Profits at Silver Wheaton drop 36% on metal price declines

Silver Wheaton Corp. (TSX:SLW) (NYSE:SLW) on Monday announced record third quarter and year to date production.

The Vancouver-based streaming company, which pays an upfront fee for the right to buy all or some of a miner’s production, announced attributable silver equivalent production for the September quarter of 8.9 million ounces (6.8 million ounces of silver and 34,800 ounces of gold), compared to 7.6 million ounces last year, an increase of 17%.

TSX and New York-listed Silver Wheaton’s attributable silver equivalent sales for the quarter came in at 7.8 million ounces (5.7 million ounces of silver and 35,300 ounces of gold), a whopping 52% jump compared to the 5.1 million during the same quarter last year.

As the result of declining metal prices, revenues growth at 3% was much more modest with turnover reaching $166.4 million compared with $161.3 million in Q3 2012.

Average realized sale price per silver equivalent ounce sold plummeted 32% year on year to $21.26 ($21.22 per ounce of silver and $1,308 per ounce of gold).

As a result net earnings fell 36% to $77.1 million ($0.22 per share) compared with $119.7 million ($0.34 per share) in the third quarter last year. Operating cash flows reduced 8% to $118.7 million or $0.33 per share.

Cash operating margin of $16.53 per silver equivalent ounce deteriorated compared with $27.20 over the same period last year.

Average cash costs were $4.13 per ounce of silver and $386 per ounce of gold translating to a hike in on a silver equivalent basis, to $4.73 compared with $4.16 in Q3 2012. The company said the rise in cash costs was primarily due to an increase in the percentage of revenue from gold sales.

The company declared a quarterly dividend of $0.09 per common share as the result of the Company’s dividend policy whereby the quarterly dividend is equal to 20% of the average of the previous four quarters’ operating cash flow.

Subsequent to quarter end, Silver Wheaton announced an amendment to the precious metal purchase agreement with Hudbay Minerals to include the acquisition of an amount equal to 50% of the gold production from the Constancia project in Peru for the life of mine.

As a result of Barrick Gold Corp’s suspension of construction activities at its Pascua-Lama project on the border between Argentina-Chile, Silver Wheaton agreed to amend its silver purchase agreement to extend its entitlement to 100% of the production from three of Barrick’s currently producing mines by one year until the end of 2016.

Silver Wheaton’s 2017 guidance is now forecast to be 42.5 million silver equivalent ounces including 210,000 ounces of gold.

Silver Wheaton’s 2013 silver equivalent production is still expected to exceed 33.5 million ounces, including 145,000 ounces of gold.

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