Silver Wheaton Reports Record Revenue and Sales Volumes IN 2016 and Announces Proposed NAME Change to Wheaton Precious Metals
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FOR IMMEDIATE RELEASE TSX: SLW
March 21, 2017 NYSE: SLW
SILVER WHEATON REPORTS RECORD REVENUE AND SALES VOLUMES IN
2016 AND ANNOUNCES PROPOSED NAME CHANGE TO
WHEATON PRECIOUS METALS
Vancouver, British Columbia – Silver Wheaton Corp. (“Silver Whe aton” or the “Company”)
(TSX:SLW) (NYSE:SLW) is pleased to announce its results for the fourth quarter and year
ended December 31, 2016. All figures are presented in United States dollars unless otherwise
noted.
Silver Wheaton had record silver and gold sales volumes in 2016 at 28.3 million ounces and
330,000 ounces, respectively. Gold production was also a record at 353,700 ounces in 2016.
In the fourth quarter of 2016, gold sales exceeded 100,000 ounces for the first time with over
73,000 ounces of gold sold from the Salobo mine alone. Silver Wheaton’s quarterly dividend
increased for the second quarter in a row to $0.07 as the impac t of growing sales volumes,
especially in gold, resulted in operating cash flow growing to approximately $175 million in
the fourth quarter of 2016.
FULL YEAR HIGHLIGHTS
Attributable production for the year ended December 31, 2016 o f 30.4 million ounces of
silver and 353,700 ounces of gold, compared with 30.7 million o unces of silver and
243,000 ounces of gold in 2015, with silver production having d ecreased 1% and gold
production, which represented a record, having increased 46%.
On a silver equivalent basis¹ and gold equivalent basis¹, reco rd attributable production
for the year ended December 31, 2016 was 56.2 million silver equivalent ounces ("SEOs")
or 770,300 gold equivalent ounces ("GEOs"), compared with 48.7 million SEOs or
658,600 GEOs in 2015, an increase of 15% and 17%, respectively.
Record sales volume for the year ended December 31, 2016 of 28 .3 million ounces of
silver and 330,000 ounces of gold, compared with 26.6 million o unces of silver and
202,300 ounces of gold in 2015, an increase of 7% and 63%, respectively.
On a silver equivalent basis¹ and gold equivalent basis¹, reco rd sales volume for the year
ended December 31, 2016 was 52.4 million SEOs or 718,400 GEOs, compared with 41.5
million SEOs or 561,600 GEOs in 2015, an increase of 26% and 28%, respectively.
Record revenues of $892 million for the year ended December 31 , 2016 compared with
$649 million in 2015, representing an increase of 37%.
Average realized sale price per ounce sold for the year ended December 31, 2016 of
$16.96 per ounce of silver and $1,246 per ounce of gold, representing an increase of 8%
for both compared to 2015.
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Net earnings were $195 million ($0.45 per share) compared with a net loss of $162 million
($0.41 per share) in 2015.
Adjusted net earnings² of $266 million ($0.62 per share) for t he year ended December
31, 2016 compared with adjusted net earnings² of $210 million ($0.53 per share) in 2015,
representing an increase of 27%. Earnings were adjusted by remo ving the impact of the
$71 million after tax impairment charge taken in 2016 and the $ 372 million after tax
impairment charge taken in 2015.
Operating cash flows of $584 million ($1.36 per share²) for th e year ended December 31,
2016 compared with $431 million ($1.09 per share²) in 2015, representing an increase of
35%.
Cash operating margin² for the year ended December 31, 2016 of $12.54 per silver ounce
sold and $855 per gold ounce sold, representing an increase of 9% and 13%,
respectively, as compared with 2015.
Average cash costs² for the year ended December 31, 2016 of $4 .42 and $391 per ounce
of silver and gold, respectively.
FOURTH QUARTER HIGHLIGHTS
Attributable production in Q4 2016 of 7.6 million ounces of si lver and 107,300 ounces of
gold, compared with 10.3 million ounces of silver and 72,400 ounces of gold in Q4 2015,
with silver production having decreased 26% and gold production having increased 48%.
