Silver Wheaton Announces Q1 2017 Results; Attributable Production Totals 12.5 Million Silver Equivalent Ounces
VANCOUVER, May 9, 2017 /CNW/ - 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 first quarter of 2016, putting the Company on track to meet or exceed full-year gold production guidance. First 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 and 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%.
- 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 having 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%.
- 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%.
- 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
- 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 gold 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."
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 average 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 realized silver price and a 3% increase in the average realized gold price in Q1 2017 compared with Q1 2016.
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.
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:
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.
In the first quarter of 2017, Antamina produced 1.5 million ounces of attributable silver, a decrease of approximately 28% relative 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 for 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.
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.
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 contractors 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.
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 success 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 annum in connection with the guarantee.
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 expansion 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.
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.
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 primarily by higher grades at Minto, partially offset by lower attributable production at 777.
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 within 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 traditional 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 gold 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 but may vary from quarter to quarter due to a number of mining 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.
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|
|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|
|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, Technical Services for Silver Wheaton, is a "qualified person" as such term is defined under National Instrument 43-101, and has reviewed and approved the technical information including information on mineral reserves and mineral resources disclosed in this news release.