I highly doubt that the glamis deal will go through. Even if it does, it will come at the cost of SLW stockholders by way of extreme dilution. That's Telfer's way of growth.
I don't see a rosy side to SLW.
I don't follow the dilution of SLW related to the Goldcorp deal with Glamis ... dilution ... there will be no dilution to SLW.
To my understanding, SLW and GG are distinct entities.
Is GG tendering SLW shares for Glamis?
SLW only stands to gain if more oz's of Ag become available under contract.
In the light, a low price of Ag benefits all SLW shareholders as the contract price that SLW buys can be negotiated at a lower price.
In the long run SLW will becaome an ATM for all that will invest.
PS Long SLW and Ag. Just so you know.
The merger is a sweet deal for SLW! GG are paying too much for Glamis just like Rob McEwen said, GG board has almost no shares in GG but I bet they have lots of SLW. SLW will get the silver and even with a dillution it will come out on top.
Anyone who can understand the business model will realize this thing has the potential to go to the moon.
Oh by the way, thanks for the rating.
To all the shorts, brace yourself, this is going to turn into a rough ride, earnings are approaching and this is going to be a good one.
Short this stock?
Me thinks it's reality check time ... new 52 week high ...
you bet, as stated before this company is awash in cash.
If your going to bet ... you gotsta bet on management.
Vilmuchka loves SLW and Ag too.
SLW won't have enough cash to get all that silver from GG. Also GG won't sell silver at a major loss.
If they sell silver at 3.90 then SLW will have to delute quite a bit BUT it's possible that will be done so GG gets the shares instead of SLW going for financing to another party. In that case GG's interest in SLW will grow to maybe 70% or more.
If GG sells silver at 6.90 there will be less delution and SLW might issue some shares to GG and a cash payment. Either way this merger is made for SLW. :)
So let's say the NewGG sells SLW 300 million ounces of silver over the next 20 years. What do you consider a fair price? How many shares of SLW do we sell to NewGG, how much cash up front and how much per ounce for the silver as we take delivery at a rate of 15 million ounces per year?
Will there even be 300 million ounces from the new mines coming online starting in 2008?
What are your thoughts?
Live and learn...
GG has always borne the brunt of the cost of mining period, and sold silver, per ounce, at a fixed rate to SLW. Why should now be any different. After all, GG owns 60% of SLW, and that is where they make the extra profit. There will be no dilution, because it would cut into GGs profits from SLW. Any adjustments will be in the price per ounce that SLW pays GG. Look for one hell of a rise in the PPS of SLW, as this Glamis deal comes together.
Go to the website and review the WHT take over and the following year. Very eye opening. SLW is about to make a killing.
GG isn't going to give the silver to SLW for "free" and hope that the appreciation in SLW share price alone would offset the loss of silver income for GG. SLW will either have to pay for it and right now looks like they just don't have the funds since they had some 52 million as of June so now maybe around $75. They would have to dilute and either go through institutions or do a private placement through GG and therefore the new shares that would be issued would go directly to GG and that would raise GG stake in SLW from 60% to 70-75%??? This way GG can sell silver at cheaper price and the loss of income from silver sales would be offset by their increase holding of SLW stock which also should greatly appreciate in price.
Original deal that was done with GG was to keep CDE from the hostile takeover of wheaton IMO, and the BOD benefited greatly from it and so did GG. And it only makes sense that BOD and GG entity benefits from selling silver to SLW for low price, other wise why sell to SLW.
You do not know what you are talking about. The silver deal with SLW had nothing to do with CDE...??? You have your facts messed up. SLW will buy the silver per ounce from Glamis/GG, just like the rest of their deals. Its not for free. Did I say it was for free? I have owned this stock from the first day of its existence. Long WHT for 3 years before the buyout. Now, you were saying?
SLW came to be as a result of CDE trying to take a run at WHT. The other theory is that WHT spin out SLW so that it's worth was fully appreciated by the market but if that was the case, they would have spun out copper instead of silver and kept WHT a pure PM stock. Anyways that is history now.
And this takes us down to the present merger. SLW has much to gain from this merger which I never said GG would give silver to SLW for free, thus the word free was in quotes. If GG is to sell silver to SLW at 3.90/oz SLW would have to pay at least another $5/oz in cash up front and SLW just doesn't have that amount of cash at present time, that's why I stated the dilution and if this all stock deal went directly to GG, GG would benefit and so would we. If they sold silver at 6.90/oz and $2oz up front, it still doesn't add up. Taken from Glamis site: http://www.glamis.com/main/?en&resources GLG has some 40million oz of silver from Marlin mine alone and with only $2/oz up front that takes us to around 80million. That's not even touching the Penasquito project.
If they buy silver at 9.90/oz from GG right now I would be surprised if the market would be so upbeat about the deal since the general market isn't too bullish on PM at this point. As Paul van Eeden suggested that the US recession could also hit PMs in the initial pullback stage and if so the silver could drop below $10/oz and therefor create losses for SLW! Mind you if silver was $15/oz and deal was for $9.90/oz then things would look different. As at present this is all speculation as to what GG will do but what numbers do you see for any possible deal without a major dilution of SLW stock????
I agree with most of what you've said. SLW is NOT going to get silver from the NewGG for the $3.90 that they have in prior deals...and what most people forget is that,yes, they are paying $3.90 per ounce, but the also coughed up a sizable chunk of money upfront..a total that makes their purchase price per ounce approximately $7.50 per ounce (I could be a little off in the actual price per ounce). And that's similar to what they are going to have to do again, to get a sizable (300 million ounces over say 15 years)chunk of the silver from the Penasquito project.
I'm thinking they are going to have to sell 100million shares of SLW (if this is even possible), a dilution of nearly 50%..and this would raise about $1billion...this would go a long ways towards the construction costs the NewGG will incur. This equals out to about $3.33 per ounce up front...then would then have to pay (for the sake of simplifying the math) about $5.67 per ounce upon delivery of the silver at a rate of 20 million ounces over the life of a 15 year contract. And if silver is at a price of $12 per ounce, I think earnings would roughly be $.55 per share. I don't know if they can swing something like this on this scale because of all the variables...but if they could....WOW. We'd be looking at a $25 stock, minimum...and if silver takes off to $20, $30, $40 per ounce....look out.
Is this along the lines of what you were thinking?
Live and learn...
Interesting analysis guys.
If and when a deal is made for the Ag oz's it all comes down to one thing ...
the price of Ag.
But it does have the potential to turn into something big.
Thanks for the posts.
Food for thought.