On a silver equivalent basis¹ and gold equivalent basis¹ attri butable production in Q4 2016
was 15.2 million SEOs or 214,100 GEOs, compared with 15.7 milli on SEOs or 209,800
GEOs in Q4 2015, with silver production having decreased 3% and gold production
having increased 2%.1
Sales volume in Q4 2016 of 7.5 million ounces of silver and a record 108,900 ounces of
gold, compared with 8.8 million ounces of silver and 64,900 oun ces of gold in Q4 2015,
with silver sales volume having decreased 14% and gold sales vo lume, which
represented a record, having increased 68%.
On a silver equivalent basis¹ and gold equivalent basis¹, reco rd sales volume in Q4 2016
was 15.2 million SEOs or 214,500 GEOs, compared with 13.6 milli on SEOs or 181,800
GEOs in Q4 2015, an increase of 12% and 18%, respectively.
As at December 31, 2016, payable ounces attributable to the Co mpany produced but not
yet delivered ³ amounted to 3.2 million payable silver ounces and 61,700 payab le gold
ounces, representing a decrease of 0.6 million payable silver ounces and 2,200 payable
gold ounces during the three month period ended December 31, 2016.
Revenues of $258 million in Q4 2016 compared with $200 million in Q4 2015,
representing an increase of 29%.
Average realized sale price per ounce sold in Q4 2016 of $16.9 5 per ounce of silver and
$1,205 per ounce of gold representing an increase of 15% and 10 %, respectively,
compared to Q4 2015.
Net earnings of $11 million ($0.02 per share) in Q4 2016 compa red with a net loss of
$169 million ($0.42 per share) in Q4 2015.
Adjusted net earnings² of $82 million ($0.19 per share) in Q4 2016 compared with
adjusted net earnings² of $57 million ($0.14 per share) in Q4 2 015, representing an
increase of 43%. Earnings were adjusted by removing the impact of the $71 million after
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tax impairment charge taken in Q4 2016 and the $227 million after tax impairment charge
taken in Q4 2015.
Operating cash flows of $175 million ($0.40 per share²) in Q4 2016 compared with $133
million ($0.33 per share²) in Q4 2015, representing an increase of 31%.2
Cash operating margin² in Q4 2016 of $12.36 per silver ounce s old and $817 per gold
ounce sold, representing an increase of 16% for both as compared with Q4 2015.
Average cash costs² in Q4 2016 were $4.59 and $389 per ounce o f silver and gold,
respectively.
Declared quarterly dividend of $0.07 per common share, represe nting an increase of 17%
relative to the previous quarterly dividend.
Asset Highlights
o Record Salobo attributable gold production in Q4 2016 of 71,32 8 ounces
compared with 39,395 ounces in Q4 2015, representing an increas e of 81% due
to the acquisition of an additional 25% of attributable gold in the third quarter of
2016 and increased throughput.
OUTLOOK
Silver Wheaton’s estimated attributable production in 2017 is forecast to be 28 million
ounces of silver and 340,000 ounces of gold. For 2017 guidance, Silver Wheaton has
assumed the ongoing strike at San Dimas will continue for a three-month period and that
San Dimas will otherwise achieve production in line with 2016.
Silver Wheaton’s estimated average annual attributable product ion over the next five
years is anticipated to be in line with 2017 production at approximately 29 million ounces
of silver and 340,000 ounces of gold.
PROPOSED NAME CHANGE TO WHEATON PRECIOUS METALS
The Board of Directors has recommended changing the Company’s name to Wheaton
Precious Metals Corp. to better align the corporate identity wi th the Company’s diverse
portfolio of both silver and gold assets. The Company plans to seek shareholder approval
for the proposed name change at its annual shareholder meeting in May.
