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Alexco: A Silver Lining?
11/30/2016 7:00 am EST
I believe that, on balance, the Trump administration will be a boon to the economy. But anyone who thinks that it will be accompanied by any semblance of fiscal conservatism has another think coming, cautions Brien Lundin, editor of Gold Newsletter.
As a result, I don't think the short-term decline in gold will last much longer. Longer-term, the massive government spending coming down the pike will assure a dollar devaluation at some point.
So while gold is facing some severe headwinds right now, it seems the wind will turn its back over the coming months.
Alexco Resources (AXU) is a solid silver play that offers a number of paths higher. The company controls much of the historic Keno Hill Silver District in the Yukon.
Over 217 million ounces of high-grade silver were produced here from 1013 to 1989.
Alexco brought the Kellekeno Mine back into production during the last silver price run-up, from 2011 to 2013, but was forced to shut down production when silver prices dropped.
At that time, the company had secured a big silver streaming financing from Silver Wheaton (SLW), but that deal ceased to be economic for Alexco.
However, they are likely to announce a revised deal with Silver Wheaton. There are no indications of how this deal might be constructed, but it's obvious that a win/win deal must be reached for both parties.
If Alexco doesn't go back into production, Silver Wheaton won't get paid anything. If the terms of the deal are too onerous to Alexco, they can't go back into production.
So a resolution will happen — the market just doesn't know yet what the terms or the timing will be.
Some of these are risk factors that have been holding them back but, once resolved, should result in a significant rerating of the stock.
If you like silver, Alexco offers a unique degree of leverage, with the potential to increase resources, raise the average grade, remove a significant risk factor with Silver Wheaton and progress into production.
Given the current environment, there's no need to chase the stock. But far-sighted investors will begin accumulating Alexco now.
By Brien Lundin, Editor of Gold Newsletter
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