Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Wheaton Corporation: The $100.00 Silver Bullet

Commodities / Gold & Silver Stocks Aug 10, 2012 - 02:25 AM GMT

By: Bob_Kirtley

Commodities Best Financial Markets Analysis ArticleToday our team is full of excitement as we work our way through the news of new acquisitions and the publication of the Q2 financial results of our largest single holding in the silver space. In this article we will cover the Q2 financial results, the additions to the silver streaming facilities, take a quick look at the charts and conclude with one long term suggestion and one short term suggestion for your consideration.


Smart Consensus Peer Ratings Detail

Silver Wheaton Corporation (SLW) Q2 Earnings have been reported as US$0.42 which is at the top end for the analysts who's expectations were in the order of US$0.420, US$0.374, US$0.350. Hopefully this result will be reasonably well received as it is in line with expectations. When earnings fall short they tend to disappoint the analysts and subsequently the stock can be sold off.

There was also good news for investors as the new dividend policy linking quarterly dividend payments to 20% of the previous quarter's operating cash flows, produced a dividend payment of US$0.10 per common share and will be paid to holders of record of its common shares, close of business on August 30, 2012, and will be distributed on or about September 13, 2012.

Also of note is the slight decrease in the cash costs to US$4.06per silver equivalent ounce (US$4.04 per ounce of silver and US$303per ounce of gold). However the cash operating margin was US$25.01 per silver equivalent ounce, compared to US$34.21 in Q2 2011.

Q2 Highlights are listed below:

Attributable silver equivalent production of 6.7 million ounces (6.5 million ounces of silver and 3,200 ounces of gold), an increase of 10% compared with Q2 2011

  • Revenues increased 3% compared with Q2 2011, to a record US$201.4 million, on record silver equivalent sales of 6.9 million ounces (6.8 million ounces of silver and 2,400 ounces of gold).
  • Net earnings were US$141.4 million (US$0.40 per share) compared to US$148.1 million (US$0.42 per share) in Q2 2011.
  • Operating cash flows increased 3% compared with Q2 2011, to a record US$172.9 million (US$0.49 per share).
  • Cash operating margin was US$25.01 per silver equivalent ounce, compared to US$34.21 in Q2 2011.
  • Average cash costs fell slightly compared with Q2 2011, to US$4.06per silver equivalent ounce (US$4.04 per ounce of silver and US$303per ounce of gold).
  • Cash balance of US$1.1 billion, with a net cash position of US$1.04 billion at the end of Q2 2012.
  • Declared quarterly dividend of US$0.10 per common share, representing 20% of the cash generated by operating activities during the three months ended June 30, 2012.
  • Announced attributable proven and probable silver reserves of 798 million ounces, nearly twice the reserves of any other silver company in the world.
  • Subsequent to the second quarter, Silver Wheaton announced that it has agreed to acquire a precious metals stream from Hudbay Minerals Inc.'s ("Hudbay") currently producing flagship 777 Mine ("777"), as well as a silver stream from their cornerstone development project, Constancia. Combined, 777 and Constancia will increase Silver Wheaton's long-term average annual silver equivalent production by approximately 4.9 million ounces.

Silver Wheaton is the largest silver streaming company in the world. Based upon its current agreements, forecast 2012 attributable production is approximately 28 million silver equivalent ounces, including 42,000 ounces of gold. By 2016, annual attributable production is anticipated to increase significantly to approximately 48 million silver equivalent ounces, including 100,000 ounces of gold. This growth is driven by the Company's portfolio of low-cost and long-life assets, including silver and precious metal streams on Barrick's Pascua-Lama project and Hudbay's flagship 777 mine and Constancia project.

Silver Wheaton Corporation has a market capitalization of $10.80Bln, an EPS of $1.62, a 52 week low of $22.94 and a high of $42.50, average volume of shares traded is around 4.00Mln, so the liquidity is good, with 353.65 million shares outstanding. Current stock price is $30.53.

New Acquisitions

We need to fully understand the significance of the latest acquisitions, however, as an indicator we refer to  Randy Smallwood, Silver Wheaton's President and Chief Executive Officer who commented as follows:

"We are extremely pleased to add two new precious metals streams, on high-quality base metal mines, to our diversified portfolio which now includes 17 operating mines and four development stage assets." This transaction provides immediate cash flow, is accretive on all short- and long-term metrics, and maintains our policy of investing in low-cost, high quality assets. It also solidifies one of the strongest growth profiles in the precious metals industry. Hudbay has a history of mining success spanning decades, and as flagships in their asset portfolio, we are confident that 777 and Constancia will deliver significant long-term value to both groups of shareholders."

Conclusion:

To conclude we have adopted a policy of not increasing our exposure to the producers for some time now as they were not performing and silver prices were also drifting lower. Once silver and gold prices gain some traction we expect them to challenge their all time highs and perform spectacularly well, catapulting SLW to the $100.00 price level. However, we still need to be convinced the silver is about to rally with gusto, but, SLW at these price levels is worth the punt. It's not a case of back up the truck, more a case of acquiring steadily, starting now.

Our preference is to increase our exposure via the selection of a few well thought out option plays. Note that we didn't say via acquiring more stock, that is for the simple reason that SLW is already the largest holding we have in the silver space and we are a tad reluctant to place more eggs in the same basket. However, we do believe that this stock should be given full consideration when building a portfolio in the precious metals sector.

Taking a quick peek at the chart below, we can see that the upswing of the 50dma, which hopefully will cross the 200dma, forming a golden crossover and thus having a positive effect on SLW. The technical indicators, the STO and the RSI now suggest that SLW is overbought, so there may be a rebound in the short term.

SLW Chart:

For a long idea we suggest accumulating this stock for the long term as and when you can. The fortunes of SLW are predicated on the performance of silver prices heading to higher ground. We are quietly confident that both gold and silver prices will return to challenge and overcome their all time highs in the very near future.

For a short idea this stock appears to be overbought so you might want to take a look at some of the near term Put options with a strike price that is just 'out of the money' as a short sharp correction appears to be on the cards. This pull back could be short lived so you will need to act fast and do not risk too much of your 'opportunity cash' as we all need to live and fight again another day.

Silver Wheaton Corporation trades on both the NYSE and the TSX under the symbol of SLW.

Have a good one!

Bob Kirtley

Email:bob@gold-prices.biz
URL: www.silver-prices.net
URL: www.skoptionstrading.com

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 200

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

Bob Kirtley Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in