Silver has been plunging, but Bank of America has increased its price objective for Silver Wheaton, a company that buys silver rights from various producers around the world.
Bank of America’s Michael Jalonen cites three main reasons for the move:
- Potential for growth – The company’s chief Randy V. J. Smallwood expects the company’s silver production to increase by 80% to approximately 43 million silver equivalent ounces by 2015.
- Strong financials – With about $12 billion market cap, the company is in a position to pursue silver streaming partnerships. These are agreements with mining companies to buy their silver deposits at a pre-determined, low cost.
- Exposure to silver and gold – Silver Wheaton has metal stream agreements associated with 9 of the top 40 silver deposits in the world and has a stake in 3 of the top 4. Its 2011 production will come from 16 operating mines with 9 in low-risk regions. Mexico makes up the largest proportion at 41% of the total resources. The company is also expected to see gold production increase to 35,000 ounces by 2015.
The bottom line: The selloff in the asset itself doesn’t change the strength of its business.
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