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« Silver Prices set to rise higher | Main | Endeavour Silver Corp: Production Up a Whopping 63%! »
Sunday
Apr292007

Silver Wheaton: Good Results

SLW Logo
Silver Wheaton is a new innovation in that it is a silver only company and does not own or operate any mines.

As we have stated before Silver Wheaton’s total revenue is derived from silver sales, which it acquires from gold and base metal mining companies as a by-product of their operations. This is the only company that we are aware of that operates in this manner. Its position is unique in the market place. By placing contracts with other miners for their silver at favourable rates and selling on to the general market they have created a terrific niche for themselves.
Having silver purchase contracts with five separate mines, the Company expects to sell approximately 15 million ounces of silver in 2007, growing to 23 million ounces by 2009.

Silver Wheaton is un-hedged and well positioned for further growth, which is something that is attractive to us as investors who want exposure to the price of silver in the coming Silver Bull Market.

In their latest news release the company have stated Net earnings of US$24.9 million (US$0.11 per share) from the sale of 3.3 million ounces of silver, an increase of 80% compared with US$13.8 million (US$0.07 per share) from the sale of 2.7 million ounces of silver in 2006. The operating cash flow has more than doubled from US$13.9 million to US$29.9 million.
The good news does not stop there as Silver Wheaton has also announced a couple of new deals, which will add to silver sales going forward. The first is an agreement to acquire 25% of the silver produced from Goldcorp’s Peñasquito project located in Mexico for the life of mine. This has cost them US$485 million in cash. In addition, an ongoing per ounce cash payment of the lesser of US$3.90 and the prevailing market price is due (subject to an inflationary adjustment), for silver delivered under the contract. So with the price of solver at say $15/oz then the company stands to make $9/oz on each ounce.

The second deal is similar to the one above whereby they have an agreement with Hellas Gold S.A., to acquire all of the silver produced from Hellas Gold’s Stratoni mining operations in Greece for the life of mine. This has cost Silver Wheaton US$57.5 million and an ongoing per ounce cash payment of the lesser of US$3.90 and the prevailing market price is due (subject to an inflationary adjustment), for silver delivered under the contract.

With more deals to come according to Peter Barnes, President and Chief Executive Officer of Silver Wheaton, the future is looking bright for the company.


Taking a look at the overall financial structure Silver Wheaton has a Market capitalisation $2.53 Billion, P/E Ratio 28.75, outstanding shares 221 million, share price US$11.43. Considering that the whole show is run by half a dozen staff this a unique business model.

Chart

Silver Wheaton Chart 28 April 2007

In conclusion we are pleased to own some of this stock and will continue to accumulate as and when our cash situation permits.

Silver Wheaton can be found on the NYSE and the TSX under the symbol SLW.

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