Silver Wheaton: Big Upside Here

Silver Wheaton (SLW) announced fourth quarter ended December 31, 2015 total revenue of $200.5 million, up 43 percent year-over-year from $140.4 million during the same period last year.

Silver Wheaton declared fourth quarter of 2015 adjusted net operational earnings of $57.4 million or $0.14 per share, up 10 percent year-over-year from $52.0 million or $0.14 per share in fourth quarter of 2014.

The global silver mining company reported somewhat healthy year-over-year growths in both its top and bottom lines primarily driven by slowly but steadily improving global commodity demand and pricing environment.

The strengths

Silver Wheaton has significantly well-diversified production among the key precious metals with total forecasted gold production for 2019 projected to increase compared to the forecasted gold production in the fiscal year 2015 which further enhances the overall value of the company’s metal production portfolio.

Silver Wheaton has a total of 22 operating mines with 7 ongoing development projects through strategic partnerships with other major precious metal miners including, Vale, Glencore, Goldcorp, Barrick, Lundin, Eldorado, Hudbay, Pan American, Primero, Capstone, Alexco and Sandspring that has impressively diversified the company’s key metals production portfolio with smaller political risk.

A strong production profile

Silver Wheaton has uniquely transformed its production profile to superior-quality asset base with smaller cost production and nearly 24% of production growth from 2015 till 2019.
Importantly, over 90% of Silver Wheaton’s key production is achieved from high-quality assets in the minimal portion of the company’s total cost curve.

The superior-quality asset base of Silver Wheaton includes, existing cornerstone assets of San Dimas strategically acquired in 2004 and recording the total projected silver production for 2015 of 6.6 Moz at AISC of nearly $680 per oz Au equivalent, assets of Penasquito acquired in 2007 with 2015 total projected silver production of 7.3 Moz, Salobo mine assets acquired in 2013 or 2015 with a total mine life of over 40 years and initial 10 years average gold production of estimate of 140Koz.

The impressively well-diversified key metals production profile of Silver Wheaton provides the company with significant revenue streams while allowing it to maintain an extremely attractive and lower cost structure in addition to minimizing the impact of global cyclical slowdown which usually forces such companies to postpone strategic capital expenditure programs to preserve cash.

Globally, the largest precious metals streaming company has strategically signed agreements to fund other major silver producers to get the rights for purchasing entire or some of the company’s silver or gold production at an extremely smaller price from superior-quality mines in the U.S., Canada, Guyana, Portugal, Greece, Sweden, Peru, Brazil, Argentina, Chile, and Mexico.

Focus on cash flow

Silver Wheaton has uniquely devised methods to generate cash to successfully sustain its daily operations profitably by declaring $500 million worth of bought contract financing including, the strategic buying of 30,125,000 common shares of Silver Wheaton’s stock at a purchase price of US$16.60 per share, for complete proceeds to the company of nearly US$500 million. Further, Silver Wheaton has allowed the option underwriters to buy a maximum of nearly an extra 4,518,000 common company shares priced at US$16.60 per share and thus, making the total proceeds of this planned offering to Silver Wheaton of about US$575 million.

The precious metals streaming company seems hugely focused on exploring high-quality and low-cost gold and silver mines to make its mining portfolio extremely robust for investors to increasingly invest into the key growth company. In addition, SILVER WHEATON is focused on delivering impressive shareholder returns through strategic share repurchases and in the form of dividends.

Importantly, Silver Wheaton declared its first quarterly cash dividend of 5 cents per share payable on or nearly April 14, 2016 to all the key shareholders as of March 31, 2016 and in line with its continued commitment to deliver attractive shareholder returns despite a tough global operating environment.


Overall, the investors are advised to “Hold” their position in Silver Wheaton Corp. considering the company’s significant long-term growth prospects, but a currently weaker financial position with total cash of just $80.51 million against elevated total debt position of $647.00 million, restricting the company to make future growth investments. The profit margin of 10.07% seems satisfactory. The PEG ratio of 8.73 is healthy and indicates strong company growth.
Published on Apr 14, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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