With SILVER on a Rampage, Which Mining Stocks Stand to Gain? John Feneck's Top Picks

Key Concepts

Silver Bull Market: Current strong upward trend in silver prices, exceeding $58/ounce.
Inflation-Adjusted Pricing: The concept that historical price targets need to be adjusted for inflation to be relevant in today's market.
Silver Supply Constraints: The idea that the supply of silver is tighter than commonly perceived.
Precious Metals Equities: Stocks of companies involved in mining gold and silver.
ETFs (Exchange Traded Funds): Investment funds that track a specific index or sector, such as SIL (silver miners) and GDX (gold miners).
GDX/GDXJ: ETFs representing large-cap and small/mid-cap gold mining stocks, respectively.
SIL/SILJ: ETFs representing large-cap and small/mid-cap silver mining stocks, respectively.
Commodity Supercycle: A prolonged period of rising commodity prices driven by strong demand.
Broad Market Correction: A significant decline in the overall stock market.
Valuations: The assessment of a company's or market's worth, often measured by metrics like Price-to-Earnings (P/E) ratios.
Relative Strength Index (RSI): A momentum indicator used in technical analysis to measure the speed and change of price movements.
Gold-to-Silver Ratio: The price of an ounce of gold divided by the price of an ounce of silver, indicating their relative value.
Critical Minerals: Minerals essential for modern technology and national security, such as tungsten and antimony.
Geopolitical Uncertainty: Risks arising from international relations, trade wars, and global conflicts.
Federal Reserve (The Fed): The central bank of the United States, responsible for monetary policy.
Non-Farm Payrolls: A key economic indicator of job creation in the US.
Consumer Price Index (CPI): A measure of inflation.
AI (Artificial Intelligence): A rapidly advancing technology with potential applications across various sectors.

Silver Market Analysis and Investment Strategy

Current Silver Price and Outlook: Silver is experiencing a significant bull market, trading at approximately $58 per ounce, surpassing previous all-time highs. John Fenick, founder and CEO of Fenic Consulting, expresses strong conviction in silver, holding it as a substantial position (12% as of September 30th) and has not sold any. His thesis is that the commonly cited $50 target price is not inflation-adjusted. When adjusted for inflation, $50 is equivalent to $68-$70 in today's market. Therefore, at $58, he believes there is still considerable room for growth, with resistance not expected until the $60s. He emphasizes the significantly shorter supply of silver than commonly understood.

Investment Advice for Silver: Fenick advises investors to "watch the tape" (monitor market movements closely) or work with a professional who can do so hourly. This is crucial for individuals who cannot dedicate constant attention to market fluctuations due to their professions.

Factors Supporting Silver and Gold:

Federal Reserve Policy: The increasing certainty (over 80%) of a 25 basis point (bip) rate cut by the Fed in December alleviates market stress and is seen as positive for precious metals.
Delayed Non-Farm Payrolls Data: The US government's postponement of the non-farm payrolls report from December 5th to December 16th, consolidating two months of data, is anticipated to reveal weaker reads due to factors like layoffs at Amazon and UPS. These weaker reads are expected to fuel further gains for silver and gold heading into the next year.

Precious Metals Equities: Silver and Gold Miners

Current State of the Sector: Fenick believes the precious metals equity sector is in the fourth or even fifth inning of its bull cycle, with some individual stocks showing exponential growth. He notes that while ETFs like SIL and SILJ have performed well (SIL up ~130%, SILJ up ~150% year-to-date), they haven't shown the same leverage to metal prices as the gold ETF GDX. His firm's core holdings include these ETFs, representing over 25% gains, as they provide exposure to producing companies.

Investment Horizon: While his partner, Don Derrett, believes in a multi-year rally, Fenick anticipates a two to three-year move, not a decade-long commodity supercycle, as he awaits evidence of a broader market downturn. He acknowledges being wrong about the S&P and NASDAQ turning over this year, as dips have been consistently bought. However, he predicts this trend will change next year as earnings expectations rise and consumer sentiment, non-farm payrolls, and GDP growth indicators potentially weaken, especially with a tariff overlay.

