-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SK1FocAeB7gZbTLSRu96+M0FP1pUQFRcj+eNAKqhSDbaEMgICpWbVYVERTPMkC4T rHUOE3JGbIMGgpWIBvdsoA== 0001176256-10-000891.txt : 20101109 0001176256-10-000891.hdr.sgml : 20101109 20101109133528 ACCESSION NUMBER: 0001176256-10-000891 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20100930 FILED AS OF DATE: 20101109 DATE AS OF CHANGE: 20101109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Silver Wheaton Corp. CENTRAL INDEX KEY: 0001323404 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 000000000 STATE OF INCORPORATION: A0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32482 FILM NUMBER: 101175467 BUSINESS ADDRESS: STREET 1: PARK PLACE, SUITE 3150 - 666 BURRARD ST. CITY: VANCOUVER STATE: A1 ZIP: V6C 2X8 BUSINESS PHONE: 604 684 3123 MAIL ADDRESS: STREET 1: PARK PLACE, SUITE 3150 - 666 BURRARD ST. CITY: VANCOUVER STATE: A1 ZIP: V6C 2X8 6-K 1 slw6kq3100930.htm REPORT OF FOREIGN ISSUER FOR THE MONTH OF NOVEMBER, 2010 Filed by e3 Filing, Computershare 1-800-973-3274 - Silver Wheaton Corp. - Form 6-K


FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the month of November, 2010

SILVER WHEATON CORP.
(Translation of registrant's name into English)

Suite 3150, 666 Burrard Street, Vancouver, British Columbia V6C 2X8 CANADA
(Address of principal executive offices)

     Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20 F [   ] Form 40 F [ X ]

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [   ] No [ X ]

     If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________

EXHIBIT INDEX

The following is a list of Exhibits included as part of this Report on Form 6-K:
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.

  Silver Wheaton Corp. 
  (Registrant) 
 
Date: November 8, 2010  By:  /s/ Peter Barnes 
    Name 
 
  Its:  Chief Executive Officer 
    (Title) 



EX-99.1 2 exhibit99-1.htm NEWS RELEASE DATED NOVEMBER 8, 2010 Exhibit 99.1

Exhibit 99.1

  

FOR IMMEDIATE RELEASE  TSX:SLW 
Nov 8, 2010  NYSE:SLW 

SILVER WHEATON REPORTS RECORD QUARTERLY EARNINGS

Vancouver, British Columbia – Silver Wheaton Corp. (“Silver Wheaton” or the “Company”) (TSX, NYSE:SLW) is pleased to announce its unaudited results for the third quarter ended September 30, 2010.

THIRD QUARTER HIGHLIGHTS


  • Net earnings more than doubled to a record US$69.2 million (US$0.20 per share), compared with US$33.6 million (US$0.11 per share) in 2009.

  • Operating cash flows increased 55% to US$70.5 million (US$0.20 per share)1, compared with US$45.4 million (US$0.14 per share)1 in 2009.

  • Record attributable silver equivalent production of 5.9 million ounces (5.5 million ounces of silver and 7,000 ounces of gold), representing an increase of 41% over the comparable period in 2009.

  • Silver equivalent sales of 4.7 million ounces (4.3 million ounces of silver and 7,100 ounces of gold), lagging production for the quarter due primarily to the build-up of concentrate inventory as the Peñasquito mine ramps up production, as well as timing of concentrate shipments from the Yauliyacu and Campo Morado mines.

  • As at September 30, 2010, approximately 2.2 million payable silver equivalent ounces attributable to the Company have been produced at the various mines and will be recognized in future sales as they are delivered to the Company under the terms of their contracts.

  • Total cash costs1 of US$4.09 per silver equivalent ounce, compared with US$4.08 per ounce in 2009.

  • Cash operating margin1 increased 42% compared to 2009, to a record US$15.72 per silver equivalent ounce, while average silver prices over the same period increased by 29%.

