INTERVIEW: 'Next Three Years Are Going To Be Exciting' – Silver Wheaton CEO

By Alex Létourneau of Kitco News

Friday March 22, 2013 3:11 PM

(Kitco News) - Fresh off reporting strong fourth-quarter and full-year results, the future looks bright for silver stream company Silver Wheaton Corp. (TSX, NYSE: SLW), according to the company’s president and chief executive officer.

“The next three years are going to be incredibly exciting for our company,” said Randy Smallwood in a telephone interview with Kitco News. “We’ve got so much organic growth that’s going to be coming on stream.”

Smallwood pointed to Pascua Lama coming on stream at the end of 2014, Constancia coming on stream at the end of 2014, Salobo reaching 24 million tons per year by the end of 2014 and Rosemont which he thinks will be up and running by the end of 2015. 

“It’s a pretty good package and the next three years are going to be very exciting and if you toss in potentially a few more creative acquisitions over that time, it’ll be very exciting times for us,” Smallwood said.

The company held back on acquisitions in 2010 and 2011 as Smallwood said the valuations of projects were simply too high at that time with silver prices reaching all time highs.

Silver Wheaton laid back and grew cash reserves until the company saw what it thought was an opportunity and then pulled the trigger on the HudBay Minerals Inc. (TSX, NYSE: HBM) and Vale S.A. (NYSE:VALE) deals.

“Expectations of value were too high, what it comes down to is just not buying on the highs,” Smallwood said.

After posting increases across the board in net earnings, to revenues to production and reserves, Silver Wheaton finds itself in an enviable position with a mining industry that is looking for money.

“I’ve never seen it so good,” Smallwood said. “I’ve seen lots of interest in the streaming and all that but it’s the quality of the assets that are coming forward right now, the quality of the operating partners coming forward, it’s the best that we’ve ever seen.” 

While Smallwood couldn’t disclose any companies he’s currently in talks with, he outlined the importance of Silver Wheaton’s approach to taking on new streams, citing the importance of the asset as well as the importance of management.

“We do have to realize that these are long-term agreements and we have to realize that management will change 20 to 30 years from now,” Smallwood said. “So, that’s where the phrase management-proof comes from, that the asset had better be strong enough to withstand the potential of bad management. 

“Bad management can happen, it has happened and it still does happen, so when we make an investment into an asset, we have to make sure it’s a strong asset,” he said. “The quality of our partners is important to us but if that’s the only thing that’s good with the project then we better be nervous.”

Smallwood had told Kitco News at the Prospector’s and Developer’s Association Convention in early March that Silver Wheaton’s silver equivalent production target is 53 million ounces by 2017.

“It’s a minimal target, I do think we’ll have more acquisitions before then but definitely on track for that,” Smallwood said. 

Fourth-Quarter And Full-Year Financial Results

Full-year net earnings rose 7% to $586 million, or $1.66 per share, compared to $550 million, or $1.56 per share last year. Fourth-quarter net earnings rose 23% to $177.7 million, or 50 cents per share, compared to $141.7 million, or 41 cents per share during the same period in 2011.

Silver equivalent production rose 22% on the quarter totaling 8.5 million ounces, consisting of 7 million ounces of silver and 26,400 ounces of gold. Full year silver equivalent production rose to 29.6 million ounces, 26.9 million of which was in silver ounces and 50,000 ounces in gold.

Revenue on the year came in 16% higher at $849.6 million due to a jump in silver equivalent ounces sold. Fourth quarter revenues rose 50% to $287.2 million, the company said.

The company reported Tuesday that its silver equivalent reserves had risen 38% in 2012 to over 1.1 billion silver equivalent ounces. Total silver ounces included 851.4 million while gold ounces rose to 4.96 million ounces, the company said.

The company expects to produce 33.5 million silver equivalent ounces in 2013.

Silver Wheaton also announced a first quarterly dividend of 14 cents per share to be paid to holders of record as of the close of business on April 2 and will be distributed on or about April 12, the company said.

By Alex Létourneau of Kitco News aletourneau@kitco.com