GOING MAINSTREAM or by selling off non-core-assets . Streaming , falls into the latter category .
“ The big advantage to streaming is that it is non-dilutive , it does not create share count . Streaming purely adds strength to your balance sheet – when Silver Wheaton invests into a mine we take on the operating risk of that mine . There are no obligations other than delivering whatever gold or silver is produced ,” says Smallwood . Over time , Smallwood has seen that companies operating in the base metals industry will often trade at a discount . This creates a significant difference in value between how the mining company values that precious metal and how Silver Wheaton values that same metal . Silver Wheaton shares that difference in value .
“ In capturing that shared value , they will get more for that non-core by-product than they would if it sat in their own asset portfolio ,” he says .
While streaming has , and will continue to become a more attractive form of capital , in some cases , taking on debt is the more attractive form of generating capital . Timing of acquisition and investment then , is critical to the strength of Silver Wheaton ’ s portfolio .
“ The best time to make an acquisition in any commodity that has cyclical pricing is of course at the bottom of those cycles ,” says Smallwood .
“ This is also the time where equity and debt is very expensive ,”
In these periods , other metal streaming companies have entered the fold and traditionally wealthy companies have converted to streaming . But Smallwood , with close to 30 years ’ experience in the precious metals space , is all too aware that when commodity prices are strong this increases the cost of acquisitions , which goes against that low risk profile that Silver Wheaton prides itself on .
Turning back the clocks to 2004 , when precious metal streaming was unheard of and Silver Wheaton was announcing itself on the world stage , acquiring partners and connecting with individual businesses to enter streaming agreements began as a process of “ knocking on the doors .”
“ I ’ m happy to say that over the last five years , streaming has become – if you ’ ll pardon the pun , mainstream ,” says Smallwood .
“ There is not a financial or chief financial officer out there in the industry today who isn ’ t aware of the streaming model .”
19