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Silver Wheaton Corp. Message Board

  • happiesthihosilveraway happiesthihosilveraway Oct 24, 2006 6:43 AM Flag

    silver wheaton becoming the darling

    of the investment world remotely interested in pm.

    just waiting for slw to make yet another silver deal.

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    • I highly doubt that the glamis deal will go through. Even if it does, it will come at the cost of SLW stockholders by way of extreme dilution. That's Telfer's way of growth.

      I don't see a rosy side to SLW.

      • 2 Replies to gary_growb
      • I don't follow the dilution of SLW related to the Goldcorp deal with Glamis ... dilution ... there will be no dilution to SLW.
        Will there?
        To my understanding, SLW and GG are distinct entities.
        Is GG tendering SLW shares for Glamis?
        SLW only stands to gain if more oz's of Ag become available under contract.
        In the light, a low price of Ag benefits all SLW shareholders as the contract price that SLW buys can be negotiated at a lower price.
        In the long run SLW will becaome an ATM for all that will invest.
        PS Long SLW and Ag. Just so you know.

      • The merger is a sweet deal for SLW! GG are paying too much for Glamis just like Rob McEwen said, GG board has almost no shares in GG but I bet they have lots of SLW. SLW will get the silver and even with a dillution it will come out on top.

    • 49% or Penasquito is roughly 280million oz over 17years roughly 16 million ounces a year for SLW. Which is 100% to today's SLW sales. The have about 6 months to close the deal and 2 years before the mine goes into production. I don't know how much GG BOD owns of SLW stock in their portfolios but I would image a substantial amount.

      Dilution is the only way for SLW to grow to this size IMO in which SLW would benefit but also GG and GG BOD. That is if the issued shares go directly to GG not an external institution(s). In that case GG could sell silver to SLW at low price of even 3.90/oz as the increase to SLW stock would offset the low cost of selling silver.

      Any major upfront cash would be substantialy dilute SLW and would affect our price in a negative way which would also mean negative impact on GG and it's BOD. Which I don't see it right now. A cash on first delivery of silver which would also be cause us to dilute would be alright but what would occur is that doing financing of this size would mean that GG's ownership might drop from 60% not to something like 40% which might not impact us in negative way but GG would loose the controling interest in SLW - which is also something I think GG BOD doesn't want to see.

      Higher cash for silver at let's say 9.90/oz might be fine if silver is $15 but not right now. They're going to be making a contract 1.5 years ahead of getting silver and many things can happen. Silver could be $30 but it could also be $5. If they make a contract right now for 9.90/oz silver now SLW might drop as this would not look as such a great deal.

      Will be interesing which route they go but the dilution is all but certain and if it's only dilution and it's done directly by GG gaining all the new shares that would benefit all parties involved because not only could silver be sold to SLW for low low price but everyone would benefit.
      That's enough of speculation. I'm off :)

    • SLW came to be as a result of CDE trying to take a run at WHT. The other theory is that WHT spin out SLW so that it's worth was fully appreciated by the market but if that was the case, they would have spun out copper instead of silver and kept WHT a pure PM stock. Anyways that is history now.

      And this takes us down to the present merger. SLW has much to gain from this merger which I never said GG would give silver to SLW for free, thus the word free was in quotes. If GG is to sell silver to SLW at 3.90/oz SLW would have to pay at least another $5/oz in cash up front and SLW just doesn't have that amount of cash at present time, that's why I stated the dilution and if this all stock deal went directly to GG, GG would benefit and so would we. If they sold silver at 6.90/oz and $2oz up front, it still doesn't add up. Taken from Glamis site: GLG has some 40million oz of silver from Marlin mine alone and with only $2/oz up front that takes us to around 80million. That's not even touching the Penasquito project.

      If they buy silver at 9.90/oz from GG right now I would be surprised if the market would be so upbeat about the deal since the general market isn't too bullish on PM at this point. As Paul van Eeden suggested that the US recession could also hit PMs in the initial pullback stage and if so the silver could drop below $10/oz and therefor create losses for SLW! Mind you if silver was $15/oz and deal was for $9.90/oz then things would look different. As at present this is all speculation as to what GG will do but what numbers do you see for any possible deal without a major dilution of SLW stock????

    • I could be wrong on any or all of the following, but I believe that in the previous deals (at least the ones I've checked) SLW has paid $3/oz up front and then has to pay $3.90/oz at the time it is delivered. Why does anyone see anything different happening now? I mean the latest deal/addendum was in March '06 which wasn't exactly a low point for the price of silver!