“2016 was a record year for Silver Wheaton on many fronts. We sold more silver and gold
than any other year and produced over 350,000 ounces of gold for the first time,” said Randy
Smallwood, President and Chief Executive Officer of Silver Whea ton. “In the fourth quarter
of 2016, we sold over 7.5 million ounces of silver and over 100 ,000 ounces of gold. Strong
sales and production resulted in operating cash flow reaching $ 175 million in the fourth
quarter alone, and over $580 million in 2016. Our portfolio of low cost, long life assets
provides a solid foundation that we believe can continue to del iver strong production, sales,
and cash flow.”
“Since 2013, our company has seen a marked increase in gold production, and in the second
half of 2016, revenue was evenly split between silver and gold. In order to better align our
corporate identity with underlying operations while maintaining a link to our past and the
innovation that the ‘Wheaton’ name has become synonymous with, we have recommended
changing our name to Wheaton Precious Metals. Over the company' s history we have
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created value through streaming both silver and gold from a div erse portfolio of high-quality
assets, and the new name will reinforce our position as the lea der in precious metals
streaming.”
Financial Review
Revenues
Revenue was $258 million in the fourth quarter of 2016, on sale s volume of 7.5 million
ounces of silver and 108,900 ounces of gold. This represents a 29% increase from the
$200 million of revenue generated in the fourth quarter of 2015 due primarily to (i) a 68%
increase in the number of gold ounces sold; (ii) a 15% increase in the average realized
silver price ($16.95 in Q4 2016 compared with $14.75 in Q4 2015 ); (iii) a 10% increase
in the average realized gold price ($1,205 in Q4 2016 compared with $1,100 in Q4 2015);
partially offset by (iv) a 14% decrease in the number of silver ounces sold.
Revenue was $892 million in the year ended December 31, 2016, o n sales volume of
28.3 million ounces of silver and 330,000 ounces of gold. This represents a 37% increase
from the $649 million of revenue generated in 2015 due primarily to (i) a 63% increase in
the number of gold ounces sold; (ii) an 8% increase in the aver age realized silver price
($16.96 in 2016 compared with $15.64 in 2015); (iii) an 8% incr ease in the average
realized gold price ($1,246 in 2016 compared with $1,152 in 2015); and (iv) a 7% increase
in the number of silver ounces sold.
Costs and Expenses
Average cash costs² in the fourth quarter of 2016 were $4.59 pe r silver ounce sold and
$389 per gold ounce sold, as compared with $4.06 per silver oun ce and $396 per gold
ounce during the comparable period of 2015. This resulted in a cash operating margin²
of $12.36 per silver ounce sold and $817 per gold ounce sold, a n increase of 16% for
both as compared with Q4 2015. The increase in the cash operating margin was primarily
due to a 15% increase in the average realized silver price and a 10% increase in the
average realized gold price in Q4 2016 compared with Q4 2015.
Average cash costs² during the year ended December 31, 2016 wer e $4.42 per silver
ounce sold and $391 per gold ounce sold, as compared with $4.17 per silver ounce and
$393 per gold ounce during the comparable period of 2015. This resulted in a cash
operating margin² of $12.54 per silver ounce sold and $855 per gold ounce sold, an
increase of 9% and 13%, respectively, as compared with 2015. The increase in the cash
operating margin was primarily due to an 8% increase in the average realized silver price
and an 8% increase in the average realized gold price in 2016 compared with 2015.
Earnings and Operating Cash Flows
Adjusted net earnings² and cash flow from operations in the fou rth quarter of 2016 were
$82 million ($0.19 per share) and $175 million ($0.40 per share²), compared with adjusted
net earnings² of $57 million ($0.14 per share) and cash flow fr om operations of $133
million ($0.33 per share²) for the same period in 2015, an incr ease of 43% and 31%,
respectively.
Adjusted net earnings² and cash flow from operations for the ye ar ended December 31,
2016 were $266 million ($0.62 per share) and $584 million ($1.36 per share²), compared
with adjusted net earnings² of $210 million ($0.53 per share) a nd cash flow from
operations of $431 million ($1.09 per share²) for the same period in 2015, an increase of
27% and 35%, respectively.
