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Old 03-23-2012, 09:48 AM   #1
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Lightbulb PM streaming companies (SLW business model)

The mining sector is having certain issues to deal with (project financing, political interference, accidents, environmental issues, unsuccessful exploration, selling by-products etc...) which a unique business model tries to eliminate: the so called streaming companies. The biggest player in the pm streaming business is SLW (Silver Wheaton).
Here's a short description of their operations:
Quote :
Silver streaming is the term often used when a company makes an agreement with a mining company to purchase all or part of their silver production at a low, fixed, predetermined price to which both parties agree. The silver is usually a by-product of the mineral the mining company's business is based on (most silver is produced as a by-product of base metals). The arrangement can be made through silver purchase agreements or precious metals agreements. The transaction is considered mutually beneficial. The mining company gets much needed capital by immediately monetizing the non core silver, while the company receiving the silver gets it without having to invest in exploration, development, maintenance. Silver streaming companies have no control over the mines that produce their silver meaning that when production falls short of expectations or is affected by political instability it must incur the losses itself; because of the lack of control over production, earnings are based entirely on the market price of silver.
Barrick Gold, and Goldcorp are 2 mining companies which do business with silver streamers. Silver Wheaton Corporation is the world's largest silver streaming company.
http://en.wikipedia.org/wiki/Silver_streaming

Essentially, an investment in such a company means buying a managed derivative on the underlying commodity. This is how SLW advertises their business model in investor presentations ( http://www.silverwheaton.com/Theme/S...001_m7woys.pdf ). They claim to be the better alternative to an ETF.
The advantages essentially are:
- Production growth
- Dividends
- Physical backing
- Leverage to the silver price due to fixed purchasing prices

I think this business model is very interesting, so I did some research to find out if there are other streaming companies in the pm business.

There's one pure gold streamer which was founded three years ago by a bunch of former SLW employees: Sandstorm Gold (Symbol: SSL at the TSX Venture Exchange)

The stock really took off (doubled) since the beginning of the year

Here's an investor presentation:
http://www.sandstormgold.com/i/pdf/Presentation.pdf

Here's a short interview with the CEO

Just a year ago, they've applied the same business model to base metals and energy and spun off a sister company called Sandstorm Metals & Energy (Symbol: TSX.V:SND )

Here's an investor presentation
http://www.sandstormmetalsandenergy....esentation.pdf
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Old 03-23-2012, 09:52 AM   #2
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SLW is a good company and I think you summed up the investment thesis pretty well.

Just so everyone knows.. Do not buy a Vancouver listed stock on margin (SND). Only purchase them in cash accounts that are separate from your own. I could get into a long discussion about this, but it's easier to just tell you not to do it
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Old 03-28-2012, 12:40 PM   #3
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SLW is on sale today. Looks like a good buy to me:

(Not my technical analysis)

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Old 04-01-2012, 01:54 AM   #4
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Silver streaming companies

Are there any other smaller silver stream companies out there? I know there was one other but it was taken over by SLW maybe a year ago. I agree this model is very interesting.
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Old 04-01-2012, 08:06 AM   #5
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Silver Wheaton scares me. They are to volatile, and do not always honor the fundamentals.

Just like AGQ, SLW has been a good vehicle for those who do not get car sick.
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Old 04-01-2012, 09:16 AM   #6
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Originally Posted by ancona View Post:
Silver Wheaton scares me. They are to volatile, and do not always honor the fundamentals.
Just like AGQ, SLW has been a good vehicle for those who do not get car sick.
They trade like a deep in the money call option on the silver price which is justfied given their business model (fixed price of ~ $5) . They even brag about beeing "the better ETF" (compared to SLV, even PSLV) in their investor presentations:
http://www.silverwheaton.com/Theme/S...001_m7woys.pdf
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Old 04-01-2012, 09:17 AM   #7
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Originally Posted by Sb51 View Post:
Are there any other smaller silver stream companies out there? I know there was one other but it was taken over by SLW maybe a year ago. I agree this model is very interesting.
I couldn't find another pure silver streaming company, just the companies I named in the op.
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Old 04-05-2012, 01:02 PM   #8
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News on Sandstorm Gold, they're doing a reverse split:
Quote :
Sandstorm Gold announced today, with the approval of the shareholders and the
venture exchange, it will up list onto a U.S. exchange. In order to meet
the necessary conditions, Sandstorm will engage in a share consolidation,
whereby investors will receive 1 new share for each 5 existing shares
. In
other words, it can be thought of as a reverse split.

