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Posts tagged ‘Silver Wheaton Corp (SLW)’

Visual Capitalist: How precious metals streaming works

September 12th, 2016

by Jeff Desjardins | posted with permission of Visual Capitalist | September 12, 2016

Miners seeking new capital have always had a variety of options: They could issue new shares, take out a loan, enter into joint-venture agreements or divest non-core assets.

However, in the last decade, a new option has emerged called “precious metals streaming”—in which streaming companies essentially offer capital up front to mining companies in exchange for metal later. If properly executed, the result is a win for both parties that can ultimately provide value to investors.

Precious metals streaming

This infographic from Silver Wheaton TSX:SLW explains the precious metals streaming model and the arbitrage opportunity that creates value for both the streamer and the miner seeking to acquire capital:

How precious metals streaming works

 

The aforementioned arbitrage opportunity in precious metals streaming is key.

For a traditional base metal miner, the majority of forecasted mine revenue may come from a metal like copper or nickel. However, along with those “target” metals, smaller amounts of gold and silver may be produced from the deposit as well.

Investors would still value those byproduct precious metals in a base metal miner’s portfolio, but the metals may be typically valued at an even higher multiple in a precious metal streamer’s portfolio. This allows the base metal miner to transfer these future “streams” to the streamer in exchange for up-front capital, which can be a win-win scenario for both parties.

Streaming benefits

In other words, miners use streaming to acquire non-dilutive financing and to extract value from non-core assets. This allows them to deploy capital on purposes more central to their strategy. Major miners such as Teck Resources TSX:TCK.A and TCK.B, Barrick Gold TSX:ABX, Vale NYSE:VALE and Glencore all sold streams in 2015.

Meanwhile, streaming companies have been very successful since this model was first pioneered 12 years ago. They are getting gold and silver at a discount, and this has created significant value for investors over the last decade. Today there are many valuable streaming companies out there, including the major ones such as Silver Wheaton, Royal Gold and Franco-Nevada TSX:FNV.

Posted with permission of Visual Capitalist.

Artificial intelligence, virtual reality help win online Gold Rush Challenge

March 7th, 2016

by Greg Klein | March 7, 2016

Artificial intelligence, virtual reality help win online Gold Rush Challenge

Located just east of Val-d’Or, the past-producing Sigma and Lamaque
mines sit between Integra’s Lamaque North and South projects.

A PDAC opening event demonstrated the evolution of mineral exploration as a high-tech Quebec team won first prize in an online search for Abitibi gold. Integra Gold TSXV:ICG asked contestants to dig through digital data representing some 75 years of mining and exploration at the past-producing Sigma/Lamaque property adjacent to the company’s Lamaque project. Out of five finalists appearing at the March 6 event, the SGS Geostat team won the $500,000 first prize.

The team “used sophisticated geostatistical methods to drive data into an expansive and unbiased block model,” Integra explained. “A prospectivity scoring system harnessed both geological knowledge and machine learning, a subfield of artificial intelligence, to identify high-value targets, which were then vetted through virtual reality with Oculus Rift technology.”

Using somewhat less sophisticated technology, Lamaque produced 4.58 million gold ounces between 1935 and 1985, while Sigma turned out 4.45 million ounces from 1937 to 1997. The digitized files included info from 30,000 holes, over 500,000 assays, hundreds of kilometres of underground workings, mining stats, geological sections, level plans and photos.

As a team of geologists, engineers and computer scientists often bound by certain limitations and boundaries, we relished in the opportunity to channel our collective creativity and curiosity to provide new exploration targets in a historic and famous mining jurisdiction known worldwide.—Guy Desharnais, team leader with SGS Geostat

SGS Geostat leader Guy Desharnais said, “As a team of geologists, engineers and computer scientists often bound by certain limitations and boundaries, we relished in the opportunity to channel our collective creativity and curiosity to provide new exploration targets in a historic and famous mining jurisdiction known worldwide.”

Four other finalists—three teams and one individual—shared another $340,000 in prizes. Integra announced the contest last June. By September over 740 entries had arrived from 65 countries.

Panellists consisted of geologist and commentator Brent Cook, Randy Smallwood and Chantal Gosselin of Silver Wheaton TSX:SLW, Rob McEwen of McEwen Mining TSX:MUX and Sean Roosen of Osisko Gold Royalties TSX:OR.

Integra didn’t specify what the winners proposed for the former mines. But CEO Stephen de Jong said some of the suggested drill targets “are like nothing we’ve ever seen before. We have decided to expedite the drill program and start testing a number of these targets in the immediate future.”

