Despite soft figures on U.S. employment, which showed that the U.S. economy created only 155,000 new job positions compared to an expectation for 200,000 new job positions, there are not severe slowdown signs yet.
Hence, November data on the U.S. payroll will likely not influence the U.S. Central Bank’s view on the U.S. economy. The road map for a December hike in interest rates and two additional raises in 2019 therefore will hardly be altered.
But the weaker-than-forecasted number on U.S. payrolls will likely guide consensus towards lower rate-hike expectations. This may be the main driver for a change in the trend of precious metals prices that can send gold well over $1,250 per troy ounce and silver beyond $15 per troy ounce. The yellow metal was at $1,245.35 per troy ounce and the grey metal closed at $14.53 per troy ounce on Monday. Despite the last three days’ jump, gold is still 6.5% below the January average price of $1,331.67 an ounce, and silver is still significantly below the January average price of $17.1684 an ounce.
In order to benefit from a rise in the price of the precious metal, investors can also gain exposure in one of the publicly traded players in the gold mining industry. If there is a precious metal stock I would recommend to investors, it is SilverCrest Metals Inc. (SILV, Financial) (SIL.V, Financial).
SilverCrest Metals has proved to be particularly resilient to a down-trending commodity. In fact, as you can see in the following two charts, SilverCrest Metals has outperformed the industry both on the New York Stock Exchange American and on the Canadian TSX Venture Exchange.
The GuruFocus chart below illustrates that SilverCrest Metals has beaten the Van Eck Vectors Gold Miners ETF (GDX, Financial) by 140% over the 52 weeks through Dec. 10 on the NYSE American when silver depreciated 8.2% and gold fell 1.7%. SilverCrest Metals closed at $2.45 per share on Monday for a market capitalization of $182.03 million.
Source of screenshot: GuruFocus.com
Consensus is a "buy" rating on the stock with an average target price of $5.04 per share, reflecting 106% growth within the next 52 weeks.
The chart below from Investing.com indicates that SilverCrest Metals has outperformed the Van Eck Vectors Gold Miners ETF by more than 155% over the 52 weeks through Dec. 10 on the TSX Venture Exchange.
Source of screenshot: Investing.com
Analysts are recommending to buy the stock on the Canadian market as well.
SilverCrest Metals explores for silver and gold properties and develops the assets that it acquires. The main property of the company is the high-grade, 1,389-hectare Las Chispas mineral project, which is located in the favorable mining jurisdiction of the Mexican State of Sonora.
The Las Chispas property hosts approximately 86.7 million ounces of mineral inferred equivalent silver resulting from 511,500 ounces of gold and 48.3 million ounces of silver. The mineral property is also characterized by a high concentration of precious metal in the mineralized rock. Silver averages 347 grams per ton and gold averages 3.68 grams per ton.
Since the company is expected to release a resources reorganization report in the first quarter of 2019, together with a preliminary economic assessment of the project, this should give an additional boost to share price on both markets.
Following the sizeable gain, the stock is not trading at its cheapest on both markets. But a valuation below Canadian dollars 3.73 ($2.80) per share, which is the price at which SilverCrest Metals has sold 8,220,645 shares of its ordinary stock to the Vancouver based precious metals producer SSR Mining Inc. (SSRM), should represent a fair appraisal of SilverCrest Metals.
SSR Mining Inc. is betting on SilverCrest Metals’ appreciation to revitalize its liquidity available in cash and short-term securities.
SilverCrest Metals has a price-book ratio of 5.5 versus an industry median of 1.74. The share price of $2.45 at close Monday is still above the 200-day simple moving average lines but below the 50- and 100-SMA lines. The 52-week range is $2.15 to $3.07. The 14-day Relative Strength indicator is 51.48.
On the Canadian TSX Venture Exchange, the stock has a price-book ratio of 5.63. The share price of 3.30 Canadian dollars at close Monday is slightly below the 50-SMA line, slightly above the 100-SMA line and well above the 200-day simple moving average line. The 52-week range is CA$1.26 to CA$3.80. The 14-day Relative Strength Indicator is 52.
In addition, the company has a solid balance sheet that GuruFocus gives a financial strength rating of 8 out of 10.
Disclosure: I have no positions in any securities mentioned.
