Maria Smirnova runs the only silver equity mutual fund in North America. Her $278-million Ninepoint Silver Equities fund was the brainchild of Eric Sprott, her former boss, mentor and now a mining financier, who has long been a bull on “poor man’s gold.” But soon after the fund’s launch in 2012, silver fell into a bear market. The metal shot up in price after COVID-19 took hold last year, however, and silver producers’ shares have soared. We asked the 43-year-old, who also co-runs Ninepoint’s Gold & Precious Minerals fund, why U.S. President Joe Biden’s green energy agenda is a tailwind for silver and whether bitcoin is a headwind for gold.
Gold has bounced around its 2011 peak of about US$1,920 an ounce in recent months. Silver also peaked in 2011, near US$50 an ounce, then sank, but has been volatile lately amid bets by retail traders in Reddit’s WallStreetBets forum. What’s your outlook?
We don’t have price targets on the metals, but our outlook is positive given the macroeconomic picture. Both metals will benefit from a low to negative interest-rate environment and a depreciating U.S. dollar. We see more monetary and fiscal stimulus being deployed globally to generate economic growth, but this may also lead to inflation in the future. Investors may see gold as a safe haven and an alternative to fixed-income securities. Silver is more volatile than gold but tends to perform better in bull markets. It will benefit from an economic recovery—because of its industrial uses—and from investment demand. Last year, silver exchange-traded funds took in more than 280 million ounces of silver.
How will Joe Biden’s US$2-trillion plan to fight climate change affect silver?
It’s positive for silver, but we don’t know how many initiatives will get passed by Congress. The metal is used in solar panels because it is one of the best conductors of electricity. Tax credits for buying residential solar installations will help silver demand. It is used in all cars and trucks but more so in electric vehicles, which Biden wants to push. His call for 500,000 EV charging stations can help silver because it’s used in their construction, and they may also be powered by solar panels.
Your silver fund holds stocks such as Pan American Silver, which mines silver, gold and other metals, and Newmont, the world’s largest gold producer. Why the other metals?
Pure silver plays are almost non-existent. Silver is mined as a byproduct of gold or with base metals, such as lead, zinc and sometimes copper. But some silver companies also acquired gold deposits to diversify during the bear market. They struggled to make money when silver traded at around US$16 an ounce. Until last year’s rally in the silver price, there was not a lot of money to invest in exploration and development. Now there is new life in the sector.
Junior silver miners, such as Discovery Metals and SilverCrest Metals, are among your top 10 holdings. How important are juniors to your fund?
The silver fund has about one-third in exploration companies. Large miners focused on silver or gold are struggling to grow production. We think they will have to buy juniors to provide future mines. We haven’t seen a big wave yet because the COVID-19 pandemic forced companies to pause their due diligence processes. We don’t bank on mergers and acquisitions—it’s the cherry on top.
Bitcoin, often called digital gold, has attracted more institutions and legendary U.S. investors, such as Paul Tudor Jones and Stanley Druckenmiller. Is it a headwind for physical gold?
Bitcoin has been a headwind for gold to the extent that it has attracted investment dollars. It may well have an increasing role in financial markets, but I don’t know how to value it given bitcoin’s digital nature. It doesn’t even have a universal price, because it trades on multiple cryptocurrency exchanges at varying prices. An attraction is that it is unregulated, but an arm of the U.S. Treasury is trying to tighten regulations around cryptocurrencies. I don’t view bitcoin as having a store of value like gold. The metal has played that role for several millennia.
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