Why Silver Wheaton is Still Going to $100
And you know that it will:
While leveraged speculators continue to lick their wounds following silver's infamous week of carnage -- which saw $1 billion exiting the iShares Silver Trust (NYSE: SLV ) amid an estimated $99 billion commodities rout -- undaunted long-term investors like this Fool are cheering a welcome buying opportunity.
Especially considering the degree to which silver equities failed to track silver prices higher during the final weeks of the metal's explosive rise, I see a broad array of compelling opportunities staring whipsawed investors squarely in the face. Under the circumstances, I am compelled to revisit a silvery prediction that I made nearly one year ago: That shares of Silver Wheaton (NYSE: SLW) will strike the $100 mark before this precious-metals bull market has run its full course.
However, before investors can invest with confidence on the basis of a targeted 60% production growth spurt, they must first determine their own degree of confidence in those targets. In the case of Silver Wheaton, those projections could scarcely be better supported. Primero Mining produced 33% more silver from the San Dimas mine in the first quarter than prior operator Goldcorp (NYSE: GG) produced in the prior-year period. After delivering the first 3.5 million ounces to Silver Wheaton, Primero retains the rights to 50% of the silver produced each year in excess of that amount. Under the very capable leadership of former IAMGOLD CEO Joseph Conway, I believe that Primero will make the most of that key silver lining.
Along with the continued long-term strength in silver prices that I obviously anticipate -- and the organic reserve growth that I expect from several of the company's key streams -- the final key ingredient to achieve a $100 price tag for Silver Wheaton involves the acquisition of new and robustly accretive silver stream agreements. Incoming CEO Randy Smallwood predicted a "flurry of transactions" once silver backed down a bit from its epic surge, and aims to ultimately amass a stream portfolio that is capable of producing 100 million ounces per year. Even as recent dislocations in the silver market have left behind a stable of enticing equity options -- epitomized by small-cap sensation Great Panther Silver (AMEX: GPL) and old-timer Hecla Mining (NYSE: HL) -- I encourage Fools to keep their gaze firmly fixed upon the superstar of silver streams: Silver Wheaton.