How Silver Wheaton Got More Precious in 2012

The year is nearing its end, and now's a good opportunity to look at what happened throughout 2012 to the stocks you follow. If you know the important things that a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it really deserves a spot in your portfolio.

Today, I'll look at Silver Wheaton (NYSE: SLW  ) . The silver streaming company isn't a conventional miner, instead providing financing to mining companies in exchange for the right to buy streams of the resulting silver production from their mines at a discount. Read on for more about what happened with shares of Silver Wheaton this year.

Stats on Silver Wheaton

Year-To-Date Stock Return

21%

Market Cap

$12.3 billion

Revenue, Past 12 Months

$754 million

Net income, Past 12 Months

$553 million

1-Year Revenue Growth

9.7%

1-Year Net Income Growth

17.9%

Dividend Yield

0.8%

CAPS Rating (out of 5)

****

Source: S&P Capital IQ.

Why did Silver Wheaton shine in 2012?
Silver Wheaton can benefit from its silver streaming business in three different ways. First, it can negotiate new streaming arrangements with companies needing financing. This summer, the company did a deal with HudBay Minerals (NYSE: HBM  ) to provide $750 million toward HudBay's Peruvian Constancia mine. In exchange, Silver Wheaton will receive rights to a stream of silver from Constancia as well as silver and gold production from its existing Manitoba mine.

Second, when Silver Wheaton's financing partners boost production, the size of silver streams can grow. Unfortunately, production problems at Goldcorp's (NYSE: GG  ) Penasquito mine and Barrick Gold's (NYSE: ABX  ) Pascua Lama mine will lead to temporary reductions and delays in Silver Wheaton's expected proceeds from those operations, but given that both Barrick and Goldcorp have plenty of incentive to get those mines running at full capacity as quickly as possible, Silver Wheaton should eventually get everything it hoped for from the deal.

Finally, rising silver prices can obviously boost Silver Wheaton's fortunes. A gain of about $2 per share for the iShares Silver Trust (NYSEMKT: SLV  ) , roughly equating to a $2 gain in bullion prices per ounce, was far less than silver's highs for the year. But the modest rise nevertheless had a positive impact on Silver Wheaton's bottom line.

This was a solid year for Silver Wheaton, and it also set the stage for strong performance in the years to come. With its unusual business structure, Silver Wheaton can benefit in so many ways that it has huge future potential.

Learn more
Silver Wheaton's had a great 2012, but what's ahead for 2013? Go beyond this simple review article to get the full scoop on the silver streamer in our premium research report on the stock. Inside, you'll find out whether Silver Wheaton is a buy along with the rest of our outlook on this favorite silver stock. Grab your copy today; click here to get started.


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  • Report this Comment On December 31, 2012, at 1:34 PM, DanCooper76 wrote:

    A similar gold play would be Franco-Nevada Corporation (FNV). FNV had a better year, with less volatility.

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