The last three years have given long-term silver investors an excellent chance to buy on the way down, as we’ve pulled back steadily since April 2011. As the price has come down I have been recommending for some time to dollar-cost average and/or pyramid down into silver. So far, 2014 has been a year of stabilization in the silver price. Despite the short-term pressure on the metals in 2012-2013, I have continued to suggest that gold and silver prices have long-term tailwinds in the form of extensive inflationary pressures.
I cannot say with certainty that we will not see some deflation, but I think that once inflation picks up, it could be severe. While gold is a straightforward way to benefit from the long-term currency debasement occurring globally, I believe that silver is poised to outperform in the next decade. As such, the purpose of this article is to discuss my favorite stock play in the silver space.
Silver Wheaton (NYSE:SLW) operates as a worldwide silver streaming company. Silver streaming is basically a process by which the company purchases a mining firm’s silver production in order to distribute that silver in the market. Silver Wheaton has contracts to purchase silver in bulk at prices well below market value and then proceeds to sell the silver at a higher price.
The company, based upon its current agreements, forecast 2014 attributable production at approximately 35 million silver equivalent ounces, including 150,000 ounces of gold. By 2017, annual attributable production is anticipated to increase significantly to approximately 49 million silver equivalent ounces, including 180,000 ounces of gold. Other than its initial upfront payment, Silver Wheaton typically has no ongoing capital or exploration costs, and the company does not hedge its silver or gold production. The company has projects/agreements and is developing projects globally (Figure 1).