ENP Newswire - 15 August 2014
Release date- 14082014 - VANCOUVER - Silver Wheaton Corp. (TSX: SLW) (NYSE: SLW) is pleased to announce its unaudited results for the second quarter ended June 30, 2014.
All figures are presented in United States dollars unless otherwise noted.
SECOND QUARTER HIGHLIGHTS
Attributable silver equivalent production in Q2 2014 of 8.4 million ounces (6.3 million ounces of silver and 31,400 ounces of gold), compared to 8.7 million ounces in Q2 2013, representing a decrease of 4%.
Attributable silver equivalent sales volume in Q2 2014 of 7.5 million ounces (5.2 million ounces of silver and 34,800 ounces of gold), compared to 7.2 million ounces in Q2 2013, representing an increase of 4%.
Revenues of $148.6 million in Q2 2014 compared with $166.9 million in Q2 2013, representing a decrease of 11%.
Average realized sale price per silver equivalent ounce sold in Q2 2014 of $19.83 ($19.81 per ounce of silver and $1,295 per ounce of gold), representing a decrease of 14% as compared to Q2 2013.
Net earnings of $63.5 million ($0.18 per share) in Q2 2014 compared with $71.1 million ($0.20 per share) in Q2 2013, representing a decrease of 11%.
Operating cash flows of $102.5 million ($0.29 per share1) in Q2 2014 compared with $125.3 million ($0.35 per share1) in Q2 2013, representing a decrease of 18%.
Cash operating margin1 in Q2 2014 of $15.11 per silver equivalent ounce compared with $18.28 in Q2 2013.
Average cash costs1 in Q2 2014 were $4.15 and $393 per ounce of silver and gold, respectively. On a silver equivalent basis, average cash costs1 decreased to $4.72 compared with $4.77 in Q2 2013.
Declared quarterly dividend of $0.06 per common share.
Subsequent to the quarter end, Primero Mining Corp. ('Primero') announced its decision to expand the San Dimas mine to 3,000 from 2,500 tonnes per day.
Vale S.A.'s ('Vale') Salobo II expansion, which will double the mill throughput capacity to 24 million tonnes per annum, was completed and first ore processed in Q2.
Hudbay Minerals Inc. ('Hudbay') announced that the Constancia project is approximately 85% complete as of the end of Q2.
'In the second quarter, we saw substantial steps forward at Salobo and Constancia, two of our key growth platforms,' said Randy Smallwood , President and Chief Executive Officer of Silver Wheaton. 'Most significantly, Vale received first production from Salobo II, the expansion which doubles the mill's capacity. At Constancia, Hudbay continues to advance the project, which is now approximately 85% complete, and we look forward to seeing production from Constancia in the fourth quarter of this year.
In addition, one of Silver Wheaton's cornerstone assets, Penasquito, also advanced during the quarter. Not only did Penasquito achieve record production despite continued water issues, Goldcorp also continues to highlight the significant potential upside of the mine.
Finally, another of our cornerstone assets, San Dimas, completed an expansion to 2,500 tonnes per day earlier this year and Primero has recently announced a further expansion to 3,000 tonnes per day. Given the progress being made at our diversified portfolio of mines and projects, we believe that Silver Wheaton is on the cusp of seeing its next stage of growth realized, leaving it well-positioned to benefit from rebounding precious metal prices.'
Revenue was $148.6 million in the second quarter of 2014, on silver equivalent sales of 7.5 million ounces (5.2 million ounces of silver and 34,800 ounces of gold). This represents an 11% decrease from the $166.9 million of revenue generated in the second quarter of 2013, due primarily to a 14% decrease in the average realized silver equivalent price ($19.83 in Q2 2014 compared to $23.05 in Q2 2013), partially offset by a 4% increase in the number of silver equivalent ounces sold.
Costs and Expenses
Average cash costs1 in the second quarter of 2014 were $4.72 per silver equivalent ounce as compared to $4.77 during the comparable period of 2013. This resulted in a cash operating margin1 of $15.11 per silver equivalent ounce, a reduction of 17% as compared to Q2 2013. The decrease in the cash operating margin was primarily due to a 14% decrease in the average silver equivalent price realized in Q2 2014 compared to Q2 2013.
Earnings and Operating Cash Flows
Net earnings and cash flow from operations in the second quarter of 2014 were $63.5 million ($0.18 per share) and$102.5 million ($0.29 per share1), compared with $71.1 million ($0.20 per share) and $125.3 million ($0.35 per share1) for the same period in 2013, a decrease of 11% and 18%, respectively. Earnings and cash flow continued to be impacted by lower gold and silver prices.
