Tuesday, March 13, 2007

Silver Wheaton as a "silver bank" will benefit from falling USD

Subprime worries are spreading very fast and as it was written before spiral of credit tightening will finish recent Bull market and put pressure on US dollar. Gold and silver will be rising again. Silver could benefit even more then gold just because size of the market is relatively small. One of the interesting companies is a "silver bank" Silver Wheaton (SLW) This company has secured supply of silver with fixed prices from silver mining companies by paying them upfront and if silver will be moving higher as I am anticipating this company will get all the upside from increasing prices. There is no specific mining risk connected to this company, it is pure option play without time decay on silver price. Now Silver Wheaton is finishing consolidation pattern and close to break out. If you are considering silver exposure for your portfolio, this company deserves your attention in line with silver juniors covered before Avino Gold and Silver mines, Sterling Mining and Mines management. Market cap of Silver Wheaton could accommodate big investors when fashion will be back into silver market and stock will benefit first from the money inflows in this sector. Very important to mention that this company is with real earnings and recently reported earnings of $23.8 mil or 10 cents per share, increase of 150% from $7 mil or 4 cents per share in the prior year quarter. For the year, earnings expanded to $85.2 million, or 37 cents per share, from $25.3 million, or 15 cents per share, in 2005. It is increase of 147% y/y and with current price $9.43 stock has P/E of 25.5. Everybody is still exited about Google growth, which is slowing by the way, and here we have ultimate earnings machine nobody have noticed yet. Silver sales more than doubled to $158.5 million from $70.9 million on increased silver sales volumes and higher average prices in 2006.
Silver Wheaton website: "Silver Wheaton is the largest mining company with 100% of its revenue from the sale of silver. Having silver purchase contracts with three separate mines, the Company expects to sell approximately 15 million ounces of silver in 2007, growing to 20 million ounces by 2009. The Company purchases all of the silver production from Goldcorp mines in Mexico and the Zinkgruvan Mine in Sweden, together with a portion of the silver production from Glencore’s Yauliyacu Mine in Peru. Silver Wheaton’s unique and simple business model is designed to create long-term shareholder value, providing for strong upside potential with downside protection. Silver Wheaton is unhedged and well positioned for further growth"

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