Categories: Precious Metals
Topics: General Precious Metals

Silver Stock Investor Editor Peter Krauth on Preparing for $300 Silver & Favorite Silver Stocks

 

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the author of The Great Silver Bull and the editor of Silver Stock Investor, amongst other things, Mr. Peter Krauth. Peter, it is great to have you on. How are you today, sir?

Peter Krauth: I'm doing well, Gerardo. It's really nice to connect and I'm really happy to be here.

Gerardo Del Real: Well, let's get right into it. You are new-ish to our audience. I know a lot of people are familiar with you, but for those that are not, can you tell us a bit about your background?

Peter Krauth: Yes, absolutely. So I've been working in the research and resource and newsletter industry for some time, I'd say going back till about 2007. And then from about 2009 till 2019, so for a decade I was writing a resource newsletter. That company went through restructuring and then I was doing some freelance writing for mining companies. It didn't last too long until I got the itch to get back into the newsletter business, and that would've been sort of late 2020. Teamed up with a woman out of Vancouver by the name Gwen Preston, who had her own newsletter called Resource Maven.

Gerardo Del Real: Absolutely.

Peter Krauth: And quite successful at that. I was very lucky and happy to team up with her. And so we did a little bit of market research and saw two things. One is we knew before, we knew right away that the silver market was not being served. There was a true gap there. And then we saw that one, it was not being served, and we saw that silver was very likely in the early stages of a mega bull cycle. So within a matter of a few months, we had a new newsletter up and running, which I've been publishing since January 1st, 2021. So we're almost four years in now.

Gerardo Del Real: Well, let's get into why silver, right? I pride myself on being a contrarian. I like being early, I like mega-trends that allow me to position and ride the wave, right? But why silver and why now, Peter?

Peter Krauth: So Gerardo, to be honest, this call is probably not going to be long enough, but I'm going to do my best to condense and give the highlights. Silver is in many ways like gold and in some ways quite different. So it's a money metal, just like gold is, has been longer than gold. Some think that silver has been responsible for more transactions globally, historically than gold has, which makes sense if you think about it, because silver has a lower value per unit and therefore it would've been involved in way more transactions daily. Small, daily transactions for forever. So it's been money forever. “Silver” is the word for money, and still today in more than 14 different languages around the world.

But it's also, it's what I call a hybrid metal. It's really both considered money and has many industrial uses. And in the last 10 years or so, its industrial applications have just soared. I would say that about 10 years ago, about half of silver consumption went to industrial applications than today. If you look at demand versus supply, we're at about 70% of silver use going to industrial applications based on the amount of supply.

So I'm going to give some really high level big numbers just for your listeners to be able to kind of grasp what the silver market is.

Gerardo Del Real: Love it.

Peter Krauth: So every year there are about a billion ounces of silver that are brought to market, and that's between mining and recycling. So about 85% of that comes from mining, about 15% comes from recycling. And if you compare that to demand, demand is actually 1.2 billion ounces. So we're actually consuming 20% more than we're producing and if you look at the last, that's been in fact the average for this year and the three prior years. So the last four years, we've been consuming 20% more than we've been producing. So a lot of people ask themselves, how is this even possible? How long can this go on? And where is the silver coming from?

So earlier this year I did some research and I figured out that more than likely, most of that silver is coming from what we call secondary inventories. So you've got these large, that you can quantify at least, that you've got these large inventories on the big future exchanges like the COMEX, the LBMA in London, and the Shanghai in China. You've also got silver ETFs that have several hundred millions of ounces, at least stockpiled as well. So if you think about it, the big consumers have been needing silver but have not been getting enough from mining and recycling.

So interestingly enough, when I started looking at the inventories of these different futures markets, you see that their inventories had been piling up, and then by the time we got to early 2021, they peaked and they started to run off pretty dramatically. So I'm talking about these inventories dropping from anywhere from about 40 to 70% over the last three years, three, three and a half years. So essentially, I think that the big silver consumers that really have no choice need the silver, it's indispensable for them, they've been tapping into these secondary markets, getting the silver, being able to buy it at spot. Not putting pressure on silver producers or recycling to get the silver that they need because it's just been sitting there in stockpiles that they've been able to draw down.