  • Goldcorp Inc. announced that its world-class gold-silver-lead-zinc Peñasquito mine achieved commercial production during the quarter with peak throughput rates as high as 105,000 tonnes per day. The ramp up to full production capacity of 130,000 tonnes per day is anticipated by early 2011. Annual production attributable to Silver Wheaton from the mine is expected to average approximately 7 million ounces of silver over the estimated 22 year mine life.

 
1 Refer to discussion on non-GAAP measures at the end of this press release.


- 2 -

  • Barrick Gold Corp.’s world-class gold-silver Pascua-Lama project remains on track to enter production in the first quarter of 2013, with detailed engineering and procurement nearing completion and earthworks underway. Once in production, Pascua-Lama is forecast to be one of the largest and lowest cost gold mines in the world with an expected mine life in excess of 25 years. In its first five years of operation, Silver Wheaton’s attributable silver production is expected to average 9 million ounces annually.

  • Goldcorp completed the sale of the San Dimas mine to Primero Mining Corp. In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, which was set to expire in 2029, has been extended to life of mine. During the first four years following closing of the transaction, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Primero will deliver to the Company a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess.
    Goldcorp will continue to guarantee the delivery by Primero of all silver produced and owing to the Company until 2029, and a payment of US$0.50 per ounce for any shortfall below 215 million cumulative silver ounces delivered to Silver Wheaton by the end of 2031. Primero has provided Silver Wheaton with a right of first refusal on any metal stream or similar transaction it enters into.

“Silver Wheaton had record production in the quarter, anchored by the continued successful ramp up of one of our cornerstone growth assets, Goldcorp’s world-class Peñasquito mine in Mexico,” said Peter Barnes, Chief Executive Officer of Silver Wheaton. “Peñasquito reached commercial production during the quarter and expects to achieve full production capacity in early 2011, in what promises to be another year of significant production growth for Silver Wheaton.”

“While quarterly sales were lower than production, due in part to the build-up of concentrate inventory as Peñasquito ramps up production, as well as the timing of shipments from the Yauliyacu and Campo Morado mines, we still achieved record earnings. Increased shipments in the fourth quarter are expected to make up for the sales shortfall and we remain on track to meet production guidance of 23.5 million silver equivalent ounces in 2010, growing to approximately 40 million ounces by 2013.”

“In an environment of continued economic uncertainty, investment demand for silver remains very strong, and silver prices approached 30 year highs in the quarter. This resulted in record cash operating margins of US$15.72 per ounce, generating strong free cash flows to fund future growth.”

“Lastly, during the quarter, Goldcorp finalized the sale of its San Dimas mine to Primero Mining, an emerging mid-tier gold producer. In conjunction with this, Silver Wheaton amended its silver purchase agreement, which continues to provide Silver Wheaton with a Goldcorp guarantee, extends the agreement from a fixed term to life-of-mine and, most importantly, incentivizes Primero Mining to increase silver production at this high-quality, low-cost, mine. San Dimas remains a key asset within our portfolio and we are confident that the amended silver purchase agreement will create additional long term value for our stakeholders.”

This earnings release should be read in conjunction with Silver Wheaton’s unaudited MD&A and Financial Statements, which are available on the Company’s website at www.silverwheaton.com and have been posted on SEDAR at www.sedar.com.



- 3 -

A conference call will be held Tuesday, November 9, 2010, starting at 11:00 am (Eastern Time) to discuss these results. To participate in the live call use one of the following methods:

Dial toll free from Canada or the US:  1- 888-231-8191 
Dial from outside Canada or the US:  1-647-427-7450 
Pass code:  15809030 
Live audio webcast:  www.silverwheaton.com 

Participants should dial in five to ten minutes before the call.

