Silver Wheaton Announces First Quarter Results FOR 2017
FOR IMMEDIATE RELEASE TSX: SLW
May 9, 2017 NYSE: SLW
SILVER WHEATON ANNOUNCES FIRST QUARTER RESULTS FOR 2017
Vancouver, British Columbia – Silver Wheaton Corp. (“Silver Wheaton” or the “Company”)
(TSX:SLW) (NYSE:SLW) is pleased to announce its results for the first quarter ended
March 31, 2017. All figures are presented in United States dollars unless otherwise noted.
In the first quarter of 2017, Silver Wheaton’s gold production and sales volumes climbed
over 35% relative to the firs t quarter of 2016, putting the C ompany on track to meet or
exceed full-year gold production guidance. F irst quarter silver production and silver sales
were impacted by strike action at San Dimas. For the third consecutive quarter, revenue
was roughly evenly split between silver and gold, aligning well with the proposed name
change to Wheaton Precious Metals.
FIRST QUARTER HIGHLIGHTS
Attributable production in Q1 2017 of 6.5 million ounces of silver a nd 84,900 ounces of
gold, compared with 7.5 million ounces of silver and 61,900 ounces of gold in Q1 2016,
with silver production having decreased 14% and gold production having increased
37%.
On a silver equivalent basis¹ and gold equivalent basis¹ , attributable production in Q1
2017 was 12.5 million silver equivalent ounces ("SEOs") or 177,900 gold equivalent
ounces ("GEOs"), compared with 12.5 million SEOs or 156,500 GEOs in Q1 2016, with
SEO production being virtually unchanged and GEO production having increased
14%.1
Sales volume in Q1 2017 of 5.2 million ounces of silver and 88,400 ounces of gold,
compared with 7.6 million ounces of silver and 65,300 ounces of gold in Q1 2016, with
silver sales volume having decreased 31% and gold sales volume h aving increased
35%.
On a silver equivalent basis¹ and gold equivalent basis¹, sales volume in Q1 2017 was
11.4 million SEOs or 163,000 GEOs, compared with 12.7 million SEOs or 160,200
GEOs in Q1 2016, with silver sales volume having decreased 10% and gold sales
volume having increased 2%.
As at March 31, 2017, payable ounces attributable to the Company produced but not
yet delivered³ amounted to 3.9 million payable silver ounces and 51,500 payable gold
ounces, representing an increase of 0.6 million payable silver ounces and a decrease of
8,100 payable gold ounces during the three month period ended March 31, 2017.
Revenues of $198 million in Q1 2017 compared with $188 million in Q1 2016,
representing an increase of 6%.
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Average realized sale price per ounce sold in Q1 2017 of $17.45 per ounce of silver and
$1,208 per ounce of gold representing an increase of 19% and 3%, respectively,
compared to Q1 2016.
Net earnings of $61 million ($0.14 per share) in Q1 2017 compared with $41 million
($0.10 per share) in Q1 2016, representing an increase of 49%.
Operating cash flows of $120 million ($0.27 per share²) in Q1 2017 compared with $114
million ($0.28 per share²) in Q1 2016, representing an increase of 5%.2
Cash operating margin² in Q1 2017 of $12.91 per silver ounce sold and $817 per gold
ounce sold, representing an increase of 22% and 4%, respectively, as compared with
Q1 2016.
Average cash costs² in Q1 2017 were $4.54 and $391 per ounce of silver and gold,
respectively.
Declared quarterly dividend of $0.07 per common share.
Asset Highlight
o Operations at the San Dimas mine in Mexico resumed on April 18, 2017, after
Primero Mining Corp. (“Primero”) resolved the work stoppage of unionized
employees that began on February 15, 2017. Primero announced that it has a
new Collective Bargaining Agreement ("CBA") that provides a formal structure
for regulating all aspects of the relationship between Primero and its unionized
employees.
“Silver Wheaton had a solid start to 2017 with our gol d business once again delivering
strong results,” said Randy Smallwood, President and Chief Executive Officer of Silver
Wheaton. “For the third quarter in a row, revenue was roughly balanced between silver and
gold, further supporting the proposed name change to Wheaton Precious Metals. While our
name may be changing, our focus remains on being the premier investment option for
precious metals.”
Financial Review
Revenues
Revenue was $198 million in the first quarter of 2017, on sales volume of 5.2 million
ounces of silver and 88,400 ounces of gold. This represents a 6% increase from the
$188 million of revenue generated in the first quarter of 2016 due primarily to (i) a 35%
increase in the number of gold ounces sold; (ii) a 19% increase in the aver age realized
silver price ($17.45 in Q1 2017 compared with $14.68 in Q1 2016); (iii) a 3% increase in
the average realized gold price ($1,208 in Q1 2017 compared with $1,175 in Q1 2016);
partially offset by (iv) a 31% decrease in the number of silver ounces sold.
