Over the past few years, the historical prices of gold and other precious metals have given investors good reason to purchase metals stocks. Yet, with the stock market back up from its 2008 lows, will these shares still provide value to investors? In this article, I will show that Silver Wheaton Corp. (USA) (NYSE:SLW), the largest precious metals streamer in the world, is an excellent short and long-term stock for your portfolio.
With the Federal Reserve continuing its quantitative easing efforts through buying back $40 billion per month in mortgage backed securities, along with the continual printing of money, the U.S. dollar has become further devalued – giving investors reason to keep buying gold as a hedge against inflation – and giving Silver Wheaton’s CEO Randy Smallwood reason to believe that gold and silver prices will keep moving higher.
Smallwood was recently quoted as stating that “[The company is] confident in precious metals as becoming a story of value. It’s a hard asset that can’t be printed, can’t be reproduced [and] it’s still pretty tough to find this stuff.” He went on to state that his company is looking to better position itself in the gold space, and that he is bullish on precious metals in general over the long run.
Over the next five years, Silver Wheaton estimates that the revenue it generates from gold will increase from roughly 12% to approximately 25%. This equates to the company’s gold streams adding approximately 110,000 ounces of gold production per year. Expanding out over a 20 year time frame, Silver Wheaton expects that this is equal to just under 6 million silver equivalent ounces, having a gold/silver ratio of 53:3:1.
In late 2012, the company announced that it had a record 7.7 million equivalent ounces produced in the third quarter of 2012, due in large part to the addition of its production from its Hudbay’s 777 mine.
Recently, Silver Wheaton also made an announcement that it will be acquiring two gold streams from Vale S.A. One is Vale’s Salobo Mine, located in Brazil, and the other includes certain Sadbury Mines that are located in Canada. Through this deal, Vale is to deliver 25% gold stream interest of the life of mine production with regard to the Salobo Mine. In addition, Vale will also deliver a 70% gold stream interest from the Sudbury Mines that are included in the deal. This interest will continue for a period of 20 years.
Silver Wheaton currently pays a dividend of $0.28 per share, giving it a yield of just under 1%. But with a P/E ratio at just under 23, and earnings per share of 1.57, while Silver Wheaton may not be pumping out loads of income to investors, the shares should still be considered on the growth side, particularly as its shares are estimated to rise nearly 30% over the next 12 months.