Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Silver streaming company Silver Wheaton on Thursday reported record second quarter results including attributable silver equivalent production of 6.7 million ounces, revenues of $201.4 million and operating cash flows of $172.9 million.
While most miners are struggling with rising costs, thanks to the Vancouver-based company’s business model that involves paying an upfront fee for the right to buy all or some of a miner’s silver production, its costs decreased during the quarter.
The company’s cash operating margin was $25.01 per silver equivalent ounce, compared to $34.21 in Q2 2011 and cash costs fell slightly compared with Q2 2011, to $4.06 per silver equivalent ounce. (US$4.04 per ounce of silver and US$303 per ounce of gold).
Net earnings were down however to $141.4 million ($0.40 per share) compared to $148.1 million ($0.42 per share) in Q2 2011. Silver Wheaton’s dividend policy saw it declare a quarterly dividend of $0.10 per common share based on 20% of the cash generated by operating activities.
Silver Wheaton also announced attributable proven and probable silver reserves of 798 million ounces, nearly twice the reserves of any other silver company in the world.
Earlier this week Silver Wheaton acquired a precious metals stream from Hudbay Minerals’ 777 Mine as well as a silver stream from the Constancia development project in Peru.
The company enjoyed a cash balance of $1.1 billion at the end of the quarter before doling out $500 million to Hudbay. It also has an untapped $400 million credit facility.
Combined, 777 and Constancia will increase Silver Wheaton’s long-term average annual silver equivalent production by approximately 4.9 million ounces and raise the company’s target for 2016 to 48 million ounces.
“For the second quarter in a row, we achieved record silver sales and revenues, putting us on track for our best year ever,” said Randy Smallwood, President and Chief Executive Officer of Silver Wheaton.
“Production from most of our assets was very solid, with Zinkgruvan once again delivering a strong quarter and with sales of concentrate produced but not yet delivered from Yauliyacu contributing considerably to our revenues and cash flow.
“While we did see some temporary shortfalls in production at the Peñasquito mine and a delay at Pascua-Lama, we remain confident in our partners and view both of these assets as core streams which solidify our industry-leading growth profile.”
