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Silver Wheaton Corp. Message Board

  • ultrahighendcomputers ultrahighendcomputers Sep 27, 2010 8:47 AM Flag

    Why does silver streaming exist? PLEASE HELP!

    Why would a sane, often well financed company, sell part or ALL of its mine production at absurdly low prices to SLW?
    They say its to raise capital and allow expansion.
    Yet can't these companies, like GG and NEM get a bank loan based on proven reserves? Or just go out into the futures market and sell future production in advance? Or issue more stock? There are so many ways to raise money.
    Why give away 25% of a mines production at $4 an ounce? Meanwhile it sells at $21 an ounce.

    Its as if SLW has a business model that is nearly perfect. They have fooled or tricked a group of mining stocks into basically giving away massive amounts of production at 20 cents on the dollar. SLW just sits back and prints money.
    How did SLW trick these companies into these absurd agreements?
    They do not seem to be mutually beneficial, they seem totally one sided for SLW. Especially in a bull silver market.

    If I were a SLW customer, I would try to void my agreements. Its as if these miners got scammed.

    Can anyone explain this?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • The big difference is that it is not a fixed amount that SLW gets in return for their payment. There is no loan amount carried on the books of the mining company as a liability. SLW does not have a mortgage or any collateral that they can forclose on. SLW is more of a 1/4 partner in the mine or 1/4 owner of the silver in the ground. What they pay is mining expense as they already purchased the rights to the silver.

    • Of course, SLW gets reimbursed -- with the right to recieve product at a contracted rate.

      You may think of it differently, but what SLW does is finance mines in return for a deferred payment of the mines' product.

    • Unfortunately for me I have to see your bile when get on the message board and I'm not logged in.

      Petey are you really 50 years old??? Because the way you post makes you sound like your 12.

      Let me ask you another question... why do you come over to this board and make claims that silver is better than gold but on the AUY board you post only pro gold nonsense? Not that you even own any gold (but that's beside the point)... but are you really that two faced?

    • Yeah, simple some of these are the same Num-Nuts that hedged gold at/below $300.00. What do you expect

    • Isn't this about 89th time you said you would put me on ignore, and then failed to do so? What's broken here, your ignore button or your word? If you were a man of your word, you would stop making stupid comments about my posts that are not directed at you, to swine. Now go home and have mac and cheese with the naggy and your three little mopheads. Oh, I understand the young one needs new braces......har har har!

    • Why does the farmer bother selling his vegetables to companies that can/package them to sell to the public at higher prices?

      • 2 Replies to batmansquared
      • Thats a terrible example.
        This is a commodity. Most commodities can be stored almost indefinitely.
        They are portable, and uniform.

        The price of a silver bar fresh smelted out of the ground, and one that is in a coin store, is essentially the same.

      • miners don't want to sell forward their silver (hedge) because they have to deduct losses from their hedge books every earnings period (it shows as a mark to market loss). So if they hedge, and the price of silver goes up, they now have a loss and look like crap, and they don't get any bonuses

        If they stream, its basically the same thing but they don't have to mark it on their books the same. Call it an accounting gimmick if you will; same affect but less downside.

        so as an example, SLW paid GG something like $500M up front for 25% of their production plus $3.90/oz. when the deal went thru, it came out to something like $8/oz. When silver went down, their was talk that SLW had too much debt and they had to sell a bunch of (cheap) shares under $10/sh to raise capital to pay off their loans. Not that silver is "high" it all looks good in retrospect.

        If SLW was to do that same deal with GG now, they would probably have to pay $900M up front and $3.90/oz

        Every miner now wants no hedges on their books to have maximum leverage to the price of whatever it is they mine.

        so in summary, this is a better accounting method than hedging.

    • Petey,

      Can you please go post on a bathroom wall at a truck stop or at an interstate highway rest area and not here?

      The mere sight of your handle when I log into Yahoo is enough to give me the dry heaves!

    • There are lots of gold and silver mines for sale. For less than $1 million you can buy a good one.

      Then all you need is $100 million to develop it. No bank will loan you $100 million against a mine that you bought for $1 million. That is especially true when it will be several years before you can make the first payment.

      If you know about mining and are capable then SLW will buy ¼ of the silver from the $1 million mine for the $100 million and pay you the cost of mining their silver. That sounds like a pretty good deal to anyone who wants to get into the mining business or expand his or her mining business.

      • 1 Reply to tburke1932
      • SLW doesn't do business that way.
        SLW make sure its 100% proved of Silver under the mine, SLW do business with well established gold miners like ABX and GG.
        Some mines already in production more than 100 years with steady records...
        It just similar to loan the money to a high tech company...
        Except SLW do not invest or loan to start up...
        It signed contracts with Google, facebook or Dell and Microsoft at early 1980s/1990s...
        Very bright people, huh!?

    • 1. SLW doesnt pay $4, its downpay + $4 per ounce.
      If the house value go under the real value (short sale status), then SLW will go foreclose or bankruptcy.
      2. Gold miners are gambling with this wave of gold price ascend, they know gold is going $2,000 or $3,000 they want to get most out of it.
      Soon they will all offering stock shares, by receiving money from SLW, they tuned up the balance sheets.
      (Poeple only care their cost of gold per ounce.)
      3. Silver is not sell at $4 + downpay (thats what SLW pay), its $4 + downpay + service.
      This new service is what SLW management offer.
      For other miners: its installation fee + digging cost ($4) + selling.
      Silver comes out of ground as a by product, you need to make it into a Silver bar then transport to market.
      4. If Silver price go down below $10 or $13 SLW will start losing money. SLW need to pay employees paychecks. It's not an easy entry for new comers.
      Service doesn't come free.
      Just like Dell computer in 1995, new service.
      Everybody sell computer, some even made those companies, anyone still remember CompUSA ?
      Where it is? But,Dell survive.
      I invest in SLW is because SLW management team is doing a great job, very bright people.
      I invest in SLV (too) for Silver itself.

      • 1 Reply to diehardtrader_1999
      • ultrahighendcomputers ultrahighendcomputers Sep 27, 2010 10:55 AM Flag

        This is a very good reply.
        Can you be more specific? $4 plus downpay plus service?
        You are putting that total at $10 to $13 total cost?

        Can you break that down to more specifics? Like $4 plus $4 downpay plus $2 service equals approx $10?

        The gross margins reported by the company are 76% according to their reports. How do these margins correspond with your numbers?

        I agree that SLW is the best streaming company and that there are no others doing anything close to them. I am sure its not an easy market to enter into.

        Is there a way to calculate the total value of all the streams that they have agreements on?

        But I am curious why mining companies need to stream at all when they can estimate production and just sell future production on the futures market. The 2014 silver is selling over $22. If you know you will have 2 million OZ of silver from a new project in 2014 and you are just starting today, you can estimate that in 4 yrs you will have that to deliver.
        If you miss your mark, you still are close and you cover the difference.
        But you get the full $22 NOT an absurd $10-$13.
        Please explain why large well funded companies use SLW at all?

    • Long Term Contracts can be broken. When the price of silver breaks thru $30 the companies selling their silver at $4 an ounce to SLW will wise up hold back production or renegotiate new contracts. Think ahead if silver Hits $50 an ounce SLW will be out of business.

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