Why We’re Revising Our Price Estimate For Silver Wheaton To $29

Precious metal prices have rallied sharply this year, driven by a surge in the investment demand for safe haven assets. A weak global economic outlook and the unexpected outcome of the UK’s June 23 EU referendum has translated into greater macroeconomic uncertainty, boosting the investment demand for silver and gold, resulting in an increase in the prices of these metals. Furthermore, the prevailing macroeconomic weakness and uncertainty is likely to preclude a Fed interest rate hike in the near term, providing further support for prices for the rest of the year. The surge in the prices of precious metals has boosted the stock prices of companies associated with these commodities, such as Silver Wheaton. Given that precious metal prices are expected to remain elevated throughout 2016, we have suitably modified our pricing forecasts for Silver Wheaton’s realized gold and silver prices to reflect the prevailing pricing environment.

In addition to benefiting from an improved precious metal pricing environment, the company has also been successful on the new deals front, announcing the acquisition of an additional 25% life of mine gold stream from Vale’s Salobo mine. ^[1] Consequently, the company has revised its five year gold production forecast (2016-2020) upwards by 27%. ^[2] This has necessitated a revision to our shipment forecast for the Salobo mine.

As a result of the changes to our pricing and shipment forecasts, we have revised our price estimate for Silver Wheaton. The new price estimate reflects the positive developments pertaining to both pricing and shipments.

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1. Silver Wheaton Increases Its Gold Stream From The Salobo Mine And Revises Production Guidance, Silver Wheaton News Release [↩]
2. Silver Wheaton’s Q2 2016 Earnings Release, SEC [↩]