Silver Wheaton is basically a loan shark, and a very profitable one at that. It is sad that all these major mining companies are selling their silver short / hedging at $4 per ounce in order to get up front funding. This is done in order to avoid going to the rapist investment bankers.
In Q3 2009, silver wheaton had sales of $70 million and profit of $33 million. Their costs included $17 million to the producers, $4 million admin, and $16 million in interest payments. They have 320 million shares outstanding and $650 million in debt. They are currently on pace to be moneychanger on 17 million oz ag equiv and plan on 40 million ag equiv by 2113. At this rate and the current metal prices they could make $300 million in 2113 which is about $1 per share. If metal prices doubled they would make $1 billion in 2113 or about $3 per share.
I think that ECU could produce 3 million oz ag equiv next year and if they triple their operation as stated in Friday's Q3 MD&A then production could be 9 million Ag equiv by 2113. I have no idea what ECU's profit would be, but if we assume 20%, then it would be $17/oz x 20% x 9 million = $30 million. This would be 10 cents per share or 1/10 that of silver wheaton. Silver Wheaton's current share price is about $15 and ECU is about 86 cents.
Based on the above, ECU is under valued, but ECU also has more leverage to increases in metal prices. If prices double, then ECU's profit would be $183 million or about 60 cents per share. This is 1/5 th of silver wheaton under the increased metal prices.
