How silver's 50% rally in 2020 has transformed the industry
The rapid rise of gold and silver prices have caused valuations from miners as well as their exploration budgets to expand, but the industry is yet to see its full potential as the lockdowns have prevented silver companies from generating free cash flow the way they should be, said Darren Blasutti, CEO of Americas Gold and Silver.
“From an industry perspective, we’ve seen market caps double and triple, especially for the explorers and the developers on more of the bottom end that aren’t producers yet. We’ve certainly seen their valuations come up,” Blasutti told Kitco News. “A lot of silver companies are obviously in Mexico and Peru where even more than the U.S., COVID has wreaked a lot of havoc on operations.”
Exploration budgets for the producers have also increased as a result of higher metals prices, Blasutti noted.
“Within our own company, our [exploration] budget was relatively modest for 2020, outside of our Galena mine in Idaho, but I think we’re going to see an exploration budget that’s going to be four or five hundred times higher for us, than what we have planned,” he said.
Americas Gold and Silver plans to increase precious metals production by 500% by 2021.
“The first thing is getting to commercial and then full production on Relief Canyon. That drives 80% of that increase from year to year. That mine started to produce gold at the end of February on a very small scale. We expected towards the end of the second quarter to be in commercial production. Given COVID and a few startup challenges that’s now moved to the mid-fourth quarter kind of timing,” he said. “We’re very confident that’s going to come in.”