Is Silver Wheaton moving in the right Direction?

Silver Wheaton has increased its gold production in recent months. Moreover, the company’s gold production is expected to triple in 2013. Is this the right move for this company? What is next for the gold and silver markets?

Silver Wheaton’s recent decision to purchase Sudbury and Salobo led to a spike in the company’s gold production in the first quarter of 2013: Gold production sharply rose from 2,088 ounces in the first quarter of 2012 to 32,227 ounces in the first quarter of 2013. Furthermore, gold sales generated 13.5% of the total revenue in the first quarter of 2013 compared with 3.2% in the first quarter of 2012.

According to the company’s outlook for 2013, Silver Wheaton’s gold production will reach 145 thousand ounces, nearly three times the amount of gold produced in 2012. Conversely, the company’s silver production will fall by 4.1% in 2013 (year-over-year). Therefore, gold sales will generate 24% of the total revenue in 2013 compared with only 9% in 2012. Is this the right move for this company?

Is gold better than silver?

A quick examination reveals the profit margin on gold is lower than on silver. Based on the company’s financial reports, the profit margin on silver reached 86.3% in the first quarter of 2013; the profit margin on gold was only 78%.

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Disclaimer: The author holds no positions in stocks mentioned and does not plan to initiate positions within 120 hours of the posting of this article. This article is to be used for educational, research and informational purposes only and does not constitute investment advice. There are no guarantees, expressed or implied, of future positive returns in regards to the subject matter contained herein. Understand the risks inherent in investing before making the decision to invest or consult an investment professional for more information. Reasonable due diligence has been performed in regards to the information in this article. However, the author expressly disclaims any liability for accidental omissions of information or errors in fact.