Wheaton Precious Metals Corp (WPM) 2009 Q1 法說會逐字稿

Good morning ladies and gentlemen. Welcome to Silver Wheaton's first-quarter results 2009 conference call. I would now like to turn the meeting over to Mr. Brad Kopp, Director of Investor Relations. Please go ahead.

(technical difficulty)

Hi everyone. We do apologize. We seem to have had a technical issue with transferring into the phone line. I'm not sure if you caught any of what we had earlier said, but I'm just going to read through it again.

We're joined here today by Peter Barnes, our President and CEO; Randy Smallwood, Executive Vice President, Corporate Development; Gary Brown, Chief Financial Officer; and Curt Bernardi, VP, Legal.

Before I do turn the call over to Peter, I would like to review read Silver Wheaton's forward-looking statements. Some of today's commentary may contain forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements.

We refer you to this section entitled Description of the Business Risk Factors and Silver Wheaton's annual information form for the year ended December 31, 2008, which is available on SEDAR and also in Silver Wheaton's Form 40-F which is on file with the US Securities and Exchange Commission.

The annual information form sets out the material risk factors that could cause actual results to differ, including the absence of control over mining operations from which Silver Wheaton purchases silver, risks related to such mining operations, and the risk of a decline in silver prices.

Now I would like to turn the call over to Peter.

Thanks Brad. Good morning ladies and gentlemen.

Our first quarter represents a strong start to the year for Silver Wheaton with net earnings of $15 million and operating cash flows of $23 million.

Silver sales for the quarter were 3.2 million ounces, up 12% from Q1 last year and 15% from last quarter.

We slightly exceeded our guidance for the quarter of 3 million ounces and remain on track to meet our annual guidance of between 15 million ounces and 17 million ounces of silver sales for the year.

All key operations were in line with expectations.

We are particularly pleased with the progress at Luismin, which demonstrated a second consecutive quarter of improved production levels.

On top of this, on March 30, we announced that our attributable proven and probable silver reserves increased by over 24% in 2008 to record levels. And attributable measured and indicated silver resources increased by 33%, which further demonstrates the quality of our core operating assets.

Also during the first quarter, we closed an equity financing for gross proceeds of CAD287 million, the proceeds of which were used to repay all outstanding debt under our $400 million revolving bank facility under available to fund future acquisitions.

Lastly, I discussed during our year-end conference call that these difficult economic times were providing us with the best growth prospects that I had ever seen and that we are focused on delivering further growth in a manner that is accretive, provides immediate cash flow, and does not overleveraged the company's balance sheet.

Well, I am very pleased to say that we have already started to deliver with our friendly acquisition of Silverstone Resources that we announced in March. The Silverstone deal, which is expected to close in the next few weeks, is immediately accretive and further strengthens our company to take advantage of the great growth opportunities that we see ahead.

Now I will turn it over to Gary Brown, our CFO, to review our quarterly results in more detail.

Thank you Peter. And good morning ladies and gentlemen.

Prior to reviewing Silver Wheaton's unaudited results for the first quarter of 2009, I would like to remind everyone that all figures discussed are denominated in US dollars.

Silver Wheaton generated revenue for the first quarter of 2009 of $38 million from the sale of 3.2 million ounces of silver at an average price of $11.90 per ounce. This compared to revenue of $49 million in the prior year from the sale of 2.8 million ounces of silver at an average price of $17.36 per ounce.

Net earnings and operating cash flow in the first quarter of 2009 were $15 million and $23 million, respectively, compared with $28 million and $33 million for the first quarter of 2008.

Basic earnings and cash flow per share were $0.06 and $0.09, respectively, for the first quarter of 2009 compared with $0.13 and $0.15 for Q1 2008.

Earnings from operations for the first quarter of 2009 amounted to $18 million, representing a margin of 49% of revenue compared with $34 million or 69% of revenue for the first quarter of 2008. The decrease in margin earnings and cash flow relative to the prior year was due to the 31% decrease in the average silver price realized, being partially offset by a 12% increase in the volume of silver sales combined with a $2.5 million reduction in corporate costs.

