Chen Still Likes This Precious Metal in Q4

If you've been following asset manager Chen Lin's quarterly picks on Streetwise Reports, you know he is bullish on silver, and the fourth quarter of 2023 is no exception.

The most conductive element in nature, the precious metal, is important to the new green economy as it's used to coat electrical contacts in computers, phones, cars, and appliances. It's also an important element in solar technology.

The World Silver Survey 2023, published by the Silver Institute, said there was a deficit of 237.7 million ounces (Moz) between supply and demand for the precious metal in 2022.

"Mined output over the longer term, four to five years out, is forecast to begin to decline," the report said. "This will be due to losses from grade decline and reserve depletion at existing operations exceeding the new production that is expected to come online from the current project pipeline."

Chen said he recommended investors look out for a new forecast from the institute expected in November.

"I believe they will forecast a big deficit for 2023 and beyond as solar panels are demanding more and more silver," Chen said. "I would accumulate silver stock using the coming tax-loss selling."  Silvercorp Metals Inc. (SVM:TSX; SVM:NYSE),

Silvercorp Metals

Chen said one silver stock he has been discussing in his newsletter is Silvercorp Metals Inc. (SVM:TSX; SVM:NYSE), a Canadian mining company that specializes in producing silver, lead, and zinc in China.

He said the company had US$200 million in cash as of the last quarter and is buying back shares and paying dividends.

Just last month, the company issued a bid to acquire 4.8% of its common shares.

"It has a low-cost silver mine in China that is generating free cash flow and used its strong cash position to buy OreCorp for a song recently," Chen said. "After the new gold mine gets into production . . . it will significantly increase its production profile and cash flow."

A feasibility study released in 2022 estimated that the project OreCorp has an 84% interest in, the Nyanzaga gold project in partnership with the government of Tanzania, could deliver 2.5 million ounces Moz gold (Au) over 10.7 years.

Mining entrepreneur Rui Feng is director, chairman, and chief executive officer of the company.

The company said 4% is owned by insiders, 32% by institutions, and 64% is retail.

Top institutional investors include Van Eck Associates with 4.77%, ETF Managers Group with 2.87%, Renaissance Technologies with 2.67%, and Global X Management with 2.42%, the company said. Feng owns 3.32%, according to Reuters. Cerro de Pasco Resources Inc. (CNSX:CDPR; OTCMKTS:GPPRF)

The company's market cap is US$403.22 million, with 177 million shares outstanding. It trades in a 52-week range of US$4.195 and US$2.145.

Cerro de Pasco Resources

A returning frequent pick of Chen's is another silver miner, Cerro de Pasco Resources Inc. (CNSX:CDPR; OTCMKTS:GPPRF), which is focused on the development of the El Metalurgista mining concession in Peru and the exploration of the Quiulacocha Tailings Project at the site and its wholly owned Santander Mine. 

The company is awaiting a rare easement for the tailings project from the country. It has signed a memorandum of understanding with Volcan Compania Minera to collaborate in the first phase of exploring the 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. Volcan will allow Cerro de Pasco rights to process materials through its processing plants.

"The significant potential benefits of the CDPR Quiulacocha Tailings Reprocessing Project are now acknowledged by key government entities, including … the Energy and Mines Ministry, as well as local communities and authorities," Cerro de Pasco said in a release.

"Then Glencore will fund their drilling program, and we should have very exciting results in the next three to six months," Chen said.

About 23% of the country is held by insiders and management, about 18% is held by institutions, and the rest is retail.

Top shareholders include LH Financial Services Corp. with 16%, Gordaldo Ltd. with about 10%, Executive Chairman Steven Zadka with 7.66%, Executive Director and Chief Executive Officer Guy Goulet with 2.79%, and President and Director Manuel Rodriguez with 1.22%. Soleno Therapeutics Inc. (SLNO:NASDAQ)

Its market cap is CA$28.19 million, with about 328 million shares outstanding. It trades in a 52-week range of CA$0.17 and CA$0.055.

Soleno Therapeutics

For Biotech, Chen said he is focusing on near-term catalysts after netting a big win with Soleno Therapeutics Inc. (SLNO:NASDAQ) (the company's stock jumped 500% from US$4.43 on Sept. 25 to US$26.80 the next day). Chen said he likes Aldeyra Therapeutics Inc., a biotech company looking for new therapies for immune-mediated diseases.