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Balance Sheet
At December 31, 2016, the Company had approximately $124 millio n of cash on hand
and $1.2 billion outstanding under the Company's $2 billion rev olving term loan (the
"Revolving Facility"). On February 27, 2017, the term of the re volving term loan was
extended so that the term loan now matures on February 27, 2022.
Asset Impairment
At the end of each reporting period, the Company assesses each precious metal
purchase agreement to determine whether any indication of impairment exists. If such an
indication exists, the recoverable amount of the precious metal purchase agreement is
estimated in order to determine the extent of the impairment (if any).
Vale has recently completed a detailed study on the Sudbury mines in an effort to improve
operating margins. This has resulted in a number of changes to Vale’s anticipated mine
plan, with the resulting 2017 to 2032 mine plan having approxim ately 20% less
recoverable gold production than previously estimated, and this reduction in recoverable
ounces is an indicator of impairment related to the Sudbury gold interest as at December
31, 2016. The Sudbury gold interest had a carrying value at December 31, 2016 of $473
million. Management has estimated that the recoverable amount a t December 31, 2016
under the Sudbury gold interest was $402 million, representing its fair value less cost to
sell and resulting in an impairment charge of $71 million.
Fourth Quarter Asset Highlights
During the fourth quarter of 2016, attributable production was 7.6 million ounces of silver and
107,300 ounces of gold, respectively, representing a decrease o f 26% and an increase of
48%, as compared with the fourth quarter of 2015.
Operational highlights for the quarter ended December 31, 2016, are as follows:
Salobo
In the fourth quarter of 2016, Salobo produced 71,328 ounces of attributable gold, an
increase of approximately 81% relative to the fourth quarter of 2015. This growth was
primarily due to the acquisition of an additional 25% of attrib utable gold from the Salobo
mine in the third quarter of 2016 as well as increased throughp ut. According to Vale’s
fourth quarter production report, production of copper in concentrate at Salobo reached a
quarterly record in the fourth quarter with December also achieving a monthly production
record.
Antamina
In the fourth quarter of 2016, Antamina produced 1.6 million ounces of attributable silver,
a decrease of approximately 33% relative to the fourth quarter of 2015. The apparent
significant decrease relative to the fourth quarter of 2015 was primarily attributed to the
Antamina transaction being closed in the fourth quarter of 2015 with a term that entitled
Silver Wheaton to Glencore’s portion of silver sold from Antami na to on offtaker as of
September 30, 2015, resulting in reported production in the fou rth quarter of 2015
including some material processed in the previous quarter. It s hould be noted that
Antamina produced 6.8 million ounces of silver in 2016, well exceeding expectations and
full year guidance of approximately 5.5 million ounces.
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Peñasquito
In the fourth quarter of 2016, Peñasquito produced 1.3 million ounces of attributable
silver, a decrease of approximately 25% relative to the fourth quarter of 2015. The drop
in production was attributable to lower grades as a result of m ine sequencing. As
disclosed in Goldcorp Inc.’s (“Goldcorp”) fourth quarter of 201 6 MD&A, the Pyrite Leach
Project (“PLP”) achieved 65% engineering progress by the end of 2016, with procurement
activities well advanced to support execution. Goldcorp further reports that as part of the
PLP, a carbon pre-flotation facility is being constructed and is anticipated to be completed
in the second quarter of 2018. The Northern Well Field project has also reportedly
reached full production capacity during the fourth quarter of 2 016 and is expected to
satisfy Peñasquito's long-term water requirements.
San Dimas
In the fourth quarter of 2016, San Dimas produced 1.4 million ounces of attributable silver,
a decrease of approximately 38% relative to the fourth quarter of 2015. The decrease in
production was primarily driven by lower throughput and grades. As per Primero Mining
Corp.’s (“Primero”) fourth quarter of 2016 MD&A, production in 2016 was impacted by the
implementation of enhanced ground support in early-2016, and la ter by high unplanned
worker absences and lack of compliance to the mine plans. This reportedly resulted in
reduced underground development rates and ventilation restrictions which reduced mine
productivity. Starting in late-2016, Primero reportedly began u ndertaking actions to
reduce the complexity and scale of the San Dimas mine operation s, including significant
decreases to the San Dimas workforce. Mining development during Q4 was reportedly
the highest quarterly total since Q2 2015.
