Silver Wheaton Corporation Hits our Target of $0.20 per share


This is what we wrote on November 6th, 2010:

Near term, look for the next set of results from the Silver Wheaton Corporation (SLW) which is due to release its third-quarter figures after the market close on Monday, 08 November, 2010. Our expectation is for earnings to be in the order of $0.20 per share.

So, here we go with a financial summary:

Third Quarter Highlights

  • Net earnings more than doubled to a record US$69.2 million (US$0.20 per share), compared with US$33.6 million (US$0.11 per share) in 2009.
  • Operating cash flows increased 55% to US$70.5 million (US$0.20 per share)(1), compared with US$45.4 million (US$0.14 per share)(1) in 2009.
  • Record attributable silver equivalent production of 5.9 million ounces (5.5 million ounces of silver and 7,000 ounces of gold), representing an increase of 41% over the comparable period in 2009.
  • Silver equivalent sales of 4.7 million ounces (4.3 million ounces of silver and 7,100 ounces of gold), lagging production for the quarter due primarily to the build-up of concentrate inventory as the Penasquito mine ramps up production, as well as timing of concentrate shipments from the Yauliyacu and Campo Morado mines.
  • As at September 30, 2010, approximately 2.2 million payable silver equivalent ounces attributable to the Company have been produced at the various mines and will be recognized in future sales as they are delivered to the Company under the terms of their contracts.
  • Total cash costs(1) of US$4.09 per silver equivalent ounce, compared with US$4.08 per ounce in 2009.
  • Cash operating margin(1) increased 42% compared to 2009, to a record US$15.72 per silver equivalent ounce, while average silver prices over the same period increased by 29%.
  • Goldcorp Inc. announced that its world-class gold-silver-lead-zinc
  • Penasquito mine achieved commercial production during the quarter with peak throughput rates as high as 105,000 tonnes per day. The ramp up to full production capacity of 130,000 tonnes per day is anticipated by early 2011. Annual production attributable to Silver Wheaton from the mine is expected to average approximately 7 million ounces of silver over the estimated 22 year mine life.
  • Barrick Gold Corp.'s world-class gold-silver Pascua-Lama project remains on track to enter production in the first quarter of 2013, with detailed engineering and procurement nearing completion and earthworks underway. 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 five years of operation, Silver Wheaton's attributable silver production is expected to average 9 million ounces annually.
  • Goldcorp completed the sale of the San Dimas mine to Primero Mining Corp. In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, which was set to expire in 2029, has been extended to life of mine. During the first four years following closing of the transaction, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Primero will deliver to the Company a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess. Goldcorp will continue to guarantee the delivery by Primero of all silver produced and owing to the Company until 2029, and a payment of US$0.50 per ounce for any shortfall below 215 million cumulative silver ounces delivered to Silver Wheaton by the end of 2031. Primero has provided Silver Wheaton with a right of first refusal on any metal stream or similar transaction it enters into.

We would also draw your attention to these comments by Peter Barnes, Chief Executive Officer of Silver Wheaton:

"We remain on track to meet production guidance of 23.5 million silver equivalent ounces in 2010, growing to approximately 40 million ounces by 2013. In an environment of continued economic uncertainty, investment demand for silver remains very strong, and silver prices approached 30 year highs in the quarter. This resulted in record cash operating margins of US$15.72 per ounce, generating strong free cash flows to fund future growth".

Well, they have met our expectations and the future looks bright, but thats just our very humble opinion.

The old adage of buy the rumour and sell the news may well kick in tomorrow and we could see a bit of a pull back, which could well represent a buying opportunity for us, but we will cross that bridge when we come to it.

Silver Wheaton Corporation trades on the New York Stock Exchange and the Toronto Stock Exchange under the symbol of SLW.

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