Silver Wheaton reaffirms Pascua Lama

Pascua-Lama is a core operation within Silver Wheaton, says CEO Randy Smallwood.

“I think it’s going to be one of the best gold mines—if not the best gold mine—in the world,” said Smallwood who spoke to MINING.com last week.

(Smallwood spoke to MINING.com on Wednesday just before a Chilean court slapped down Barrick Gold with a $16 million fine. On Friday Smallwood issued a statement reiterating support for the project: “We remain confident in Barrick’s commitment to this project, and look forward to seeing this issue resolved.”)

Silver Wheaton (NYSE:SLW), which pioneered the streaming business model, provided Barrick Gold (NYSE:ABX) with US$625 million cash financing in return for a silver purchase agreement. Silver Wheaton made the deal in 2009.

Pascau-Lama will be a sizeable part of Silver Wheaton’s production. If there were no acquisitions between now and 2015, Pascua-Lama would account for 15% to 20% of Silver Wheaton’s silver production.

Smallwood admits the mine is in a difficult area.

“It underscores how good the asset is even though it is in that tough location.”

With the falling commodity prices and weak markets, Silver Wheaton is feeling share-price pain. Since the beginning of the year the company is down 36.97% to $22.74. Smallwood feels he will be making more acquisitions. The chief criteria for making a deal is quality and how cheaply the miner can get the metal out of the ground.

“We are concentrating on assets in the lowest half of the cost curve.”

Smallwood say lower cost producers are better able to manage the ups and downs of the commodity markets, management changes and other surprises.

Considering all the money that has flown out of the resource sector, Smallwood says part of the blame lies with miners themselves who “over promise and under deliver.”

“There have been all sorts of surprises in the cost as well as the revenue side, which have really hurt the industry as it relates to trust.”

Smallwood points to all-in cost accounting, recently adopted by Goldcorp, as one of the ways trust is being rebuilt.

The Silver Wheaton CEO believes gold and silver will stop falling.

“I am confident we are closer to a bottom rather than a top,” says Smallwood.

“It’s just a matter of surviving this until we get some momentum again.”