And by the way, there's a fantastic parallel in the uranium market. If you think back five years, in fact, I saw this parallel but I guess it really got, it hit me right in the face about maybe four or five months ago when I read a quote by a guy by the name Leigh Goehring, who's with a group out of New York, Goehring and Rozencwajg. And Leigh Goehring managed one of the world's largest commodities funds up until a few years ago, and he said, "We became uranium bulls five years back when we saw that it had gone into a structural deficit and the utilities were buying, were tapping into secondary supplies of uranium because uranium had been overproduced and then consumption drew back dramatically starting in 2011 with this whole Fukushima disaster."

So they were able to tap into these secondary stockpiles, and he knew that the stockpiles would get drawn down and then the utilities would need supplies coming from mining and miners had scaled back dramatically. So he knew that suddenly the market was going to get tight and that the uranium price would reverse. And look what happened, uranium went from about $25 three years ago to about $80 recently and it's stuck in this $80 range, a little bit above, a little bit below. And the parallels for silver are just tremendous. That is, I believe, a perfect example or description of what we can expect to happen in silver. So that's kind of an overview and why I'm so excited about it.

Gerardo Del Real: No, no, no, I love the parallel. I got to ask, obviously, right? Where do you think we head as far as the silver price goes? Because I think for the first time in a long time it's finally trading like the precious metal that it is, but also the commercial applications, the industrial applications happen to coincide with increased demand at a time that, as you mentioned beautifully and outlined beautifully, that supply is getting harder and harder to come by. Where do you think silver heads and how do you see that playing out?

Peter Krauth: So yes, you're absolutely right. I think that we are still early in this bull cycle. Silver is the only metal if you look across all the major precious and platinum group metals and the base metals, it's the only metal which has not yet surpassed it's 1980 high, which is just crazy. Every other metal is well above the height that it reached at the end of the '70s or basically 1980. So it's just crazy when you think that that's still the case. And so technically, so I'm not a technician, but I do follow technical analysis a little bit and I do think it's got a lot of value because many people do follow it. And from the experts I've read, they believe silver is probably the biggest and best technical breakout setup we've ever seen in probably any asset.

So that's a mouthful, but the reason is that anyone who follows technical analysis can look at a long-term chart of the silver price, and we've got what we call a big cup and handle formation. The left side, if you think of a cup from the profile and you see the left side, the lip of the cup is the top, and then the cup draws down like a big bowl. And then on the right side you've got the handle which dips down like a second little bowl and then curves back up. We're sort of near the bottom of that handle. And once it breaks out from... So that peak, that limit would be $50. Once we break above $50, we're in completely uncharted territory. And I mean, there's no upside limit.

I personally think that we are likely to see $35, which was what I had predicted for Q4 of this year. We saw that it dialed back, we're still around $31 right now or so, but I think we'll see $35 in Q1 next year. I think we'll see $40 probably sometime shortly thereafter. I think $50 is very, very likely in '26, maybe before, but I'm going to say probably higher odds in 2026. And as I say, when it surpasses 50, all bets are off after that, where it's going to go. I think it could actually probably even double in a short time just because of FOMO, the fear of missing out, it'll be so pent-up that it's going to take it to new highs. Triple digit silver I think is in the cards, and honestly, my ultimate price target is $300.

Now, it's funny because many people have thought, this is just wild, that's ridiculous, it's crazy, it's just trying to be sensational. And I kind of felt that way at the beginning too but honestly, Leigh Goehring, the guy I told you about at the beginning who gave his thesis on uranium and it's been playing out, has a $500 target on silver. Now he's making me look tame, and I'm hearing even bigger targets than that lately.

So Gerardo, I published a book two years ago called The Great Silver Bull, which you mentioned in your intro earlier. Thank you for that.

Gerardo Del Real: Of course.

Peter Krauth: I appreciate it. The book is really meant as an easy read overview of what I consider silver to be a generational opportunity. So it goes through the history of silver, it talks about some economics about why silver is important now. What drives the silver market, I talk about supply demand and what the uses are, etc. And then ultimately, some developments, I guess I would call developments in the silver market and what some of the drivers are and how to build a silver portfolio. Ultimately, how to eventually sell, how and when to sell both maybe some of your silver and your silver stocks.

