Silver Wheaton faces potential share sale by Goldcorp and equity offering for M&A
Posted: January 03, 2008, 8:06 AM by Jonathan Ratner
Shares of Silver Wheaton Corp. have risen 50% in the past six months and climbed more than 12% on Wednesday alone.
The miner, which gets all of its revenue from the sale of silver production from companies like Goldcorp, Lundin Mining, Glencore and European Goldfields, is benefitting from higher demand for the metal and related ETFs, as well as more interest from investors.
One of the issues that could cause overhang risk for Silver Wheaton shares in 2008 is the potential sale of Goldcorp�s 48% stake, which many consider a non-core asset, according to RBC Capital Markets analyst Michael Curran. As time moves on and as Silver Wheaton shares potentially climb higher, he thinks the chances rise that Goldcorp may look to sell some or all of its holdings.
Mr. Curran also noted that with only US$8-million in cash and US$446-million in debt at the end of the third quarter of 2007, Silver Wheaton likely does not have enough borrowing capacity to make further acquisitions. As a result, any such deals would likely require an equity offering, he told clients in a note.
Mr. Curran downgraded his rating on Silver Wheaton shares to �underperform� from �sector perform� for this reason, but primarily due to recent gains for the stock. His price target remains US$19
Would be interesting to see an analyst with enough sense to suggest SLW valuation with respect to Silver Spot Prices. Right now, whatever was said two days ago is based upon silver prices two days ago. The only way these guys can predict SLW value is to "ASS" "UME" future prices of silver.
This is just the most completely pathetic attempt to pick up shares for cheap. If case most here haven't realized, Silver Wheaton was 100% part of Gold Corp. The original name if the co. was Wheaton Gold. Wheaton Gold bought out 2 other Gold miners 4-5yrs. ago and then spun off Silver Wheaton and that is how Silver Wheaton was created. Wheaton Gold renmaed itself to Gold Corp and pretty much owns Silver Wheaton. They are not going to sell any part of Silver Wheaton, that idiot at RBC is just trying to get some cheap shares.
In other words, SLW is GG and vise versa. They are sister companies and directly tied together. How in the heck do you think they get all that Silver on the cheap for $3.90 from Gold corp!
That idiot did the best he could, I hope his big clients only got a fraction of the shares they seek. He is very misleading about their balance sheet/financial strengh as well. Any good accountant knows you hide real value and money flow for tax purposes. Silver Wheaton has about cornered the global Silver Market. They are the BANK for Silver miners. They have more CASH than most would know what to do with. In other words, they are loaded to the hilt.
Today's mining technology is very accurate at predicting what you can extract from a mine. We know SLW's proven reserves. The probable is right on whithin a 3% + or - range. This places their value at around the 6 billion dollar range. The profitability is just incredible and the future forcasts of SLW call for much increased Silver reserves over the next several quarters.
The big money just wants in, plain and simple. They have tried to pull a coup to get in cheap. They are accumilating as much as they can today and when they finish loading the boat, the stock will take off above $20 to higher and higher levels. Most of the intelligent here added on the dip today. Smart move. We might not like institutional bank methods at times, however the experienced trader knows that since the stock will be in fewer and fewr iron stength hands that will be holding for the very long term, the stock will take off even stronger than ever before when the uptrend continues. SLW will most likely go higher tommorrow than the level reached yesterday, I bought on the dip and am enjoying the cheap shares! Thank you weak hands!
Will still easily reach the target of $21-$23 anbd do it very soon. RBC better hurry, I imagine Goldman Sachs or someone else with more cloput will be giving an "upgrade" at any day now!
A couple of points on this article, some of which may have been covered already. Most important for last
1) Remember just less than a month ago, Goldman Sachs indicated gold was a sell, only to cover their short position to the lowest amount in 2 years.
2) When Barnes went out and got the line of credit for the penasquito acquisition, he was extremely proud of himself for not diluting the company shares. Go listen to his conference call on SLW website. He does not plan further dilution.
3) Barnes laid out his strategy in that call by suggesting, and don't quote me on this i'm going on memory, at something like $18-$22 silver, the line of credit would have been paid off--COMPLETELY! As silver spot approaches those price ranges, the line of credit is paid down, freeing up additionalline of credit for other CAP expenditures.