The company has announced that the Food and Drug Administration has accepted its new drug application (NDA) for topical ocular reproxalap for the treatment of dry eye disease.

"ALDX should have a positive FDA decision in November," Chen said. "It has a lot of cash and doesn't need to raise money. I like this situation here."

About 36% of the company is owned by institutions, and 21% by insiders and management. The rest is retail.

Top shareholders include Perceptive Advisers LLC at 19.37%, The Vanguard Group Inc. at 5.41%, State Street Global Advisers (US) at 5.19%, Knoll Capital Management LLC at 5.15%, and BlackRock Institutional Trust Co. at 5.07%. Chief Executive Officer, President, and Director Todd Brady owns 1.95%, Reuters said. TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX), 

Its market cap is US$371.5 million, with 58.6 million shares outstanding. It trades in a 52-week range of US$11.97 and US$4.9541.

TAG Oil

In the energy sector, Chen said he likes TAG Oil Ltd. (TAO:TSX.V; TAOIF:OTCQX), which just announced it has started drilling the horizontal portion of its first horizontal well in the Badr Oil Field in the Western Desert of Egypt.

The company successfully drilled the vertical pilot hole to a depth of 3,290 meters and performed open-hole logging, formation imaging, and pressure measurement, followed by cement plugback of the lower vertical pilot hole. It then proceeded into whip-stock drilling of build and lateral horizontal sections in the Abu Roash F (ARF) formation.

The shaft will target oil in the ARF reservoir. The lateral section of the horizontal well is expected to take three weeks and will extend more than 1,000 meters, the company said.

"The Company expects the well will be completed by calendar Q4/23," Research Capital Corp. analyst Bill Newman wrote in an updated research note on the company on August 30. "Based upon an independent resource report, a successful well is expected to initially produce in the 1,000 to 1,500 bbl/d (barrels a day) range."

The company has "great economics at the current oil price," Chen said. "I am hoping they knock it out of the park with 3,000 (bbl/d)."

Management and insiders own 27.14% of the company. Askar Alshinbayev owns 18.78% with 29.99 million shares, Abdel Fattah Z Badwi owns 3.36% with 5.38 million shares, Shawn Reynolds owns 1.49% with 2.38 million shares, Suneel Gupta owns 0.99% with 1.59 million shares, Toby Robert Pierce owns 0.95% with 1.51 million shares, Barry MacNeil owns 0.85% with 1.36 million shares, and Gavin Hugh Lothian Wilson owns 0.72% with 1.15 million shares.

Institutions own 10.93% of the company. YF Finance, Ltd. owns 8.14% with 13.01 million shares, Purpose Investments Inc. owns 2.15% with 3.44 million shares, and Novum Asset Management AG owns 0.64% with 1.02 million shares.

There are 159.74 million shares outstanding and 102.77 million free-float traded shares. The company has a market cap of CA$104.48 million. It trades in a 52-week range of CA$0.39 and CA$0.79. New Stratus Energy Inc. (NSE:TSX.V),

New Stratus Energy

Chen also picked New Stratus Energy Inc. (NSE:TSX.V), a Canadian oil and gas company focused on Latin America.

He said the company is working on three deals in the coming month or two, including a partnership with GoldPillar International Fund SPC Ltd. that is expected to lead to a joint venture into onshore oil and gas fields in Venezuela's prolific Eastern Basin. 

"There is a lot of excitement in the company, and if all is closed as expected, I see it can go back to over CA$1 by the end of the year and become the hot energy stock for 2024," Chen said.

The stock was CA$0.64 per share on Monday afternoon.

According to Reuters, about 2% of the company is owned by institutions, and 25% is owned by strategic entities.

Top shareholders include Victnico Investments LLC with 9.08%, Chief Executive Officer and Director Jose Francisco Arata with 4.99%, Independent Director Wuilian Mauco with 4.91%, Chief Geological Officer and Executive Director Marino Ostos with 4.18%, and U.S. Global Investors Inc. with 1.54%.

Its market cap is CA$77.44 million with 122.91 million shares outstanding.

It trades in a 52-week range of CA$0.94 and CA$0.14.

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1. TAG Oil Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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