But in the book I talk about, I explained my $300 silver target and how I get there, what was interesting when I did the research to come up with an ultimate target was I said, "Okay, I'm just going to run some ratios and so on and see where it brings me," not have a preset idea of any sort of real scientific research where you lay out a thesis that something's going somewhere, and then you do the work and you see what it brings you. And frankly, what I found pretty interesting was different indicators. I think I had four or five different indicators. They all pointed to at least a $300, within the range of $300. So I'm going to say sort of maybe $250 to $350 range. And I said if I'm projecting multiple years out, and obviously you make all kinds of assumptions and guesses, etc, etc, things could go anyway. But I said I'd be silly if I said $305, so I said $300, right? I think that's ridiculous. So round numbers are important, we know that psychologically in investing. So I said $300, and I really think that's ultimately where [we’re headed].

If you look at the gold-silver ratio, if you look at when it peaked in 1980. So gold was at $850, silver was at $50, and the ratio was at 15. So I think gold is going to $5,000, conservatively. We're basically more than halfway there so I don't think that's a stretch anymore. People thought it was crazy eight or 10 years ago, and I've been saying it for longer than that. So we're already halfway there. If you do a 15 to one on $5,000 gold, which was the peak, bottom of the ratio in 1980 gold-silver, you're at $333 silver. I actually now believe gold's going to $10,000. And if you still do a 30 to one ratio, which is more conservative than 15 to one, you're still at $333 silver.

You look at average home price in 1980 in the US to the peak in the silver price, I think it was something like, geez, now I'm guessing because I have so many numbers in my head, but I think it was 14. I think it was, geez, I think it was 14,000 ounces of silver or something like that. No, it was, I think 4,000 ounces of silver. It recently has been 14,000. It was about 4,000 ounces of silver. And so if you did 4,000 ounces of silver to the average home price today, you'd be looking at around $300 silver again. If you did the Dow or the S&P to the silver price at the peak in 1980, you had, again, if you used current indexed prices to the silver ratio that you had at the peak in 1980, you still get, again, as I say, around a $300 silver price.

So I thought, this is a sign. All these big, well, I'm not going to say conclusive, but these big, clear indicators that are unrelated but all peaked right around the same time in 1980, at today's levels would give us a $300 peak in the silver price. So I said that makes sense to me, that's what I'm going with. And ultimately, I really think that's something that we're going to see. I'm not saying it's going to $300 and it's going to stay there, although, who knows? But if it happened quickly, that would wreak havoc on industry.

Gerardo Del Real: Sure.

Peter Krauth: You could just imagine what that would do to all kinds of products that require silver, even small amounts. So it may go there and not last long, but I do still do think that we are going to see that kind of level.

Gerardo Del Real: So I got to ask you, and I'm talking my book now, right? I love having precious metals exposure through the equities. I particularly like the juniors, and I really love when I find one that's early stage with successful management with a past producing district and you know where I'm going because I think we're both biased here on one specific company that we'll talk about here in a second. But how do you play it with the equities? What are you looking at? What do you like out there that maybe people could do some due diligence on?

Peter Krauth: Yeah, so I'm going to say, look, my newsletter is called The Silver Stock Investor, and there's one thing I realized pretty early was that not only is it the only silver focused investment newsletter out there, bar none, I do not know of any other today. So I'm just saying that what I realized early on was that if I was going to talk about silver stocks, they had to be real silver stocks. And what I mean by that is many companies will have silver in their name, but if you look at their resource or what they're finding when they explore, they're quoting silver equivalents. So they're really not really truly silver stocks. They may have 80% zinc and lead, or 80% copper and gold and just 20% silver. I don't consider that to be a silver company.

So as I became more and more familiar with how the resources worked, I decided that my filter, and I do make a few exceptions for different reasons, but my initial filter is that the resource has to either be or have reasonable odds of being if the company ends up with a resource, an economic deposit, at least 40% of the metal in the ground has to be silver, actual silver. I'm biased towards gold as the next metal that contributes to the value in the ground, but silver has to be somewhere around 40%.

And so needless to say, I like the really high grade silver projects. There are not many, and they're very valuable. So one company that I added actually not very long ago, a matter of a few weeks ago, it's done very well. And as far as I know, you're also quite bullish on them, it's Kingsmen resources. So this is an advanced brownfields play, it's in Chihuahua, Mexico, which has something like four or 500 years of history mining silver. It's in the Parral district, which has produced over 800 million ounces of silver since it was discovered. And it's got everything I like in Mexico, high-grade, near-term discovery potential, real district scale, excellent jurisdiction and infrastructure.

