With much of the financing drying up for mining companies, Silver Wheaton (SLW) has increasingly become the go to company for capital, with the difference now being that larger companies are seeking financing from the silver streaming company, whereby in the past smaller miners had primarily been those chiefly interested in Silver Wheaton as a way to raise capital.
That has come about largely because of the weak banking system in Europe, where banks there had been the major source of loans for the mining industry. Most of that has dried up, so now larger mining companies are scrambling to raise capital in a tough lending environment.
How the streaming company works is Silver Wheaton offers capital to fund projects in exchange for a discount price on the gold and silver production from the specific project being capitalized.
The majority of streams are of silver, which is produced as a byproduct of larger deposits of base metals, which the miners are more interested in.
Recently Silver Wheaton CEO Randy Smallwood said larger companies have been approaching the company for funding needs over the last quarter and longer.
For Silver Wheaton shareholders this is good news for those looking at the company as a long-term investment, because it offers less volatility and lower risk than smaller mining companies. Most of the risk is in relationship to production levels coming short or being disrupted, although most of that is over the short term.
According to Smallwood, Silver Wheaton is positioned to invest over $1 billion in possible deals going forward. The company has $555.1 million in cash on hand, along with a revolving credit facility of $400 million, among other capital resources.
In 2012 Silver Wheaton made one deal, that one with HudBay Minerals Inc. (HBM), where it sought funds for its Constancia copper mine in Peru. Per that deal Silver Wheaton received the right to acquire all the silver and gold produced through 2016 or until the mine is completed. After that, it will be able to acquire all the silver and 50 percent of the gold in the future.
The weak lending markets make this a terrific time for Silver Wheaton to be flush with cash in the midst of rising capital demand.
If done right, Silver Wheaton could easily position itself for a very profitable and predictable future.