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Silver Wheaton Corp. Message Board

  • investora2z investora2z May 24, 2013 7:13 AM Flag

    Rangebound phase of consolidation

    The gold and silver prices are trying to show some resilience. If the recent lows manage to hold, then the stocks may be able to move towards the upper end of the range. There are some signs that there may be a little more confidence that these stocks will hold the recent lows. The corrections were deep, and weakness in precious metals had made people extra negative. The results for Silver Wheaton were below expectations on a yoy basis. While the revenues went up marginally, the net income went down by 9.7%. In the last quarter of 2012, the revenue and net income had grown by 50% and 23% respectively. On a qoq basis, the revenues and net income declined drastically (by 29% and 25% respectively). The acquisitions of gold streams of mines in Brazil and Canada increased the leverage and also decreased the cash available with the company. However, all this is in line with what is happening with other gold / silver companies. Leverage has increased in other companies and some other companies are also trying to take advantage of low valuations of gold and silver assets in the market. e.g. Franco-Nevada (FNV) had purchased some royalty rights in development stage assets from Midas Gold. Other development stage companies like Pershing Gold Corporation (PGLC) are also available at cheap valuations for investment. Pershing Gold is about to start production in 2014, and is available at valuations which are lower than that for early development stage companies. These deals are a win-win and help both the party's long term interests. The business model of Silver Wheaton gives it high margins at low risks. Thus the stock may be able to turnaround pretty quickly if the sentiments improve. So the recent lows can be an entry point, but with a definite stop loss in mind. The underlying condition is that nothing terrible should happen to prices of precious metals.

 
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