The conference call will be recorded and you can listen to an archive of the call by one of the following methods:

Dial toll free from Canada or the US:  1- 800-642-1687 
Dial from outside Canada or the US:  1-416-849-0833 
Pass code:  15809030 
Archived audio webcast:  www.silverwheaton.com 

About Silver Wheaton

Silver Wheaton is the largest silver streaming company in the world. Forecast 2010 production, based upon its current agreements, is 22.0 million ounces of silver and 28,000 ounces of gold, for total production of 23.5 million silver equivalent ounces. By 2013, annual production is anticipated to increase significantly to approximately 40 million silver equivalent ounces. This growth is driven by the Company’s portfolio of world-class assets, including silver streams on Goldcorp’s Peñasquito mine and Barrick’s Pascua-Lama project.

CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
The information contained herein contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements with respect to the future price of silver and gold, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, reserve determination and reserve conversion rates. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “an ticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Silver Wheaton to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: fluctuations in the price of silver and gold; the absence of control over mining operations from which Silver Wheaton purchases silver or gold and risks related to these mining operations including risks related to fluctuations in the price of the primary commodities mined at such operations, actual results of mining and exploration activities, economic and political risks of the jurisdictions in which the mining operations are located and changes in project parameters as plans continue to be refined; and differences in the interpretation or application of tax laws and regulations; as well as those factors discussed in the section entitled “Description of the Business - Risk Factors” in Silver Wheaton's Annual Information Form available on SEDAR at www.sedar.com and in Silver Wheaton's Form 40-F on file with the U.S. Securities and Exchange Commission in Washington, D.C. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to: the continued operation of the mining operations from which Silver Wheaton purchases silver or gold, no material adverse change in the market price of commodities, that the mining operations will operate and the mining projects will be completed in accordance with their public statements and achieve their stated production outcomes, and such other



- 4 -

assumptions and factors as set out herein. Although Silver Wheaton has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements. Silver Wheaton does not undertake to update any forward-looking statements that are included or incorporated by reference herein, except in accordance with applicable securities laws.



- 5 -

Consolidated Statement of Operations (unaudited)

Three Months Ended
September 30

Nine Months Ended
September 30

(US dollars and shares in thousands, except per share amounts - unaudited)

 

2010

2009

2010

2009

Sales

 

$

92,834

 

$

69,767

 

$

273,776

 

$

148,742

 

 

 

 

 

 

 

Cost of sales

 

19,154

 

18,765

 

 

60,022

 

43,069

 

Depletion

 

 

12,505

 

 

13,164

 

 

41,416

 

 

26,170

 

 

31,659

 

31,929

 

 

101,438

 

69,239

 

Earnings from operations

 

 

61,175

 

 

37,838

 

 

172,338

 

 

79,503

 

 

 

 

 

 

 

Expenses and other income

 

 

 

 

 

 

General and administrative 1

 

4,947

 

3,906

 

 

18,260

 

12,917

 

Gain on mark-to-market of warrants held

 

 

(7,861)

 

-

 

 

(8,094)

 

(33)

 

Other

 

 

(360)

   

366

 

 

(164)

   

(496)

 

 

 

(3,274)

 

 

4,272

 

 

10,002

 

 

12,388

 

 

 

 

 

 

 

Earnings before tax

 

64,449

 

33,566

 

 

162,336

 

67,115

 

Future income tax recovery

 

 

4,785

 

 

-

 

 

4,785

 

 

-

 

Net earnings

$

69,234

 

$

33,566

 

$

167,121

 

$

67,115

 

 

 

 

0.11

 

 

 

 

0.23

 

Basic earnings per share

$

0.20

 

$

$

0.49

 

$

Diluted earnings per share

$

0.20

 

$

0.11

 

$

0.48

 

$

0.23

 

Weighted average number of shares
     outstanding

 

 

 

 

 

 

Basic

 

 

344,253

 

313,445

 

 

343,168

 

294,208

 

Diluted

 

 

350,361

 

 

317,431

 

 

348,469

 

 

297,936

 
                         

1) Stock based compensation (a non-cash item) included in general and administrative

 

$

1,306

$

623

 

$

6,431

 

$

3,312

 



- 6 -

Consolidated Balance Sheets (unaudited)

 

September 30

December 31

(US dollars in thousands - unaudited)

2010

2009

 

 

 

Assets

 

