Silver Wheaton, the largest silver streaming company in the world, has reported record quarterly earnings, with net earnings for Q3 2010 more than doubling to $69.2 million, compared with $33.6 million in third quarter 2009.
Operating cash flows increased 55 percent to $70.5 million, compared with $45.4 million in 2009.
Silver streaming is an arrangement where the company agrees with a mining company to purchase all or part of its silver production at a predetermined price. The silver is usually a by-product of the core mineral the mining company extracts.
The mining company benefits by immediately monetizing the non-core silver, while the company receiving the silver saves the cost of investment in exploration, development, and maintenance. Silver Wheaton has major silver streaming agreements with Goldcorp and Barrick Gold.
Goldcorp’s gold-silver-lead-zinc Penasquito mine achieved commercial production during the quarter with peak throughput rates as high as 105,000 tonnes per day. The ramp up to full production capacity of 130,000 tonnes per day is anticipated by early 2011.
Annual production attributable to Silver Wheaton from the mine is expected to average approximately 7 million ounces of silver over the estimated 22 year mine life.
"Silver Wheaton had record production in the quarter, anchored by the continued successful ramp up of one of our cornerstone growth assets, Goldcorp's world-class Penasquito mine in Mexico," said Peter Barnes, chief executive officer of Silver Wheaton.
"While quarterly sales were lower than production, due in part to the build-up of concentrate inventory as Penasquito ramps up production, as well as the timing of shipments from the Yauliyacu and Campo Morado mines, we still achieved record earnings,” continued Barnes. “Increased shipments in the fourth quarter are expected to make up for the sales shortfall and we remain on track to meet production guidance of 23.5 million silver equivalent ounces in 2010, growing to approximately 40 million ounces by 2013."
Goldcorp also completed the sale of the San Dimas mine to Primero Mining, an emerging mid-tier gold producer, at which time Silver Wheaton amended its silver purchase agreement relating to the mine. Originally set to expire in 2029, the agreement has been extended to life of mine and incentivizes Primero Mining to increase silver production.
“San Dimas remains a key asset within our portfolio and we are confident that the amended silver purchase agreement will create additional long term value for our stakeholders," concluded Barnes.
Meanwhile, Barrick Gold's gold-silver Pascua-Lama project remains on track to enter production in the first quarter of 2013, with detailed engineering and procurement nearing completion and earthworks underway.
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 five years of operation, Silver Wheaton's attributable silver production is expected to average 9 million ounces annually.
