August 18, 2013
– Comments (2) |
RELATED TICKERS: SAND
I now say SLW over SAND. Why? Because they went gold streaming too and they have better streams coming on line.
I agree completely. I was lucky and put a nice chunk of change in SLW under $3 in 2008. I also prefer silver over gold due to the fundamentals. But Sandstorm has more potential upside from here, in part because the 2015 warrants which given you an additional 2-2.3x leverage. The only problem I have with Silver Wheaton and its gold streams has to do with the Vale transaction. I absolutely love Salobo and mid-long term upside potential ( I think it will double capacity by 2020-2023 AFTER it reaches 24mtpa. Most investors fail to realize the vast upside potential in Salobo. What I didn't like was the Sudbury Transaction fro $570m for several reasons; because its in Canada, SLW has to pay taxes on all attributable gold production and sales, the fact it has a 20 yr-term instead LOM and given that Salobo cost 1.33B, spending an additional 570m , for a total of 1.9B in one transaction is never smart. Imagine if they had that $570m to deploy now and much further it would go. I know mgmt says they still have a lot of capacity available but i doubt theyd acquire anything bigger than a 2-3m oz. stream as to not increase the debt load. SLW also has the 2nd payment to Hudbay of $125m next year and $230m to Rosemont (in stages) likely starting mid-late 2014. SLW will also realize increased production from Penasquito in 2h 2014, with likely full production sometime in 2015, increased production from San Dimas next year.
Sandstorm also has some great streams especially if you take into account what they paid for them.
1) Aurizona -( 17m + shares ) - Initial capacity was to be 60k per annum. In 2014, Aurizona production will double to 120-130k oz.'s. By 2016 or 2017, production will likely double again with the underground mine to anywhere between 200-300k oz. p.a , although 240k looks like the base case scenario.
2) Bachelor Lake - Paid $20 for a 20% stream on BL which was initially forecast to produce 60k p.a. They have fairly recently come out and said it will increase mill capacity by 50%, such that 2015 production is estimated to be between 80-90k oz. p.a.
3) Serra Pelada - Based on the drill holes ive looked at as well as all the analyst reports out there for CSI, avg Pt grade will likely be between 4.8-5.3 g/t. This translates into roughly 15k oz. Pt @ just $200/oz. + 3k-3.2k oz. Au at $400/oz. There is also significant upside.
The list goes on with Silvercrest, Ming, not to mention the $200m in available capacity for new streams.
My biggest holding by far is SLW but i;ve owned SAND since .48c or $2.4 adjusted for the split, along with A lot of 2015 warrants.