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Silver prices enjoyed a bullish third quarter and will keep the rally going through the end of 2012.
Reaping the benefits from this precious metal's increase has been silver exchange-traded funds (ETFs) and silver mining companies.
One mining company, Silver Wheaton Corp. (NYSE: SLW), is clearly riding high on these good times.
Back in July as silver was making its ascent, Silver Wheaton sat at $25. Today (Tuesday) it is trading at $39.12, with year-to-dates gains exceeding 34%.
Don't worry investors, you haven't missed out: It also has a bright future.
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SLW Soars on Silver Price Climb
Silver Wheaton has found its niche in silver streaming.
The company provides money for capital expenditures on the front end as a project starts to develop. It then acquires rights to purchase the produced precious metals at low, fixed prices.
The company neither pays for ongoing capital nor exploration costs from mines. So its fixed, one-time costs cut down its risks, according to a profile in Forbes.
The company gets silver at fixed price then sells it at current market prices against the volatility of daily prices. Silver Wheaton's gains rise as silver market prices increase.
Currently the company has 15 silver purchase agreements and three precious metal purchase agreements across 13 mining partners worldwide.
Silver Wheaton CEO Randy Smallwood attributes Silver Wheaton's success to its precious metal of choice.
Smallwood explained, "It is all about choosing the right commodity, and being focused on silver has proved to be a good decision for us. We are careful to select projects that will deliver significant organic growth."
Silver Wheaton: Let's Make a Deal
Silver Wheaton owes part of its recent rise to the market's favorable reaction to its acquisition of HudBay Minerals Inc. The $750 million deal closed on Sept. 28, 2012.
Silver Wheaton now has an opportunity to take 100% of production from two of the company's mines. This will allow it to expand from this year's forecast of 28 million equivalent silver ounces to a 2016 forecast for 48 million equivalent silver ounces, reported Trefis.
This is just one of the many benefits from the acquisition.
According to Forbes, the deal gives Silver Wheaton the ability to insulate itself from rising production costs, while also protects it from the downside of lower production.
And the deal-making could continue. The company has more cash to spend on new transactions and is focusing on business development.
Silver Wheaton has a cash balance of $1.1 billion as of June 30, 2012. Since then it's had to pay $500 million to acquire Hudbay and a Barrick payment of $138 million, but has also generated an additional quarter's worth of cash.
Recently Smallwood said to Mining Weekly that the company will finance new projects with its cash stash. He said that approximately 80% of the company's revenue has gone to its funding while 20% has been returned to investors via quarterly dividends.
Smallwood isn't the only one expressing confidence in SLW. Fortune magazine recently named Silver Wheaton as the fastest-growing company thanks to its 340% increase in profits over the last three years to $575 million.
Revenue has increased 76% to $771 million during this time period.
Staying on top could last for "quite a while" said Smallwood.
"We have a strong growth profile and we expect to produce 48-million ounces of silver a year within the next four years – and that excludes any future deals we may decide to enter into," he told Mining Weekly.
With the increased demand for silver in industrial production as well as the ongoing global financial woes, silver prices are expected to continue rising.
For Silver Wheaton, this is a very good thing.
Related Articles and News:
- Money Morning:
Silver Prices: Much More To This Rise Than a QE3 Rally
- Money Morning:
Play Rising Silver Prices With These ETFs
Silver Wheaton Corporation: Par Excellence
- Mining Weekly:
Silver Wheaton expects to remain Fortune's fastest growing
Silver Wheaton's Worth $37 Though Hudbay Deal Could Add Upside