WHT analysis frome Wayne on the FOOL
Howdy, Mish
I took a first look at Wheaton River ( NY:WHT ; T:WRM ). Came up with some facts, some impressions, and some question marks. Before I shifted any personal capital into it, I would have to dig much deeper .... but that doesn't mean it couldn't be a good short-term play.
1. Strong at the Board level. They seem to have no trouble raising money .... or spending it! Lots of "dealing" going on as they rationalize assets after extremely rapid growth. Telfer's been around, Giustra knows everybody in the business, and Lassonde is an Advisor to the Board. They're ambitious and I think we'll see more deals.
2. Not sure if they have the expertise at the operational level to go from a sleepy little part-time Canadian producer to a 500,000 oz. producer as fast as they have. Only time will tell.
3. After a look at the reserves they've bought, I'd say they paid a lot on a per-ounce basis for both of the big acquisitions.
4. The Peak mine in Australia is transitioning from an older 'mining area' to 2 new ones. More underground/less open pit. I'm not sure they can keep production ( 20% of overall ) or production costs at previous levels.
5. If the price of copper rises they will get a huge windfall from Alumbera and this mine will turn out to have been a steal.
6. All other things being equal ( which never happens but sometimes factors 'balance' ) a $ 10 increase in POG will increase eps by about a penny a share. This compares favorably with Glamis and Meridian.
7. This is a really rough guess but I think no matter what happens they should stay profitable at anything above $ 300 / oz POG. On a pullback below $ 315 I would be counting on an economic recovery pushing up the price of copper to pick up the slack )
Capitalization
This is where it gets real tricky to try to predict the future.
There are currently 420mm shares issued trading @ $ 0.93 .
Last 2 share issues, weighted average issue price ... $ 0.91
Also 117 mm warrants exercisable until May, 2007 @ $ 1.14
Typically, this many warrants would put a ceiling on the stock. At anout $ 1.25 I would expect at least some investors would begin to cash in. Time element plays .... taking longer to go up may raise the amount of return desired.
I say typically because the last huge issue of 230 mm shares plus 55 mm warrants was a 'private placement'. I cannot determine who owns most of them. Thus, I don't know if they were bought for 'trading' or as longterm investments. We can probably assume the latter for most as until the 'mania' develops the Market cannot absorb any large divestment. Future Edgar filings may tell us something more.
Wheaton obviously now has their US listing. This will be good if it gets "hot" and starts attracting interest there thanks to US investors tendency to over-react. You probably noticed that all my 'producer' holdings are inter-listed!
Is WHT a "Buy" right now? Very tough call. If it does start to "channel" between $ .80 and $ 1.10 it may be appropriate for dudes like you guys who know how to play the 'charts'. A rising Gold tide, and in this case Copper, will raise the boat but the warrants may limit WHT compared to its peers.
Caution: I am not an accountant. Neither am I always right but I "cut and run" when I'm wrong. IMHO, I am almost certain some people are going to make a lot of money on Wheaton .... I'm just not sure that retail investors will be in that group.
( Everything above is in US Dollars as the Greenback will probably be worth more than the Loonie for a while yet :-)
Best 'o' luck
Wayne
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