Silver Wheaton Revenues More Than Double

Press Release Source: Silver Wheaton Corp. On Monday August 8, 2011, 6:30 am EDT

VANCOUVER, August 8, 2011 /PRNewswire/ --

TSX: SLW

NYSE: SLW

Silver Wheaton Corp. ("Silver Wheaton" or the "Company") (TSX:SLW.to - News)(NYSE:SLW - News) is pleased to announce its unaudited results for the second quarter ended June 30, 2011.

SECOND QUARTER HIGHLIGHTS

Attributable silver equivalent production increased 5% compared with Q2 2010, to 6.2 million ounces (5.9 million ounces of silver and 6,500 ounces of gold).

Revenue more than doubled compared with Q2 2010, to a record US$194.8 million, on silver equivalent sales of 5.1 million ounces (4.9 million ounces of silver and 5,700 ounces of gold).

Net earnings almost tripled compared with Q2 2010 (on an adjusted basis[1]), to a record US$148.1 million (US$0.42 per share).

Operating cash flows increased 151% compared with Q2 2010, to a record US$168.3 million (US$0.48 per share[1]).

Cash operating margin[1] increased 137% compared with Q2 2010, to a record US$34.21 per silver equivalent ounce, demonstrating Silver Wheaton's significant leverage to increasing silver prices.

Average cash costs of US$4.14[1] per silver equivalent ounce.

Quarter-end cash balance of US$701.4 million, with a net cash position of US$608.5 million.

Randy Smallwood, the President and one of the founders of Silver Wheaton, was appointed Chief Executive Officer, replacing Peter Barnes who resigned effective April 11, 2011. Since 2004, Mr. Smallwood has been instrumental in building Silver Wheaton into the second largest silver company in the world.

"Silver Wheaton delivered another quarter of record financial results in Q2 2011," said Randy Smallwood, President and Chief Executive Officer of Silver Wheaton. "Though quarterly silver sales have lagged production over the past year, primarily due to a build-up of concentrate inventories at Glencore's Yauliyacu mine in Peru and Goldcorp's Peñasquito mine in Mexico, we have now had five consecutive quarters of increasing operating cash flows. With silver production rates forecast to grow by 80% over the next five years, and ongoing global economic and political uncertainties supporting robust silver prices, our shareholders should continue benefiting from strong free cash flow generation in the years ahead."

"Quarterly production was impacted by operational challenges at some of our partners' mines, including lower quarterly throughput than anticipated at the Peñasquito mine in Mexico, which continues to ramp up production levels; and a one month mill workers' strike at the San Dimas Mine in Mexico, which is now resolved. As previously reported, Silver Wheaton has reduced its 2011 attributable silver equivalent production guidance, primarily due to decreased annual production guidance at the Peñasquito mine, which is now anticipated to reach full production capacity in early 2012. Our long-term 2015 attributable production guidance remains unchanged at approximately 43 million silver equivalent ounces, including 35,000 ounces of gold, which is one of the strongest growth profiles in the entire precious metals industry."

"The mining industry once again finds itself facing significant inflationary pressures, resulting in accelerating operating and capital costs. The benefits to Silver Wheaton in this environment are twofold. First, Silver Wheaton is immune from inflationary cost pressures as our unique business model guarantees essentially fixed operating costs of approximately US$4/oz. Fixed costs provide our investors with significant margin expansion as silver prices climb. Second, as mining companies' capital commitments continue to materially increase, and cash needs arise, Silver Wheaton can offer a very attractive source of funds compared to other forms such as debt and equity. When combined with one of the strongest growth profiles in the precious metals industry and a dividend yield with the potential to grow over time, we believe that Silver Wheaton continues to be the premier investment vehicle for investors desiring silver exposure."

Financial Review

Revenues

Revenue was US$194.8 million in the second quarter of 2011, on silver equivalent sales of 5.1 million ounces (4.9 million ounces of silver and 5,700 ounces of gold). This represents a 105% increase from the US$95 million in revenue generated in the second quarter of 2010, due primarily to increases in the average realized selling price of silver and gold of 108% and 24%, respectively.