So I can go into some of the specifics. This company has something called the Las Coloradas Project. It's a former mine, so this was mined underground as recently as sort of the mid '40s to early '50s by a company called Asarco that became Grupo Mexico. But like I say, this ground has actually been mined for over 450 years, but as we know, technology is a lot better today. So that shouldn't scare anyone to think that there's no silver left. I'm convinced there's plenty of silver left. This is just about 40 kilometers from Parral City in Chihuahua. That means that they have excellent access to skilled labor, equipment, services, everything they could possibly need for this project. They have the surface right agreements in place, they have access, and they have drilling permits already. They just raised a bunch of money, this is all going to go into the ground. They're going to have an 8,000 meter drill program get started very soon.

Some of the historic grades, just to give your listeners a bit of an idea, by Asarco, the previous operator, worked 300 to 518 grams per tonne silver, plus gold, plus lead, plus zinc. So yeah, quite impressive. If you even look on the lower end of these ranges, it was a very rich mine. And so the geology is actually similar to the rest of the Parral mining district, and the mineralization reaches depths of up to 600 meters to even 1,000 meters. So up to a kilometer deep is where this thing could go. I know I've been talking a lot, but I just can't help myself.

Gerardo Del Real: No, no, no, no, I don't blame you. And look, I think it's worth pointing out that with it being a past producing district and the first time that land package has been consolidated under one group, for it to only have a $14 million market cap, that's the part where I get really, really excited, right?

Peter Krauth: Yeah, absolutely. Very tight structure. When silver moves, it does not surprise me to see these kinds of companies move. If you're talking about a quality company, usually that's exactly what happens. A very tight structure, very well capitalized, low share count. I mean, just on that, never mind quality assets, that in itself is rare in a junior miner, explorer. So I mean, just true quality all around. They just recently put out a news release saying that some geophysics helped them find a very high priority drill target that they didn't know of before.

And just a little bit of sort of interesting background I want to point out. So if some of your listeners may realize that there was some big consolidation that happened in the last couple of months. One of them is First Majestic buying out Gatos Silver. Well, Gatos Silver is a big silver producer that throws off a lot of cash. They are actually not very far in Chihuahua from this project. And one of the senior geologists there, a guy by the name Mark Pryor, is actually going to be retained by First Majestic after the closing of their acquisition of Gatos. Well, he's actually an advisor to Kingsmen, and he's very excited about the potential. He thinks that this could actually turn out to be an analog to Gatos, and Gatos is a big, big silver project. I cannot remember the number of ounces, but this is big. It's also a big producer.

And let's just say that I think there's more M&A to happen in this space generally and in this area as well, because it's just so conducive to profitable silver exploration and mining. So ultimately, who knows, maybe guys like this will end up being a takeout target. It would not surprise me, all the ingredients are there.

Gerardo Del Real: Yeah, I couldn't agree more, Peter. Any other names? I don't want you to give away the farm, but I would like for you to let people know where they can go to find your book, to find your letter, to subscribe to your service, because I absolutely agree that we are in, I think it's a commodity super cycle. And I agree that the one outlier thus far, the anomaly that hasn't performed the way that it will is silver, right? For the simple fact that we have all-time highs in gold, we have all-time highs in other metals. We have copper moving towards that clearly, right? With deficits materializing, and yet here we are with silver where it's at right now. I think it provides a heck of an opportunity. Where can people find your stuff, sir?

Peter Krauth: Okay, so I just want to ask, do we have time for, I can give you a very quick summary on one other name if you'd like.

Gerardo Del Real: Absolutely, absolutely. No doubt.

Peter Krauth: Okay. Okay. So I'll do my best to keep it succinct. So a name that I added not too long ago has performed well. I really like a lot, I think massive potential stuff still left in it is Cerro de Pasco. So this is essentially, it's actually a huge remediation play. It has a Silver Ridge Tailings project in Peru, basically in the town of Cerro de Pasco, so the same name as the company. And this goes back a century in fact, this project. It's a huge open pit mine that is, I don't think even being mined at all anymore, but this was actually, this mine was basically one of the world's trophy assets that long ago. It was actually brought public, by no less than JP Morgan himself. He brought Cerro de Pasco onto the New York Stock Exchange, and it was the place that everybody wanted to work at in the mining business. He brought the absolute best technology down there, the top geologists, the top operators. And so yeah, I mean, it's been mined, I'm going to say almost continuously since then.