At June 30, 2014, the Company had approximately $139.2 million of cash on hand. The combination of cash and ongoing operating cash flows, combined with the credit available under the Company's $1 billion Revolving Facility, positions the Company well to fund all outstanding commitments as well as provide flexibility to acquire additional accretive precious metal stream interests.
Operational and Development Highlights
During the second quarter of 2014, attributable silver equivalent production was 8.4 million ounces (6.3 million ounces of silver and 31,400 ounces of gold), representing a decrease of 4% compared to the second quarter of 2013.
Operational highlights for the quarter ended June 30, 2014, are as follows:
As per Primero's second quarter 2014 Management's Discussion and Analysis ('MD&A'), mill throughput in the second quarter averaged 2,405 tonnes per day ('tpd'), below the current capacity of 2,500 tpd due to a planned nine day shutdown at the Company's hydro-power facility in order to expand its capacity. In addition, Primero recently announced its decision to expand the San Dimas mine to 3,000 tpd.
As per Goldcorp Inc.'s ('Goldcorp') second quarter 2014 MD&A, Penasquito had record production in the second quarter driven by higher mill throughput and higher ore grades as mining continued at the bottom of Phase 4. Initial permits for the Northern Well Field ('NWF') were received, allowing construction to commence, with completion expected mid-year 2015.
Goldcorp indicated that contingency plans remain in place for fresh water supply to Penasquito until the NWF is operational. The studies for the long-term tailings facility continued during the second quarter of 2014, and Goldcorp indicated that three viable options are being evaluated. Additionally, the existing tailings facility life has been extended to 2018.
Goldcorp has indicated that in the second quarter of 2014, Penasquito's exploration drilling program continued to focus on defining the copper-gold sulphide rich skarn deposit located below and adjacent to the diatreme ore body. Current exploration activities include drilling to establish the vertical and horizontal size and extent of the skarn deposit.
In addition to exploration, Goldcorp is investigating the potential for producing a saleable copper concentrate at Penasquito (the Concentrate Enrichment Project or 'CEP') as well as assessing the viability of leaching a pyrite concentrate from the zinc flotation tailings ('Pyrite Leach').
Pre-feasibility studies for CEP and Pyrite Leach are advancing and expected to be completed in late 2014 and early 2015, respectively. Successful implementation of one or both of these projects has the potential to significantly improve the overall economics and add to the reserves and resources of Penasquito through the addition of another saleable product, and to increase gold and silver recoveries, respectively.
As per Vale's second quarter 2014 MD&A, Salobo II - the expansion of the mill throughput capacity at the Salobo mine to 24 million tonnes per annum ('Mtpa') - was completed in the second quarter with first production of copper concentrate achieved on June 5, 2014. Salobo I, the original 12 Mtpa line, experienced minor delays in its ramp-up in the second quarter as the components of the Salobo II project were connected into the operation.
As per Vale's second quarter 2014 MD&A, second quarter production was impacted by planned annual maintenance at some surface facilities. However, Vale indicated that during this year's scheduled maintenance, the Sudbury mines - which are the bottleneck in the Sudbury system - did not stop producing. They continued to build up inventory of ore and concentrates, which Vale anticipates should be smelted and refined in the second half of this year. As a result, Vale expects stronger output for the second half of 2014, compensating for the planned lower production in the second quarter.
Constancia - As per Hudbay's second quarter 2014 MD&A, the Constancia project in Peru is approximately 85% complete and remains on track for initial production in the fourth quarter of 2014 and commercial production in the second quarter of 2015. Key milestones have been achieved, including the construction of the power transmission line from Tintaya to Constancia, the placement of first ore on the run of mine pad in July, and the commencement of commissioning activities on the primary crusher and coarse ore stockpile conveying systems.
As per the agreement with Hudbay, a final payment of $135 million1 relative to the gold stream on Constancia will be paid to Hudbay once $1.35 billion in capital expenditures has been incurred by Hudbay on Constancia. Silver Wheaton's payment to Hudbay is expected to be made in the third quarter of 2014.
Mineral Park - As per Mercator Minerals Ltd's ('Mercator') news release dated August 1, 2014, the proposed business combination between Mercator and Intergeo MMC Ltd. ('Intergeo') has been terminated. As a result of the termination of the arrangement, Mercator has indicated that certain events of default have occurred and are continuing under the credit agreement entered into between Mercator's indirect wholly owned subsidiary, Mineral Park Inc. ('MPI'), and its senior lenders, and under the bridge loan agreement entered into between Mineral Park and Intergeo's controlling shareholder, Daselina Investments Ltd.
