Silver Wheaton builds silver treasure chest

Vancouver Silver Wheaton (SLW-T, SLW-X), a pure-play silver company held 58.9% by Goldcorp (G-T, GG-N), posted net earnings of US$7 million in the latest quarter ended Dec. 31, four times net earnings in the comparable period a year earlier.

The company doesn’t own or operate mines directly, and instead holds rights to buy silver production from mines owned and operated by other companies, namely Goldcorp’s Luismin mines in Mexico, and the Zinkgruvan mine in Sweden, owned by Lundin Mining (LUN-T). These operations are low-cost producers with sufficient reserves and resources for more than two decades of production.

For the full year 2005, Silver Wheaton earned US$25.3 million, or US$0.15 per share, from the sale of 9.7 million oz. silver. Silver sales in the latest quarter of 2005 were 2.2 million oz.

Silver Wheaton secured its silver purchase agreements in the latter half of 2004, and reported net earnings of US$1.8 million from the sale of 1.5 million oz. for the 4-month period ended Dec. 31, 2004.

Early this year, the company agreed to amend its initial agreement with Goldcorp, and will acquire increased silver production of more than 100 million oz. over 24 years. As a result, annual silver sales will increase to 15 million oz. by 2009, and continue thereafter. Sales in the years 2006 through 2008 are estimated at 11.5 million oz.

Silver Wheaton raised US$86 million in a recent financing, and intends to seek new silver-related acquisitions, either through long-term silver purchase contracts, or by acquiring silver exploration and development projects and producing mines. At year-end, cash and cash equivalents stood at US$117.7 million, for working capital of US$118.7 million.

In mid-2005, the company acquired about 15% of Bear Creek Mining (BCM-V) for US$13.7 million. Bear Creek is earning a 70% interest in the Corani silver project in Peru through staged expenditures and payments. The project has been tested with 70 drill-holes and 23 trenches, and a resource estimate is expected shortly.