On February 15, 2017, Primero announced that unionized employee s at the San Dimas
mine had initiated a strike action, resulting in the complete stoppage of mining and milling
activities at the San Dimas mine. Primero has noted that its ke y focus in these
negotiations has been to better align the short-term bonus structure with overall mine-site
performance and profitability, to move the labour force onto a more continuous shift cycle
to improve productivity and to achieve the necessary reductions to the unionized
workforce. Primero has indicated that depending on its duration, the strike could have a
negative impact on Primero’s 2017 production.
As was further noted in Primero’s fourth quarter of 2016 MD&A, Primero has commenced
a strategic review process to explore alternatives as there is material uncertainty related
to the company’s ability to continue as a going concern.
Sudbury
In the fourth quarter of 2016, Vale’s Sudbury mines produced 11 ,028 ounces of
attributable gold, a decrease of approximately 19% relative to the fourth quarter of 2015.
This decrease was attributable to lower throughput and grades. According to Vale’s fourth
quarter production report, Sudbury production was adversely imp acted in the quarter by
operational issues and by mine redesign and remediation work. F urthermore, Sudbury
will transition to a single furnace operation during 2017 and, as preparation for this, Vale
will take one of the furnaces off-line in mid-March in order to rebuild and expand the
furnace. The rebuilt furnace will reportedly remain in operatio n post the transition to one
furnace in the second half of the year. Subsequent to quarter end, Vale announced that
the Stobie mine, one of the six currently operating mines from which Silver Wheaton is
entitled to gold production, will be placed on care and maintenance later in 2017 due to a
number of factors including low metal prices and ongoing market challenges, declining
ore grades, and, more recently, seismicity issues that restrict ed production below the
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3,000-foot level. The Stobie mine represented approximately 5% of Silver Wheaton’s
attributable production from Sudbury.
Other Gold
In the fourth quarter of 2016, total Other Gold attributable production was 21,825 ounces,
an increase of 49% relative to the fourth quarter of 2015. The increase was driven
primarily by higher grades at Minto and, to a lesser extent, better recoveries at 777.
Other Silver
In the fourth quarter of 2016, total Other Silver attributable production was 2.5 million
ounces, a decrease of approximately 21% relative to the fourth quarter of 2015. The
decrease was driven primarily due to lower silver grades at Zin kgruvan, Cozamin, and
Veladero. In addition, as per the amendment to the silver strea m agreement dated
November 30, 2015, production from Yauliyacu was split evenly w ith Glencore for the
entire fourth quarter of 2016 as the mine reached the annual sh aring threshold of 1.5
million ounces in the third quarter of 2016.
Development Update – Pascua Lama
As per Barrick Gold Corporation’s (“Barrick”) news release “Barrick Reports Progress on
Projects” dated February 15, 2017, Barrick has initiated a prefeasibility study to evaluate
the construction of an underground mine at Lama. Barrick has in dicated that the study
will evaluate the use of low-cost bulk mining methods, including sub-level cave and block
cave mining, designed to target higher-value ore on the Argentinean side of the border in
the initial stages of the operation. According to Barrick, cash flow from Lama could
support a staged development that would, over time, incorporate ore from the Chilean
side of the border, subject to additional permitting in Chile. Barrick’s efforts in Chile in
2017 will reportedly focus on advancing project concepts in parallel with the Lama study,
with the intention of moving to a prefeasibility level study in 2018. According to Barrick,
conceptually, initial ore processing at Lama would be undertake n using one of three
partially completed processing streams at the site, which curre ntly has a capacity of
approximately 15,000 tonnes per day; existing infrastructure co uld potentially be scaled
up to 25,000 tonnes per day at a later date. Furthermore, Barri ck states that an
underground mine would reduce the surface footprint of the operation and would be less
susceptible to weather-related production interruptions during the winter season.
