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Silver Wheaton Corp. Message Board

  • benbernankie benbernankie Apr 22, 2011 12:01 PM Flag

    SLW News

    TORONTO, April 21 (R e u t e r s) - Silver Wheaton could close new deals within six months as it seeks to become the world's top silver producer, confident that wary miners will seek out its financing model once soaring prices flatten out.
    Silver Wheaton pioneered a business model where it provides up-front financing to miners to build projects in exchange for the right to buy the silver by-product at the time of production, something known as stream deals.
    The model has worked well for the company, which has grown from 9.7 million ounces of silver equivalent in 2005 to 23.9 million ounces last year, without mining a single ounce. It was one of the top 2010 performers on the Toronto Stock Exchange.
    "I see us continuing the strive towards 100 million ounces a year in silver production," Chief Executive Randy Smallwood told R e u t e r s in an interview. "We'll be at about 43 million ounces by 2015 with our current portfolio, so I believe that that's an achievable target."
    But to keep growing Silver Wheaton needs to secure new deals -- a daunting task as rising metal prices prompt mining companies to shun hedging and stream deals and hold on to their silver.
    Smallwood, who helped found the company in 2004 and took over the top job this month, said interest in stream deals has never been higher.
    "We're in discussions with quite a few companies right now," he said. "I'm hopeful that we'll close some acquisitions in the next few months, within the next six months or so."
    "But I won't commit to it," Smallwood quickly added. "Mainly because the silver prices are so volatile."
    Silver hit a 31-year high of $45.71 an ounce today, as worries over the U.S. economic outlook increased the allure of precious metals as safe-haven investments. The price of silver, which also has industrial uses, has more than doubled in the last year and most analysts forecast $50 an ounce by year-end.
    This rapid rise has translated to huge profits for Silver Wheaton, which pays about $3.90 an ounce for its silver at the time of production.
    "What we've seen over the last several months, as silver has gone through this dramatic growth, is companies are very interested in stream financing," said Smallwood. "But they want to wait for some stability in the silver price."
    SECURING STREAMS
    Smallwood, an avid skier and a geological engineer by trade, said he is bullish on silver, but the price won't keep going up forever.
    "Every commodity is cyclical -- and silver's no different," he said. "We'll see some down cycles in the future.
    Once silver starts moving down, Smallwood expects a "flurry of deals", as miners try to lock in top value for their by-product rather than hanging on to it.
    "As long as there's mine construction or mine development going on in the world, there will always be a need for capital to help fund that," he added.
    Shares of Silver Wheaton were up 1.18 percent on Thursday at C$40.25 on the Toronto Stock Exchange. Shares are up over 30 percent in the last 90 days. (Reporting by Julie Gordon)

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