For PM Bulls: Are Streaming Companies Relevant Long term?
If you're like me and believe that PM's are going a lot higher over the next several years due to governmental monetary and fiscal policies, I'd like to know what you think about the following. Many in the PM sector say that streaming companies like SLW are a safe bet to ride the wave in the silver market because they don't have to concern themselves with the heavy costs and risks associated with mining. Right now, with prices subdued and the PM market still not mainstream, that makes sense to me. Miners need financing for their projects, and with the general public sentiment of PM's being still quite low, they may not be able to get the necessary funds from traditional business loans or through equity financing. Streaming companies fill that need for the miners. But my question is, what happens when, as I believe, the bull market in PM's goes mainstream and enters the public mania stage? What happens when everyone you know, and even the CNBC anchors begin to realize that PM's are the place to be? The way I see it, while the streaming companies will be making good money on their existing agreements with the miners, their ability during this mania stage to secure new agreements will be greatly undermined due to the massive interest in mining shares by both individual and institutional investors. It seems to me that this increasing investor interest will negate the need for miners to part with their metals via a streaming deal. Why enter into an agreement with a streaming company when you have more than enough financing from equity sales and every bank in town is lining up to loan you money at low interest? So what I'm saying is that SLW looks like a good company in the current environment, but when the tide changes and PM's become the hot commodity, their services are simply not going to be needed by the miners until the bull market in PM's comes to an end. Any thoughts?
SLW business model makes it the best way to play the metals. The miners do all the work and SLW gets the gravy. They pay about 4.30 per ounce for silver. Its virtually impossible for SLW to lose money.
Trouble with miners getting loans from traditional banks is bankers dont have the knowledge or expertice about the mining business to venture the loans. Would you loan money to someone who told you he had this really cant miss gold mine somewhere in South America ? Amazing SLW is up 18 cents now where I figured it would be down a dollar or two this morning.
SLW and SAND don't make streaming deals with any just Joe Shmoe who claims to have a mine either. They look at your track record and your financials and make a decision based on that information. Do you really think Nolan Watson has an extensive knowledge of geology and mine engineering? He is a financial analyst. A damn good financial analyst, but a financial analyst nonetheless. Any bank that would loan to a mining company has financial analysts that specialize in analyzing those types of companies. That is what Nolan Watson does. But I'm thinking his business model, while currently very profitable, may become practically irrelevant if PM prices really start to take off.