Silver Wheaton's Flawless Performance

While bullion investors focus more on weight and the purity of metal content, coin collectors are after those rare near-flawless gems. When it comes to investing in silver, I consider Silver Wheaton (NYSE: SLW  ) the brilliant uncirculated specimen in a fountain of fine collectibles.

Silver Wheaton set records in the third quarter like Michael Phelps, surpassing previous achievements for: net earnings, production volume, sales volume, and operating cash flow. It sold 70% more silver at 4.6 million silver equivalent ounces (SEOs), achieving a commensurate 70% boost to operating cash flow with $45.4 million. Repeating the previous quarter, Silver Wheaton's sales still lagged attributable mine production by 1 million SEOs as delivery delays pay it forward.

Net earnings rose 66% to $33.6 million, although the share dilution incurred to fund the transformational Barrick Gold (NYSE: ABX  ) silver stream purchase watered that down to just a 22% increase on a per-share basis. Easing the dilution, however, that Barrick deal yielded 223,000 ounces of low-cost silver during the quarter to help tide shareholders over until the 200 million-ounce jackpot begins to flow from Pascua Lama, targeted for the first quarter of 2013.

By that time, on the strength of Goldcorp's (NYSE: GG  ) Penasquito, which is ramping up production, Silver Wheaton expects to have grown silver production by 135% from anticipated 2009 production to 40 million ounces annually. Penasquito alone will send an average of 7.2 million ounces of silver down Silver Wheaton's stream during the mine's 22-year life. For comparison, that single stream equates to 84% of Hecla Mining's (NYSE: HL  ) entire silver production through the first three quarters of 2009.

The results are in
Nearly a year has passed since I issued my clarion call for Fools to examine Silver Wheaton just as panicked traders carved their historic trough into this multiyear bull market for gold and silver. Despite the share price appreciating by roughly 500% since that time, this Fool has continued to highlight Silver Wheaton as the shiniest catch in silver. Surprisingly, Fools voting in a recent Motley Fool poll expressed greater interest in Hecla Mining than Silver Wheaton (with 35% and 33% of votes, respectively). Coeur d'Alene Mines (NYSE: CDE  ) came in a distant third with 22%, while industry stalwart Pan American Silver (Nasdaq: PAAS  ) never stood a chance. Placing tremendous value on the collective insight of the Motley Fool CAPS community, I will take a fresh look at Hecla, but Silver Wheaton still reigns over this Fool's silver kingdom.

Fool contributor Christopher Barker carries a silver coin that reads: "Honest value never fails." He can be found blogging actively and acting Foolishly in the CAPS community under the user name TMFSinchiruna. He tweets. He owns shares of Coeur d'Alene Mines, Hecla Mining, Pan American Silver, and Silver Wheaton. The Motley Fool's disclosure policy is 0.999 pure.


Read/Post Comments (4) | Recommend This Article (22)

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  • Report this Comment On November 12, 2009, at 1:28 AM, Fool wrote:

    SLW is the best of class, and the silver streaming company is well run and the execution of its business plan is superb. I am very long SLW and will add on any weakness. This stock was selling below $12 per share on a pullback several weeks ago and now is over $15 per share. An amazing stock.

  • Report this Comment On November 14, 2009, at 5:39 PM, catoismymotor wrote:

    + 1 Rec

  • Report this Comment On November 14, 2009, at 5:40 PM, catoismymotor wrote:

    + 1 Rec

  • Report this Comment On November 24, 2009, at 5:14 AM, TMFCop wrote:

    "Nearly a year has passed since I issued my clarion call for Fools to examine Silver Wheaton just as panicked traders carved their historic trough into this multiyear bull market for gold and silver."

    I heeded that call, Chris, well, eventually anyway. I haven't enjoyed the 500% returns, but it has doubled in value since my purchase. Thanks!

    I do keep an eye on what you've got to say about precious metals as I find your analyses thoughtful and cogent. Keep up the good work.

    Rich (a fan)

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