I hope youre right in that this is the final shakeout before SLW starts heading north again. I'm getting the same feeling.
It seems the only real problem with SLW is the delivery schedule from the mines. Is there anyway SLW can write into their agreements some kind of minimum annual delivery amounts...since most contracts are of 18-20 years in length, the mines have no pressure to provide 1/18th or 1/20th of the agreed upon production level, every year. I guess in an environment where the price of silver is expected to increase well into the future, this might be fine, but most bull markets aren't going to run for 18-20 years. Any ideas to possible solutions to this timing problem SLW is having every quarter?
The more of these deals SLW signs the less dependant SLW is on any one mine...which should flatten the impact of these delivery problems. There just doesn't seem to be any incentive for the mines to meet these production shedules....especially if everyone is of the belief that the price of silver will be higher this time next year, and higher the next year etc.
cash flow and EPS is a major incentive to the producers, their investors look at cf and EPS, not the balance sheet.
SLW has minimums in place but the risk is the mine is delayed going into production or production drops or is halted, which is why SLW is not the 30s today. As more of these mines come on stream, SLW will lower its risk profile and its leverage will scale to its earnings.