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Silver Wheaton Beats Squarely in 4Q

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Silver Wheaton Corp.’s fourth-quarter 2012 earnings of 50 cents a share surpassed the Zacks Consensus Estimate by a penny and the year-ago quarter earnings by 9 cents. The Canada-based silver mining company’s profit increased 22.8% year over year to a record $177.7 million. Increased silver equivalent sales boosted the bottom line in the quarter.

For full-year 2012, Silver Wheaton posted earnings of $1.66 per share compared with $1.56 per share in 2011, missing the Zacks Consensus Estimate of $1.69 per share.

Revenues rose 50% year over year to a record $287.2 million in the reported quarter, beating the Zacks Consensus Estimate of $246 million. The growth was fueled by a 53% year over year increase in silver equivalent sale that recorded 9.1 million (including 7.3 million ounces of silver and 33,000 ounces of gold with relatively unchanged gold and silver prices).

For full-year 2012, revenues increased 16% to $849.6 million from $730 million in 2011, and were ahead of the Zacks Consensus Estimate of $821 million.  

Attributable silver equivalent production jumped 22% year over year to 8.5 million ounces in the quarter including 7 million ounces of silver and 26,400 ounces of gold. Silver Wheaton recorded its fourth straight year of record annual attributable production of 29.6 million silver equivalent ounces, a 17% year-over-year increase.

Average cash costs per silver equivalent ounce rose to $4.70 in the fourth quarter from $4.06 a year ago. Cash operating margins declined 5% year over year to $26.76 per silver equivalent ounce due to higher production payments related with the precious metals stream on Hudbay's 777 mine, which includes $5.90 per ounce of silver and $400 per ounce of gold.

Silver Wheaton had cash and cash equivalents of $778 million as of Dec 31, 2012, down roughly 7.4% year over year, along with the liquidity provided by the $2.5 billion of new credit facilities. Operating cash flows increased 55% year over year to $254 million in the fourth quarter.

Last month, Silver Wheaton entered into an agreement with a subsidiary of mining giant Vale S.A. (VALE - Free Report) to acquire gold production from mines in Brazil and Sudbury, Canada.. As per the agreement, Silver Wheaton will receive 25% of the life of mine gold produced from Vale’s Brazilian Salobo mine as well as 70% of the production from its Sudbury Mines for a period of 20 years.

Silver Wheaton expects attributable production for 2013 to be roughly 33.5 million silver equivalent ounces, including 145,000 ounces of gold, a 13% increase compared with  2012 attributable production. The expected increase is based on the added production from Vale's Salobo and Sudbury mines and a full year production from the Hudbay's 777 mine acquired in Sep 2012.

Silver Wheaton currently carries a Zacks Rank #3 (Hold).

Other mining companies worth considering are Sandstorm Gold Ltd. (SAND - Free Report) and Seabridge Gold, Inc. (SA - Free Report) with both having a Zacks Rank #2 (Buy).

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VALE S.A. (VALE) - free report >>

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