      So if SLW is going to write a contract with GG/GLG for 300 million ounces, they would need to come up with $900 million up front. They should have close to $100 mil in cash and cash equivalents ($78 mil as of the end of September and they've been making more in the current quarter as well). They can issue about a 12% dilution of current shares to GG which will boost their holdings to about 70%, which should be the equivalent of $350 mil. They can write promissory notes to GG (which they did in the previous deal) for another $100 mil or so. They can then borrow/get a line of credit for $250 mil to make up the remainder. I hope that the $350 mil in up front cash would be enough for GG to cover start up of the Penasquitos mine and then everyone is heading straight to the bank with the proceeds!

      This deal will double SLW's silver sales so I would be quite alright with a 12% dilution and $350 mil in debt (that would take, what a year or two for SLW to pay off the way it makes money with double the number of ounces per year??).

      So hit me with that 'D' word, if it means instead of making $.11/share on 238 million shares (per quarter) instead we make $.20/share on 266 million shares (per quarter)! This is just straight math with NO appreciation in the price of silver.


    • Thank you H Brown. The price per ounce would have to be adjusted to cover the costs of start up, but don't forget the Silver as a biproduct in the other Glamis gold mines, which will help mitigate these costs, along with the copper. The way I see it, GG PPS has been held down because Telfer is quick to allow GG to bear the brunt of all the cost of mining, and the street isn't used to factoring in a 60% ownership in a spun off entity. If you don't know what I mean, a picture is worth a thousand words.

    • GG isn't going to give the silver to SLW for "free" and hope that the appreciation in SLW share price alone would offset the loss of silver income for GG. SLW will either have to pay for it and right now looks like they just don't have the funds since they had some 52 million as of June so now maybe around $75. They would have to dilute and either go through institutions or do a private placement through GG and therefore the new shares that would be issued would go directly to GG and that would raise GG stake in SLW from 60% to 70-75%??? This way GG can sell silver at cheaper price and the loss of income from silver sales would be offset by their increase holding of SLW stock which also should greatly appreciate in price.

      Original deal that was done with GG was to keep CDE from the hostile takeover of wheaton IMO, and the BOD benefited greatly from it and so did GG. And it only makes sense that BOD and GG entity benefits from selling silver to SLW for low price, other wise why sell to SLW.

    • Interesting analysis guys.
      If and when a deal is made for the Ag oz's it all comes down to one thing ...
      the price of Ag.
      But it does have the potential to turn into something big.
      Thanks for the posts.
      Food for thought.

    • GG has always borne the brunt of the cost of mining period, and sold silver, per ounce, at a fixed rate to SLW. Why should now be any different. After all, GG owns 60% of SLW, and that is where they make the extra profit. There will be no dilution, because it would cut into GGs profits from SLW. Any adjustments will be in the price per ounce that SLW pays GG. Look for one hell of a rise in the PPS of SLW, as this Glamis deal comes together.
      Go to the website and review the WHT take over and the following year. Very eye opening. SLW is about to make a killing.

    • pnzrvi,

      So let's say the NewGG sells SLW 300 million ounces of silver over the next 20 years. What do you consider a fair price? How many shares of SLW do we sell to NewGG, how much cash up front and how much per ounce for the silver as we take delivery at a rate of 15 million ounces per year?

      Will there even be 300 million ounces from the new mines coming online starting in 2008?

      What are your thoughts?

      Live and learn...

    • Reticiiz,

      I agree with most of what you've said. SLW is NOT going to get silver from the NewGG for the $3.90 that they have in prior deals...and what most people forget is that,yes, they are paying $3.90 per ounce, but the also coughed up a sizable chunk of money upfront..a total that makes their purchase price per ounce approximately $7.50 per ounce (I could be a little off in the actual price per ounce). And that's similar to what they are going to have to do again, to get a sizable (300 million ounces over say 15 years)chunk of the silver from the Penasquito project.

      I'm thinking they are going to have to sell 100million shares of SLW (if this is even possible), a dilution of nearly 50%..and this would raise about $1billion...this would go a long ways towards the construction costs the NewGG will incur. This equals out to about $3.33 per ounce up front...then would then have to pay (for the sake of simplifying the math) about $5.67 per ounce upon delivery of the silver at a rate of 20 million ounces over the life of a 15 year contract. And if silver is at a price of $12 per ounce, I think earnings would roughly be $.55 per share. I don't know if they can swing something like this on this scale because of all the variables...but if they could....WOW. We'd be looking at a $25 stock, minimum...and if silver takes off to $20, $30, $40 per ounce....look out.

      Is this along the lines of what you were thinking?

      Live and learn...

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