* CEO sees potential future cash flows of $2-$3 bln
* To boost dividends as cash flows rise
* Sees silver above $50/oz in next two years
* Lots more deals possible, only wants "best assets"
(In U.S. dollars unless noted)
By Julie Gordon
TORONTO, March 10 With silver prices expected
to continue to rise over the next few years, Silver Wheaton
(SLW.TO) sees the possibility of paying out around half its
cash flow each year in dividends, its chief executive said.
"I don't see any reason why in the future we couldn't be
paying out 40, 50 or 60 percent of our cash flow every year in
dividends," Peter Barnes said in an interview with Reuters on
the sidelines of the PDAC prospectors and developers
"If we can take this company to cash flows of $2 billion or
$3 billion a year," he added. "It'll be tough to spend that
amount of money on new deals all the time."
Silver Wheaton expects to have over $700 million in cash
flows this year. Even if the company doesn't do a single new
deal, it will grow 80 percent over the next five years, said
The Vancouver-based company pays cash upfront to mining
companies in exchange for future silver offtake. It has seen
its shares more than double in the last twelve months.
Last week, Silver Wheaton announced an inaugural dividend
of 3 cents a share.
"Until now, we've been a pure growth story and investors
have really liked it," said Barnes. "I think now we're becoming
growth and yield, and I think investors are going to like it
With cash costs of just $4 an ounce, and spot silver near
31-year highs at $35 an ounce, Silver Wheaton is reaping the
benefits of soaring metal prices and Barnes doesn't see that
changing any time soon.
"I think silver is going through $50 in the next two or
three years," he said. "Therefore, our cash flows are going to
continue to do very well."
With silver prices high, it would seem logical that miners
would want to keep the silver offtake from their mines, and
turn to the debt and equity markets for financing instead.
Not so, said Barnes.
"We're getting a lot more opportunities now to do more
deals than we've ever had before," he said.
"If you look at what makes the most sense for a company,
nine times out of 10, streaming makes more sense," he added.
"Its less risky."
When a company issues shares, it dilutes the value for each
shareholder. If a company takes out debt, then it is stuck with
high interest payments and could be in trouble if the metal
Silver Wheaton is also attractive to smaller mining
companies because it pays out cash now for silver from projects
that won't be in production for another few years.
"Just because the silver price is $35 now doesn't mean its
staying there for 50 years," said Barnes. "At some stage, it's
going to go down, just as quickly as it has gone up."
Because of that volatility, Barnes said that Silver Wheaton
will never pay more than $4 an ounce for offtake.
"They're obviously wanting a lot more money up front than
when we were doing deals while the silver price was $16," said
Barnes. "The focus isn't on the $4 an ounce, its on the upfront
And while growth remains important, Barnes said the company
will focus on quality deals over quantity.
"Every deal looks good when gold and silver prices are
where they are now," said Barnes. "But they're not going to be
around these levels forever."
(Reporting by Julie Gordon; editing by Rob Wilson)