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Silver Wheaton Reports Record Quarterly Production Results
Silver Wheaton Corp. ("Silver Wheaton" or the "Company") (TSX:SLW) (NYSE:SLW) is pleased to announce its unaudited results for the third quarter ended September 30, 2012 .
THIRD QUARTER HIGHLIGHTS
"With the addition of production from Hudbay's 777 mine in the quarter, we produced a record 7.7 million silver equivalent ounces, putting us on track to reach our 2012 annual production forecast of 28 million ounces," said Randy Smallwood , President and Chief Executive Officer of Silver Wheaton. "Our diversified asset base once again achieved strong production, with notable contributions from Yauliyacu, Zinkgruvan, and Minto . While overall production was strong, payable silver equivalent ounces produced but not shipped during the quarter increased by 2 million ounces due to the timing of concentrate shipments, negatively affecting silver equivalent sales volume. This increase included the new precious metals contained in base metal concentrates produced at the 777 mine as the concentrate storage and transportation system was being filled with materials mined after August 1st . It is very important to remember that these ounces will inevitably be sold, it is simply a matter of timing."
"During the quarter we paid out over $630 million dollars , including our first payment to Hudbay and our last payment to Barrick, and yet, we finished the quarter with $550 million of cash on hand. With this cash, a fully undrawn revolving credit facility of $US400 million , and strong forecast annual operating cash flow, we remain very focussed, capable and excited about our potential to continue adding additional accretive ounces to our portfolio."
Financial Review
Revenues
Revenue was US$161.3 million in the third quarter of 2012, on silver equivalent sales of 5.1 million ounces (4.8 million ounces of silver and 6,900 ounces of gold). This represents a 13% decrease from the US$185.2 million of revenue generated in the third quarter of 2011. This was due to a 13% decrease in the realized price per silver equivalent ounce, which was only slightly offset by a 1% increase in the number of silver equivalent ounces sold. The relatively small increase in ounces sold relative to those produced in the quarter was primarily related to the timing of shipments of stockpiled concentrate and doré at some of the mines underlying the Company's silver and precious metal purchase agreements.
Costs and Expenses
Average cash costs in the third quarter of 2012 were US$4.16 per silver equivalent ounce, compared with US$4.12 during the comparable period of 2011. This resulted in cash operating margins of US$27.20 per silver equivalent ounce, a 15% decrease compared to the third quarter of 2011, primarily a result of a 13% decrease in the realized price per silver equivalent ounce.
During the third quarter of 2012, the Company recorded an income tax expense of US$513,000 , which includes a non-cash deferred income tax expense of US$361,000 , attributable primarily to income from Canadian operations, partially offset by the recognition of deferred income tax assets relating to the increase in fair value of long-term investments in common shares. This compares to an income tax expense of US$8.6 million in the comparable period of the previous year, which included a non-cash deferred income tax expense of US$8.4 million which was primarily due to the reversal of previously recognized deferred income tax assets due to the decline in fair value of long-term investments in common shares held.
Earnings and Operating Cash Flows
Net earnings in the third quarter of 2012 were US$119.7 million ( US$0.34 per share), compared with US$135.0 million ( US$0.38 per share) for the same period in 2011, a decrease of 11%. Cash flow from operations in the third quarter of 2012 was US$128.7 million ( US$0.36 per share ), compared with US$167.2 million ( US$0.47 per share ) for the same period in 2011, a decrease of 23%. The change in net earnings and operating cash flows is primarily due to a 13% decrease in the realized price per silver equivalent ounce.
Balance Sheet
At September 30, 2012 , the Company had approximately US$555 million of cash on hand. In addition, the Company had US$400 million of available credit under its revolving bank debt facility. The combination of cash, available credit, and strong operating cash flows, positions the Company well to execute on its growth strategy of acquiring additional accretive silver stream interests.
Please refer to non-IFRS measures at the end of this press release.
Operational Highlights
Attributable silver equivalent production was 7.7 million ounces (6.8 million ounces of silver and 18,000 ounces of gold) in the third quarter of 2012, representing an increase of 26% compared to the third quarter of 2011.