 

 

Current

 

 

 

Cash and cash equivalents

$

255,189

 

$

227,566

 

Accounts receivable

 

7,798

 

4,881

 

 

Other

 

 

924

 

 

1,027

 

 

263,911

 

233,474

 

 

 

 

Long-term investments

 

 

155,122

 

73,747

 

Silver and gold interests

 

 

1,943,224

 

1,928,476

 

Other

 

 

1,368

 

 

1,527

 

 

 

$

2,363,625

 

$

2,237,224

 

 

 

 

Liabilities

 

 

 

Current

 

 

 

Accounts payable

$

1,398

 

$

5,397

 

Accrued liabilities

 

4,606

 

4,578

 

Current portion of bank debt

 

 

28,560

 

28,560

 

 

Current portion of silver interest payments

 

 

145,317

 

 

130,788

 

 

179,881

 

169,323

 

 

 

 

 

Long-term portion of bank debt

 

85,760

 

107,180

 

Long-term portion of silver interest payments

 

 

120,323

 

 

236,796

 

 

 

 

 

385,964

 

 

513,299

 

Shareholders' Equity

 

 

 

Issued capital and contributed surplus

 

 

1,372,525

 

 

1,333,191

 

Retained earnings

 

510,955

 

343,834

 

Accumulated other comprehensive income

 

94,181

 

46,900

 

 

 

 

 

605,136

 

 

390,734

 

 

 

 

 

1,977,661

 

 

1,723,925

 

 

 

 

$

2,363,625

 

$

2,237,224

 

 

 

 



- 7 -

Consolidated Statement of Cash Flows (unaudited)

Three Months Ended
September 30

Nine Months Ended
September 30

(US dollars in thousands - unaudited)

 

2010

2009

2010

2009

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

Net earnings

$

69,234

 

$

33,566

 

$

167,121

 

$

67,115

 

Items not affecting cash

 

 

 

 

 

 

    Depreciation and depletion

 

12,573

 

13,229

 

 

41,615

 

26,359

 

    Stock based compensation

 

1,306

 

623

 

 

6,431

 

3,312

 

    Gain on mark-to-market of warrants held

 

 

(7,861)

 

 -

 

 

(8,094)

 

(33)

 

    Future income tax recovery

 

 

(4,785)

 

 -

 

 

(4,785)

 

 -

 

    Other

 

(1,251)

 

(338)

 

 

(879)

 

(148)

 

Change in non-cash operating working capital

 

 

1,269

 

(1,700)

 

 

(6,334)

 

(1,652)

 

Cash generated by operating activities

 

70,485

 

 

45,380

 

 

195,075

 

 

94,953

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

Bank debt drawn down

 

 

-

 

140,200

 

 

-

 

140,200

 

Bank debt repaid

 

 

(7,140)

 

(7,140)

 

 

(21,420)

 

(234,920)

 

Shares issued

 

 

-

 

287,531

 

 

-

 

517,955

 

Share issue costs

 

-

 

(11,645)

 

 

(85)

 

(21,620)

 

Share purchase warrants exercised

 

5,017

 

10,345

 

 

6,022

 

10,508

 

Share purchase options exercised

 

8,579

 

4,200

 

 

26,881

 

5,789

 

Cash generated by financing activities

 

6,456

 

 

423,491

 

 

11,398

 

 

417,912

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

Silver and gold interests

 

(144,465)

 

(213,819)

 

 

(158,176)

 

(218,466)

 

Acquisition of Silverstone Resources Corp.,
     net of cash acquired

 

 -

 

(261)

 

 

(201)

 

2,407

 

Long-term investments

 

 

(644)

 

 -

 

 

(21,533)

 

-

 

Other

 

(10)

 

1,599

 

 

396

 

1,615

 

Cash applied to investing activities

 

(145,119)

 

 

(212,481)

 

 

(179,514)

 

 

(214,444)

 

Effect of exchange rate changes on cash and cash
    equivalents

 

471

 

 

(122)

 

 

664

 

 