Breaking down the operating results further, during the first quarter of 2009 the company sold 1.4 million ounces of silver from the Luismin mines, representing the second consecutive quarterly increase with net earnings and operating cash flows of $10.4 million and $11.5 million, respectively. This compared to the first quarter of 2008 during which the company generated net earnings and operating cash flow $21.7 million and $22.4 million, respectively, from the sale of 1.7 million ounces of silver, with the decrease being driven primarily by the decline in realized silver prices in addition to a 16% decrease in volume.

Zinkgruvan contributed net earnings and operating cash flow of $2.8 million and $3.2 million, respectively, in the first quarter of 2009 from the sale of 451,000 ounces of silver. In the comparable quarter of the prior year, Zinkgruvan generated net earnings and operating cash flow of $3.9 million and $4.2 million, respectively, from the sale of 318,000 ounces of silver. The increased volume was attributable to an increase in concentrate shipments from the mine in the most recent quarter.

Yauliyacu generated net earnings and cash flows of $3.2 million and $5.8 million in the first quarter of 2009 based on the sale of 743,000 ounces of silver. This compares to the first quarter of 2008 during which Yauliyacu contributed net earnings and operating cash flow of $7.4 million and $10 million, respectively, from the sale of 734,000 ounces of silver. Again, the decrease in net earnings and cash flow was attributable to the lower realized silver prices.

Stratoni contributed net earnings and operating cash flow of $1.1 million and $2.9 million during the first quarter of 2009 from the sale of 353,000 ounces of silver. This compares to the first quarter of 2008 in which Stratoni generated net earnings and operating cash flow of approximately $700,000 from the sale of 88,000 ounces of silver. The increase in silver sales in the most recent quarter is primarily attributable to the effect of the strike at a port in Greece that occurred in the first quarter of the prior year.

Silver flows from the Penasquito heap leach operations amounted to 135,000 ounces during the quarter with the decrease from the prior quarter being partially attributable to the effect of the Penoles strike, which limited the conversion of dore produced at the mine site.

Silver deliveries from other silver purchase agreements amounted to 73,000 ounces in the first quarter of 2009 with Campo Morado achieving commercial production and making its first silver delivery in the quarter.

The company reaffirms its guidance for 2009 with silver sales from its existing silver interests forecast to be in the range of 15 million ounces to 17 million ounces.

G&A expenses amounted to $4.5 million in the first quarter of 2009, representing a 19% decrease from the comparable period of the prior year, primarily attributable to lower stock-based compensation expenses and lower consulting expenses. Excluding noncash stock-based compensation, we continue to expect G&A expenses to be in the range of $11 million to $13 million for 2009.

Other income in the first quarter of 2009 amounted to $1.2 million, which was primarily attributable to foreign exchange gains realized on the conversion of the Canadian dollar proceeds received from the equity issue to US dollars.

Interest costs of $1.9 million were capitalized for the cost of Penasquito, Mineral Park, and Campo Morado and Keno Hill silver interests during the first quarter of 2009 with an average realized interest rate 2.6%. This compares to the first quarter of the prior year during which $5.8 million of interest was capitalized at the Penasquito silver interest. The lower amount of interest incurred in the most recent quarter is attributable to the combination of lower outstanding debt levels and lower interest rates.

Penasquito's mill operation is expected to achieve commercial production from Silver Wheaton's perspective in the latter half of 2009, at which time it is expected that interest costs will start to be expensed.

On February 12 the company successfully closed an equity financing, raising gross proceeds of approximately $230 million through the issuance of approximately 36 million common shares. The net proceeds from this financing were used to repay outstanding debt under the company's revolving credit facilities leaving the entire $400 million of credit being available to fund future acquisitions and silver interests.

At March 31, 2009 the total debt outstanding under the company's term loan facility was $157 million with cash and cash equivalents of $27 million.

