Gold Still 'Fantastic' As All Currencies Are Losing To U.S. Dollar - America Silver
(Kitco News) - Although the gold market has struggled to attract fresh investment capital, one mining CEO said that the market has held up exceptionally well, given the headwinds the precious metals face.
In a recent interview with Kitco News, Americas Silver Corp.(NYSE: USAS) CEO Darren Blasutti said that gold faces tough competition as the U.S. dollar benefits from a growing economy that is seeing record low unemployment, as well as businesses profiting from historic tax cuts.
“Nobody is doing well against the U.S. dollar this year,” he said. “You have all these factors driving the U.S. dollar higher, but gold is still holding in there. I think gold is doing fantastic.”
As gold fights to find momentum, Blasutti added that it is not surprising that silver has also suffered. Although silver remains range-bound below critical resistance at $17 an ounce, the market has held up reasonably well as gold comes off a five-month low hovering around $1,300 an ounce. July silver futures last traded at $16.42 an ounce, down 0.76% on the day.
“The problem with silver is that it doesn’t know where to go when it has no direction from gold,” he said.
However, Blasutti added that he is confident that it is only a matter of time before interest comes back into the precious metals and when it does, he expects silver to outperform the yellow metal.
Even as interest in the mining sector dwindles as prices of precious metals struggle, Blasutti said that there are still things companies can do to create value for shareholders. He added that value creation is the most significant factor that will bring investors back to the beleaguered marketplace.
While Americas Silver is primarily a silver producer, Blasutti said that his company’s deposits also have a high concentration of base metals. The company continues to produce more zinc and lead than silver, and those base metals are just off a 10-year high.
For the year, the company is planning to increase its silver-equivalent production 64% while its pure silver production remains flat. Blasutti added that the company is holding on to its silver reserves until prices move higher.
“This focus is fueling lower costs, profits and free cash flow,” he said. “We have all these high-grade silver resources, but at $16 an ounce, they don’t make enough money to be brought into production. If we can’t make an $8 to $10 profit in silver, why should we produce it?”
Looking at zinc and lead prices, Blasutti said that as some material has come into the market, dragging prices from their 10-year highs, he remains bullish on the market. He added that the supply-and-demand fundamentals in the marketplace haven’t changed and should continue to support the metals’ uptrend.
“Our view is that zinc is going to be above $1.40 for the next few years,” he said.
Blasutti’s comments come after the company’s first-quarter earnings report released at the start of the month. In the first three months of the year, the company reported net earnings of $500,000 or 1 cent per share, up from a $200,000 net loss reported in the first quarter of 2017. The company saw modest earnings in the first quarter as the company spent $1.8 million on an exploration program.
The company reported production of 1.6 million silver equivalent ounces, an increase of 46% from the first quarter of the previous year.