The MPI lenders have agreed to forebear from exercising their various rights and remedies under the credit agreement, until August 15, 2014. Under the current streaming agreement, Silver Wheaton is entitled to 100% of the payable silver from the Mineral Park mine.
Produced But Not Yet Delivered 2
Payable silver equivalent ounces produced but not yet delivered to Silver Wheaton by its partners decreased by 0.1 million ounces to approximately 6.3 million silver equivalent payable ounces at June 30, 2014. A large increase in produced but not yet delivered ounces at the Yauliyacu mine was more than offset by significant decreases at the Salobo, 777, Penasquito, and Sudbury mines.
About Silver Wheaton
Silver Wheaton is the largest precious metals streaming company in the world. Based upon its current agreements, forecast 2014 annual attributable production is approximately 36 million silver equivalent ounces1, including 155,000 ounces of gold.
By 2018, annual attributable production is anticipated to increase significantly to approximately 48 million silver equivalent ounces1, including 250,000 ounces of gold. This growth is driven by the Company's portfolio of low-cost and long-life assets, including precious metal and gold streams on Hudbay's Constancia project and Vale's Salobo and Sudbury mines.
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 www.silverwheaton.com and have been posted on SEDAR at www.sedar.com.
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
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 or gold, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production (including 2014 and 2018 attributable annual production), costs of production, reserve determination, reserve conversion rates, statements as to any future dividends, the ability to fund outstanding commitments and continue to acquire accretive precious metal stream interests and assessments of the impact and resolution of various legal and tax matters.
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, operations, 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 or 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, environmental, 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; differences in the interpretation or application of tax laws and regulations and the Company's interpretation of, or compliance with, tax laws, is found to be incorrect; 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 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 and 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, the continuing ability to fund or obtain funding for outstanding commitments, the ability to source and obtain accretive precious metal stream interests, expectations regarding the resolution of legal and tax matters, that Silver Wheaton will be successful in challenging any reassessment by the Canada Revenue Agency 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 and are cautioned that actual outcomes may vary. 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.
CAUTIONARY LANGUAGE REGARDING RESERVES AND RESOURCES
For further information on Mineral Reserves and Mineral Resources and on Silver Wheaton more generally, readers should refer to Silver Wheaton's Annual Information Form for the year ended December 31, 2013, and other continuous disclosure documents filed by Silver Wheaton since January 1, 2014, available on SEDAR at www.sedar.com.
Silver Wheaton's Mineral Reserves and Mineral Resources are subject to the qualifications and notes set forth therein. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
Cautionary Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Mineral Resources: The information contained herein uses the terms 'Measured', 'Indicated' and 'Inferred' Mineral Resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them and expressly prohibits U.S. registered companies from including such terms in their filings with the SEC.
'Inferred Mineral Resources' have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies.
United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves or that any exploration potential will ever be converted to any category of Mineral Reserves or Mineral Resources. United States investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable. United States investors are urged to consider closely the disclosure in Silver Wheaton's Form 40-F, a copy of which may be obtained from Silver Wheaton or from http://www.sec.gov/edgar.shtml.
Silver Wheaton has included, throughout this document, certain non-IFRS performance measures, including (i) operating cash flow per share (basic and diluted); (ii) average cash costs of silver and gold on a per ounce basis and (iii) cash operating margin.
Operating cash flow per share (basic and diluted) is calculated by dividing cash generated by operating activities by the weighted average number of shares outstanding (basic and diluted). The Company presents operating cash flow per share as management and certain investors use this information to evaluate the Company's performance in comparison to other companies in the precious metals mining industry who present results on a similar basis.
Average cash cost of silver and gold on a per ounce basis is calculated by dividing the total cost of sales, less depletion, by the ounces sold. In the precious metals mining industry, this is a common performance measure but does not have any standardized meaning. In addition to conventional measures prepared in accordance with IFRS, management and certain investors use this information to evaluate the Company's performance and ability to generate cash flow.
Cash operating margin is calculated by subtracting the average cash cost of silver and gold on a per ounce basis from the average realized selling price of silver and gold on a per ounce basis. The Company presents cash operating margin as management and certain investors use this information to evaluate the Company's performance in comparison to other companies in the precious metals mining industry who present results on a similar basis.
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 Silver Wheaton's Management Discussion and Analysis available on the Company's website at www.silverwheaton.com and posted on SEDAR at www.sedar.com.
Senior Vice President
Silver Wheaton Corp.