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Wednesday, November 9, 2011

Silver Wheaton Revenues and Operating Cash Flows Double in the Third Quarter

VANCOUVER, Nov. 9, 2011 /CNW/ - Silver Wheaton Corp. ("Silver Wheaton" or the "Company") (TSX:SLW)(NYSE:SLW) is pleased to announce its unaudited results for the third quarter ended September 30, 2011.


  • Attributable silver equivalent production increased slightly compared with Q3 2010, to 6.1 million ounces (5.9 million ounces of silver and 5,100 ounces of gold).

  • Revenue doubled compared with Q3 2010, to US$185.2 million, on silver equivalent sales of 5.1 million ounces (4.8 million ounces of silver and 6,300 ounces of gold).

  • Net earnings increased 96% compared with Q3 2010 (on an adjusted basis1), to US$135.0 million (US$0.38 per share).

  • Operating cash flows more than doubled compared with Q3 2010, to US$167.2 million (US$0.47 per share1).

  • Cash operating margin1 more than doubled compared with Q3 2010, to US$32.11 per silver equivalent ounce, demonstrating Silver Wheaton's leverage to increasing silver prices.

  • Average cash costs of US$4.121 per silver equivalent ounce.

  • Quarter-end cash balance of US$715.6 million, with a net cash position of US$629.9 million.

  • Third quarterly dividend for 2011 of US$0.03 per common share was paid. 

"Another quarter of increased silver equivalent sales, along with strong silver prices, produced solid financial results," said Randy Smallwood, Silver Wheaton's President and Chief Executive Officer. "During the quarter, several of our partners' mines continued their focus on ramping up silver production, including Goldcorp's Peñasquito mine, which had record throughput levels in the month of September. As a result, we remain confident of achieving our 2011 production guidance of between 25 and 26 million silver equivalent ounces."
"The Company's operating cash flows more than doubled, despite sales continuing to lag production, which was primarily the result of concentrate inventory build-up at Glencore's Yauliyacu mine in Peru. However, in 2012, Glencore anticipates a more consistent schedule of concentrate deliveries, which should result in more regular silver deliveries to Silver Wheaton."
"Our Company's ability to consistently deliver amongst the highest cash operating margins in the precious metals industry, a direct result of our model of essentially fixed operating cash costs, continues to result in significant cash flow generation, particularly in the current environment of strong silver prices. Cash flows will be used to continue making accretive silver stream acquisitions and to return capital to our shareholders in the form of sustainable dividend growth. To this end, we are pleased to have recently amended our dividend policy, which now links to operating cash flows, and has resulted in a tripling of our current dividend."
"In recent months, the resurgence in global economic turmoil has resulted in tighter debt and equity markets, negatively impacting advanced exploration and development stage mining companies' access to project financing. Silver Wheaton is in a unique position to assist these companies with their growth goals by providing a value-enhancing source of capital through silver stream transactions. As such, our Corporate Development team continues to aggressively pursue high-quality and low-risk silver stream opportunities from around the globe, in order to further expand our sector leading production growth profile."
Financial Review

          Revenue was US$185.2 million in the third quarter of 2011, on silver equivalent sales of 5.1 million ounces (4.8 million ounces of silver and 6,300 ounces of gold). This represents a 100% increase from the US$92.8 million in revenue generated in the third quarter of 2010, due primarily to increases in the average realized selling price of silver and gold of 87% and 26%, respectively.
          Costs and Expenses
          Average cash costs in the third quarter of 2011 were US$4.121 per silver equivalent ounce, compared with US$4.091 during the comparable period of 2010. This resulted in cash operating margins1 of US$32.11 per silver equivalent ounce, a 104% increase compared with the third quarter of 2010, demonstrating Silver Wheaton's leverage to increasing silver prices.
          During the third quarter, the Company recorded a non-cash deferred income tax expense of US$8.4 million, attributable primarily to the reversal of previously recognized deferred income tax assets relating to the decline in fair value of long-term investments in common shares, and to a lesser extent, income from Canadian operations.
          Earnings and Operating Cash Flow
          Net earnings in the third quarter of 2011 were US$135.0 million (US$0.38 per share), compared with adjusted net earnings1 of US$68.9 million (US$0.20 per share) for the same period in 2010, an increase of 96% (an increase of 90% on a per share basis). Cash flow from operations in the third quarter of 2011 was US$167.2 million (US$0.47 per share1), compared with US$70.5 million (US$0.20 per share1) for the same period in 2010, an increase of 137%. The increase in net earnings and operating cash flow is primarily attributable to increased selling prices of silver and gold.
          Balance Sheet
          At the end of the third quarter, the Company had approximately US$716 million of cash on hand, after making a scheduled upfront payment to Barrick of US$137.5 million, relating to the Barrick silver stream agreement. In addition, it had US$400 million of available credit under its revolving bank debt facility. The cash and available credit, together with strong operating cash flows, position the Company well to execute on its growth strategy of acquiring additional accretive silver stream interests.
Operational Highlights
Attributable silver equivalent production was 6.1 million ounces (5.9 million ounces of silver and 5,100 ounces of gold) in the third quarter of 2011, a slight increase compared to the third quarter of 2010. Operational highlights in the quarter are as follows:

