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Silver Wheaton Industry Analysis

Autor:   •  March 30, 2012  •  Case Study  •  1,553 Words (7 Pages)  •  1,130 Views

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Chapter 1 Introduction

1.1 Industry Analysis

Established in 2004, Silver Wheaton has quickly positioned itself as the largest metals streaming company in the world. The company has the right to purchase all or a portion of the silver production, at a low fixed cost, from high-quality mines located in politically stable regions. (Appendix A)

As shown in Appendix A, total demand for silver has long outstripped what mining companies have been able to produce, this year the difference between the 900 million ounces demanded and the 780 million ounces the mining industry will be able to suppy.

The silver market continues to move in a state of flux as the metal struggles to free itself from its current period of price correction. However, one must not take this to be a sign of overall weakness in the silver bull market but rather a normal adjustment to the recent $15 highs that caused silver to race too far ahead of its normative indicators. In terms of Elliott Wave analysis, the most probable picture to me is laid out below.

1.2 Company Analysis

Silver Wheaton is the largest silver streaming company in the world. The Company has long term contracts to purchase all or a portion of the silver production from mines in Mexico, Sweden, Peru, Greece, Portugal, Canada and the United States.Beyond the initial upfront payment, no ongoing capital expenditures are required to generate this growth and Silver Wheaton does not hedge its silver production.

Silver Wheaton was previously controlled by Goldcorp until December 7, 2006 when Goldcorp's sale of 18 million shares reduced its ownership to 48%. On February 14, 2008 Goldcorp divested itself completely of Silver Wheaton, selling 108 million shares for C$1.566 billion. Silver Wheaton’s industry-leading growth profile is driven by a portfolio of world-class assets, including silver streams on Goldcorp’s Peñasquito mine in Mexico and Barrick’s Pascua-Lama project straddling the border of Chile and Argentina. The company’s unique business model creates significant shareholder value by providing leverage to increases in the silver price while reducing the downside risks faced by traditional mining companies. Silver Wheaton has an experienced management team with a strong track record of success and is well positioned for further growth.

Chapter 2 Financial Information Analysis

2.1 Ratio Analysis

According to the annual report of Silver Wheaton Inc. we can calculate the total debt ratio, debt-to-equity ratio, equity multiplier and the degree of financial leverage in past five years. (Appendix B)

2.2 Liabilities Analysis

The total liabilities of the company are $ 1,006,730,000, including total current $212,607,000 liabilities

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