4)When Silver wheaton was formed, the entire executive of GoldCorp sold their holdings in GoldCorp and invested it all in Silver Wheaton. Look it up, don't believe me. See for yourself. Also, Goldcorp said after their last sale, which was about a year ago, they have no intention of selling anymore for the foreseeable future.
5)As a swing trader, I analyse the tape at the end of the day. RBC took their position in SLW on the Canadian market no more than 3-4 months ago, as I remember it. I have to check my notes but At the time, I don't remember them taking up more than 1.5 million shares. Today is the first time, I've seen them as a large net seller but still not by much. They wouldn't put a underperform in to drop the price on their 1 million plus shares unless they were trying to pick up more. Then again, they could have gotten out under anonymous but I don't think so. Their PM trading desk is pretty good. They are trying to pick up more long term.
6)Basic trading rules tell you that you do not sell on a new 52 week high breaking through with volume and with at least 1% follow through. Silver wheaton did all those things yesterday. $17 Canadian is now a bottom.
7)When an analyst puts out a report, it is weeks in the making. He didn't write today. He finished it a week or two ago, and had his superior go over it. Well, he just got egg on his face because he wasn't factoring in a break out of gold with 1% follow through that occured yesterday. If his report wasn't ready yesterday, you could be dang sure it would have been revised before release
This just plain insight and it is great to see another very knowledgable trader on this board that knows and understands the history behind GG/SLW!
Ok even though I know the reason behind that pathetic and ridiculous article by RBC today, I was trying to find a "connection" between RBC and SLW. Surfing around, I ended up going over to Silver Wheaton's website http://www.silverwheaton.com/ and was looking around and behold! at the bottom of the first page I found this./
December 11-12, 2007 RBC Silver Conference
RBC Capital Markets is hosting a silver company conference for institutional investors over two days, one day in New York and one day in Toronto. Peter Barnes, President and CEO of Silver Wheaton, will be presenting on both days. More details to follow.
RBC must have had to shell out a few bucks to host this Silver Co. conference in New York and Toronto in succesive days and who was one of the lead speakers? Peter Barnes CEO of SLW!
Just another inside job IMO for the really big hedge funds to try and get some very sought after shares on the cheap. Even with this "shakeout" the buys where far bigger than any of the sells. Biggest sell was 23k I think. The biggest buy was 43k! Doesn't matter to me and I expect something like this when a stock becomes very desirable. In the long run it just makes the stock stronger, for now SLW is in fewer and fewer iron strong hands that will be holding for the long term.
The smart loaded up on more shares,(like me) as I can see. Very smart move. Silver is now above $15.30(it closed at $15.15 yesterday), higher than where is was yesterday when the price of SLW reached the $19.15 area. Manipulation to get cheap shares and since Silver is 16 cents higher than where is was yesterday, we should see a gap and run tommorrow!
We will most likely see a very down day for the DOW tomorrow as a dismal job report will be out and most day traders pull their money out of the market and place it in cash(they should buy Gold and Silver and their related mining stocks) for the weekend.
We just pulled back the bow today and will release the arrow tommorrow, would be suprised if we are above $20 and Silver Contracts above $16!
Great points.. This young analyst will learn the lesson the hard way with eggs already on his face. Given his experiences (only 1 former employer - CIBC, and a CFA charter), he must not be old enough for diapers when last time silver broke up to $55.
SLW is a high-strike call option on silver. Discount cash flow models taught in CFA courses don't come even close to being useful in evaluating PM shares.
"Mr. Curran downgraded his rating on Silver Wheaton shares to �underperform� from �sector perform� for this reason, but primarily due to recent gains for the stock. His price target remains US$19."
So this brilliant analyst Michael Curran says if the stock goes up you should downgrade it. This "analyst" needs to go back to school and learn how to analyze. SLW stock price depends solely on the selling price of silver bullion, which I predict is about to explode. Yesterday, SLW made an all time high for a reason. The smart investors believe Ag will go much higher. If you have any dry powder, get on board now. GLTA.
I'm not sure why GG would want to sell SLW. They could face a lot of criticism is silver then went ballistic. SLW is GG's way to get max value from their silver streams. That's why it was created. Why sell it and get rapidly depreciating dollars? I don't think they're hurting for cash.