Silver Wheaton’s Impressive Run Will Continue

Silver prices bottomed out at a five and a half year low in December last year in the middle of prospects for surging interest rates in the United States and a slowdown in China. However, the prices are up over 50 percent since that period, after stockholders and opportunists turned to the precious metal as a safe haven in the midst of unrestrained economic times.

Stocks in the sector have benefited largely from the rise with the likes of Silver Wheaton Corp. (SLW) performing very nicely in 2016.

In the most recent quarter, Silver Wheaton shared earnings per share of $0.14, in line with the analysts’ estimates.
Revenue for the second quarter came in at $212 million, $10.58 million greater than the analysts’ estimates, signifying an impressive year over year growth of roughly 29 percent.

As a matter of fact, silver has been a primary growth driver for the company. In the first half of 2016, the company generated 15.1 million ounces of silver and out of that it sold 14.7 million ounces. Moreover, the company’s silver production escalated 11 percent in the first half of 2016 compared to the first half of 2015.

On the other hand, the company’s sales surged 32 percent y-o-y in the first half of 2016.
Silver Wheaton’s Impressive Run Will Continue
Image by tookapic / Pixabay
Therefore, it clearly signifies that the company’s sales are mounting at rapid pace compared to its production. Most significantly, the company is aggressively focusing on the silver production cost, as its average cash for a single silver ounce was $4.30, a surge of just 2 percent which is almost negligible.

Apart from this, Silver Wheaton has also increased its gold production forecast for the full year mainly because the company has attained an additional gold stream of 25 percent from Vale’s Salobo mine, located in Brazil. After this acquisition, the company will now get 75 percent of Salobo’s gold production, which is projected to run at a rate of 300,000 ounces a year. As a result, this deal adds 25,000 ounces of gold production on a yearly basis to the company’s portfolio.

Given that both gold and silver prices are on the way up, I expect Silver Wheaton to continue performing better in the months to come. The company is making the most of the recent turnaround in precious metal prices by increasing its production at a rapid rate. All in all, despite the stunning performance this year, I think Silver Wheaton still has upside to offer.
Published on Aug 30, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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