Operational highlights for the quarter ended September 30, 2012 , are as follows:
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As stated in Goldcorp Inc.'s ("Goldcorp") October 25, 2012 , disclosure, the Peñasquito mine achieved record production during the third quarter as higher grades and recoveries partially offset the continued impact of water shortages from lower well field production. The plant achieved throughput of 100,000 tonnes per day during the third quarter, within their previously guided range of 98,000 and 107,000 tonnes per day. Goldcorp also stated that work continues on the drilling of additional water wells in the current well field, and that they have initiated a Water and Tailings Study to optimize potential long-term water constraints and tailings operations. Goldcorp anticipates the study to be completed during the first half of 2013.
As at September 30, 2012 , approximately 1.6 million ounces of cumulative payable silver equivalent ounces have been produced at Peñasquito but not yet delivered to the Company, representing an increase of 0.5 million payable silver equivalent ounces during the quarter.
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On September 28, 2012 , the Company announced that it had closed the previously announced purchase from Hudbay of 100% of the life of mine silver production from its currently producing 777 mine, 100% of the life of mine silver production from its Constancia project (" Constancia "), as well as 100% of gold production from the 777 mine until Constancia satisfies a completion test, or the end of 2016, whichever is later. At that point, Silver Wheaton's share of gold production from 777 will be reduced to 50% for the remainder of the mine life.
Production from 777 began accruing to Silver Wheaton on August 1, 2012 , and totaled 733,000 silver equivalent ounces (139,000 ounces of silver and 11,500 ounces of gold) in Q3 2012. As at September 30, 2012 , approximately 0.7 million ounces of cumulative payable silver equivalent ounces (0.1 million ounces of silver and 11,100 ounces of gold) have been produced at 777 but not yet delivered to the Company, with the Company having received its first delivery of silver and gold related to the 777 mine on October 3, 2012 .
Since mid-2009, concentrate shipments from Glencore International AG's ("Glencore") Yauliyacu mine have been affected by the shut-down of the Doe Run Peru La Oroya smelter, historically the largest buyer of the bulk concentrate produced at the mine. Since that time, alternative smelting arrangements have been made by Glencore for a portion of the stockpiled bulk concentrates at Yauliyacu, leading to an inconsistent delivery schedule and delaying the eventual complete reduction of this bulk concentrate. In the second quarter of 2011, Glencore began producing separate copper and lead concentrates, replacing the bulk concentrate. During the third quarter of 2012, Glencore established new offtake agreements for the sale of bulk concentrates. As a result, Glencore has decided to return to the production of bulk concentrates.
As at September 30, 2012 , approximately 1.2 million ounces of cumulative payable silver equivalent ounces have been produced at Yauliyacu but not yet delivered to the Company, representing an increase of 0.4 million payable silver equivalent ounces during the quarter.
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As per Barrick Gold Corporation's ("Barrick") third quarter 2012 MD&A, Barrick made substantial progress at its world-class gold-silver Pascua-Lama project during the quarter. Along with construction advancement at site, Barrick strengthened the construction management team and hired Fluor Corporation ("Fluor") to assume overall project management. Fluor is a global leader in construction of large mining projects, and the same firm that successfully managed construction of Barrick's recently completed Pueblo Viejo mine. Initial production from the Pascua-Lama project is now scheduled for the second half of 2014. Previous guidance, announced in July, was for mid 2014. Delays in the earthworks and underground works for the process plant are the main reason for the shift in schedule to the second half of 2014. Other highlights in the third quarter of 2012 include advancing the ore conveyor tunnel to approximately 60% complete, increasing on site labor by approximately 1,900 new hires, and securing 90% of the required material and equipment for the processing plant.
Until December 31, 2015 , Silver Wheaton will be entitled to all or a portion of the silver production from Barrick's Veladero, Pierina and Lagunas Norte mines, to the extent Pascua-Lama is operating below 75% of design capacity. Once in production, Pascua-Lama is forecast to be one of the largest and lowest cost gold mines in the world with an expected mine life in excess of 25 years. In its first full five years of operation, Silver Wheaton's silver production attributable to Pascua Lama is expected to average 9 million ounces annually.
San Dimas -
Subsequent to the quarter, Primero Mining Corp. ("Primero") announced a mine and mill expansion of the San Dimas mine in Mexico . Primero has elected a staged approach to the full expansion and has approved the expenditure of a total $14.4 million to expand the San Dimas mine and mill from the current 2,000 tonnes per day to 2,500 tonnes per day. Construction of the mine and mill expansion will begin immediately, with an estimated completion during the first quarter of 2014. A further plant expansion to 3,000 tonnes per day continues to be assessed and is dependent on future exploration success by Primero.