Costs and Expenses
Average cash costs² in the first quarter of 2017 were $4.54 per silver ounce sold and
$391 per gold ounce sold, as compared with $4.14 per silver ounce and $389 per gold
ounce during the comparable period of 2016. This resulted in a cash operating margin²
of $12.91 per silver ounce sold and $817 per gold ounce sold, an increase of 22% and
4%, respectively, as compared with Q1 2016. The increase in the cash operating
margin was primarily due to a 19% increase in the average realiz ed silver price and a
3% increase in the average realized gold price in Q1 2017 compared with Q1 2016.
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Earnings and Operating Cash Flows
Net earnings and cash flow from operations in the first quarter of 2017 were $61 million
($0.14 per share) and $120 million ($0.27 per share²), compared with $41 million ($0.10
per share) and $114 million ($0.28 per share²) for the same period in 2016, an increase
of 49% and 5%, respectively.
Balance Sheet
At March 31, 2017, the Company had approximately $115 million of cash on hand and
$1.1 billion outstanding under the Company's $2 billion revolving term loan (the
"Revolving Facility"). On February 27, 2017, the term of the revolving term loan was
extended so that it now matures on February 27, 2022.
First Quarter Asset Highlights
During the first quarter of 2017, attributable production was 6.5 million ounces of silver and
84,900 ounces of gold, respectively, representing a decrease of 14% and an increase of
37%, as compared with the first quarter of 2016.
Operational highlights for the quarter ended March 31, 2017 , based upon counterparties’
reporting, are as follows:
Salobo
In the first quarter of 2017, Salobo produced 53,200 ounces of attributable gold, an
increase of approximately 38% relative to the first quarter of 2016. This growth was
primarily due to the acquisition of an additional 25% of attributable gold from the Salobo
mine in the third quarter of 2016. According to Vale S.A.’s first quarter of 2017
production report, production was impacted by conveyor belt and plant repairs in
February, as well as by lower grades.
Antamina
In the first quarter of 2017, Antamina produced 1.5 million ounces of attributable silver, a
decrease of approximately 28% rel ative to the first quarter of 2016. This decrease was
primarily the result of lower throughput, grades and recovery. The mine site was
reportedly well prepared f or the major floods and mudslides that affected Peru during
the month of March, with no long-term impacts to production expected in 2017 .
Antamina is on track to meet the six million ounce silver forecast for full-year 2017.
Peñasquito
In the first quarter of 2017, Peñasquito produced 1.3 million ounces of attributable
silver, a decrease of approximately 1% relative to the first quarter of 2016. According to
Goldcorp Inc.’s (“Goldcorp”) first quarter of 2017 MD&A, higher grade ore is expected in
the second quarter of 2017 as further mining occurs in Phase 5, after which mill feed is
expected to consist of lower grade ore and stockpiled material for the remainder of
2017. Goldcorp further reports that it expects increased productivity throughout 2017 as
a result of ongoing initiatives, including improved pit conditions with large and wide cut -
backs, a continued focus on balancing truck haulage with available shovels, and an
optimization of drill -and-blast activities. Finally, pre-stripping of the Chile Colorado pit
has reportedly commenced ahead of schedule with the first two benches being mined.
Goldcorp has indicated that mining of ore is expected to start in 2018.
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According to Goldcorp, the Pyrite Leach Project (“PLP”) achieved construction progress
of 6% and engineering progress of 81% by the end of the first quarter of 2017, with
major procurement activities nearing completion, material and equipment arriving on
site and major works con tractors having mobilized to site. Goldcorp also reports that
earthwork activities are now complete, concrete works are underway, and mechanical
works installation will commence in the second quarter of 2017. As part of the PLP, a
carbon pre-flotation facility is being constructed which will reportedly allow Peñasquito
to process ore which was previously considered uneconomic, including significant
amounts already in stockpiles.
San Dimas
In the first quarter of 2017, San Dimas produced 0.6 million ounces of attributable silver,
a decrease of approximately 33% relative to the first quarter of 2016. Operations at San
Dimas resumed on April 18, 2017, after Primero resolved the work stoppage of
unionized employees that began on February 15, 2017. Primero announced that it has a
new CBA with the National Union of Mine, Metal, Steel and Allied Workers of the
Mexican Republic. Primero believes the new CBA allows for a competitive cost structure
and improved performance bonus parameters aligned to the future succes s of San
Dimas operations. A phased restart of the San Dimas operation is currently underway ,
and Primero is guiding for 2017 silver production of between 4.5 to 5.5 million ounces.