Costs and Expenses

Average cash costs in the second quarter of 2011 were US$4.14[1] per silver equivalent ounce, compared with US$4.03[1] during the comparable period of 2010. This resulted in cash operating margins[1]of US$34.21 per silver equivalent ounce, a 137% increase compared with the second quarter of 2010, demonstrating Silver Wheaton's leverage to increasing silver prices.

Second quarter net earnings included several non-cash expenses. These included a US$3.0 million expense, classified as 'Other', primarily in relation to a US$2.7 million non-cash, fair value loss recorded on the Company's share purchase warrants held. In addition, the Company recorded a non-cash deferred income tax expense of US$2.2 million, primarily in relation to income from Canadian operations.

Earnings and Operating Cash Flow

Net earnings in the second quarter of 2011 were US$148.1 million (US$0.42 per share), compared with adjusted net earnings[1] of US$52.7 million (US$0.15 per share) for the same period in 2010, an increase of 181%. Cash flow from operations in the second quarter of 2011 were US$168.3 million (US$0.48 per share[1]), compared with US$67.0 million (US$0.20 per share[1]) for the same period in 2010, an increase of 151%. 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 second quarter, the Company had approximately US$701 million of cash on hand and 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.

Operations Highlights

Attributable silver equivalent production was 6.2 million ounces (5.9 million ounces of silver and 6,500 ounces of gold) in the second quarter of 2011, a 5% increase compared to the second quarter of 2010.

At Goldcorp's world-class Peñasquito mine, silver grades and recoveries continued to meet or exceed expectations; however, processing rates were less than anticipated in the quarter. This was due to lower than forecast pebble feed from the SAG mills to the high pressure grinding roll circuit, and slower-than-expected progress on the raising of the tailings dam embankment resulting in insufficient water for full operation of the milling circuit. Goldcorp is undertaking measures to remedy these issues and full production capacity of 130,000 tonnes-per-day is anticipated to be achieved by the end of the first quarter of 2012.

Primero's San Dimas mine experienced a 31-day mill workers' strike, beginning on March 30, 2011, resulting in reduced mill throughput levels during the second quarter. The strike was resolved on May 2, 2011. As the San Dimas mill has been running below its nameplate capacity of 2,100 tonnes-per-day, Primero expects that the ore stock-piled during the stoppage can be processed in addition to regular daily production, and anticipates meeting its annual forecast silver production.

Barrick Gold Corporation's world-class gold-silver Pascua-Lama project remains on track to commence production in the first half of 2013. Over 40% of the pre-production capital budget of $4.7 to $5.0 billion has been committed with the engineering design approximately 90% complete. In Chile, earthworks are more than 80% complete, with significant infrastructure development in Argentina also advancing. Preparations are underway to commence pre-strip mining in Q4 2011. 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 nine million ounces annually.

Payable silver equivalent ounces produced but not yet delivered by our partners increased by over 500,000 ounces in the second quarter, resulting in a total of approximately 3.5 million payable ounces at June 30, 2011. This was primarily the result of a continued build-up in concentrate inventories at the Peñasquito mine as it ramps up production levels, as well as at the Yauliyacu mine which continues to experience an irregular concentrate shipment schedule.

Since mid-2009, concentrate shipments from the Yauliyacu mine have been affected by the shut-down of the Doe Run Peru smelter, the largest buyer of the 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 and a corresponding increase in the cumulative payable silver equivalent ounces produced but not yet delivered to Silver Wheaton.

In the second quarter of 2011, Glencore began producing separate, and more marketable, copper and lead concentrates, replacing the bulk concentrate. The consistency and quantity of these new concentrates are expected to increase in future quarters, and we anticipate more consistent silver deliveries to Silver Wheaton as this occurs.

As at June 30, 2011, approximately 1.3 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 400,000 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 the press release or in Silver Wheaton's MD&A in the 'Results of Operations and Operational Review' section.

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

This earnings release should be read in conjunction with Silver Wheaton's unaudited MD&A and Financial Statements, which are available on the Company's website at http://www.silverwheaton.com and have also been posted on SEDAR at http://www.sedar.com.