Despite the downturn

January 31st, 2014

Roundup 2014 speakers discuss how investors can profit and companies thrive

by Greg Klein

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We’re near bottom, we’ve hit bottom, the worst is behind us—over the last few wretched years those comments have come repeatedly from speakers at industry conferences. So maybe Victoria Yehl put it best in her January 30 closing remarks at Roundup 2014: “You, as the attendees and the delegates, let us know what’s going on in this industry … almost every evening at the Seawall Bar and Grill. It was certainly a higher level of enthusiasm than we’ve seen for a number of years.”

As chairperson of the Association for Mineral Exploration British Columbia’s annual event, Yehl was referring to the evening get-togethers, known for a non-market type of liquidity. But boozy as it might have been, can so much enthusiasm be dismissed?

Roundup 2014 speakers discuss how investors can profit and companies thrive

Near-record attendance and growing optimism characterized
AME BC’s Roundup 2014, “the world’s premier technical
mineral exploration conference.”

Yehl thanked company sponsors who came through despite tough times and noted a near-record crowd of 6,643 people from 37 countries, a possible indication of not-so-tough times ahead. Roundup 2014’s five last speakers further developed that sentiment.

The guardedly optimistic group included Rick Rule, who told investors they can be contrarians or victims: “The choice is yours.” Discussing some potential “fire sale prices” in resource stocks, the chairman of Sprott US Holdings said, “When I talk about coal now people say, ‘Global warming, you’re the culprit.’ I love it when people aren’t merely bored, they’re hostile.”

Uranium, he added, “is cheap. Zinc is cheap. People hate nickel…. Until three or four months ago natural gas was cheap, cheap, cheap.”

Bull markets follow bear markets “as day follows night,” Rule argued. But he warned that although a valuation’s increase might be inevitable, it isn’t necessarily imminent. Profits require time and patience, he emphasized.

Turning the forum’s attention from investors to companies, Silver Wheaton TSX:SLW president/CEO Randy Smallwood said most financing has been coming from various types of debt. The streaming model, he maintained, allows companies to optimize their portfolios through deals on non-core assets. “Seventy percent of silver does not come from silver mines,” he pointed out. About 40% comes from copper mines, another 15% from lead-zinc operations. Those miners “aren’t interested in silver. They’re driven by copper, they’re driven by lead-zinc.”

A new type of deal announced in November offers some juniors additional hope, Smallwood said. Silver Wheaton stepped in earlier than usual to give Sandspring Resources TSXV:SSP an initial $13.5 million to take its Toroparu gold project in Guyana to feasibility.

“If they had gone out and raised $13.5 million in the market, their current shareholders would have lost 33% of the value of that project…. What they did was give us 10% of the gold, if we fund them another $135 million when they get to the point of construction. It’s pretty attractive for their shareholders. It makes a lot of sense for juniors to consider this.”

But with prefeasibility in place, Toroparu was already quite advanced. Exploration geologist Miles Thompson discussed earlier-stage projects and the “bizarre disconnect between markets and the time needed to find and develop mines.”

“Unfortunately the easy stuff has already been found and our job is becoming increasingly harder,” said the director of Reservoir Minerals TSXV:RMC and CEO/chairman of Lara Exploration TSXV:LRA. For all that, Reservoir has been successfully raising money and spending it in Serbia for over 10 years. “We follow the prospect generator business model, which means we work the same way the pharmaceutical industry works, the software industry…. We see ourselves as R&D teams. We build projects, we define targets, we work out projects for mining companies and investors.”

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Can streaming agreements save some good junior miners?

November 12th, 2013

by Ana Komnenic | November 12, 2013 | Reprinted by permission of MINING.com

Financing has been tough for juniors lately: Cash generated from financing activities in Canada fell 34% this year compared with last year, according to a recent report by PricewaterhouseCoopers.

Can streaming agreements save some good junior miners?

Randy Smallwood,
CEO Silver Wheaton.

Randy Smallwood, CEO of Silver Wheaton TSX:SLW—the world’s largest precious metals streaming company—says that in his 30 years in the mining industry, he’s “never seen it this bad.”

But a stream financing model for juniors may be the silver lining during these cash-strapped times.

Silver Wheaton just signed its first early deposit gold stream agreement with exploration company Sandspring Resources TSXV:SSP.

Under the $148-million deal, Sandspring will get $13.5 million up front to complete feasibility work, after which Silver Wheaton will have the right to buy 10% of the life-of-mine gold production from the Toroparu project in Guyana. If Silver Wheaton elects not to proceed with the gold stream, Sandspring will return all but $2 million of the advanced funds.

