Friday, September 24, 2010

Silver At Decade Highs...Silver Wheaton (SLW)

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In recent days there has been an increase awareness of silver and more specifically one mining company, Silver Wheaton. This silver stock has been one of the top performing picks in the Itz Pix portfolio over the the last year. Below is the profile of the company from their website.
Company Profile
Established in 2004, Silver Wheaton has quickly positioned itself as the largest metals streaming company in the world. The company currently has fifteen silver purchase agreements and two precious metals agreements where, in exchange for an upfront payment, it has the right to purchase all or a portion of the silver production, at a low fixed cost, from high-quality mines located in politically stable regions.

Forecast 2010 production, based upon the company's current agreements, is 22.2 million ounces of silver and 20,000 ounces of gold, for total production of 23.5 million silver equivalent ounces. By 2013, annual production is anticipated to increase significantly to approximately 38 million ounces of silver and 59,000 ounces of gold, for total production of over 40 million silver equivalent ounces. No ongoing capital expenditures are required to generate this growth and Silver Wheaton does not hedge its silver production.

Silver Wheaton’s industry-leading growth profile is driven by a portfolio of world-class assets, including silver streams on Goldcorp’s Peñasquito mine in Mexico and Barrick’s Pascua-Lama project straddling the border of Chile and Argentina. The company’s unique business model creates significant shareholder value by providing considerable leverage to increases in the silver price while reducing the downside risks faced by traditional mining companies. Silver Wheaton has an experienced management team with a strong track record of success and is well positioned for further growth.

Silver Wheaton is the largest metals streaming company in the world, and the only company that derives more than 95% of its revenue from the sale of silver. The company has entered into fourteen silver purchase agreements and two precious metals agreements with nine operating partners, including Barrick Gold Corporation and Goldcorp Inc.  

It is estimated that 70 percent of silver production comes as a by-product from base metal and gold mines. This characteristic, along with Silver Wheaton management’s bullish sentiment for long-term silver prices, was the basis for creating Vancouver-based Silver Wheaton in 2004. Silver stream agreements allow Silver Wheaton to purchase, in exchange for an up-front payment, the by-product silver production from a base or precious metal mine that it does not own or operate. The predetermined price that Silver Wheaton pays for future silver production is typically US$3.90 per ounce, with a small inflationary adjustment, ensuring that costs are fixed. This allows the company to stabilize operating costs and reduce downside risk, while providing the upside of significant leverage to the price of silver. Other than the initial up-front payment, no additional capital expenditures or exploration costs are required. Yet, Silver Wheaton benefits from the production and exploration growth of its operating partners.

Silver Wheaton’s low-risk business model, which was designed specifically to create long-term shareholder value, has a number of unique aspects. At its core are multi-year agreements to purchase, at a low fixed cost, all or a portion of the silver production, and a small amount of gold, from high-quality mines in Mexico, Chile, Argentina, Peru, Sweden, Greece, Portugal, Canada and the United States. The company has fixed operating costs, no currency risk, and no ongoing capital expenditures or exploration costs. In addition, a large percentage of the company’s revenue is derived from low-cost and long-life mining operations and it does not sell forward its silver sales. All of this provides significant leverage to increases in the price of silver while mitigating the downside risks associated with traditional mining companies. As a result, Silver Wheaton has an industry-leading growth profile, and it is very well positioned for further, sustained growth.


Total cash costs(1) of US$4.03 per silver equivalent ounce, compared
       with US$3.99 per ounce in 2009.
Silver Wheaton reports record second quarter earnings

Currently silver is making 30 year highs @ $21.48, Silver Wheaton's costs is around $4.00 per ounce and with silver @ $21 equals $17.00 profit per ounce. So, 23 million ounces this year and increasing to 40 million in can see that SLW stock should see further upside. Itz has maintained a $27.50 near term price objective, Itz is raising the 12 month target to $40.

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