Readers here will be familiar with Excelsior's work from the 'Kereport' which i post from time to time. Here he is today.:
Excelsior
11 hours ago
Those are precisely all the reasons I like Santacruz Silver and why it has so much room to “surprise” investors to the upside.
SCZ has always been a higher cost producer, which is what gives it so much leverage during periods or rising metals prices. This is exactly why is smoked all the other Silver producers in the huge run higher in 2020 when Silver prices rebounded out of the March pandemic lows.
The transaction with Glencore gives them a big boy partner, 5 new Silver mines, 3 Mills, 2 exploration projects, and 2 power plants. That will easily move them up the profile to a mid-tier producer, while reducing down overall costs, and will greatly adjust higher their market cap.
People need to quit wanting what they don’t want (less risk). If they don’t want as much risk then buy a royalty company like Franco, or a large producer like Newmont. The whole reason to invest in Junior mining stocks is because they are quite a bit riskier and can also move quite a bit more to the upside.
Once all the analysts determine a stock is not risky anymore, then it is likely fairly valued at that point and won’t have explosive moves higher or beta against peer companies. What provides the leverage is risk being diminished at a faster percentage rate when metals prices rise, and we’ve mentioned for years on here that this is the attraction to the #BestOfTheWorst.
The other compelling driver for a company, as Rick Rule puts it is “Answering the unanswered question.” In the case of Santacruz Silver those unanswered questions (seen as risky by others) are what will provide the rerating higher. Unanswered questions like: When will the Glencore multiple mines & mills transaction happen? What will the new company AISC be? What will the new fair value market-cap be? — those are the same risks that could lead to the same out-sized rewards.