Silver Wheaton still hunting for acquisitions, sees 2010 production jump
By Brenda Bouw, THE CANADIAN PRESS
2009-11-10 12:50:00
VANCOUVER, B.C. - Silver Wheaton Corp. (TSX:SLW) is still on the hunt for more acquisitions, saying its recent deal to buy silver from Barrick Gold Corp. (TSX:ABX) has opened the door to other "good quality" purchases.
"People who we have been talking to for a while see Barrick do a deal and say 'You know what, if it makes sense for Barrick, maybe it makes sense for us?"' Silver Wheaton president and CEO Peter Barnes told investors during a conference call Tuesday.
"We are seeing more good quality opportunities now than we've ever seen... . I don't think that is going to slow down. I think we are going to have more good quality acquisitions to announce over the next year or two."
Barnes said the company's acquisition goals will delay any plans to start paying dividends to its shareholders in the short term.
"It is something we will always think about... but right now we are focused on increasing shareholder value through future acquisitions."
His comments came after the company announced record production, sales and earnings for the third quarter ended Sept. 30, despite lower than predicted production at three of its mines.
The Vancouver-based company, which keeps it books in U.S. dollars, reported a third-quarter profit of $33.6 million or 11 cents per share, up from $20.2 million or eight cents per share a year ago.
Sales totalled $69.8 million, up from $39.4 million.
Production reached 4.3 million silver equivalent ounces - including four million ounces of silver and 3,698 ounces of gold - at a total cash cost of US$3.971 per silver ounce, a 59 per cent increase over the same quarter last year.
Sales came in at 4.6 million ounces - four million ounces of silver and 9,953 ounces of gold - up 70 per cent from last year.
The company also revised its 2009 guidance to the lower end of its 17 to 19 million production target, after changing the basis for its guidance on silver equivalent production, instead of sales.
"It's literally impossible to predict a year ahead what sales could be," Barnes said in explaining the change.
"I focus on production because once it's produced it is going to get sold... whether it's this quarter or next quarter, it is going to get sold."
However, Barnes said 2010 production will increase "very significantly" from the current year due to the expected production startup at Goldcorp's (TSX:G) Penasquito mine in Mexico, as well as production from two Silver Wheaton acquisitions this year, including the Barrick deal.
Silver Wheaton said in September it would pay $625 million over three years to buy silver produced from four Barrick mines in South America.
That deal, Silver Wheaton's largest to date, will boost its production to 40 million ounces by 2013.
The key part of the deal for Silver Wheaton is the 25 per cent life-of-mine silver production it is buying from Barrick's Pascua-Lama project, which straddles the border of Chile and Argentina. Production there is expected to begin production in late 2012.
Silver Wheaton is also buying 100 per cent of the silver production from Barrick's Lagunas Norte, Pierina and Veladero mines until the end of 2013.
The Barrick deal comes after Silver Wheaton bought its only competitor, Silverstone Resources Corp. (TSXV:SST), for $190 million earlier this year.
Silver Wheaton also has a deal with buy silver from the Penasquito mine, which is slated to begin production next year.
Production at Penasquito is expected to be about five million ounces of silver next year, increasing to average annual production of about 7.2 million ounces over the estimated 22-year mine life.
Overall, Silver Wheaton is forecasting production of 40 million ounces by 2012 and sales of 39 million ounces.
"Given SLW's recent acquisitions, we expect further quarterly production records could be set over the next few years," UBS analyst Dan Rollins said in a research note Tuesday.
Silver Wheaton shares were trading down 19 cents at $15.27 on the Toronto Stock Exchange Tuesday.