That concludes the financial summary. And with that we shall open up the call for questions, operator.

(Operator Instructions). Haytham Hodaly, Salman Partners.

Just one quick question. Have you guys gotten any guidance from Goldcorp with regards to the go-forward plan for San Dimas in terms of how quickly an expansion could happen, if it will happen? And just any further progress on Penasquito? We've listened to their conference call I guess late last week, but not too much guidance was provided on that.

With respect to San Dimas and as to Goldcorp, as Chuck mentioned in his conference call, and Steve Reed, and the expansion there is really contingent on getting into the vein systems in that Sinaloa graven, which they are developing in towards, and so as that -- as those veins are opened up -- and that's really what's going to dictate sort of any type of significant expansions at San Dimas.

Outside of that the continued success in that central block is sort of turning the grades around, and they will probably be with success there marginal improvements, but essentially most of the infrastructure has already been set up. It's a matter of just getting the open -- the working faces.

At Penasquito, again, the guidance that Goldcorp gave was along the lines of what we've seen. It's -- everything is on schedule and on target. They expect to have that sulfide circuit up and going. They've got a nice stockpile building up already. I think they've got 3 million tons sitting at the crusher just waiting to go, and looking for the latter half of this year turning.

They're not going to -- they won't make their commercial production until early 2010, but for our purposes we class the silver out of this sulfide circuit late this year, so -- I don't know if there's anything else I can add to that.

David Haughton, BMO.

You mentioned a strike at Stratoni impacting exports there. Can we see any catch-up going forward? The strike was last year, right? So that was in the December quarter. Everything is cleared out now? It's all okay?

No. In fact, there's a couple of shipments. We were missing about -- over 300,000 ounces from the December quarter, and none of that has come through yet. So it will come through at some stage, and that will just be extra sales for us.

Okay. So hopefully in the second quarter you might see a little bit of extra coming through?

Yes.

On a similar theme, I noticed in your commentary, La Negra didn't deliver a relatively small amount of ounces. Was that including your quarterly numbers, or is that also something that we can expect to see as a catch-up later in the year?

Well, La Negra, we got some silver from in the quarter. We've got a pretty low budget for them for the year, around about 300,000 ounces. They and a lot of other mining companies in the world picked what turned out to be the worst time possible to bringing a new mine on-stream as metal prices were crashing. I mean, they're a copper mine and copper prices halved.

They've done a good job of struggling through what nobody expected when they started production. They -- a lot of people are kind of working with them to help them get through this difficult period until things turn around, and we've done that. We've not taken all the silver that we were due, and we may not for the rest of the year. But we will get it at some stage hopefully, so -- and again, it's not a material portion of our sales, so our guidance we still expect to be in the 15 million to 17 million ounces of sales.

Also, looking at the cash flow statement, there was expenditure of about $3.4 million on silver interests. What did that relate to?

That was adding to some of our share ownerships.

Okay. So that's more like investment in (multiple speakers)

Correct. Long-term investment.

And it was also capitalized interest, David.

Ah, okay.

Oh yes. Sorry. That's what that was there (multiple speakers)

Okay. So about a third of that would be capitalized interest, the balance investments? Okay. Well, thank you very much.

Steven Butler, Canaccord Adams.

Peter, under the other category, about 70 -- just to come back to La Negra, etc., the other category, 73 odd thousand ounces, roughly -- which other mine did give you some ounces? Was it Campo Morado and/or Mineral Park?

It was Campo Morado.

Campo Morado. Mineral Park? Is that producing for you yet though, or selling to you yet, Peter?

It's producing but not selling yet. We don't get sales until this quarter.

Until Q2. Okay. That is all I had.

(Operator Instructions). There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Barnes.

Great. Well, thank you. That was the easiest Q&A I think we've ever had. I hope that means we are doing a good job.

Listen, thanks very much for calling in, and we look forward to speaking with you again next time. Bye.

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.