Q3: Chen Is Still Bullish on This Precious Metal

Asset manager Chen Lin may feel like he's starting to sound like a broken record in 2023: silver, silver, silver. The author of What is Chen Buying? What is Chen Selling? is still bullish on the precious metal that is also vital to the emerging green economy.

Silver companies dominate his picks for the third quarter — just like they did in the first two quarters.

And recent tumult in the market could mean opportunities for investors. Silver recently hit three-month lows.

"I think it's a great time for investors to pick up silver and silver-related stocks."

According to the Silver Institute's "World Silver Survey 2023," 2022 saw a deficit in supply and demand of 237.7 million ounces (Moz), most likely "an all-time record."

"When the dust settles by the end of the year, we will see a huge silver deficit," Chen predicted to Streetwise Reports. "I wouldn't be surprised if this year's will be even larger than last year's. … I think it's a great time for investors to pick up silver and silver-related stocks."

Silver is great at coating electrical contacts and is an important element in solar technology. Almost all computers, phones, cars, and appliances contain the metal. Chen's top silver picks include a company that has made the upgrade from explorer to producer in Mexico. He also has some biotechnology and energy stocks he suggests taking positions in.

MAG Silver Corp.

At the top of the list is MAG Silver Corp. (MAG:TSX; MAG:NYSE American), which announced earlier this month that it had achieved commercial production at its new Juanicipio processing plant in Mexico.

The stock is back down at levels from five years ago, he said.

"They are in production; they are mining high-grade," Chen said. "I think that it seems to be a good Buy."

The Juanicipio mill is operating at about 85% of its design capacity of 4,000 tonnes per day (tpd), the company said. Silver recovery has consistently been above 88% and about 3.2 million ounces silver (Moz Ag) were produced from March to the end of May. Production is expected to grow steadily and reach design capacity in Q3.

"Achieving commercial production at Juanicipio was a key step for MAG as it completes its transition from an explorer/developer to a producer," wrote Canaccord Capital Markets analyst Michael Fairbairn, who has rated the stock a Speculative Buy with a CA$26 per share target price.

Analysts have said that MAG's focus this year will turn from construction to optimization at the mill, and the company will start receiving cash from the plant.  That will increase the attractiveness of the stock, analyst Brian MacArthur of Raymond James has written.

"We believe that MAG is one of the better options for investors looking for exposure to silver," MacArthur wrote, rating the stock Outperform with a target of CA$24.50 per share.

Institutions own 71% of MAG, and 29% is retail, according to the company. Guanajuato Silver Co. (GSVR:TSX.V; GSVRF:OTCQX)

Top institutional shareholders include Juanicipio project operator Fresnillo Plc. with 9.9%, BlackRock Asset Management at 8.8%, ETF Managers Group LLC at 5.3%, Sprott Asset Management at 5.1%, and First Eagle Investment Management at 5%, the company said.

MAG Silver has a market cap of US$1.47 billion. It has 102.9 million shares outstanding, according to TSX Infosuite. It trades in a 52-week range of US$22.96 and US$13.60.

Guanajuato Silver Co.

Chen also likes Guanajuato Silver Co. (GSVR:TSX.V; GSVRF:OTCQX), which acquires and breathes life back into mining projects, overbuilt or overlooked by past operators, in Mexico's Guanajuato silver district.

Once a new project is part of its portfolio, the company optimizes the operation, rapidly improves productivity, and seeks to extend the mine life through exploration and new mineralization sources.

The company this week released a positive Preliminary Economic Assessment (PEA) that envisions a six-year mine life at its recently acquired El Cubo mine and processing plant. Guanajuato restarted production there in 2021.

"Their future looks very good from here," Chen said.

The company is on its way to becoming a leading producer in the district. In April, it caught the attention of Echelon Capital Markets, which launched research coverage on it.

"From just one mine and plant producing 2,100,000 ounces of silver equivalent (2.1 Moz Ag eq) at a US$20.89 per ounce ($20.89/oz) all in sustaining cost (AISC) in 2022, we look for production of close to 6 Moz Ag eq per year with sub-US$18/oz AISC by 2024 from four mines and three plants, with management also focused on additional growth opportunities through further district consolidations and mergers and acquisitions opportunities," analyst Gabriel Gonzalez wrote in an April 20 initiation note. 

Echelon initiated on Guanajuato Silver with a Speculative Buy rating and a CA$0.85 per share target price. Cerro de Pasco Resources Inc. (CNSX:CDPR; OTCMKTS:GPPRF)

According to Yahoo Finance, about 20% of the company's shares are held by insiders, and about 3% are held by institutions. The rest are retail.

Endeavour Silver Corp. owns 8.52%, Fidelity Management & Research Co. owns 7.31%, Director Daniel Oliver owns 4.59%, ETF Managers Group LLC owns 3.03%, and Chairman and Chief Executive Officer James Anderson owns 2.05%, Reuters reported.

Guanajuato has a market cap of CA$124.24 million with 328.4 million shares outstanding. It trades in a 52-week range of CA$0.65 and CA$0.27.

Cerro de Pasco Resources Inc.

A return pick from the second quarter is silver miner Chen likes is Cerro de Pasco Resources Inc. (CNSX:CDPR; OTCMKTS:GPPRF), focused on the development of the El Metalurgista mining concession in Peru.

The company has signed a memorandum of understanding with Volcan Compania Minera to collaborate in the first phase of exploring the Quiulacocha Tailings Project at the site. Glencore International Plc (GLNCY:OTCMKTS) is providing a US$2 million loan to cover the costs of the first phase of the project, including geophysical studies, sonic drilling, laboratory testing, mineralogy studies, resource estimation, and economic assessment. 

