TORONTO, Nov 10 (Reuters) - Mining financier Silver Wheaton Corp sees a $2 billion-plus opportunity as mining companies plan to expand or restart their mines, and switch gears from debt reduction, its chief executive said on Thursday.
Silver Wheaton pioneered the concept of “streaming” deals in the mining industry in 2004, a type of financing where miners receive cash upfront to build mines or reduce debt in exchange for future production at a discounted, fixed price.
“Up until probably six months ago, we didn’t see any investment into the ground,” Silver Wheaton Chief Executive Randy Smallwood said in an interview.
“With the rebound in precious metals prices and a bit of a rebound in base metals prices, we’re starting to see companies explore restarting projects or expanding projects and they need capital,” he said.
The bulk of those deals are in the $300 million to $400 million range, with some around $500 million, he said.
There is more competition from other streaming companies for these smaller-scale deals, he said, but Silver Wheaton hopes to win “a couple” of the transactions over the next year.
Silver Wheaton’s shares slumped just over 15.5 percent on Thursday afternoon, to C$27.20. It reported a profit of 19 cents a share after the market close on Wednesday, 2 cents below expectations, reflecting larger-than-expected inventories.
The amount of metal produced by miners with streaming deals, but not yet delivered to Silver Wheaton, increased in the quarter. Gold inventory grew by 18,500 ounces to 63,300 and silver increased by 800,000 ounces to 3.8 million ounces.
Inventory levels had been lower than normal over the last few quarters, Smallwood said, but returned to typical levels this quarter. Inventory, recognized in future sales as it is delivered, typically represents two months of annualized production.
“We’re being set up perfectly for a very good fourth quarter,” Smallwood said. (Reporting by Susan Taylor, editing by G Crosse)