Sand becomes a mine, the high-paying ore will be processed right at the beginning of the mine’s lifecycle.
The project has great economics, confirmed by a prefeasibility study that the company finished in June 2024.
It has 175 million ounces in silver reserves, which makes it one of the largest undeveloped silver deposits in the world.
It has a post-tax net present value (or NPV) of US$740 million (or ~CAD1 billion).
This is about three times higher than the company’s current market capitalization.
And best of all, the study was based on a US$24 silver price. Right now, the metal’s price is higher than that, and we believe that it could rise higher still as the gold and silver bull market continues.
Silver Sand could become a mine that produces 12 million ounces of silver a year. For comparison, the largest silver producer in the U.S. mined 14.3 million ounces in 2023.
Silver Sand alone could put New Pacific Metals Corp. (TSX:NUAG, NYSE-American:NEWP) in the same league as the world’s top mining companies…
But the company has another massive catalyst…
This is New Pacific’s “secret weapon.”
New Pacific acquired Carangas through staking in 2021 and made a significant discovery in the following year.
It outlined a mineral resource of over 200 million ounces there, and right now, it’s working on a preliminary economic assessment (or PEA).
This assessment will provide investors with an idea of how much Carangas is worth… and we see indications that it could be another “company maker” in addition to Silver Sand.
Much like Silver Sand, Carangas has multiple high-grade areas sitting close to the surface. This bodes well for its economics, in our view.
Although the PEA will be primarily centered on the shallow silver zone, Carangas also hosts a deeper gold zone with over 1 million ounces of gold, adding significant optionality to the project.
New Pacific has already done metallurgical work at Carangas… and it showed favorable silver/gold metallurgy using a conventional flowsheet. (As a reminder, conventional mining methods are usually more cost-efficient than the ones requiring extra or unusual steps to address the requirements of a particular metal mix.)
And there could be massive exploration and expansion potential regionally. The company has focused on a small area within the project’s 41 square-kilometer footprint.
And here’s the kicker…
That market hasn’t noticed the potential the project has.
This is a case of “value investing,” which is Warren Buffett’s approach to selecting industries and companies.
Carangas doesn’t have any value assigned to it by the market… but it could potentially become a “company maker” in itself.
Which, to us, sounds like it’s the perfect time and a perfect company to focus on.
To learn more about New Pacific Metals Corp. (TSX:NUAG, NYSE-American:NEWP), please click here.
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Disclaimer
The material in this article should not under any circumstances be construed as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Neither Canadian Mining Report (the "Publisher", "we", "us", or "our"), nor any of its principals, directors, officers, employees, or consultants ("Publisher Personnel"), are registered investment advisers or broker-dealers with any agencies in any jurisdictions. Canadian Mining Report ("Canadian Mining Report", "Us", "Our" and/or "We") is a Canadian based media company that typically works with publicly traded companies and provides digital marketing strategies and services.
At most, this communication should serve only as a starting point to do your own research and consult with a licensed professional regarding the companies profiled and discussed. Conduct your own research. We do not provide personalized or individualized investment advice or advice that is tailored to the needs of any particular recipient.
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