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Hyperinflation

 
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  • MAG Silver Offers Excellent Value To Silver Bulls [View article]
    Juanicipio will produce in excess of 16m oz. Ag when in production and operating at design capacity.
    Aug 29 07:45 PM | Likes Like |Link to Comment
  • Buy Seabridge Gold's Dirt, Dirt-Cheap And Buy It Now [View article]
    Seabridge obviously will never be able to build the mine given the CAP-EX required. The preliminary feasibility back in may 2012 has cap-ex at 5.3B but even back then 400-800m in over runs would drive cap-ex toward $6b. over 2 years later, its easily increased to $8-$9b inclusive of over-runs and by the time construction actually starts, it will easily be over $10b to build the mine. Cash costs in the study were about $600/oz, so the real cost i.e Extraction, Processing, Labor, G&A, interest (if any), royalties, taxes (often not counted but a cost of doing business) and sustaining capital would make AISC somewhere in the neighborhood of $900-$1,050. Cash costs have been rising at a furious pace as have capital costs, so today it would probably be $1,250-$1,400 and by the time it gets up and running ( I would guess 6-10 years), costs will have rise to $1,700-$1,900/oz. There are so many other quality projects out there without absurd capital costs.
    Jun 19 12:11 PM | Likes Like |Link to Comment
  • Silver Wheaton: A Diamond In The Rough [View article]
    exactly, thats why im still shocked when you mention a companies capital structure to someone, notably share structure, i never get a look of amazement. Even with 1 position i have which has just 29m share out. some people go in so far to ask if a company's cheap [esp in penny stock]. Someone who asks such a question should pay someone to manage their money.
    May 9 10:03 AM | Likes Like |Link to Comment
  • Silver Wheaton: A Diamond In The Rough [View article]
    Why are you comparing or even mentioning EPS for that matter instead of OCF/share? While DD&A could be considered a cost by some, then all cap-ex acquiring streams needs to be added back, otherwise its double counting. Now, its just serves as a tax shield for SLW. But even if I were to agree that DD&A is a cost, why is there no "write up" on assets suck as San Dimas? the stream was acquired for less than $200m and starting this year, will provide attributable production of 6.2-6.4m and likely 7m oz. after the phase II expansion in 2017 +/-.
    May 8 07:28 AM | 1 Like Like |Link to Comment
  • Silver Wheaton: A Diamond In The Rough [View article]
    Interesting you say that because in first estimate of Q1 GDP (which is a BS number anyway), real retail sales contracted, the housing market slowed, durable goods orders slowed, the unemployment rate fell again (but so did the labor participation rate), 800K+ jobs were lost in April yet personal savings rate was flat. This is the first of 3 quarters marking the start of another recession, although personally my cost of living has been rising roughly 6-9% annually from 2008-present to now, meaning there hasn't been any recovery in the US economy when measured in real terms.
    May 8 07:22 AM | 5 Likes Like |Link to Comment
  • Precious Metals Royalty And Streaming Companies: A Qualitative Analysis [View article]
    If you look at Salobo's current 2p gold reserves, using 60k oz. per annum, you get something like 60-65 years or so. I haven't done the math yet but if you include dilution its still between 45-50+ years. There also remains significant upside in exploration potential. Mr. Smallwood likely wouldn't agree because he'll want to stay on the conservative side but I think he has said Salobo could double capacity from 24mtpy and then increase capacity further.
    Apr 20 09:08 AM | 1 Like Like |Link to Comment
  • Precious Metals Royalty And Streaming Companies: A Qualitative Analysis [View article]
    Lawrence,

    Here is some food for thought on how a stream should/could be valued. For example, If I wanted to buy a silver or gold futures contract, I would pay more for the longer dated expiration i.e Dec 2014 vs Dec 2017. So what's to say a stream shouldn't be valued the same, whereby instead of discounting, why not give each cash flow a small time premium. So using ($1,350 Au-$400) x 60,000 = $57m would be the gross revenue in the first year when producing 60k oz. But if you assume a 2.5% time premium 5 years later and the same production ($1527-$420) x 60,000 = $66,420,000. If you add in your above 5% CAGR in the price deck, then you arrive at a larger number relative to when you assumed just a 5% cagr.

    Personally, I just use a price deck but neither apply a discount over time nor a time premium, so an undiscounted cash flow. But because the market discounts cash flow, I like to buy when i can apply an 8-10% discount rate and a streaming company is either under or fairly valued.
    Apr 19 01:41 PM | 1 Like Like |Link to Comment
  • Precious Metals Royalty And Streaming Companies: A Qualitative Analysis [View article]
    Sudbury is a bit easier as it now has Totten ramping up and another mine reaching production next year I believe. It also has a history of out-performance but the guidance given for 50k attributable from 2016-until end of term by mgmt is likely the most accurate. I modeled Salobo providing attributable production of 72,000 to SLW in 2018, increasing to 90,000 in 2019 and 100,000 in 2020 and thereafter. I still think this will prove to be overly conservative by 2022-2023.