Silver Mining Stock Picks:

ETFs: SIL (large-cap silver producers) and SILJ (small to mid-cap silver producers) are recommended as core holdings for those lacking time for individual stock research.
Triumph Gold (TIG/TIGCF): Trading at $0.24 USD, this company is not receiving credit for its recent silver acquisition in Utah, which is near the historically productive OSCO camp. Fenick views Utah as a mining-friendly jurisdiction. The company is expected to drill in Q1 or Q2 of next year. The share structure is considered reasonable with significant insider and strategic ownership (over 40%).
Silver 47 Exploration (AAF/AGA): This company merged with Suma Silver and completed a substantial financing, enabling year-round drilling across three assets in different states. This strategy allows for continuous news flow, which is highly beneficial in a hot silver market where even average drill results are being positively received.
Guanajuato Silver (GSVRF/GSVR): This company made a significant acquisition of Bolanitos from Endeavor for a low price, which is expected to boost silver production significantly starting next year. The stock reacted positively to this news, indicating the market's recognition of its value. The company has established operations and power in Mexico, avoiding the permitting delays faced by some open-pit miners. Fenick favors aggressive CEOs who seize opportunities.

Gold Mining Stock Picks:

GDX (Large-cap Gold ETF): Has made an all-time high, placing it in "no man's land" with uncertain future direction, similar to Nvidia in the tech sector.
GDXJ (Small/Mid-cap Gold ETF): Trading at $108, significantly below its historical high of $179.10, indicating substantial upside potential. Fenick overweighted this segment last summer and is seeing positive returns.
Daenerius Metals (DNRSF/DMET): The chairman has 40 years of mining experience and a track record of building companies. While production has been slower to ramp up, it is expected to increase next year. With the stock trading at $0.365 USD, the downside risk is considered minimal (around $0.29-$0.30), while the upside potential is estimated at a double next year due to projected revenue from Colombia and the upcoming production from its fully permitted Spanish assets. The recent financing, while putting some short-term pressure on the stock, is seen as a positive for long-term growth.
Rua Gold (NZAUF/RUA): Located near a highly successful producer, this company has multiple projects, including an antimony project. Fenick sees antimony as a valuable "kicker" to the gold exposure, with companies like American Tungsten also benefiting from this critical mineral. He emphasizes the importance of stories changing for the better and the opportunity cost of holding underperforming assets.

Gold vs. Silver and Valuation

Gold-to-Silver Ratio: The gold-to-silver ratio, which measures the relative value of gold to silver, stretched over 100 earlier in the year. Fenick predicted that silver would catch up to gold, causing the ratio to drop, which has occurred. However, he does not anticipate the ratio reaching extremely low levels (e.g., 100 ounces of silver for one ounce of gold) in the near future, as it will take time for silver to reach such valuations.

Gold Outlook: The outlook for gold in the coming year is considered extremely bullish. While some analysts have conservative price targets (e.g., $2500-$2700 by June), most banks project prices between $4100 and $5000, which is highly constructive for gold producers.

Undervaluation: Even at current prices, Fenick agrees with the sentiment that many gold and silver producers, including large-cap ones, remain undervalued.

Broad Market Analysis and Correction Potential

Valuation Concerns: Fenick concurs with Howard Marks' assessment that current broad market valuations are stretched, with historical 10-year returns following such levels being between -2% and +2%. He anticipates a traditional correction of around 20% in the S&P 500 next year, which he believes is "very doable."

Tesla Valuation Example: He highlights Tesla's P/E ratio of 260-300 as an example of stretched valuations, contrasting it with mining stocks trading at P/E ratios of 15-20.

Systemic Risk and Velocity of Trading: Fenick expresses concern about the increased amount of money managed by asset managers and the high velocity of trading, which can exacerbate sell-offs. He uses Apple's over 20% drop in five consecutive trading sessions as an example of how quickly investors can experience significant pain, especially in margin accounts.

Technology Sector Concentration: The technology sector's weight in the S&P 500 has increased significantly (around 44% as of October) compared to the late 1990s (around 30%). This concentration means that during redemption periods, portfolio managers will likely be forced to sell these tech stocks, potentially leading to self-feeding selling. Michael Burry and others share this concern about inflated valuations.

Impact of a Broad Market Correction on Commodities: Fenick acknowledges that precious metals equities (GDX, GDXJ) will experience a sell-off during a general market correction. However, he argues that these corrections have been shorter than anticipated in recent years. He points to the sell-off from October 1st, where HUI (a gold miners index) was down about 21%, gold down ~12%, and silver down ~15%. He believes many investors cannot tolerate such drawdowns and exit prematurely, only to regret it as the market snaps back quickly. His advice is to avoid trading and to view these as typical corrections within a bull run, adding to core holdings on dips.

