Ninepoint Silver Equities Class
March 2018 Commentary
Volatility continued to plague the broader equity markets in the month of March. In our previous commentary, we had commented on the resiliency of gold bullion in the face of rising volatility across equities, bonds and currencies. This did not change in March as gold bullion rose 0.54% in U.S dollar terms. Over the same time-frame, the S&P 500 declined by 2.54%, while the Nasdaq Composite and the S&P/TSX Composite declined by 2.79% and 0.16% respectively. For the month of March, the Ninepoint Silver Equities Fund gained 1.76%, while the MSCI Silver Select Index (CAD) added 3.90% in the same period.
We view the recent increase in volatility as a symptom of broader shifts occurring across multiple asset classes. Equity markets are trying to figure their way around increased risks arising from rising trade and geopolitical tensions while also attempting to quantify the current economic backdrop. Let’s also not forget that central banks around the world are in a process of reducing their balance sheet, taking away the enormous amount of monetary stimulus markets had grown used to over the years. The current environment is exceptionally bullish for precious metals and while silver has languished, we have seen gold continue to behave exceptionally well as a result. This leads us to believe that silver is biding its time to shine. Based on our work, gold’s outlook, especially over the next twelve months could not be brighter. We see the metal primed for a move beyond $1400/oz in the coming months as the U.S. dollar continues its slide lower. This move would hugely benefit silver bullion and silver equities as they are seen as a derivative play on gold. We continue to believe that silver equities stand to benefit handsomely as the bull market in gold bullion translates into a bull market for precious metals equities at large.
The three largest contributors to March fund performance were First Majestic Silver, Wheaton Precious Metals and Fortuna Silver Mines. First Majestic’s stock recovered after a sharp sell-off in January and February post their acquisition of the San Dimas mine and the announcement of a US$150 million convertible senior note offering. Wheaton Precious also regained ground after an 11.6% drop in February despite First Majestic acquiring Primero Mining and its Mexican San Dimas mine. The deal removed the overhang on Wheaton Precious from Primero’s potential bankruptcy and restructured silver stream on San Dimas. Fortuna Silver reported a solid fourth quarter and continues to build its Lindero project in Argentina.
The three largest detractors from March performance were Industrias Penoles, Excellon Resources and Dolly Varden Silver. Penoles reported strong Q4 results, but corrected after performing well in December and January. Excellon continued to correct after reporting weak Q4 production and guiding to weaker than previously expected Q1 production. The Company will release a new reserve and resource report and new mine plan in April. Dolly Varden announced an $8.9 million exploration program for the 2018 season. The program will focus on resource delineation, particularly in the areas of new discoveries, but will also include exploration of the prospective mineral camp.
1 All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at March 30, 2018; e) 2012 annual returns are from 02/28/12 to 12/31/12. The index is 100% MSCI ACWI Select Silver Miners IMI (CAD) Index and is computed by Ninepoint Partners LP based on publicly available index information.
The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: capital gains risk; class risk; commodity risk; concentration risk; currency risk; cybersecurity risk; derivatives risk; exchange traded funds risk; foreign investment risk; inflation risk; liquidity risk; market risk; securities lending, repurchase and reverse repurchase transactions risk; series risk; short selling risk; small capitalization natural resource company risk; specific issuer risk; sub-advisor risk; substantial shareholder risk; tax risk; uninsured losses risk.
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