Produced But Not Yet Delivered -
Payable silver equivalent ounces produced but not yet delivered to Silver Wheaton by its partners increased by 2.0 million ounces to approximately 5.2 million silver equivalent payable ounces at September 30, 2012 . The increase was primarily due to the timing of sales at Goldcorp's Peñasquito mine, Hudbay's 777 mine, and Glencore's Yauliyacu mine.
Detailed mine by mine production and sales figures can be found in the Appendix of this press release and in Silver Wheaton's Management's Discussion and Analysis ("MD&A") in the 'Results of Operations and Operational Review' section.
This earnings release should be read in conjunction with Silver Wheaton's MD&A and unaudited Financial Statements, which are available on the Company's website at http://www.silverwheaton.com and have been posted on SEDAR at http://www.sedar.com.
Webcast and Conference Call Details
A conference call will be held Monday, November 5, 2012 , starting at 11:00 am (Eastern Time) to discuss these results. To participate in the live call please use one of the following methods:
Dial toll free from Canada or the US: 1-888-231-8191
Dial from outside Canada or the US: 1-647-427-7450
Pass code: 35654938
Live audio webcast: http://www.silverwheaton.com
Participants should dial in five to ten minutes before the call.
The conference call will be recorded and you can listen to an archive of the call by one of the following methods:
Dial toll free from Canada or the US: 1-855-859-2056
Dial from outside Canada or the US: 1-416-849-0833
Pass code: 35654938
Archived audio webcast: http://www.silverwheaton.com
About Silver Wheaton
Silver Wheaton is the largest silver streaming company in the world. Based upon its current agreements, forecast 2012 attributable production is approximately 28 million silver equivalent ounces, including 42,000 ounces of gold. By 2016, annual attributable production is anticipated to increase significantly to approximately 48 million silver equivalent ounces, including 100,000 ounces of gold. This growth is driven by the Company's portfolio of low-cost and long-life assets, including silver and precious metal streams on Barrick's Pascua-Lama project and Hudbay's flagship 777 mine and Constancia project.
The information contained herein contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements with respect to the future price of silver and gold, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, reserve determination, reserve conversion rates and statements as to any future dividends. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Silver Wheaton to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: fluctuations in the price of silver and gold; the absence of control over mining operations from which Silver Wheaton purchases silver or gold and risks related to these mining operations including risks related to fluctuations in the price of the primary commodities mined at such operations, actual results of mining and exploration activities, economic and political risks of the jurisdictions in which the mining operations are located and changes in project parameters as plans continue to be refined; and differences in the interpretation or application of tax laws and regulations; as well as those factors discussed in the section entitled "Description of the Business - Risk Factors" in Silver Wheaton's Annual Information Form available on SEDAR at http://www.sedar.com and in Silver Wheaton's Form 40-F on file with the U.S. Securities and Exchange Commission in Washington, D.C. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to: the continued operation of the mining operations from which Silver Wheaton purchases silver or gold, no material adverse change in the market price of commodities, that the mining operations will operate and the mining projects will be completed in accordance with their public statements and achieve their stated production outcomes, and such other assumptions and factors as set out herein. Although Silver Wheaton has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements. Silver Wheaton does not undertake to update any forward-looking statements that are included or incorporated by reference herein, except in accordance with applicable securities laws.
Consolidated Statement of Earnings
Consolidated Balance Sheets
Consolidated Statement of Cash Flows
Summary of Ounces Produced and Sold
Results of Operations (unaudited)
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These non-IFRS measures do not have any standardized meaning prescribed by IFRS, and other companies may calculate these measures differently. The presentation of these non-IFRS measures is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For more detailed information, please refer to pages 18 to 20 of Silver Wheaton's Management Discussion and Analysis available on the Company's website at http://www.silverwheaton.com and posted on SEDAR at http://www.sedar.com.
For further information:
Patrick Drouin
Vice President, Investor Relations
Silver Wheaton Corp.
Tel: +1-800-380-8687
Email: info@silverwheaton.com
Website: http://www.silverwheaton.com