One way to value SLW

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#1 Thu, Jun 23, 2011 - 2:51pm
Hackswell
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One way to value SLW

Here's an article about one way to possibly calculate "Book Value" of Silver Wheaton or Sandstorm:

https://seekingalpha.com/article/276086-an-alternative-approach-to-valua...

Edited by: Hackswell on Nov 8, 2014 - 5:09am
Thu, Jun 23, 2011 - 3:13pm
Kryptonite for Bankers
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Thanks for posting this!

Thanks for posting this!

Thu, Jun 23, 2011 - 6:52pm
Pyrat
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Thanks for post.

Thanks for this article.

The authors calculation seems fairly straightforward, though I have to admit I'm not exactly certain how the SLW model works. Since they agree to buy all the silver that's mined as a by-product, isn't the delivery of the cash flows somewhat uncertain? 

If I read that correctly, he's suggesting the price of the shares are due for at least a 100% increase to fairly value the future silver flow of SLW.

Fri, Jun 24, 2011 - 10:09am (Reply to #3)
Hackswell
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PM Streaming companies

Pyrat wrote:

Thanks for this article.

The authors calculation seems fairly straightforward, though I have to admit I'm not exactly certain how the SLW model works. Since they agree to buy all the silver that's mined as a by-product, isn't the delivery of the cash flows somewhat uncertain? 

If I read that correctly, he's suggesting the price of the shares are due for at least a 100% increase to fairly value the future silver flow of SLW.

Silver Wheaton and Sandstorm are silver/gold streamers. They make a contract with miners directly for the right (but not the obligation) to buy their PMs at a certain price. A miner would want to make this contract for a couple of reasons:

* Need CA$H fast! By selling a portion of their production NOW, they get money up-front without loans or diluting shareholders.

* Known income... hedging against silver/gold price crash (But then, SLW/SNDXF would probably choose to not buy at that time)

And it seems that many of the contracts are with juniors. Any bigger contracts would probably be more hedges on the miner's part.

It's a nice business model. In a secular bull market for PMs... the streaming company practically incurs no debt, needs a literal handful of employees, and buys low/sells high on the market. Sounds like a GREAT business plan to me. However... in the far future when PMs enter their next secular bear market... I don't know how they can be nearly as profitable, other than cheaply funding junior miners.

Mon, Jun 27, 2011 - 12:18am
Warren Peace
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This investment stuff is easy!

And just imagine where these streamers will be when the sinister government PPT algorithm gets blown up!!!

Hint..... way, way higher.

As the great Mogambo always says... weeeeeee!!! This investment stuff is easy... Lol.