Silver Wheaton Corporation Update Target $30

SLW : TSX : C$21.59
SLW : NYSE
BUY 
Target: C$30.00

COMPANY DESCRIPTION:
Silver Wheaton is uniquely positioned as the purest silver
producer. The company’s asset base consists of silver
purchase agreements with the San Dimas and
Penasquito mines in Mexico, Pascua-Lama project in
Chile/Argentina, Zinkgruvan mine in Sweden, Yauliyacu
mine in Peru, Stratoni mine in Greece. Most recent
streaming deals with Hudbay minerals (silver and gold
streams at 777 and Constancia) and Vale (gold streams
at Salobo and Sudbury mines).
All amounts in C$ unless otherwise noted

Metals and Mining — Precious Metals and Minerals
MINERAL PARK FINDS A BUYER;
KENO HILL NOT EXPECTED UNTIL 2015; MAINTAIN BUY RATING AND C$30.00 TARGET


Investment recommendation


We maintain our BUY rating on Silver Wheaton. We believe the
perceived increased risk with respect to Pascua construction and
Rosemont permitting has been largely discounted in the company’s
shares. SLW boasts a robust growth profile and continues to generate
strong free cash flow at spot gold and silver prices.
Investment highlights
 We updated our model to reinstate the stream from Mercator’s
Mineral Park mine in Arizona following the proposed merger with
Intergeo MMC, which is expected to inject cash to sustain
operations. Based on Mercator’s previous mine plan, not assuming
any changes are made following the merger, we value the Mineral
Park stream at US$108 million or 1.4% of NAV.
 We also updated our model to incorporate the new PEA for Alexco’s
Keno Hill project in the Yukon. Production re-start is now expected
approximately one year later in Q1/15. Our valuation for Keno Hill
has declined from US$116 million to US$50 million. Given the
significant financing risk surrounding the re-start, we continue to
discount the stream by 50%. Alexco is in violation of the completion
agreement based on achieving throughput of 400tpd by YE14. We
assume SLW will extend the deadline given the option value.
 Overall, our 2014 production forecast of 39.4mozs remains largely
unchanged. Our 2013 EPS and CFPS estimates remain materially
unchanged at $1.06 and $1.50, respectively.
Valuation
We are maintaining our target price of C$30.00, which is predicated on
a 1.30x multiple to our forward curve derived operating NAV estimate of
C$25.29 (previously C$25.44) plus net debt and other assets.

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