Darren Blasutti, Americas Silver: Don't Expect Silver M&A Until Prices Move

TL;DR

Darren Vasudha discusses the state of the silver market, predicting a slow but positive year for silver prices and the impact of the Fed's decision to pause rate hikes.

Transcript

I'm Nicole Rashad with the investing news network and we're here at day three of PDAC and joining me today is Darren Vasudha at the CEO of America silver how are you today I'm great thank you for having me thank you for joining us so how's the conference been so far it's been great it's a little more little muted compared to last year but the merge... Read More

Key Insights

• 🫓 The silver market has remained relatively flat, relying on gold price movement to determine its future.
• ☠️ The Fed's decision to pause rate hikes is expected to have a positive effect on both gold and silver prices.
• 🫱 Increasing uncertainty in the market, including the Trump administration's trade war, makes it challenging to predict future market movements.
• 🥈 Consolidation within the silver industry is limited due to a small number of profitable companies, as most companies cannot make money at current silver prices.
• 😮 America Silver increased revenue by shifting focus to base metals, taking advantage of their increasing prices while waiting for the silver price to rise.
• 🤘 The acquisition of Pershing Gold will help America Silver increase its precious metal revenue and provide optionality for future production decisions.
• 👷 The construction of Pershing Gold mine is a major catalyst for America Silver, expected to start in 2019 and generate significant gold production.

Questions & Answers

Q: What are your predictions for silver prices in the coming year?

Vasudha believes that silver prices will see a positive movement in the second half of the year or early next year, following the predicted good year for gold. He expects silver to reach $17-$18 and potentially closer to $20 by the end of 2020.

Q: Will the Fed's pause in rate hikes have a similar effect on silver prices as it does on gold?

Vasudha suggests that the Fed's decision will likely have a positive effect on silver prices, as they closely follow the movement of gold. However, he acknowledges the market's quick reaction to information, which can lead to overreactions.

Q: Is there potential for consolidation within the silver industry?

Vasudha explains that consolidation in the silver industry may be limited due to the small number of profitable companies. With current silver prices, only four or five companies are making money. It is challenging to find profitable assets to acquire in the industry until there is a substantial increase in the silver price.

Q: How did America Silver manage to increase revenue despite the decrease in metal prices?

America Silver strategically shifted its focus from being primarily a silver company to a company with a higher percentage of revenue from base metals. This decision allowed them to take advantage of the increasing prices of base metals like lead and zinc while waiting for the silver price to improve. By reducing silver production and increasing base metal production, they were able to maintain revenue growth.

Summary & Key Takeaways

• Silver prices have remained relatively flat, but Vasudha predicts a good year for gold, which will eventually lead to a move in the silver price.

• The Fed's decision to pause rate hikes will have a positive effect on gold, and Vasudha believes it will likely have the same effect on silver.

• Vasudha acknowledges the uncertainty in the market due to factors like the Trump administration's trade war, but believes it is best to plan for the worst while remaining cautious in capital spending.

• In terms of consolidation, the silver industry has fewer companies that are profitable due to current silver prices. Therefore, there may be less consolidation until there is a significant movement in the silver price.