Shares of prospective silver miner Alexco Resource Corp. (NYSEMKT:AXU) are down 13.9% as of 11:00 a.m. EDT today. While there was no specific news from Alexco about its mine development, the stock move comes as the price of silver is tanking as well.
Alexco Resource is a company looking to develop a new silver mine in Northwest Canada. Without a revenue-generating asset, much of its stock price movement is likely going to be predicated on the price of silver. With the price of silver down 4.1% today to $18.74 per troy ounce, there's little surprise that its stock is taking a hammering.
Investing in small-cap mining companies looking to develop a new site is always a roller coaster ride. On top of all the legal, financial, and operating hurdles a company has to clear to execute its business plan, the price of that mine's target resources is going to send its stock all over the map until the mine is operational.
Even if we ignore commodity price movements for a moment, the investment case for Alexco is shaky at best. This is a stock that has been public for more than 10 years and is still doing prefeasibility studies on the prospective site. Miraculously, though, those early estimates just so happen to assess the site as having an internal rate of return of 84% with silver as low as $15.00 an ounce. One would think that a mine that attractive would be further along than it is, but yet here we are.
Stay away from the siren-song investor presentations; they are where your capital goes to die.