For example, if an investor owns 10,000 shares trading at $2/share, he/she
will be given 2,000 new shares that trade for $10/share.

There is no impact one way or another as the percentage ownership of the
company will stay the same. In fact, this is actually very beneficial
because U.S. fund managers, pension funds and institutions will be able to
buy shares.
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Old 04-05-2012, 01:20 PM   #9
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So this doesn't mean anything other than a consolidation, right? In other words, there is no value added other than being listed on a better exchange?
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Old 04-05-2012, 02:00 PM   #10
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Yes.
It's a sign that the company is going to the next level.
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Old 04-16-2012, 12:15 PM   #11
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SLW is down 6% today on no news but huge volume. WTF?!
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Old 05-06-2012, 04:18 PM   #12
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Quote :
Sandstorm Gold Recognizes Record Gold Sales and Operating Cash Flow of US$9.3 Million

VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 05/03/12 -- Sandstorm Gold Ltd. (TSX VENTURE: SSL) ("Sandstorm" or the "Company") is pleased to announce its unaudited results for the first quarter ended March 31, 2012 (all figures in U.S. dollars).

First Quarter Highlights
-- Record operating cash flow of $9.3 million.
-- Record gold sales of 7,946 ounces.
-- Average cash cost per ounce(1) of $314 resulting in cash operating
margins of $1,380 per ounce.

-- Sandstorm entered into a revolving credit agreement to borrow up to $50
million, which remains undrawn.

(1) Sandstorm has included a non-IFRS performance measure in this press
release being average cash cost per ounce. Average cash cost per ounce
is calculated by dividing the Company's costs of sales by the number of
ounces sold. The Company presents average cash cost per ounce as it
believes that certain investors use this information to evaluate the
Company's performance in comparison to other companies in the precious
metals mining industry who present results on a similar basis.


"The first quarter proved to be another record quarter in terms of gold sales and cash flow," said President & CEO Nolan Watson. "As our cash balance continues to grow, we are better positioned to complete additional gold streams while minimizing equity dilution. I am confident that our team will be able to add significant value through acquisition during 2012."

Outlook

Based on existing gold stream agreements, the forecasted attributable production for 2012 is 26,000 to 34,000 ounces of gold increasing to over 50,000 ounces of gold per annum by 2015.

Further details of the individual commodity streams can be found within Management's Discussion and Analysis contained in the Company's first quarter 2012 report and on the Company website
http://www.finanznachrichten.de/nach...illion-256.htm
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Old 07-28-2012, 01:09 PM   #13
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Sandstorm gold is doing fine:

Quote :
Sandstorm Gold Reports Record Gold Sales and Operating Cash Flow in Q2, 2012

VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 07/26/12 -- Sandstorm Gold Ltd. ("Sandstorm" or the "Company") (TSX VENTURE: SSL) is pleased to announce its unaudited results for the second quarter ended June 30, 2012 (all figures in U.S. dollars).

Second Quarter Highlights

-- Record gold sales of 9,259 ounces.
-- Record operating cash flow of $11.3 million.
-- Average cash cost per ounce(1) of $298 resulting in cash operating
margins of $1,317 per ounce.

-- Net income of $5.3 million.
-- Sandstorm acquired from Magellan Minerals Ltd., a 2.5% net smelter
returns royalty on the Coringa gold project and a 1.0% NSR royalty on
the Cuiu Cuiu gold project.
-- Sandstorm acquired a 2.4% net smelter returns royalty on the Mt.
Hamilton gold project from Solitario Exploration & Royalty Corp. and Ely
Gold & Minerals Inc.


"Steady production growth from our mining partners has led to consecutive record quarters for Sandstorm," said President & CEO Nolan Watson. "During the second quarter we deployed our cash into royalty transactions that we believe will be accretive to shareholders, and the pipeline of potential gold streaming opportunities is stronger than ever."

