Thursday, June 2, 2011

Straight From the Horse's Mouth: Silver Wheaton's Outlook on Silver

For our readers concerned about silver's recent correction, perhaps you can find some comfort learning the long term outlook for silver of one of the most successful silver companies during the current bull market, Silver Wheaton.

SilverDoctors presents an interview with

Brad Kopp
Senior Vice President,
Investor Relations
Suite 3150 -
666 Burrard Street
Vancouver, BC V6C 2X8

1.) There is speculation in the investor community that silver supply is shrinking, is this true?
Mr. Kopp: According to various metals consultancy groups, over the past ten years, silver supply from mine production has grown at an average annual rate of approximately 2.5%, whereas scrap silver supply growth has remained relatively constant, exhibiting only marginal growth. Mine production growth for the next several years is anticipated to remain at approximately 2.5%, and scrap silver supply is anticipated to increase slightly. Silver bullion inventories (above ground stocks) are estimated to have declined from 1989 until 2005. The introduction of silver exchange traded funds in 2006 reversed this trend and current inventories of above ground silver are estimated at approximately 1 billion ounces (not including silver coins). Given approximately 45-50% of silver is consumed in industrial applications, with much of the consumed silver not recycled, one could draw the conclusion that as industrial uses for silver increase and both developed and developing nations grow, silver inventories may experience downward pressures in the future (excluding ETF’s).

2.) If you have any, what are your speculative figures (expected outlook) for the price of silver in 2012?
Mr. Kopp:  Our belief is that the drivers that propelled silver prices to the highs of 2011 are expected to persist for the next several years. Global economic and political uncertainty, which typically drives investment in precious metals, remains high. Concerns about currency devaluations and sovereign-debt risks, coupled with historically low interest rates and renewed fears of inflation, should continue to increase silver’s safe-haven appeal.

3.) What would you say to someone interested in buying silver?
Mr. Kopp: For the reasons stated above, we believe that portfolios should have some exposure to silver’s safe haven attributes and that investing in a company such as Silver Wheaton is the best way to achieve that exposure. Silver Wheaton offers investors:
· Significant leverage to increasing silver prices · Cost certainty -The company’s unique business model ensures that operating costs are essentially fixed at approximately $4/oz.
This is particularly important given the significant inflationary pressures the mining industry has experienced for much of the last decade. Fixed cash costs has resulted in Silver Wheaton having amongst the highest cash operating margins in the precious metals industry.
In addition, other than an initial up front payment, Silver Wheaton has not ongoing capital or exploration expenditures. Yet, Silver Wheaton benefits from the production and exploration growth of its operating partners.
· Sector-leading production growth –80% production growth forecast over next five years to 43 million silver equivalent ounces in 2015.
· Dividend yield –Silver Wheaton initiated a dividend in the first quarter of 2011, further differentiating an investment in Silver Wheaton from a silver ETF.