TORONTO (miningweekly.com) – The world’s largest precious metals streaming company Silver Wheaton on Tuesday said it has an appetite for more large deals this year, following its blockbuster acquisition of a share of the gold production from two mines owned by diversified miner Vale for $1.9-billion, early in February.
Co-founder and CEO Randy Smallwood told Mining Weekly Online on the sidelines of the Prospectors & Developers Association of Canada’s yearly mining investment convention that the sheer quantity and quality of projects available almost certainly bodes well for the company entering into more deals.
“In fact, I would be surprised if we do not enter into more deals this year as the quality of projects in the market for deals are really encouraging. That’s why we also raised $2.5-billion to give us extra capacity after the Vale transaction,” he said.
Smallwood said that, despite there having been times in the past when the company was busy, the phone is now ringing as much as ever with companies seeking finance.
He stressed the equity and debt markets are exceedingly negative at the moment, forcing companies to seek creative ways to raise funds and that is what has brought the strength of the metals streaming business model to the fore.
There exists a fundamental arbitrage in metals. Smallwood explained that nobody associates Vale with gold, or Barrick with silver, but it is in unlocking the hidden value in the noncore metals miners produce that is attractive.
This was especially true for the base metals companies, such as Vale, which did not get recognition for the value inherent in its gold operations. “Look at the Vale gold deal, its but a small percentage of its gold production, but it had just raised $1.9-billion for them. They don’t get recognised for that,” he explained.
“We think the price and demand [for silver] will grow as the technological demand grows and for most part the same is true for gold. In a global environment where governments continue to print cash, we believe gold will continue to act as a store of value,” he said.
Smallwood said the company would never venture out of the precious metals space.
In fact, the company would continue to focus on the silver market, owing to it seeing more upside for price increases, as demand grows as a result of the white metal’s use in technology.
“We see more opportunities in the silver space. We will not become a gold-dominant metals streaming company.”
Smallwood said the company was “maturing nicely into a cash-flow machine”.
Silver Wheaton generate about $200-million in free cash per quarter and that is climbing rapidly through the company’s production profile, which is this year expected to be 33.5-million silver-equivalent ounces.
“By 2017, our guidance is 53-million ounces of silver equivalent, which is expected to be achieved by 2015 in any case, as mines are coming on stream,” he said.
“Despite the Vale deal having cleaned out our balance sheet, we have more than $1-billion in capacity right now, and I expect it would not be difficult to arrange more debt financing. And if the right opportunity came along, we would even go much larger than that,” Smallwood said.
Since 2009, Silver Wheaton has bought metals streams from Vale, Hudbay Minerals and Barrick Gold in Latin America. It also bought shares in Bear Creek Mining, which is developing silver mines in Peru.