Outlook

Based on existing gold stream agreements, the forecasted attributable production for 2012 is 28,000 to 33,000 ounces of gold, increasing to over 50,000 ounces of gold per annum by 2015.

Further details of the individual commodity streams can be found within Management's Discussion and Analysis contained in the Company's second quarter 2012 report and on the Company website.
http://www.finanznachrichten.de/nach...2-2012-256.htm
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Old 08-08-2012, 09:54 AM   #14
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SLW is up 5% today on a major acquisition:

Quote :
Silver Wheaton Corp. ("Silver Wheaton" or the "Company") (SLW.TO) (SLW) is pleased to announce that it has agreed to acquire from HudBay Minerals Inc. ("Hudbay") (HBM.TO) (HBM) 100% of the life of mine silver production from its currently producing 777 Mine ("777"), located in Canada, and 100% of the life of mine silver production from its Constancia Project ("Constancia"), located in southern Peru. In addition, Silver Wheaton has agreed to acquire 100% of the life of mine gold production from Hudbay's 777 Mine until Constancia satisfies a completion test, or the end of 2016, whichever is later. At that point, Silver Wheaton's share of gold production from 777 will be reduced to 50% for the remainder of the mine life.

Silver Wheaton will pay Hudbay total cash consideration of US$750 million, of which US$500 million is payable upon closing, with two further payments of US$125 million each to be made upon the satisfaction of minimum capital expenditures having been incurred at Constancia. In addition, Silver Wheaton will make ongoing payments of the lesser of US$5.90 per ounce of silver and US$400 per ounce of gold (both subject to an inflationary adjustment) or the prevailing market price per ounce of silver and gold delivered.

TRANSACTION HIGHLIGHTS

Provides Immediate Cash Flow
Silver Wheaton will receive 100% of the silver production from Hudbay's currently producing flagship mine, 777, and will also receive 100% of the gold production until the later of the completion of Constancia or the end of 2016, at which point Silver Wheaton will receive 50% of the gold production from 777 for the remainder of the mine life;
Average annual attributable production from 777 is anticipated to be approximately 4.2 million silver equivalent ounces, including 0.82 million ounces of silver and 68,000 ounces of gold1, until the end of 2016;
Silver Wheaton's total forecast 2012 silver equivalent production increases from 27 million ounces to approximately 28 million ounces, including 42,000 ounces of gold1.

Significantly Increases Long Term Growth Profile
Combined, 777 and Constancia will increase Silver Wheaton's average annual silver equivalent production by approximately 4.9 million ounces1;
Silver Wheaton's total forecast 2016 silver equivalent production increases from 43 million ounces to approximately 48 million ounces (including 100,000 ounces of gold2), an increase of 90% from 2011.

Further diversifies Silver Wheaton's portfolio of low-cost and long-life mines with exciting exploration upside

Staged upfront payments relating to the construction of Constancia aligns Silver Wheaton with Hudbay's capital spending schedule
Initial payment of US$500 million to come from Silver Wheaton's existing cash balance of US$997 million at the end of the first quarter of 2012.

"We are extremely pleased to add two new precious metals streams, on high-quality base metal mines, to our diversified portfolio which now includes 17 operating mines and four development stage assets," said Randy Smallwood, Silver Wheaton's President and Chief Executive Officer. "This transaction provides immediate cash flow, is accretive on all short- and long-term metrics, and maintains our policy of investing in low-cost, high quality assets. It also solidifies one of the strongest growth profiles in the precious metals industry. Hudbay has a history of mining success spanning decades, and as flagships in their asset portfolio, we are confident that 777 and Constancia will deliver significant long-term value to both groups of shareholders."

"We have reviewed numerous streaming opportunities since our last transaction, and have been steady in our focus on quality. First and foremost, the mines underlying our precious metals streams must be lower-cost operations, ensuring they continue to produce through all phases of the commodity price cycle. Secondly, they must possess exciting exploration upside potential, with the possibility of delivering organic reserve growth and, as a result, long mine lives. With the 777 and Constancia streams, we continue to adhere to these principals, while at the same time executing the type of high-quality and accretive acquisition on which we've built our reputation."

