Investors may want to consider making new friends with a couple of companies in the Basic Materials sector who have some history of rewarding shareholders. Of course, like making friends in your personal life, doing so as part of an investing strategy requires the same trust element.
The following are two precious metals companies to consider. One is silver and the other is gold. One is Silver Wheaton Corp. (USA) (NYSE:SLW) and the other is Barrick Gold Corporation (USA) (NYSE:ABX). Careful research of their respective operations and financials may make them welcome additions to your stock portfolio, depending on your risk profile.
5 Reasons to consider Silver Wheaton
1. A strong portfolio
Silver Wheaton Corp. (USA) (NYSE:SLW) has several agreements, where they have the right to buy all, or a part of the silver and/or gold production from 19 operating mines and four development stage projects. Their asset portfolio includes silver and precious metal streams on Barrick Gold’s Pascua-Lama project. It also includes streams on Hudbay Minerals’ 777 mine and Constancia project, and Vale S.A.’s Salobo and Sudbury mine.
2. Growth in attributable proven and probable reserves
Silver Wheaton recently reported that attributable proven and probable reserves increased more than 38% in 2012. They grew to a record 1,116.1 million silver equivalent ounces. This consists of 851.4 million ounces of silver and 4.96 million ounces of gold.
Therefore, for proven and probable reserves, the company has major growth in that portion of their Measured and/or Indicated mineral resource that is the economically mine-able portion.
3. They have no exploration costs
As a precious metals streaming company, Silver Wheaton offers upfront money, which they provide to a mining enterprise seeking capital. They can enjoy the benefits of exploration without having to take part in the exploration. They don’t have to invest additional resources (such as manpower, and more) and assume the risk inherent in that exploration.
4. Their Focus is buying at a low fixed cost
Their agreements with other companies pertains to them buying a percentage of a mine’s production at a price that’s lower than the spot price (stated outright value at any given time on the market) for the particular precious metal. Therefore, Silver Wheaton’s gain is the spread between their fixed payment and the spot price.
5. Strong forecasted production
Silver Wheaton Corp. (USA) (NYSE:SLW)’s 2013 attributable production forecast is approximately 33.5 million silver equivalent ounces. The company anticipates annual attributable production to grow to approximately 53 million silver equivalent ounces by 2017.
Production growth is a path to better shareholder returns and something for investors to look at. However, this production growth must be in tandem with cost containment and better production efficiency. A drop in commodity prices, without an accompanying drop in costs, can put the hurt on companies and their shareholders.
5 Reasons to consider Barrick Gold
1. Flush with cash
Barrick Gold Corporation (USA) (NYSE:ABX)’s full year 2012 operating cash flow was a record $5.44 billion. Mr. Jamie Sokalsky, Barrick Gold CEO, said recently, “The first step towards increasing returns to shareholders is to have the underlying business running well. For 2012, we delivered record annual operating cash flow, and the second-highest adjusted earnings per share in Barrick’s history.”
2. Nuggets in Nevada
In their own words, ” Nevada is a core operating region for Barrick and is the cornerstone of our success.” At their Goldrush deposit in the state, the company has a measured and indicated resource of 8.4 million ounces ( as of Dec. 31, 2012). This is a 500% increase from the prior year. Now, everything’s not high-gloss for Barrick; they reported a net loss of $0.67 billion for full year 2012. However, there’s potential for growth and improved results with operations such as Goldrush contributing to their gold pot.
3. They’re getting to the core of the issue
Barrick Gold Corporation (USA) (NYSE:ABX) is refocusing on what they do best – mining for gold. Consequently, the company recently reported that they are ” Pursuing and actively engaged in realizing opportunities to rationalize our portfolio, including the sale of Barrick Energy and other non-core assets with short mine lives and high operating costs.” ( reported Feb. 14, 2013).