On March 30, 2017, Silver Wheaton and certain of its subsidiaries provided a guarantee
to the lenders under Primero’s existing revolving credit facility, which is set to mature on
November 23, 2017, capped at a maximum of $81.5 million, plus interest, fees and
expenses. Primero will pay Silver Wheaton a fee of 5% per ann um in connection with
the guarantee.
Sudbury
In the first quarter of 2017, Vale’s Sudbury mines produced 15,100 ounces of
attributable gold, an increase of approximately 91% relative to the first quarter of 2016.
This increase was attributable to higher grades and recovery more than offsetting lower
throughput. According to Vale’s first quarter of 2017 production report, production in the
second quarter of 2017 will be impacted as Vale took furnace #2 offline mid-March for a
three-month long rebuild and e xpansion in its’ capacity as this will be the furnace in
operation when Sudbury officially transitions to a single furnace in the fourth quarter of
2017. Furthermore, in the second quarter, Sudbury will have its three-week long surface
plant wide scheduled maintenance shutdown, which occurs every 18 months.
Constancia
In the first quarter of 2017, Constancia produced 0.5 million ounces of attributable silver
and 2,400 ounces of attributable gold, an increase of approximately 6% for silver
production and a decrease of approximately 29% for gold production relative to the first
quarter of 2016. Lower grades were more than offset for silver and partially offset for
gold by increased throughput and recovery. According to Hudbay Minerals Inc.’s
(“Hudbay”) first quarter of 2017 MD&A, ore mined at Constancia during the first quarter
of 2017 increased by 6% compared to the same period in 2016 as the company wanted
to increase stockpiles to improve the ability to blend ore at the processing plant.
Other Gold
In the first quarter of 2017, total Other Gold attributable production was 14,200 ounces,
an increase of approximately 17% relative to the first quarter of 2016. The increase was
driven prim arily by higher grades at Minto, partially offset by lower attributable
production at 777.
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Other Silver
In the first quarter of 2017, total Other Silver attributable production was 2.5 million
ounces, a decrease of approximately 7% relative to the first quarter of 2016. The
decrease was driven primarily due to lower grades , throughput, and recovery at
Yauliyacu and Zinkgruvan, partially offset by higher throughput and grades at Pierina.
In March 2017, the Company amended its silver purchase agreement with Alexco
Resource Corp. (“Alexco”) to make the production payment a function of the silver head
grade and silver spot price in the month in which the silver is produced. In addition, the
area of interest was expanded to include properties currently owned by Alexco and
properties acquired by Alexco in the future which fall wi thin a one kilometer radius of
existing Alexco holdings in the Keno Hill Silver District. As consideration of the
amendments, on April 10, 2017 Alexco issued 3 million shares to Silver Wheaton with a
fair value of $5 million.
Development Update – Rosemont
Hudbay has completed an updated feasibility study for its Rosemont project in Arizona,
United States. Since their acquisition of Rosemont, Hudbay has completed an extensive
work program, including in -fill drilling, detailed metallurgical test work, and a bottom-up
approach to cost estimation, along with other feasibility -level work, as detailed in the
National Instrument 43-101 technical report (“Rosemont Technical Report”) in respect to
the Rosemont project dated March 30, 2017 . Rosemont will be a traditi onal open pit,
shovel and truck operation with an expected 19 -year mine life. Project capital cost for
Rosemont is now estimated at approximately $1.9 billion (100% basis) and is expected
to be spent over a three-year construction period.
Subsequent to the quarter, Hudbay announced in its news release dated May 8, 2017,
that the U.S. Forest Service has published a notice to the U.S. Federal Register
regarding the Rosemont project. The notice states that, "The Record of Decision (ROD)
for the Rosemont Copper Project is expected to be signed in early June, 2017 by (the)
Coronado National Forest Supervisor." The Final Record of Decision is one of the two
key federal permits outstanding, the other being the Section 404 Water Permit from the
U.S. Army Corps of Engineers.
As per the precious metals streaming agreement, Silver Wheaton (Caymans) Ltd. will
provide a payment of a $230 million deposit upon achievement of certain milestones in
exchange for an amount equal to 100% of the life of mine silver and gol d production
from Rosemont3.
Produced But Not Yet Delivered 4
As at March 31, 2017, payable ounces attributable to the Company produced but not yet
delivered³ amounted to 3.9 million payable silver ounces and 51,500 payable gold
ounces, representing an increase of 0.6 million payable silver ounces and a decrease
of 8,100 payable gold ounces during the three month period ended March 31, 2017 .
