Luismin powers Wheaton to record Q1

Benefiting from higher gold prices, Wheaton River Minerals (WRM-T) saw its first-quarter earnings soar to US$4.1 million.

The earnings totalled 2 per share, compared a year-earlier profit of just US$262,000, or nil per share. Sales amounted to US$17.9 million, compared with zero sales in the first quarter of 2002 (reflecting the 2001 closure of the Golden Bear mine in British Columbia).

Wheaton sold a total of 55,666 gold-equivalent ounces at an average realized price of US$351 apiece during the quarter. Total cash costs, net of byproduct copper credits, averaged US$175 per oz., down from the US$182-per-oz. cost of producing each of the 106,000 equivalent ounces of 2002.

Last summer, Wheaton River acquired the Mexican company Minas Luismin. During the first three months of 2003, Luismin’s three gold and silver mines generated US$3.3 million in net earnings. Quarterly sales totalled 1.6 million oz. silver, or 20,533 gold-equivalent oz. Cash costs were US$185 per gold-equivalent ounce, up from US$182 in fiscal 2002.

In mid-March, Wheaton acquired, from Rio Tinto (RTP-N), an initial 25% interest in the Bajo de la Alumbrera gold-copper mine in Argentina; in return, Rio Tinto received US$210 million. Wheaton’s quarter-stake of Alumbrera netted it US$516,000 during the two weeks of ownership in the quarter. The mine sold 4,712 oz. gold and 1,611 tonnes copper. Cash costs were minus US$81 per oz. (counting byproduct copper credits) for the 2-week period. Wheaton also received a US$11.2-million after-tax cash distribution, as a result of its stake in the mine.

Wheaton and partner Northern Orion Explorations (NNO-T) expect to pick up a further quarter-interest in the operation, this time from BHP Billiton (BHP-N), by the end of June. The two will split the US$180-million price tag, and each will take home a 12.5% share. Wheaton will debt-finance its portion of the purchase price.

“The next cheque is due in November, and by that time we’ll own 37.5% of Alumbrera, so we expect to get about US$17 million pretax,” says Wheaton CEO Ian Telfer.

He adds that Wheaton will receive two more US$17-million cheques over the subsequent year. Thereafter, the amount will jump to more than US$30 million twice a year.

“It’s unusual in the mining industry to invest US$180 million and, eight weeks later, get US$12 million back on your investment,” Telfer says.

Once it attains 37.5% at Alumbrera, Wheaton River will begin accounting for the stake on a proportionally consolidated basis, picking up the operation’s revenues, cash and debt. The US$263 million in debt at Alumbrera is non-recourse to Wheaton.

At the same time that it acquired Alumbrera, Wheaton added the Peak gold mine in New South Wales, Australia. Peak suffered a net loss of US$191,000 for the 2-week period on sales of 4,844 oz. The loss reflects lower-grade ore from pit operations. Cash costs were US$330 per oz.

Once another 12.5% of Alumbrera is in hand, Wheaton figures its annualized production will exceed 500,000 gold-equivalent ounces at an estimated cash cost of less than US$125 apiece (including copper credits).

At quarter’s end, Wheaton had cash and equivalents of US$20.5 million, down from US$23 million at the end of 2002. Working capital stood at US$17.9 million, down from US$24.4 million.