Lack of Development Projects a Challenge for Silver Wheaton

- March 20th, 2015

In an interview with Mining Weekly, Randy Smallwood, CEO of Silver Wheaton Corp. (TSX:SLW,NYSE:SLW), said that the lack of development projects in the pipeline could hurt his company’s prospects moving forward.

In an interview with Mining Weekly, Randy Smallwood, CEO of Silver Wheaton Corp. (TSX:SLW,NYSE:SLW), said that the lack of development projects in the pipeline could hurt his company’s prospects moving forward. Providing capital for new development projects is a key component of Silver Wheaton’s business model.

Smallwood commented:

One of the areas that we supply capital for is new development projects and there is definitely very little development at the moment. There is no doubt that a shortage of new exploration projects coming onto the table in the medium term could dent our ability to strike new streaming deals. That will reduce our potential opportunities to add to our portfolio.

That said, Silver Wheaton is not sitting idly by. According to the article:

Smallwood said as a result of the commodity super-cycle being under downward pressure, the company had been entertaining more contract negotiations, as miners scrambled for capital in the difficult market.

‘This is an excellent time for our industry in terms of making sure that there are opportunities for us to grow. Companies need the capital support and that’s what we do, we supply capital,’ he noted.

Smallwood explained that one of the ways companies needed Silver Wheaton’s support stemmed from not wanting to add more debt, as most of them had tight balance sheets as it was and did not want to issue dilutive shares at low current market prices.

‘Another option is to sell assets and streaming is a means of selling off an asset. It’s what I call ‘portfolio optimisation’. It’s where one sits and decides what is core to a company and what one can sell in support of that core operation,’ he added.

Further, Silver Wheaton had been in many discussions regarding its ‘early deposit gold stream’ financing model, such as the one struck with Sandspring Resources, in 2013, but had not been able to close any new deals since.

‘One of the challenges is that there is just absolutely zero support for companies of that scale right now in the marketplace,’ Smallwood advised, explaining that Silver Wheaton had to ensure that the junior companies had the appropriate financial strength to be able to survive until there was an equity market that would, once more, provide them with some support.

‘This has been a tough hurdle and that’s why we have not been able to close anything. There are some promising assets out there, but you have to have a company that’s going to withstand an extended period before the capital markets wake up again and start investing in that space again,’ he stated.

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