Monday, November 5, 2012

Silver Wheaton Q3 earnings down on lower prices

The world’s largest metals streaming firm Silver Wheaton had reported an 11% drop in year-on-year third-quarter earnings as a result of lower prices.

Despite reporting record attributable silver-equivalent production of 7.7-million ounces in the quarter ended September 30, which was a 26% increase over the 6.1-million ounces, the company posted earnings of $119.7-million or 34c a share in the period, compared with $135-million or 38c a share in the year-earlier period.

Revenue was down 13% at $161.3-million, compared with $185.2-million a year earlier, mainly attributable to a 14% decrease in silver prices from a year earlier. The company realised $31.16/oz of silver in the period, compared with $36.44/oz of silver a year earlier.

Silver Wheaton said that while production was at record levels, silver equivalent sales totalled 5.1-million ounces as a result of the timing of deliveries, with the difference attributable to an increase of two-million payable silver equivalent ounces being produced in the quarter that would be recognised in future sales.

During the quarter, the company had closed the purchase from Hudbay Minerals of a precious metals stream from its currently producing flagship 777 mine, as well as a silver stream from HudBay’s $1.5-billion Constancia copper mine, currently under construction in Peru.

Initial production covering the period August 1, to September 30, from 777 totalled 733 000 silver-equivalent ounces, helping the company achieving its record production.

"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," Silver Wheaton CEO Randy Smallwood said in a statement.

"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 two-million ounces due to the timing of concentrate shipments, negatively affecting silver equivalent sales volume.”

He added that during the quarter the company had paid out over $630-million dollars, including the first payment to Hudbay and the last payment to Barrick Gold. “And yet, we finished the quarter with $550-million of cash-on-hand. With this cash, a fully undrawn revolving credit facility of $400 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,” Smallwood said.

Based upon its current agreements, Silver Wheaton said its expected attributable production for the year is about 28-million silver-equivalent ounces, including 42 000 oz of gold. By 2016, yearly attributable production is expected to increase significantly to about 48-million silver-equivalent ounces, including 100 000 oz of gold.

This growth would be 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, in Peru, and Hudbay’s flagship 777 mine and Constancia project.

The royalties and metals streaming firm was recently named Fortune magazine’s fastest-growing company after it managed to grow profit by 340% in three years.

The company’s Toronto-listed stock traded 1.88% lower at C$38.71 on Monday.

Edited by: Creamer Media Reporter