Economic Trends and Geopolitical Factors

Key Economic Indicators:

Federal Reserve Actions: Fenick stresses the importance of monitoring Fed meetings and announcements, as they drive market behavior globally. He advises marking Fed dates on calendars due to the volatility they often induce.
Inflation: A primary concern for the Fed, influencing monetary policy decisions.
Job Growth (Non-Farm Payrolls): A critical data point for the Fed. The significant downward revision of 258,000 jobs in August was a key factor that led Fenick's firm to go "all in" on precious metals.
Consumer Sentiment and GDP: These indicators are also being watched for signs of weakening.

Geopolitical Considerations:

Trade Policy and Tariffs: The ongoing trade tensions, particularly between the US and China, and potential tariffs are significant factors.
China's Export Restrictions: China's restrictions on rare earths and potential restrictions on silver exports highlight the strategic importance of critical minerals.
Russia-Ukraine Conflict: While an awful period, a potential resolution is being watched.
Venezuela: Unforeseen geopolitical events like those in Venezuela can emerge.
Trump Administration's Potential Impact: Fenick speculates that a potential Trump presidency could lead to a Fed stacked with his appointees, who might favor lower interest rates, which would be beneficial for gold and silver. He believes Trump is a decisive leader who takes action, which could influence global dynamics.

Critical Minerals and US Policy: The US government's commitment of approximately $100 billion towards critical minerals in the coming year is seen as a massive positive for the sector. This is a response to the US being significantly behind China and Russia in mineral production.

Other Commodities and Investment Opportunities

AI and Biotech:

Mindwalk (HYFT): Fenick is bullish on this AI-driven biotech company, which has rebranded from IPA. He has a personal connection to the sector due to family experiences with cancer and diabetes. He sees significant potential for AI in biotech and has recently added to his position.

Oil and Gas:

Anchor Resources: Fenick is positive on this company, which secured a 30-year lease for producing assets in Cambodia. The company has established relationships in the country and is led by a strong management team that owns a significant portion of the stock. He believes energy exposure is sensible, especially in times of geopolitical uncertainty.

Critical Minerals (Beyond Gold and Silver):

Tungsten and Antimony: Fenick highlights the strategic importance of these minerals.
- Guardian Metal (GMTLF/GML): This company has two assets in Nevada. Tungsten has not seen export relief from China, and its price chart is stable or rising. The stock has experienced a significant price drop despite these positive factors. The presence of billionaire Stan Druckenmiller as a significant shareholder is noted as a positive indicator.
- American Tungsten (TGF/TUNG): This company's stock was previously trading at a high of $3.40-$3.50 but has since fallen to around $1.30. Fenick believes this presents a buying opportunity, especially given the company's dominant position in a niche market with strong relationships with the DoD and DOE. He notes the limited number of publicly traded tungsten companies globally.

Investment Conferences and Consulting Services

Fenic Consulting Investor Events:

Washington D.C.: May 17th-19th at the Grand Hyatt.
Fort Lauderdale, Florida: May 20th-22nd at the Four Seasons.

Conference Structure and Philosophy: Fenick emphasizes that these are manageable events focused on quality over quantity. They carefully select companies to attend, prioritizing those that offer genuine value to investors. The conferences are designed for networking, allowing investors to meet CEOs one-on-one. Attendees must complete a form to ensure they are active buyers of mining stocks, creating a mutually beneficial environment for both investors and companies. Speakers are not scheduled during meals to maximize networking opportunities.

Fenic Consulting Services:

Website: fenicconsulting.com
Newsletter: Available for 3-month or 6-month subscriptions.
Real-Time Emails: Provides immediate updates on market action, drill results, and company milestones. This is considered a core offering due to its timeliness.
Book a Call: Investors can schedule a direct call with John Fenick to discuss their investment questions (though he cannot provide buy/sell recommendations due to licensing requirements).

Conclusion and Key Takeaways

The current market presents a compelling opportunity for investors in precious metals, particularly silver, which is in a strong bull market with significant upside potential due to inflation-adjusted pricing and supply constraints. While the broader market faces potential headwinds and a significant correction, precious metals equities are expected to weather such downturns and ultimately benefit from a long-term trend. Fenick advocates for a disciplined approach, focusing on quality companies with strong management, strategic assets, and favorable valuations, while also considering the growing importance of critical minerals and the potential impact of geopolitical shifts and Federal Reserve policy. His emphasis on working with professionals and staying informed through real-time data is crucial for navigating these complex markets.