Volcan will allow Cerro de Pasco rights to process materials through its processing plants.

"They will have a very, very important news in the next few weeks for the easement with the government," Chen said. "Once they got the easement, my understanding is the Glencore US$2 million will kick in."

"They have very, very strong community and government support," Chen added.

About 23% of the company is owned by insiders, according to Yahoo Finance, and 18% is held by institutions. The rest is retail.

According to Reuters, top institutional holders include LH Financial Services Corp. with 16.25% and Gordaldo Ltd. with 9.62%. Executive Chairman Steven Zadka leads insiders with 7.75%. Amyris, Inc. (AMRS:NASDAQ)

Cerro de Pasco has a market cap of CA$34.54 million with 323.71 million shares outstanding, and 252.85 million free-floating. It trades in a 52-week range of CA$0.25 and CA$0.055.

Chen also said he likes Vizsla Silver Corp. (VZLA:NYSE American) and Silvercorp Metals Inc. (SVM:TSX; SVM:NYSE)

Amyris Inc.

A frequent pick of Chen's that is also making another appearance on his list is Amyris, Inc. (AMRS:NASDAQ), a synthetic biotech company that "programs" cells to create sustainable ingredients.

The company has begun production at its new precision sugar fermentation plant in Brazil, comprised of five precision fermentation "mini-factories" that can produce 13 of Amyris' molecules, which are used in everything from health and beauty products to flavors and fragrances.

Amyris is a frontrunner for the US$1 billion the U.S. Department of Defense will be investing in the bio-industrial domestic manufacturing infrastructure over the next five years. It's part of the US$2 billion the U.S. government plans to spend to boost biomanufacturing under an executive order announced last month.

The company just announced the departure of President and Chief Executive Officer John Melo and global layoffs as part of a restructuring. 

"I think once they announce a strong CEO and new leadership, (the company) will start moving," Chen said. "I think that's a very good company at a very interesting junction."

About 30% of the company's shares are held by insiders, and about 35% by institutions. The rest is retail, Yahoo Finance reported.

Amyris' top shareholders include Foris Ventures LLC, with 23.63%, The Vanguard Group Inc., with 6.25%, Dsm BV with 4.52%, BlackRock Institutional Trust Co. N.A. at 3.51%, and Vivo Capital LLC, with 2.1%, according to Reuters. Soleno Therapeutics Inc. (SLNO:NASDAQ)

Its market cap is US$325.43 million, and it has 369.39 million shares outstanding, 260.34 million of them free-floating. It trades in a 52-week range of US$4.86 and US$0.55522.

Soleno Therapeutics Inc.

Another biotech Chen likes is Soleno Therapeutics Inc. (SLNO:NASDAQ), which is focused on the development and commercialization of new treatments for rare diseases.

The company's lead candidate, diazoxide choline controlled-release (DCCR) tablets, a once-daily oral tablet for the treatment of Prader-Willi Syndrome (PWS), is currently being evaluated in a Phase 3 clinical development program.

The hallmark symptom of Prader-Willi Syndrome is hyperphagia, a chronic feeling of insatiable hunger. Other symptoms of the disease include behavioral problems, cognitive disabilities, low muscle tone, and short stature. There are currently no approved therapies to treat it. 

Chen thinks the "upside will be extraordinary" if the company is successful. TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX)

According to Yahoo Finance, about 21% of the company is held by insiders, about 36% is held by institutions, and the rest is retail.

Top shareholders include Perceptive Advisors LLC, with 27.03%, Abingworth Management Ltd., with 14.71%, Nantahala Capital Management LLC, with 8.56%, and Orin Hirschman, with 5.55%.

The company's market cap is US$36.11 million, with 8.17 million shares outstanding. It trades in a 52-week range of US$6.20 and US$0.85.

TAG Oil Ltd.

Finally, in the energy sector, Chen likes TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX), which has plans for a new horizontal well in Egypt.

The company has successfully secured a suitable drilling rig for the horizontal well and is expected to start drilling it next month.

Meanwhile, a vertical well at the site began production in May. Chen predicted the ramifications would be huge if TAG is successful.

"They would change politics forever," he said. "Egypt would become a major oil producer."

The company's future plan is to focus on producing oil and generating cash flow off of larger, more complex assets.

TAG has a history of building companies to sell, such as Bankers Petroleum, Rally Energy, and Kuwait Energy.

The company is expecting the completion of its second horizontal well to be completed in December 2023 or January 2024. 

Askar Alshinbayev owns 10.89% of the company, Abdel Fattah Z Badwi owns 2.04%, Shawn Reynolds owns 1.52%, Suneel Gupta owns 1.02%, Barry MacNeil owns 0.87%, Toby Robert Pierce owns 0.81%, and Gavin Hugh Lothian Wilson owns 0.74%.

YF Finance, Ltd. owns 8.34%, Purpose Investments Inc. owns 1.11%, and Novum Asset Management AG owns 0.65%.

There are 155.99 million shares outstanding and 112.43 million free-float traded shares.

The market cap is CA$105.41 million, and it trades in the 52-week range between CA$0.27 and CA$0.79.

Important Disclosures:

1. MAG Silver Corp. and TAG Oil Ltd. are billboard sponsor(s) of Streetwise Reports and have paid SWR a sponsorship fee between US$3,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of TAG Oil Ltd.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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