Friday, January 20, 2006

 

Readers Choice: Take A Look At Silver Wheaton

One reader recommended a look at a silver mining stock. "Silver Wheaton Corp. (SLW) engages in the purchase and sale of silver. It purchases silver produced by Luismin mines in Mexico and the Zinkgruvan Mine in Sweden. The company was incorporated in 1994. It was formerly known as Chap Mercantile, Inc. and changed its name to Silver Wheaton Corp. in 2004. Silver Wheaton is headquartered in Vancouver, Canada."

At this link one can find the financial statements. And at this link the company explains it's cost per ounce is only $3.90; that is probably Canadian. This isn't a small company either, with a market cap near one billion.

Here are the companys reserves and resources.

From the firms 12/22/05 press release. "Silver Wheaton Corp. is pleased to announce that it has closed its previously announced bought deal equity financing for gross proceeds of C$100 million. A syndicate of underwriters, led by GMP Securities L.P., and including Scotia Capital Inc., Haywood Securities Inc. and Fort House Inc., purchased 15,625,000 units at a price of C$6.40 per unit. The size of the offering was increased from C$80 million to C$100 million upon the exercise of the underwriters’ option to purchase an additional C$20 million of units. Each unit consists of one common share and one-half of one Series 'B' common share purchase warrant."

"Each whole warrant entitles the holder to purchase one common share of Silver Wheaton at a price of C$10.00 at any time on or before December 22, 2010. The warrants are listed on the Toronto Stock Exchange under the trading symbol 'SLW.WT.B.'"

"Silver Wheaton is the only public mining company with 100% of its revenue from silver production. Silver Wheaton is debt-free, unhedged and well positioned for further growth."

So my question for the reader is, what is SLW planning to do with the C$100 million?

Comments:
I'll try and revisit these mining stock posts with more detail over the next couple of days.
 
Ben or others-
Maybe this has been talked about before but I've been looking in to Swiss annuities for safety and wealth preservation as well as the potential to switch out of US dollars when needed. Have you heard anything about Safe Wealth group out of Switzerland?
 
Why did mining companies take such a hit today? were they just entrained in the downdraft?
 
Interesting company. Couple things caught my eye. Their tax structure discourages bringing any of the profits back from the Caymen sub. Their two contracts for silver purchasing look good, but they're dealing with overseas producers, adding an extra element of risk. Don't like to see all the dilution of shares that has taken place since '04. Rather see a company leverage w/ debt (especially w/ the low rates right now), rather than on existing shareholders' backs.

Not sure if I'd buy it right now.
 
cl,

Swiss annuities have always been a conservative play. One drawback about the Franc is the central bank sold several tons of gold and cut interest rates to stimulate the economy. That eliminated much of the gains from the last couple of years. BTW, I am an affiliate for Everbank now, so check out the icon in the sidebar.
 
Thanks, Ben. I looked at Everbank a while back and had been planning to look again after hearing it mentioned on this blog. Just heard they are offering an Icelandic Krona CD for over 8%. Do you know how Everbank is rated by Weiss?

The annuity offered by Safe Wealth does allow you to buy short term treasury paper in 6 different currencies including the US so you don’t have to settle for low Swiss returns. All this while keeping your money in the safest, highest rated Swiss insurance company & banks (High cash reserves & low exposure to mortgages, hedge funds, etc). OF course all this is based on the Swiss economy being fundamentally strong. Could the underlying Swiss economy/ currency be significantly less reliable now that they are selling reserves? Any idea how much gold backing they still have? Other drawbacks with this annuity: a lot of costs (starting with a 1% US excise tax) & fees involved with opening, administration and switching between currencies.
 
Silver Wheaton is my favorite silver play. I wrote a full analysis of the company with a buy reco here:

Click Here
 
I too am looking for information on the Safe Wealth Group. It appears they have disappeared, as their website is not functioning and emails are returned. Any suggestions, or are there other places to get similar services?
 
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