    My view is that Vale has several reasons why they will expand the mine. First is more pressure on copper prices due to a supply glut. By 2020, mega copper mines will have come online with Oyu Tolgoi O/P + U/G, Cobre-Panama (now forecast to produce 15-20% more per annum per the feasibility study by Quantuum Minerals), Las Bambas (now that it has been sold) and a fairly large amount of smaller contributions from small and medium size mines. While this obviously sounds a reason for vale not to expand, it will incrementally decrease all in cost per oz. of copper mined at Salobo. Vale will also receive an additional $400m if throughput capacity is increased to 40mtpa by Jan 1, 2021. Doing this would also increase the value of silver wheaton shares in which Vale received 10m warrants ($65/strike) with a 10-year term. In other words, Vale could make a considerable amount.
    Apr 19 11:50 AM | Likes Like |Link to Comment
  • Precious Metals Royalty And Streaming Companies: A Qualitative Analysis [View article]
    good article. One thing most fail to point out is that typically streaming transactions are mutually beneficial. For example, base metal companies on average have received a 4-6x EBITDA multiple on its cash flow generation from byproduct gold and silver, while a company like SLW on average typically receives a 13-16x EBITDA multiple on the same amount of cash flow but given a premium because it is considered a primary silver/gold producer [though they don't actually produce]. In other words, the base metal miner actually generate more cash flow multiple from the upfront payment while SLW obtains a higher multiple than it pays for the stream.

    On a side note: I;ve talked to Vale every several months and although nothing has been announced, the probability of another expansion of 50% is almost a guarantee. It may be done in 2 phases, although they have an incentive to do it in one as it will receive another payment from SLW.
    Apr 17 09:55 AM | Likes Like |Link to Comment
  • Avino Silver And Gold Mines: The Perfect Growth Story [View article]
    Yes Sir.
    Apr 9 08:44 AM | Likes Like |Link to Comment
  • Avino Silver And Gold Mines: The Perfect Growth Story [View article]
    Yes, they do. The put out a PEA 2 yrs ago or so, so I bet all in costs have increased but its still attractive. The timetable is still for heap leach processing to begin start of 2016 and produce roughly 1m oz. Ag & 6,500 oz. Au for 5 years.
    Apr 8 03:55 PM | Likes Like |Link to Comment
  • Avino Silver And Gold Mines: The Perfect Growth Story [View article]
    My Apologies, I mean the Avino mine.
    Apr 8 03:46 PM | Likes Like |Link to Comment
  • Silver Wheaton Remains Trapped In 'Crisis' Valuation Range [View article]
    Why do you use EPS? not CFPS?. DD&A is a non-cash charge and it should be added to earnings. While isn't isn't always the when dealing with DD&A, SLW has a track record of buying streams on mines which either increase the initial mine life (or contract per the San Dimas stream) and/or increase production beyond initial design capacity (again San Dimas is a perfect example). Currently, SLW's DD&A has spiked and will continue to do so as SLW expenses the upfront payment it made for 777, Salobo, Sudbury. The latter 2 were part of the Vale Deal which SLW paid 1.9B for. In other words, if you go back 3-5 years and calculate net margins based on Gross Revenue, you will see it trend downwards, but that is actually beneficial as having a higher portion expensed as DD&A, reduced the effective tax rate (SLW pays so little tax but its beneficial nonetheless).
    Apr 8 03:39 PM | 1 Like Like |Link to Comment
  • Silver Wheaton: A Look Into Its Cash Flow Prospects [View article]
    Also, what deal are you referring to? Constancia was the last deal and it's a primary copper mine. If you're referring to Toroparu, debatable on whether this is considered a stream. If the feasbility study isn't to SLW's liking or they are able to find more value with that money elsewhere, off the top of my head it'd only cost them between $2-$3m if they don't go ahead with it.
    Mar 26 01:47 PM | Likes Like |Link to Comment
  • Silver Wheaton: A Look Into Its Cash Flow Prospects [View article]
    SLW increased its debt capacity when the crash began but to give them more financial flexibility for near term deals. First was the Keno Hill Stream. They did issue equity but this was for the Silverstone Acquisition. If they had engaged in an equity issuance without following up with a streaming acquisition I'd agree with you. The equity issuance was $250m and Silverstone to the best of knowledge was somewhere between $175-$200m
    Mar 26 01:42 PM | Likes Like |Link to Comment
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