On August 10, Silver Wheaton Corp. (NYSE: SLW) reported its second quarter 2016 financial results. The silver streamer reported net earnings of $60 million, or 14 cents per share, in line with analysts' expectations, compared to $54 million or 13 cents per share for the same period in 2015.
The silver streamer reported higher volumes of silver and gold sold. Revenue, earnings, cash operating margin and cash flow from operations were higher thanks to higher average realized precious metal prices.
The silver streamer generated higher revenue in the second quarter of 2016 ($212 million), compared to the same period of 2015 ($164 million), a 29% year-over-year increase, beating  analysts’ expectations by $10.58 million. Compared to the second quarter of 2015, the company sold more ounces of silver (+28%) and more ounces of gold (16%), on higher average realized silver and gold prices, respectively 5% and 6%. In the second quarter of 2016, SLW sold 7.1 million ounces of silver and 70,800 ounces of gold.
The increase in the average realized precious metal prices enabled SLW to report an increase in the cash operating margin, both per silver ounce sold and per gold ounce sold.
The streamer reported a higher cash operating margin per silver ounce sold, +5%, from $4.26 in the second quarter of 2015, to $4.46 in the second quarter of 2016. They also reported a higher cash operating margin per gold ounce sold, +8%, from $395 in the second quarter of 2015, to $401 in the second quarter of 2016.
During the second quarter of 2016, the streamer also reported higher average cash costs per silver ounce sold (+4.7%) and per gold ounce sold (+1.5%).
Average cash costs in the second quarter of 2016 were $4.46 per silver ounce sold and $401 per gold ounce sold, compared to $4.26 per silver ounce and $395 per gold ounce sold during the comparable period of 2015.
The cash flow from operations in the second quarter of 2016 was $134 million (31 cents per share), compared to $109 million (27 cents per share) for the same period in 2015, an increase of 23%.
As of June 30, the company had approximately $124 million in cash.
During the second quarter, the company raised total net proceeds of approximately $607 million from the issuance of a total of 38,105,250 common shares, at a price of $16.60 per share, which was primarily used to repay the outstanding debt under the company's $2 billion revolving credit facility due by February 27, 2021.
On Aug. 2, Silver Wheaton agreed to acquire from a subsidiary of Vale SA (NYSE:VALE) an additional amount of gold equal to 25% of the life of mine gold production from its Salobo mine, located in Brazil, entitling the silver streamer to 75% of the life-of-mine gold production from the mine. Silver Wheaton will pay an upfront cash consideration of $800 million for the increased gold stream with cash on hand, as well as proceeds from the company's $2 billion revolving term loan.
The company did not provide an update on the ongoing tax dispute with the Canadian Revenue Agency. The dispute is about taxes owed on revenue generated by foreign subsidiaries. The CRA is seeking additional taxes and penalties totaling $310 million from the company's streaming income, earned by its foreign units.
For 2016, Silver Wheaton forecasts attributable gold production of 305,000 ounces, up from 265,000 ounces previously forecasted and average annual attributable gold production over the next five years (including 2016) of approximately 330,000 ounces of gold per year, up from 260,000 ounces.
For 2016, the company forecasts silver production of approximately 32 million ounces, down slightly from previous guidance of 32.8 million ounces. Annual silver production over the next five years (including 2016) remains unchanged at 31 million ounces per year.
Disclosure: I have no positions in Silver Wheaton Corp.
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