          Peñasquito - As per their October 26, 2011 disclosure, Goldcorp Inc. continues to focus on ramping up metal production at its world-class Peñasquito mine, with ore grades and metalurgical recoveries as anticipated. The mine remains on track to achieve its revised schedule of full production capacity of 130,000 tonnes per day by the end of the first quarter of 2012. Lower production was experienced during July and August as sulphide plant modifications and tests were completed. However, normal operating conditions in September led to record weekly and monthly plant throughput in excess of 100,000 tonnes per day.
          Progress continued on the supplemental ore feed system in order to ensure a sufficient quantity of pebble feed to the high pressure grinding roll circuit.  An additional project underway to increase the height of the tailings dam proceeded as planned. In conjunction with this project, additional water supplies, required for the grinding and process plant, were added to eliminate current and potential future water shortfalls. Completion of these projects is the final step in bringing the Peñasquito plant's throughput to its full design capacity.
          Pascua-Lama - As per Barrick Gold Corporation's October 27, 2011 disclosure, its world-class gold-silver Pascua-Lama project remains on track to commence production in mid-2013, with over 50% of the pre-production capital budget of $4.7 to $5.0 billion committed.  At the end of the third quarter, earthworks in Chile and Argentina were approximately 80% and 60% complete, respectively. 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 full five years of operation, Silver Wheaton's attributable silver production is expected to average 9 million ounces annually.
          Zinkgruvan - As per Lundin Mining Corporation's October 26, 2011 disclosure, metal production, including silver, at its Zinkgruvan mine was lower than expected due to technical problems in the grinding mills at its zinc/lead plant. Elevated vibrations experienced during the quarter were controlled by reducing the zinc mill throughput, which in turn led to lower than expected silver produced in concentrate. Normal mill throughput rates are expected to resume after the re-setting of the girth gear in October 2011.
          Mineral Park - As per Mercator Minerals Ltd.'s October 4, 2011 disclosure, construction of the Phase II expansion to 50,000 tons per day was completed at its Mineral Park mine during the third quarter of 2011. During the quarter, the plant achieved peak throughput in excess of 60,000 tons per day, averaging over 45,000 tons per day in the first 45 days of commissioning.
          Produced But Not Yet Delivered - Payable silver equivalent ounces produced but not yet delivered to Silver Wheaton by its partners increased by over 300,000 ounces in the third quarter, resulting in a total of approximately 3.8 million payable ounces at September 30, 2011. This was primarily due to an increase in concentrate inventory at the Yauliyacu mine, offset in part by reduced concentrate inventory levels at the Peñasquito mine.
          Since mid-2009, concentrate shipments from Glencore International's ("Glencore") Yauliyacu mine have been affected by the shut-down of the Doe Run La Oroya smelter in Peru, previously the largest buyer of the bulk concentrate produced at the mine. Since that time, Glencore has had to make alternative smelting arrangements for its stockpiled bulk concentrates at Yauliyacu. This has led to an inconsistent delivery schedule, delaying the eventual complete reduction of this bulk concentrate.
          In the second quarter of 2011, Glencore began replacing the bulk concentrate by producing separate, and more marketable, copper and lead concentrates. The consistency and quantity of these new concentrates has now stabilized, with more regular silver deliveries to Silver Wheaton from the copper concentrates expected in future quarters. Discussions between Glencore and prospective offtakers for the new lead concentrates are ongoing, however Glencore expects these discussions to be finalized in early 2012.
          As at September 30, 2011, approximately 1.8 million ounces of cumulative payable silver equivalent ounces have been produced at Yauliyacu but not yet delivered to Silver Wheaton. Approximately 900,000 ounces are attributable to the bulk concentrate, while 900,000 ounces are attributable to the new copper and lead concentrates.

Detailed mine by mine production and sales figures can be found in the Appendix of this press release and in Silver Wheaton's MD&A in the 'Results of Operations and Operational Review' section.

Operational highlights do not include material updates for mines with which Silver Wheaton has a silver purchase agreement but where our partners have yet to report their quarterly results. 

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