Silver Wheaton Reports Lower Adjusted Profit, Record Output, Streaming Deal

Vancouver-based Silver Wheaton Corp.has reported marginal adjusted profit during the third quarter of the year despite reporting record production levels.

(Kitco News) - Silver Wheaton Corp. (TSX, NYSE: SLW), a Vancouver-based silver streaming company, reported a smaller third-quarter adjusted profit than a year ago amid lower prices for metals, even though production rose to a record level for the third quarter in a row.

The company also announced a new streaming agreement with a Glencore Plc. subsidiary for the Antamina Mine in Peru.

After the stock market closed Tuesday, Silver Wheaton reported adjusted earnings of $49.8 million, or 12 cents per share. This was down from $72.6 million, or 20 cents, in the third quarter of 2014.

During the three months ended Sept. 30, Silver Wheaton took an impairment charge of $154 million related to its interest in silver and gold at the 777 mine in Canada. In 2012, Silver Wheaton entered into an agreement with Hudbay Minerals Inc. to acquire 100% of the silver and gold production from the 777 mineuntil the end of 2016, and 100% of the silver and 50% of the gold production for the remainder of the mine life. However, during the third quarter, Silver Wheaton officials said they were informed that as a result of an unsuccessful drilling program at 777, Hudbay's management believes that the mine life is unlikely to be extended beyond 2020, leading to the impairment charge.

Including the after-tax impact of the impairment, Silver Wheaton reported a net loss in the third quarter of $95.9 million, or 24 cents per share, compared with net earnings of $4.5 million, or a penny, in the same period of 2014.

Silver Wheaton declared a quarterly dividend of 5 cents per share.

“With over 32 million ounces produced year to date, we remain well on track to deliver on our original production growth guidance of over 20% in 2015,' said Randy Smallwood, president and chief executive officer of Silver Wheaton. 'Clearly, not everything has been smooth sailing, as we have also faced persistently low commodity prices, along with the receipt of the notices of reassessment from the CRA (Canada Revenue Agency).”

The CRA is looking to reassess income earned by foreign subsidies outside of Canada, with Silver Wheaton saying it will vigorously defend its tax-filing position.

For the third quarter, the company reported record silver-equivalent production of 11.0 million ounces (6.9 million ounces of silver and 54,500 ounces of gold), up 24% from 8.9 million silver-equivalent ounces in the same period a year ago. Record silver-equivalent sales in the third quarter were 10.2 million ounces, up 17% from 8.7 million in the year-ago period.

The average realized price per silver-equivalent ounce sold was $15.03 ($15.05 per ounce of silver and $1,130 per ounce of gold), a 21% decrease from $18.98 in the third quarter of 2014.

“While the low commodity price environment has had its challenges, it has also created some great opportunities,” Smallwood said. “This is clearly evidenced by the announcement of our acquisition of a silver stream on Antamina, one of the lowest-cost, largest copper mines in the world. Antamina is an ideal asset for Silver Wheaton, one that readily fits in to our portfolio of top tier assets.'

Silver Wheaton’s wholly owned subsidiary, Silver Wheaton (Caymans) Ltd., has agreed to acquire from Anani Investments Ltd., a subsidiary of Glencore, silver from the Antamina Mine.

SWC will make a cash payment of $900 million for the silver stream, plus ongoing payments of 20% of the spot price per silver ounce delivered. SWC will receive from Glencore 33.75% of the Antamina silver production until the delivery of 140 million ounces of silver and 22.5% of silver production thereafter for the life of mine.

This acquisition immediately increases Silver Wheaton's production profile by adding expected average silver production of 5.1 million ounces per year in 2016 and 2017, then 4.7 million ounces per year over the first 20 years, the company said.

Antamina is considered the eighth-largest copper mine in the world.

Courtesy: Kitco News

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