Merrill Bullish On Silver Wheaton, Bearish On Silver Prices Long-Term

Merrill Lynch initiated coverage on Silver Wheaton Corp. (SLW) last week with a "buy" rating on the Vancouver-based mining company.

Saying the company is undervalued compared to its peers, analyst Michael Jalonen believes Silver Wheaton is trading at an approximate 15% discount to the North American precious metals average.

He set a 12-month target for the stock of US$13.50 per share, or roughly 30% upside from the company's current share price.

In 2006, Silver Wheaton, the world's only mining company that derives 100% of its revenues from the sale of silver, had sales of 13.5 million ounces and ranked second among the world's silver sellers.

The company expects to expand its silver sales from 15 million to 20 million ounces between 2007 and 2009, Mr. Jalonen said in a research note.

Meanwhile, the company's total cash costs should remain below US$4 an ounce based on its long-term silver purchase agreements, he said.

The price of silver today in comparison, ranges from US$13 to US$14 an ounce.

Mr. Jalonen's estimates the price will continue to rise this year reaching as high as US$13.75 an ounce before dropping back to US$13 in 2008 and US$12 in 2009. His long-term silver price forecast is $10 an ounce.

Comments

[Bob Kirtley:]

We would agree with Silver Wheaton being under valued and we are puzzled as to why this is so, but the author does not offer an explanation. We also struggle with forecasts for silver of $13 for 2008, we would humbly suggest that silver will test the £20 this year.

2007 Mar 23 10:10 AM

[mergenthal:]

Silver Wheaton does not have any mining costs per se.They have agreements with Goldcorp hedging to buy silver at $3.90 an ounce. In other words, they have the best of both worlds. They have their own cake and don't have to bake it. Extremely bright management with a great game plan.

2007 Mar 26 06:41 AM