RE: Missing something
Hi Drox2000,
Thanx for calling IR but something still doesn't quite fit right and in my DD I want what IR says to be confirmed by documents. Too many IR's have been proven too unreliable in the Jr. miner and explorer area to just trust their words unquestionly.
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From SilverWheaton web page. NR dated 13 Feb 2006, para 3
“Under the existing silver purchase agreement dated October 15, 2004, Silver Wheaton is entitled to purchase all of the silver produced by Goldcorp’s Mexican operations, Luismin, for a per ounce cash payment of the lesser of US$3.90 and the prevailing market price (subject to an inflationary adjustment commencing in 2007). Further, Luismin is required to deliver a minimum of 120 million ounces over the 25 year contract period and Silver Wheaton is obligated to pay 50% of any capital expenditures made by Luismin at its mining operations in excess of 110% of the projected capital expenditures outlined in the agreement.”
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This makes sense. If SilverWheaton was buying silver at spot they would be at the mercy of market forces.. basically speculating that the price would continue to go up and benefit their shareholders, whom they have a fudiciary duty to protect.. Betting on continually rising prices does not seem like a good business method to me...
The only business model that makes sense (that is if you plan on operating as a profitable company for any length of time) is to have your exposure to market fluctuations in silver protected in some way. Regarding SilverWheatons GoldCorp purchases this is to limit the price you will pay for silver as above...
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From Starcores 3/16 announcement…
“Completion of the purchase is subject to (i) execution of a definitive sales agreement, (ii) receipt of all required regulatory and stock exchange approvals, (iii) third party and shareholder approvals, (iv) Starcore assuming the obligations of Luismin for the sale of silver from the mine, and (v) completion by Starcore of not less than US$25 million in financing. There is no guarantee that Starcore will be able to satisfy these conditions or that the transaction will be completed on the terms agreed to or at all.
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From Silverwheaton 3/16 announcement
“Vancouver, British Columbia – Silver Wheaton Corp. (“Silver Wheaton”) is pleased to announce that as part of the recently announced sale of Goldcorp Inc.’s (“Goldcorp”) (TSX: G) San Martin Mine located in the State of Queretaro, Mexico to Starcore International Ventures Ltd. (“Starcore”) (TSXV: SAM), one of the conditions of the sale is that Starcore will assume the obligations of Goldcorp for the sale of silver from this mine to Silver Wheaton. The silver production from San Martin, which represents 3% of Silver Wheaton’s annual revenue, will continue to be delivered to Silver Wheaton in accordance with previously agreed terms. “
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The obligation was for the lesser of $3.90 or the prevailing market price. I can find NO record anywhere of any agreement to alter this sales condition…
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Does anyone imagine in a rising silver market Silverwheaton would say… Oh forget that silly $3.90 minimum we want to pay spot?
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Until this is clarified I’d be cautious. I would like to see the agreement or terms of the EXACT agreement. Not meaning to bash but something isn’t making sense here…
nonrev