Payable silver ounces produced but not yet delivered increased primarily as a result of
increases related to the Peñasquito, Antamina, Zinkgruvan , and Yauliyacu silver
interests, partially offset by a decrease related to the San Dimas silver interest. Payable
gold ounces produced but not yet delivered decreased primarily as a result of decreases
related to the Salobo and 777 gold interests, offset partially by an increase related to the
Sudbury gold interest. Payable ounces produced but not yet delivered to Silver Wheaton
companies are expected to average approximately two months of annualized production
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but may vary from quarter to quarter due to a number of minin g operation factors
including mine ramp-up and timing of shipments.
Detailed mine-by-mine production and sales figures can be found in the Appendix to this
press release and in Silver Wheaton’s consolidated MD&A in the ‘Results of Operations and
Operational Review’ section.
Outlook
Silver Wheaton’s estimated attributable silver and gold production in 2017 is forecast to be
28 million silver ounces and 340,000 gold ounces. Estimated average annual attributable
silver and gold production over the next five years (including 2017) is anticipated to be
approximately 29 million silver ounces and 340,000 gold ounces per year. As a reminder,
Silver Wheaton does not include any production from Barrick’s Pascua -Lama project or
Hudbay’s Rosemont project in its guidance.
From a liquidity perspective, the $115 million of cash and cash equivalents as at March 31,
2017 combined with the liquidity provided by the available credit under the $2 billion
Revolving Facility and ongoing operating cash flows positions the Company well to fund all
outstanding commitments and known contingencies as well as providing flexibility to acquire
additional accretive precious metal stream interests.
Webcast and Conference Call Details
A conference call and webcast will be held Wednesday, May 10, 2017, starting at 11:00 am
(Eastern Time) to discuss these results. To participate in the live call, please use one of the
following methods:
Dial toll free from Canada or the US: 888-231-8191
Dial from outside Canada or the US: 647-427-7450
Pass code: 3204939
Live audio webcast: www.silverwheaton.com
Participants should dial in five to ten minutes before the call.
The conference call will be recorded and available until May 17, 2017 at 11:59 pm ET. The
webcast will be available for one year. You can listen to an archive of the call by one of the
following methods:
Dial toll free from Canada or the US: 855-859-2056
Dial from outside Canada or the US: 416-849-0833
Pass code: 3204939
Archived audio webcast: www.silverwheaton.com
This earnings release should be read in conjunction with Silver Wheaton’s MD&A and
Financial Statements, which are available on the Company’s website at
www.silverwheaton.com and have been posted on SEDAR at www.sedar.com.
Mr. Neil Burns, Vice President , T echnical Services for Silver Wheaton, is a “qualified
person” as such term is defined under National Instrument 43 -101, and has reviewed and
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approved the technical information including information on mineral reserves and mineral
resources disclosed in this news release.
Silver Wheaton believes that there are no significant differences between its
corporate governance practices and those required to be followed by United States
domestic issuers under the NYSE listing standards. This confirmation is located on the
Silver Wheaton website at http://www.silverwheaton.com/company/corporate-
governance/default.aspx.
End Notes
1 Please refer to the table on the bottom of pages 12 and 13 for the methodology of converting production and
sales volumes to silver and gold equivalent ounces, which are provided to assist the reader.
2 Please refer to non-IFRS measures at the end of this press release.
3 In the Rosemont Technical Report, including the effect of the stream, Hudbay estimates silver to represent
only approximately 2% of the mines revenue, while the financial impact of gold was not estimated as it is
currently thought to be negligible to the overall economics of the mine.
4 Payable silver and gold ounces produced but not yet delivered are based on management estimates, and may
be updated in future periods as additional information is received.
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Condensed Interim Consolidated Statements of Earnings
Three Months Ended
March 31
(US dollars and shares in thousands, except per share amounts - unaudited)
2017 2016
Sales
$ 197,951 $ 187,511
Cost of sales
Cost of sales, excluding depletion
$ 58,291 $ 56,636
Depletion
63,943
71,344
Total cost of sales
$ 122,234 $ 127,980
Gross margin
$ 75,717 $ 59,531
Expenses
General and administrative 1
$ 7,898 $ 10,844
Interest expense
6,373
6,932
Other expense
94
1,160
$ 14,365 $ 18,936
Earnings before income taxes
$ 61,352 $ 40,595
Income tax (expense) recovery
(128)
384
Net earnings
$ 61,224 $ 40,979
Basic earnings per share
$ 0.14 $ 0.10
Diluted earnings per share
$ 0.14 $ 0.10
Weighted average number of shares outstanding
Basic
441,484
402,952
Diluted
441,955
403,125
1) Equity settled stock based compensation (a non -cash item) included in general and
administrative expenses.
$ 1,196 $ 1,397