So, but they had a big remediation issue. So there's a massive, I think it's something like 400 million tonnes of tailings. There's also a stockpile, I'm not even counting. The tailings are, like I say, a remediation project. This needs to be cleaned up, but there are, I think it's something like 100 million ounces of silver alone in the tailings. So Cerro de Pasco spent, they spent about $4 million and four years to get the Peruvian government to issue what they call an easement, meaning, it was I think the first time this was ever done on a tailings project in the country. So basically it gives them the ability, the president signed this, it gives them the ability to go... They just did actually, go start drilling the tailings to start getting data on the content. So they knew that this was rich, they know it has silver equivalent of 464 million ounces of silver.

So far, what we know is about 26% of the tailings are silver, 12% are gold. So if you add them up, you're at 38% silver and gold. But before I added this company to the portfolio, I knew that the silver was likely to improve, and we were starting to see that with recent drill results. The assays have shown that the silver is about 35% richer than they thought. So that's really going to boost the silver content. I think we're going to see the silver well above 30%, plus the gold. So we're going to be probably somewhere around 40 or 45% of the value in there just from silver and gold. And now interestingly enough, they had previously never tested the tailings for critical metals. There is something called gallium, which China has actually recently banned, and antimony as well. And they think that these metals could actually be worth as much as the silver in the resource.

So a guy whose name, again, your listeners may recognize, Eric Sprott is a huge investor in Cerro de Pasco. He's gone in there a couple of times with big cash infusions. He thinks that the numbers are way, way too conservative in this company. And that, I mean, these are his words, not mine, he thinks this could ultimately turn out to be something like a 400 bagger from the levels he got in at, which admittedly are a bit lower than the current price, which is about 32 cents Canadian right now. I think he got in, he probably averaged around 15 or 16 cents. So it's still not bad, but he thinks this could actually be up 400 times from the level he got in. He thinks that, like I say, there's all sorts of factors that you can include in the calculations of the value of the project. And he says it's worth just way, way more than we're giving it credit for.

Gerardo Del Real: That's a lot, a lot of very useful and practical information. I encourage everybody to look Peter up. Where can they find you, Peter?

Peter Krauth: Okay, so my book is on Amazon. You can buy it in print, you can buy it as a Kindle version, and you can buy it as an audiobook as well. Just go to Amazon and Google or search The Great Silver Bull, and it makes for a great gift, by the way, we're at the holidays, so just keep that in mind. And the other thing you can do is go to silverstockinvestor.com, and that is where you'll find my newsletter. I consider that a way to follow the silver space in real time. So again, a pretty big portfolio, lots of stocks in there to choose from. I cover the whole space, everything from some of the larger silver ETFs and big royalty companies and producers, all the way down through midsize producers, developers, and junior explorers. So as I say, that's kind of a real-time way to follow what's going on in the silver space. And I'm very active on Twitter, Peter_Krauth, that's K-R-A-U-T-H, and I'm on LinkedIn and pretty active there as well. So, I'm easy to find.

Gerardo Del Real: No, listen, it's been absolutely a pleasure and it's been insightful. I'm looking forward to doing this again. I think we're going to have a heck of a run here over the next several years. A lot of ways to capitalize off of that. Thank you so much for the guidance and the tips and your insights, Peter. I really enjoyed this.

Peter Krauth: My pleasure. I'm certainly looking forward to it, and all the best to you and your followers and your subscribers and listeners for the holidays. And I think silver will have several, not just next year, but several just fantastic years. I think it is, like I said earlier, it is really, truly a generational opportunity. I think it's the next uranium in some ways. Some people think things like Bitcoin have run too far. You still have tremendous opportunity in something like silver.

Gerardo Del Real: I couldn't agree more. Peter, thanks again. Appreciate it.

Peter Krauth: My pleasure, Gerardo. All the best.

Gerardo Del Real: Cheers now.