Transcription of Finance News Network Interview with Silver Wheaton Corp. (TSE:SLW, NYSE:SLW) President and CEO, Randy Smallwood Lelde Smits: Hello I’m Lelde Smits for Australia’s Finance News Network and joining me from Silver Wheaton Corp. (TSE:SLW, NYSE:SLW) is its President and CEO, Randy Smallwood. Randy, welcome to Mines and Money here in London.
Randy Smallwood: Glad to be here, thank you.
Lelde Smits: Silver Wheaton was established in 2004 and describes itself as the world’s largest precious metals streaming company. How does your business model compliment your growth profile?
Randy Smallwood: The business model is strong. It reduces the cost risk and so it gives us all sorts of capital. The fact that we don’t have operating cost risk or capital cost risk attracts investors which gives us the support going forward to continue growing. So, it’s the business model itself that is sort of self-funding in terms of the quality. Now we are to the point we have such a strong asset base our production profit, of course, that is the first money that goes into the ground.
Lelde Smits: The business of precious metals streaming enables the company to purchase, in exchange for an upfront payment, gold or silver production. How many agreements do you have in place and over how many mines or development projects?
Randy Smallwood: We’ve got 25 projects under contract right now. 19 of them are delivering metal to us going forward. So, it’s a good strong portfolio. The ones that aren’t delivering are either in construction or awaiting permits going forward. So, it’s a good strong portfolio – assets scattered through the Americas and Europe.
Lelde Smits: Could you share some names of projects or company’s investors may be familiar with?
Randy Smallwood: Sure, obviously Barrick’s Pascua-Lama [project in South America] will be a very exciting mine once it gets up and built. It is one of the most profitable gold mines in the space and it will be very, very attractive. So, we’re confident that Barrick will move that one going forward.
Goldcorp at Penasquito in Mexico. Vale with the Salobo [Brazil] and Sudbury [Canada] operations. Glencore with the Yauliyacu operations [Peru]. As you can see, a lot of very large companies that have recognized the value that streaming provides to them in allowing them to focus on their core products.
Lelde Smits: When it comes to agreements how does Silver Wheaton determine the amount it pays for silver and gold?
Randy Smallwood: The secret sauce. Very, very thorough due-diligence. We are driven – I am a geological engineer by background – my experience is all project evaluations. It is, it runs in our veins, in terms of making sure that these projects have got good strong resource opportunities, good strong reserve behind that. If you don’t have a good ore body it’s pretty tough to make a good mine. So, we start by making sure it’s a good ore body.
Lelde Smits: Precious metals have come under pressure this year, with both silver and gold sitting at depressed levels. Why do you think we’ve seen such a slump?
Randy Smallwood: I think there is an emotional strength or support into the US dollar right now that doesn’t have a lot of merit behind it. There is not a lot of substance behind it. I think it is more of an emotional trend. So, that has brought these precious metals prices down.
Lelde Smits: And how has it impacted Silver Wheaton?
Randy Smallwood: Even at the current prices – Silver trading in the $US20 range and gold at the $US1,200-1,250 range – still very profitable from a Silver Wheaton perspective. Our cost for silver is about $US4 an ounce. Our price for gold is about $US400 an ounce. So, lots of profit still.
Lelde Smits: What is your outlook for the gold and silver price heading into 2014?
Randy Smallwood: I do think that a year from now we will be slightly higher than we are now. I think it’s probably going to be a six to eight to ten month sort of a flat, sort of a challenging time. But, I do think there will be a resurgence in precious metals. I think of it more not as a resurgence but, sort of the next stage in devaluation in terms of fiat currencies. It will come.
Lelde Smits: Finally Randy, what are your ambitions for Silver Wheaton over the following year?
Randy Smallwood: Obviously looking for opportunities. These are good time for us to continue growing our company. There is a strong need for capital in the industry. There is not a lot of debt or equity support out there right now and so I’m hopefully we can continue adding on high quality assets that deliver us growth and continue growing Silver Wheaton.
Lelde Smits: Randy Smallwood, thank you for joining us in London and for the introduction to Silver Wheaton.
Randy Smallwood: Glad to be here, thank you.
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