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Silver Wheaton Misses Estimates in 1Q

Zacks Equity Research

Silver Wheaton Corp.’s (SLW) first-quarter 2013 earnings of 37 cents a share trailed the Zacks Consensus Estimate and the year-ago quarter’s earnings by 4 cents. The Canada-based silver mining company’s profit decreased by roughly 9% year over year to $133.4 million.

Revenues rose 3% year over year to $205.8 million in the reported quarter, but missed the Zacks Consensus Estimate of $253 million. The gain was fueled by a 13% year-over-year increase in silver equivalent sale that recorded 6.9 million (including 6.0 million ounces of silver and 16,900 ounces of gold.

Operational Performance

Attributable silver equivalent production jumped 20% year over year to 8.0 million ounces in the quarter including 6.3 million ounces of silver and 32,000 ounces of gold.

Average cash costs per silver equivalent ounce rose to $4.39 in the first quarter from $4.08 a year ago due to increased gold sales associated with Hudbay 777 mine. Cash operating margins declined 11% year over year to $25.33 per silver equivalent ounce due to a 9% year over year decline in the realized silver price in the quarter and increased cash costs.

Financial Position

Silver Wheaton had cash and cash equivalents of $75.5 million as of Mar 31, 2013, down roughly 92.5% year over year from $997.5 million a year ago.

Silver Wheaton entered into two credit facilities in Feb 2013, comprising a $1 billion revolving credit facility, having a 5 year term and a $1.5 billion bridge financing facility having a 1 year term. Silver Wheaton owed roughly $1.09 billion under its Bridge Facility in connection with the acquisition of the Salobo and Sudbury gold streams as of Mar 31, 2013.

Operating cash flows increased 1% year over year to $165.6 million in the first quarter.


Silver Wheaton’s second quarter’s dividend payout of 12 cents per common share is in accordance with its amended dividend policy whereby the quarterly dividend will be equal to 20% of the average of the previous four quarters' operating cash flow


Silver Wheaton expects attributable production for 2013 to be roughly 33.5 million silver equivalent ounces, including 145,000 ounces of gold.

The company expects attributable production to increase to roughly 53 million silver equivalent ounces, including 180,000 ounces of gold, by 2017. The expected increase is based on Silver Wheaton’s portfolio of low-cost and long-life assets, added production from the recently acquired gold streams of Vale's Salobo and Sudbury mines along with the addition of silver streams on Barrick Gold’s (ABX) Pascua-Lama project and Hudbay’s (HBM) Constancia project.

Silver Wheaton, in Feb 2013, entered into an agreement with a subsidiary of mining giant Vale S.A. (VALE) to acquire gold production rights from mines in Brazil and Sudbury, Canada. As per the agreement, Silver Wheaton will receive 25% of the life of mine gold produced from Vale’s Brazilian Salobo mine as well as 70% of the production from its Sudbury Mines for a period of 20 years. Silver Wheaton currently carries a short-term Zacks Rank #3 (Hold).

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