Produced But Not Yet Delivered 3
As at December 31, 2016, payable ounces attributable to the Company produced but not
yet delivered ³ amounted to 3.2 million payable silver ounces and 61,700 payab le gold
ounces, representing a decrease of 0.6 million payable silver o unces and 2,200 payable
gold ounces during the three month period ended December 31, 20 16. Payable silver
ounces produced but not yet delivered decreased primarily as a result of decreases
related to the Yauliyacu, Zinkgruvan, and San Dimas silver interests, partially offset by an
increase related to the Antamina silver interest. Payable gold ounces produced but not
yet delivered decreased primarily as a result of decreases related to the Salobo and Minto
gold interests, offset partially by an increase related to the 777 gold interest. Payable
ounces produced but not yet delivered to Silver Wheaton compani es are expected to
average approximately two months of annualized production but m ay vary from quarter
to quarter due to a number of mining operation factors including mine ramp-up and timing
of shipments.
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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.
Reserves and Resources
As of December 31, 2016, Proven and Probable Mineral Reserves a ttributable to Silver
Wheaton were 735.6 million ounces of silver compared with 775.3 million ounces as reported
in Silver Wheaton’s 2015 Annual Information Form (“AIF”), a dec rease of 5%, and 11.55
million ounces of gold compared with 8.79 million ounces, an in crease of 31%. On an
attributable Measured and Indicated Mineral Resource basis, sil ver resources were 783.6
million ounces compared with 675.4 million ounces as reported in Silver Wheaton’s 2015 AIF,
an increase of 16%, and gold resources were 3.05 million ounces compared with 2.70 million
ounces, an increase of 13%. On an attributable Inferred Mineral Resource basis, silver
resources were 392.1 million ounces compared with 473.5 million as reported in Silver
Wheaton’s 2015 AIF, a decrease of 17%, and gold resources were 2.85 million ounces
compared with 2.38 million ounces, an increase of 20%.
Estimated attributable reserves and resources contained in this press release are based on
information available to the Company as of March 2, 2017, and t herefore will not reflect
updates, if any, after that date. Updated reserves and resources data incorporating year-end
2016 estimates will also be included in the Company's 2016 Annual Information Form. Silver
Wheaton’s most current attributable reserves and resources, as of December 31, 2016, can
be found on the Company’s website at www.silverwheaton.com.
2017 and Long-Term Production Forecast
Silver Wheaton is pleased to provide its updated one-year and l ong-term production
guidance. Silver Wheaton’s estimated attributable silver and go ld production in 2017 is
forecast to be 28 million silver ounces and 340,000 gold ounces . For 2017 guidance, Silver
Wheaton has assumed the ongoing strike at San Dimas will continue for a three-month period
and that San Dimas will otherwise achieve production in line wi th 2016. Estimated average
annual attributable silver and gold production over the next fi ve years (including 2017) is
anticipated to be approximately 29 million silver ounces and 340,000 gold ounces per year.
Over the next five years, forecast production growth from Salob o, Pe ñasquito, and
Constancia is expected to be offset by the cessation of product ion from assets with fixed
terms. In particular, the 10-year-term contract on Capstone Mining’s Cozamin mine, acquired
with Silver Wheaton’s 2009 acquisition of Silverstone, expires in April 2017. In addition, Silver
Wheaton’s streaming agreement with Barrick regarding Pascua-Lama provides the Company
with silver production from the Lagunas Norte, Veladero, and Pi erina mines until March 31,
2018. In addition, Hudbay’s Constancia mine satisfied its compl etion test in 2016, resulting
in gold production from the 777 mine attributable to Silver Whe aton dropping from 100% to
50% in 2017. And lastly, as a reminder, Silver Wheaton does not include any production from
Barrick’s Pascua-Lama project or Hudbay’s Rosemont project in its guidance.