Silver Wheaton Earnings Wednesday: What We’re Watching

November 7th, 2011 by Trefis Team
SLW: Wheaton Precious Metals logo
SLW
Wheaton Precious Metals

Silver has seen extreme volatility in the past six months, ranging from a high of $48 per ounce, to a low of $27 per ounce in September. Silver Wheaton (NYSE:SLW) will release its third quarter earnings on Wednesday, and among other items, we wait to see the average realized price of silver by the company in the volatile quarter. SLW, the world’s largest silver streaming company, competes with silver miners like Silver Standard Resources (NASDAQ:SSRI), Pan American Silver (NASDAQ:PAAS), Bear Creek Mining Corporation (CVE:BCM) and Endeavor Silver (NYSE:EXK).

We have a $42.40 price estimate for Silver Wheaton’s stock, which is roughly 20% above the market price.

See our full analysis for Silver Wheaton

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Profits hit, but still robust

Silver Wheaton procures silver from mining companies at a fixed price in lieu of an upfront investment in that company’s project. The average cost of silver for the company in the previous quarter was $4.10 per ounce. In contrast to this, the average selling price for silver was $38.38 per ounce during the same period. The greater this difference is, higher will be the margins for the company. There will be a definite dip in the average realized price of silver sold by the company in the second quarter, but the high margin that the company commands will still help it post a robust profit.

Silver Wheaton’s profitability depends highly on the amount of silver it sells and the price it sells it on. Silver price in Q3 has ranged from $43 to $28.

We expect the company to post an average selling price of $33 in the upcoming earnings, and we may see higher shipments by Silver Wheaton as the the dip in the silver price would have triggered the physical demand for the precious metal.

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