Randy Smallwood, President and CEO of Silver Wheaton Corp. (USA) (SLW), says production is anticipated to grow 35% over the next four years. He was speaking at the Canaccord Genuity Global Resources Conference 2014 in New York, held at the New York Palace Hotel.
Silver Wheaton is a streaming company that makes upfront payments to mining companies in return for the right to purchase a fixed percentage of the future silver and/or gold production from a mine, Smallwood said. As the mine owner delivers precious metal to Silver Wheaton, an additional delivery payment is made to them. Silver Wheaton receives a percentage of life-of-mine silver and/or gold production.
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The delivery payments are typically subject to an inflationary adjustment of approximately 1% per annum after the third year of production. “The mining industry always has a need for capital,” Smallwood said. “That’s what we provide.”
The company is partnered with Vale, Glencore, Goldcorp, Barrick, Eldorado and several other companies. They are currently under contract with a total of 19 operating mines and five development projects. The company targets “high-quality assets with a long life,” Smallwood said.
Smallwood said production from its operating partners is forecast to grow 35% to 48 Moz Ag Eq. in 2018. Its Pacua Lama project is not in the 2018 forecast, but would add an additional 9Moz in its first five years, Smallwood said, adding that its forecasted operating cash flow more than offsets capital commitments, leaving over $950 million in available capacity for growth.
As of June 30, 2014, Silver Wheaton has $140M in cash, with capital commitments of $365M. The company has 358M share outstanding. Silver Wheaton generated $534 million in cash flow from operations in 2013 and has access to a $1 billion line in revolving credit that is undrawn.
The company has the financial capacity to do more deals, Smallwood said. “To be able to satisfy the need for capital is one of the keys for us continuing to grow.”
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