This model allows Silver Wheaton to take advantage of high-quality, earlier-stage projects. Meanwhile, Sandspring gets access to critical funds without diluting shareholder value.

According to Smallwood, early deposit gold stream agreements are the “most attractive forms of financing for juniors.”

“Previously, prior to the feasibility study, the only source of capital has been the public markets,” Smallwood told MINING.com.

But Silver Wheaton is picky, and Smallwood is not looking to strike a deal with just any company.

“There’s a lot of projects out there that shouldn’t be financed,” the CEO said. His team spent a lot of time picking the right one—putting a lot of emphasis on the firm’s management team.

“We wouldn’t be there if we weren’t very confident,” he said.

Silver Wheaton plans on executing more of these deals but the CEO wouldn’t say with which companies.

“There is an option, just make sure your project is as good as you say.”

As for business as usual, Silver Wheaton’s primary focus remains regular precious metal stream agreements. The company recently struck a $135-million deal with Hudbay Minerals TSX:HBM to acquire 50% of its gold production from the Constancia project. Silver Wheaton already has an arrangement for 100% of the life-of-mine silver production.

Ultimately Smallwood sees more value in silver for two reasons. For one, the uses of silver are much broader: Half of its consumption is attributed to industrial applications including high-efficiency electronics and antibacterial products. Silver’s market position is also more volatile than gold—which can be both a blessing and a curse.

Reprinted by permission of MINING.com

Week in review

February 2nd, 2013

A mining and exploration retrospect for January 26 to February 1, 2013

by Greg Klein

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Search for quarry workers postponed, victims believed dead

Efforts to find two workers missing in a gravel quarry accident at L’Epiphanie, Quebec were postponed on Thursday. The truck drivers, employed by Maskimo Construction, were buried by a landslide two days earlier. High winds and unstable ground made it unsafe to operate the helicopter and heavy equipment involved in the mission. Searchers hope to resume their efforts on Saturday but “police have acknowledged they don’t expect to find survivors,” the CBC reported.

One co-worker described the landslide in a Canadian Press story reprinted in Wednesday’s Montreal Gazette.

Colombia exploration workers remain in captivity

A mining and exploration retrospect

Five people kidnapped from Braeval Mining’s TSX:BVL Snow Mine project in Colombia remain missing. The Monday edition of Colombia Reports stated the military, which arrested four more suspects on Sunday, claimed it was making progress. But, the journal added, the National Liberation Army (ELN) kidnappers warned that any rescue attempt would endanger the hostages.

Among the ELN’s demands are stricter regulation and heavier taxation of the mining industry, legalization of small-scale mining and a national debate on mining policy, Colombia Reports stated.

The victims—a Canadian, two Peruvians and two Colombians—were abducted on January 18 in northern Colombia’s Bolivar department.

On Thursday the country’s biggest rebel army, the Revolutionary Armed Forces of Colombia (FARC), released three Gran Tierra Energy TSX:GTE contractors after one day in captivity. But, Reuters stated, the guerrillas killed four soldiers in southwestern Colombia’s Narino department on Wednesday.

More mid- and large-cap companies selling royalties

The streaming business has grown tremendously, both from the amount of money available and the size of companies seeking it. As Bloomberg reported on Thursday, “the biggest miners have joined the queue of capital-hungry companies requesting funding.”

Silver Wheaton TSX:SLW CEO Randy Smallwood told the news agency that his company has seen increased interest from miners with market caps “up into the tens and hundreds of billions.… Doors that we’ve been knocking on for a long time, they are all of a sudden knocking on our door.”

If an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.—Franco-Nevada chairman Pierre Lassonde in an interview with BNN

Although Silver Wheaton completed only one transaction last year, it was a $750-million deal with HudBay Minerals TSX:HBM, which has a press-time market cap of $2 billion. Such deals obviously benefit Silver Wheaton, which has been outperforming both silver prices and metal producers, Bloomberg stated.

Not surprisingly, success brings competition. But the founder of the first royalty company, Franco-Nevada TSX:FNV chairman Pierre Lassonde, considers most of the newcomers to be small fish. In an BNN interview posted Thursday, he said, “Every week we must have two, three, four, five companies coming and approaching us, but they’re of a size that there’s only two or three royalty companies that look at them.” Over the last six months his company has been working on three “really large deals” of half a million to a billion-plus, he said.

