I've been looking at Silver Wheaton (NYSE:SLW), the silver streaming company whose unique business model has taken the precious metals world by storm. My premium report on Silver Wheaton explains the silver streamer's business model and how it has produced massive profits during silver's bull run.
Given the challenges that miners face, including safety issues, labor disputes, and big rises in production costs, Silver Wheaton's streaming model may seem easy to run by comparison. But great deals don't happen by themselves; they take strong players at the helm to find and complete. Let's take a closer look at who's running the show at Silver Wheaton.
CEO Randy Smallwood was one of the co-founders of Silver Wheaton. Although he's only been at the company's helm since April 2011, he served as president starting in 2010 and as vice president of corporate development since early 2005. He worked as a director of project development both at Goldcorp (NYSE:GG) since 2002 and at Silver Wheaton since its formation, and has previously worked at a host of other mining companies, including Homestake Mining and Teck Resources (NYSE:TECK).
Smallwood is also on the Silver Wheaton board of directors, but he doesn't act as its chairman. Doug Holtby has that role, having been chairman since May 2009. He's also vice chairman at Goldcorp and has previously served as director at a number of other companies both within and outside the mining industry.
Unfortunately, neither Smallwood nor Holtby have a particularly significant stake in the company. Holtby owns shares worth roughly $8 million, while Smallwood's holdings add up to about $5 million. While that's not a small amount of money, the two stakes combined add up to less than 0.1% of Silver Wheaton's outstanding shares.
Yet at $1.4 million in salary and bonuses for 2011, Smallwood's compensation doesn't seem terribly out of line, even though his taking over the CEO role coincided almost perfectly with the stock's high-water mark. With nice gains so far in 2012, Smallwood appears to be earning his keep. Moreover, with its decision to tie the stock's dividend to its cash flow, Smallwood is letting shareholders participate in the company's success.
Perhaps more importantly for the company's long-term prospects, Smallwood has continued Silver Wheaton's legacy of finding lucrative deals and capitalizing on them. Even though some of its streaming partners, including Goldcorp and Barrick Gold (NYSE:ABX), have experienced project delays and lower production output, Silver Wheaton has huge silver reserves that are the envy of the entire industry. Smallwood also orchestrated a key new deal with Hudbay Minerals (NYSE:HBM) whereby Silver Wheaton will provide $750 million in cash to invest in its 777 and Constancia mines. In exchange, Silver Wheaton will have the right to buy every bit of silver from the two mines, as well as 100% of gold production at the 777 mine, through 2016. With prices of less than $6 per ounce for the silver and $400 per ounce for the gold, the deal is just the latest example of how Silver Wheaton brings success to its bottom line.
Best of all, Smallwood is clearly committed to realizing Silver Wheaton's potential. As he recently told Mining Weekly Online, "It is all about choosing the right commodity, and being focused on silver has proven to be a good decision for us. We are careful to select projects that will deliver significant organic growth." With his belief that junior miners are undervalued, Silver Wheaton has the perfect chance to reap rewards.
Silver Wheaton has smart, knowledgeable leaders with plenty of experience at the helm. As the company moves into the future, Smallwood and his team appear well-positioned to continue Silver Wheaton's success.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
The Gold-to-Silver Ratio Just Topped 75: Here Are 3 Silver Stocks to Consider Buying Right Now
These three miners provide the highest leverage to physical silver.
8 Reasons Wheaton Precious Metals Could Be the World's Most Perfect Stock
You'll struggle to find a gold or silver mining stock with better a operating margin than Wheaton.
Better Dividend Stock: Royal Gold, Inc. vs. Silver Wheaton
These sizable streaming companies are both keyed in on dividends, but in very different ways.