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« Silver prices in whip lash mode | Main | SK OptionTrader Banks Gains of 116%, 108% on GLD Calls Before Gold Correction »

Silver Wheaton Corporation Q1 Earnings of $0.35

slw table 10 May 2011.JPG

The general consensus from various analysts was around the $0.41 mark so these results will have come as a disappointment to them. However, Silver Wheaton Corporation (SLW) still posted impressive figures setting a number of records along the way. We remain fans of the their business model and note that the total cash costs have risen to US$4.07 per silver equivalent ounce, compared with US$4.04 in Q1 2010, so no dramatic changes here.

Despite good results SLW was outperformed by other stocks as the chart shows, as silver prices bounced back. As we see it there are at least two reasons for the apparent lack of investor interest regarding SLW, the first being the sudden departure of the CEO, Peter Barnes. Hopefully this is a one off event and as time goes on the focus will be concentrated on performance.

The second reason being the shadow cast by the rumours surrounding the possibility of Peru nationalizing mining activities and the effect it would have on the bottom line. As we understand it Peru accounts for around 2.5% of SLW’s proven silver reserves so Peru plays only a small part in the scheme of things.

The worry for us would be if Peru do nationalize their mining industry would other governments follow in their foot steps. Mexico, for instance, might be tempted, which would spook the whole of precious metals market as a large number of producers are operating there. Anyway we wont go there.

The highlights of Silver Wheaton's results are as follows:

Revenue increased 84% to a record US$158.2 million compared with US$85.9 million in Q1 2010.

Net earnings increased 142% to a record US$122.2 million (US$0.35 per share), compared with US$50.6 million (US$0.15 per share) in Q1 2010.  

Operating cash flows increased 121% to a record US$127.2 million (US$0.36 per share1) compared with US$57.6 million (US$0.17 per share1) in Q1 2010.

Record attributable silver equivalent production of 6.2 million ounces (6.1 million ounces of silver and 2,900 ounces of gold), representing an increase of 10% over the comparable period in 2010. 

Silver equivalent sales of 4.9 million ounces (4.8 million ounces of silver and 2,500 ounces of gold).

As at March 31, 2011, approximately 3.0 million payable silver equivalent ounces attributable to the Company have been produced at the various mines and will be recognized in future sales as they are delivered to the Company under the terms of their contracts. This represents an increase in the first quarter of approximately 700,000 payable silver equivalent ounces, and is primarily due to the timing of concentrate shipments from the Yauliyacu, Zinkgruvan, Mineral Park and Campo Morado mines. 

Total cash costs of US$4.071 per silver equivalent ounce, compared with US$4.041 in Q1 2010.
Cash operating margin1 increased 114% compared to Q1 2010 to a record US$28.17, while the average realized silver price over the same period increased by 85%. 

Announced an inaugural quarterly cash dividend of US$0.03 per common share (US$0.12 per common share, annually). The initial dividend of US$0.03 per common share was distributed on March 30, 2011.

Announced attributable proven and probable reserves increased by over nine percent in 2010, as a result of an increase of 80 million ounces of silver and 23,000 ounces of gold, to a record 954 million silver equivalent ounces. Over the same period, attributable measured and indicated resources increased by one percent to 377 million silver equivalent ounces. Attributable inferred resources increased by 22%, as a result of an increase of 89 million ounces of silver, to 497 million silver equivalent ounces. 

Barrick Gold Corporation's world-class gold-silver Pascua-Lama project is forecast to commence production in the first half of 2013. Over 45% of the pre-production capital budget of $US3.3-3.6 billion has been committed and earthworks are more than 65% complete. First concrete for the process plant will be poured in Q2 2011 and pre-strip mining is expected to begin 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.

Subsequent to quarter end, 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.

So there we have it, if you wish to read the whole article in full please click here.

We recently reported that had closed another two trades for profits of 108.52% and 116.67% respectively, this was followed with two more profitable trades so the chart and stats have been updated accordingly.

Over in the Options pit, our model portfolio has achieved an average return of 41.92% per trade, 78 closed trades, 76 closed at a profit, or a 97.43% success rate. Average trade open for 46.45 days.

sk chart 04 May 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

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Reader Comments (4)

Silver Wheaton is always going to do well, even with higher inputs such as the cost of fuel. Every company and consumer is feeling the pain on fuel costs. Government intervention is something that can't be good for any stock's price but SLW's business model really does work for this company. That is as long as the price of the metal itself stays strong heh heh...

May 10, 2011 | Unregistered Commenterdaveydog

What is your current plan with respect to the Accumulator trades?

I jumped into SLW for June 45 Calls yesterday - it is so oversold I reasoned.

It amazes me how the miners are lagging the price of silver so much.

May 10, 2011 | Unregistered CommenterGreek Fire

Greek Fire,

We were hoping for a serious bounce back after the sell off, however, SLW was clobbered again today. We are still of the opinion that silver prices will go on and push past $50.00/oz but not quickly enough to save our position. We will see how things pan out in the next week or so and look to salvage what we can as the expiry date is looming towards us.

May 11, 2011 | Unregistered CommenterSilver Prices

Why is Silver Wheaton "always going to do well?" When price of silver was still going vertical(up) share price of SLW was also going vertical, but DOWN. This stock just doesn't pass my "if not now, when?" test. Something seriously wrong with this company, IMHO.

May 12, 2011 | Unregistered CommenterJoeBronx

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