"Silver Wheaton's balance sheet remains very strong. After the initial upfront payment of US$500 million, we still have over US$500 million in cash on hand, a fully undrawn US$400 million revolving credit facility and strong forecast operating cash flows, including immediate cash flows from 777. As a result, we remain exceptionally well-positioned to continue our growth via new precious metal streams, and are pursuing numerous additional growth opportunities."

...

ABOUT 777 MINE

Hudbay's flagship 777 mine is located in the prolific Flin Flon Greenstone Belt, Manitoba, Canada, where Hudbay has been mining for nearly 85 years. A low-cost producer of zinc, copper, gold and silver, 777 is an underground mining operation, with an ore concentrator and zinc production facility located immediately adjacent to the mine. 777 commenced commercial production in 2004 and has a reserve mine life until 2020. The mine has very good exploration upside with drilling in recent years shifting from reserve definition to exploration. Over 21,000 metres of exploration drilling in 2011 will be followed up with a similar sized program in 2012, with a focus on targeting additional resources. In addition, completion of the 777 North expansion, which is well underway, will provide access to mineral resources in the north and east zones, and will also provide an underground exploration platform to enable the evaluation of additional exploration opportunities near the 777 mine.

ABOUT CONSTANCIA PROJECT

Constancia is located in an established mining district in the province of Chumbivilcas in southern Peru. It is forecast to be a large, lower-cost and long-life open pit mine, producing copper, molybdenum, silver and gold. With key environmental permits in place, strong community support, and engineering and design work essentially complete, first production is anticipated in 2014 with full production in 2015. Capital expenditures are estimated at US$1.5 billion and the mine plan currently contemplates an annual production rate of 90,000 tonnes of contained copper in concentrate with molybdenum, silver and gold by-products. Constancia has more than a 16 year mine life and will become Hudbay's largest mine, once in production. Considerable exploration potential exists, as was evidenced by an initial resource at the higher-grade Pampacancha satellite deposit, which was announced by Hudbay in April of 2012. Significant exploration drilling at Constancia is ongoing, and Hudbay believes that there is the potential to yield additional higher grade mineralization in satellite deposits.
http://finance.yahoo.com/news/silver...124500439.html
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Old 09-28-2012, 03:46 PM   #15
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Follow up on the post above:

Silver Wheaton Closes Acquisition of Precious Metals Streams From HudBay's 777 Mine And Constancia Project
http://finance.yahoo.com/news/silver...3Rpb25z;_ylv=3
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Old 10-22-2012, 08:32 AM   #16
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Sandstorm Gold's CEO was on Cramer 2 weeks ago, here is the video:
Fri 05 Oct 12 | 06:15 PM ET
http://video.cnbc.com/gallery/?video...deo|&par=yahoo
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Old 03-04-2013, 11:42 AM   #17
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Snidely

Originally Posted by swissaustrian View Post:
Sandstorm Gold's CEO was on Cramer 2 weeks ago, here is the video:
Fri 05 Oct 12 | 06:15 PM ET
http://video.cnbc.com/gallery/?video...deo|&par=yahoo

Believe it or not, Cramer has called the top again.

SAND is down nearly 50% since the appearance of it's CEO on Cramers show which marked the top nearly to the day.
The fundamentals are a screaming buy right now. The company is gonna grow production by 100% in just three years and they're purchasing their stuff through streams at fixed prices between $400-500 dollars. I'm a buyer today! It might go lower, but these prices are too tempting in the long run. If you wanna buy, too, DO NOT use leverage!

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Old 03-08-2013, 10:42 AM   #18
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Impressive rebound by Sandstorm Gold (SAND) since I bought on Monday, up 80 cents from 8.6 to 9.3 or 7.6%.
That's a massive outperformance against gold as well as the big miners and most juniors.
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Old 04-09-2013, 05:29 PM   #19
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Audio Interview with Sandstorm's CEO Nolan Watson
“I Expect The Streaming Industry To Exceed $100B Over Time”
http://bullmarketthinking.com/wp-con...2013watson.mp3
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