With each transaction Franco-Nevada gets a free perpetual option on any further discoveries on the same property. “It is this optionality that has given us the kind of rate of return that we give the shareholders,” he explained.

Lassonde attributed “de-ratings in the gold stocks” to smaller, lower-grade deposits than those found in the 1980s and ’90s. “At Franco, as far as we’re concerned, if an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.”

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Growth Without Risk

August 17th, 2012

Silver Wheaton Strikes Big in Peru and Manitoba with its HudBay Deal

By Kevin Michael Grace

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See here for a Resource Clips feature on Peru and mining.

For investors in gold and silver bullion, ETFs (paper bullion) and mining companies all have their risks and rewards. Randy Smallwood, President/CEO of Silver Wheaton TSX:SLW, argues that his company supplies the rewards without the risks. “I think,” he declares, “we provide the best—and I’m not just going to say silver—I think we provide the best option for exposure to precious metals.”

He explains, “We provide growth and dividends, and we provide leverage. The key is growth. Currently about 20% of the reserves that we have on our books right now have come from organic growth within the company. When you invest in bullion or ETFs it doesn’t grow—an ounce stays an ounce stays an ounce. We also provide protection on the costs. Our costs are fixed by contract; our capital costs are fixed; and our production costs are fixed.”

Silver Wheaton Strikes Big in Peru and Manitoba with its HudBay Deal

Constancia: A big vote of confidence in Peru.

Silver Wheaton is not a mining company; it is a streaming company, the largest of its kind. It signs deals with miners which sell future production of silver and gold to SLW. For years, it paid $3.90 per silver ounce. Its $750-million deal with HudBay Minerals TSX:HBM bumps that up to $5.90 per ounce.

“This is the first acquisition we’ve done in over three years, and there is no doubt costs are higher,” Smallwood says. “Analysts looking at this from an undiscounted basis estimate we’ve paid somewhere between $15 and $16 per ounce. I think it will be better than that, mainly because the exploration success isn’t being factored in; they’re just looking at current reserves. For instance, when [HudBay's] 777 [Manitoba mine] started production in 2004, it had 14 years of reserves. [In 2012,] it’s still got 14 years of reserves. That’s pretty typical of the VMS deposits.”

Under the terms of the deal with HudBay announced August 8, SWL acquires 100% of the life-of-mine silver production from 777 and 100% of the life-of-mine silver production from HudBay’s Constancia Copper-Molybdenum-Silver Project in south Peru. SLW has also acquired 100% of gold production (at $400 per ounce) from the 777 Mine until Constancia satisfies a completion test, or the end of 2016, whichever is later. SLW‘s share of gold production from 777 will then be reduced to 50%. SLW will not share in any ongoing capital or exploration expenditures at the mines.

I think we provide the best option for exposure to precious metals —Randy Smallwood

Smallwood reports that the HudBay deal is “the largest we’ve ever done in terms of total dollar value. It’s the third largest in terms of metal production behind the Pascua-Lama and Peñasquito transactions, which were nine and seven million ounces silver equivalent a year, respectively. [The HudBay deal] will produce five million ounces a year for us. What’s intriguing on this one is it has a bit more gold than we’ve traditionally had. It still keeps us dominantly silver-focused, but I’m happy to have a bit of gold in the mix.”

Silver Wheaton had $1.1 billion cash in hand as of June 30. “We can easily afford a billion-dollar deal now,” Smallwood says. On August 9, SLW reported 2Q net earnings of $141.4 million, $0.40 per share, on revenues of $201.4 million. (Figures for 2Q 2011 were $148.1 million, $0.42 per share, $194.8 million.) Production was 6.5 million ounces silver and 3,200 ounces gold or 6.7 million silver-equivalent ounces, up 10% from a year earlier. Sales were 6.9 million silver-equivalent ounces. Proven and probable silver reserves were 798 million ounces. Smallwood says that the HudBay deal will result in a 10.7% increase in proven and probable silver reserves.

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Silver Wheaton CEO Randy Smallwood on HudBay Gold-Silver Production Deal

August 9th, 2012

…Read More

Silver Wheaton, HudBay announce Manitoba-Peru Silver-Gold Production Deal

August 9th, 2012

Resource Clips - essential news on junior gold mining and junior silver miningSilver Wheaton Corp TSX:SLW announced the acquisition from HudBay Minerals Inc TSX:HBM of 100% of the life-of-mine silver production from its currently producing 777 Mine in Manitoba and 100% of the life-of-mine silver production from its Constancia Copper-Molybdenum-Silver Project in south Peru. Silver Wheaton has also acquired 100% of gold production from the 777 Mine until Constancia satisfies a completion test, or the end of 2016, whichever is later. Silver Wheaton’s share of gold production from 777 will then be reduced to 50% for the remainder of the mine life.

Silver Wheaton will pay Hudbay US$750 million, of which US$500 million is payable upon closing, with two further payments of US$125 million each to be made upon the satisfaction of minimum capital expenditures having been incurred at Constancia. Silver Wheaton will make ongoing payments of the lesser of US$5.90 per ounce of silver and US$400 per ounce of gold (both subject to an inflationary adjustment) or the prevailing market price per ounce of silver and gold delivered. Silver Wheaton will not share in any ongoing capital or exploration expenditures at the mines.

The Constancia completion test requires Hudbay to complete Constancia’s processing plant to at least 90% of expected throughput and recovery by December 31, 2020. If Hudbay fails in this, Silver Wheaton would be entitled to a proportionate return of the upfront cash consideration relating to Constancia. Hudbay has granted Silver Wheaton a right of first refusal on any future streaming agreement, royalty agreement, or similar transaction related to the production of silver or gold from Constancia or 777. Silver Wheaton will use cash on hand to make the US$750 million in payments. The company’s cash on hand was approximately US$997 million at the end of 1Q 2012.

We like Peru, and I think the new President of the country [Ollanta Humala] has done a very good job in terms of managing some pretty tough situations—Randy Smallwood

Silver Wheaton’s share price rose 9% in the two days after the announcement. President/CEO Randy Smallwood tells ResourceClips.com, “We’re now back in acquisition mode. The shareholders have stuck with us and have been patient and are being rewarded. And silver has had a bit of a bounce back. We’re pretty volatile from that basis, but I think people are starting to recognize that the current business environment out there is very positive for us in terms of making acquisitions and helping companies grow.

“[The HudBay deal] is the largest we’ve ever done in terms of total dollar value. Most of it is because silver is worth more than in the past. It’s the third largest in terms of metal production behind the Pascua-Lama and Peñasquito transactions, which were nine and seven million ounces silver equivalent a year, respectively. [The HudBay deal] will produce five million ounces a year for us. What’s intriguing on this one is it has a bit more gold than we’ve traditionally had. It still keeps us dominantly silver-focused, but I’m happy to have a bit of gold in the mix.”

With regard to the per-ounce payments to HudBay, Smallwood says, “This is a bit of a change. Until now all our contracts had had a $3.90 production payment for the silver. But this is the first acquisition we’ve done in over three years, and there is no doubt costs are higher. So when we looked at this one, we settled on a $5.90 production payment. Analysts looking at this from an undiscounted basis estimate we’ve paid somewhere between $15 and $16 on a discounted basis for the ounces of silver here. I think it will be better than that, mainly because the exploration success isn’t being factored in; they’re just looking at current reserves. For instance, when 777 started production in 2004, it had 14 years of reserves. [In 2012,] it’s still got 14 years of reserves. That’s pretty typical of the VMS deposits.”

Recent events in Peru have left miners wary, so Silver Wheaton’s deal with HudBay is a big vote of confidence in that country. Smallwood comments, “We like Peru, and I think the new President of the country [Ollanta Humala] has done a very good job in terms of managing some pretty tough situations. [HudBay] has got community support all the way through [at Constancia], and they put a real strong focus into it long before they commenced on the construction side. So they have the agreements on the community side; they’ve got a high degree of respect for social license. HudBay has done one of the best jobs I’ve seen in Peru, which I think has been unfairly marked as being a bit risky or riskier. I actually think things have improved under Humala. I think he’s done some really good things on some other projects where there really are challenges on the social side. We’re happy with Peru, and we’re happy to continue investing in Peru.”

Smallwood concludes, “Our business model is based on having a bank balance of zero. I would rather have ounces in the ground than cash on hand. So we continue to focus on that, but we have very stringent requirements for acquisitions: high-quality assets with high operating margins in low-risk political jurisdictions. We like exploration success because it provides us protection in case there are shortfalls in production; the growth on the exploration side usually more than offsets that. I think we can get our company to 70 million ounces a year through further strong acquisitions, and in this market there are lots of opportunities out there for us.”

View Company Profile

Silver Wheaton Corp
Brad Kopp
Senior VP, Investor Relations
1.800.380.8687

HudBay Minerals Inc
John Vincic
VP Investor Relations and Corporate Communications
416.204.1241

Read a feature story about Peru mining

by Kevin Michael Grace