(673)

 

(Decrease) increase in cash and cash equivalents

 

(67,707)

 

256,268

 

 

27,623

 

297,748

 

Cash and cash equivalents, beginning of period

 

322,896

   

48,590

 

 

227,566

   

7,110

 

Cash and cash equivalents, end of period

$

255,189

 

$

304,858

 

$

255,189

 

$

304,858

 



- 8 -

Results of Operations (unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2010

 

Ounces produced 3

Ounces sold

Sales

Average realized
price
($'s per ounce)

Total cash cost
($'s per ounce)
4

Total depletion
($'s per ounce) 4

Net earnings
(loss)

Cash flow from
(used in) operations

Silver

San Dimas

1,255

1,274

$

25,613

$

20.11

 

$

4.04

 

$

0.78

 

$

19,471

 

$

20,468

 

Zinkgruvan

508

635

12,680

19.95

 

4.04

 

1.72

 

9,021

 

9,522

 

Yauliyacu

633

87

1,548

17.79

 

3.98

 

3.47

 

900

 

1,202

 

Peñasquito

1,017

692

12,980

18.76

 

3.90

 

2.54

 

8,521

 

10,281

 

Minto

46

40

912

22.92

 

3.90

 

3.69

 

610

 

567

 

Cozamin

381

306

5,825

19.06

 

4.04

 

4.62

 

3,177

 

4,868

 

Barrick 5

682

533

10,202

19.16

 

3.90

 

3.58

 

6,218

 

8,281

 

Other 6

1,023

710

 

13,649

 

 

19.22

 

 

3.93

 

 

4.51

 

 

7,658

 

 

10,518

 

5,545

4,277

$

83,409

$

19.51

 

$

3.98

 

$

2.53

 

$

55,576

 

$

65,707

 

Gold

Minto

6,961

7,127

$

9,425

 

$

1,323

 

$

300

 

$

237

 

$

5,599

 

$

5,972

 

Silver Equivalent 7

5,947

4,688

$

92,834

$

19.81

 

$

4.09

 

$

2.67

 

$

61,175

 

$

71,679

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,059

 

 

(1,194

)

 

5,947

4,688

$

92,834

 

$

19.81

 

$

4.09

 

$

2.67

 

$

69,234

 

$

70,485

 

1)     

All figures in thousands except gold ounces produced and sold and per ounce amounts.

2)     

Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.

3)     

Certain production figures are based on management estimates.

4)     

Refer to discussion on non-GAAP measures.

5)  The ounces produced and sold during the third quarter of 2010 include 250,000 ounces received from Goldcorp, in connection with Goldcorp’s four year commitment to deliver to Silver Wheaton 1.5 million ounces of silver per annum resulting from their sale of San Dimas to Primero.
6)  

Comprised of the Lagunas Norte, Pierina and Veladero mines.

7)     

Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.

8)     

Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.




- 9 -

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2009

 

Ounces produced

Ounces sold

Sales

Average realized
price
($'s per ounce)

Total cash cost
($'s per ounce) 3

Total depletion
($'s per ounce) 3

Net earnings
(loss)

Cash flow from
(used in) operations

Silver

San Dimas

1,232

1,234

$

18,886

$

15.30

 

$

4.02

 

$

0.65

 

$

13,120

 

$

13,925

 

Zinkgruvan

415

433

6,861

15.85

 

4.02

 

1.78

 

4,350

 

4,415

 

Yauliyacu

750

698

10,600

15.19

 

3.94

 

3.47

 

5,426

 

7,849

 

Peñasquito

165

190

2,691

14.15

 

3.90

 

2.36

 

1,502

 

1,950

 

Minto

46

68

1,043

15.29

 

3.90

 

4.48

 

472

 

794

 

Cozamin

366

384

5,736

14.94

 

4.00

 

4.72

 

2,389

 

4,229

 

Barrick 4

223

187

3,008

16.07

 

3.90

 

3.46

 

1,631

 

2,278

 

Other 5

783

780

 

11,369

 

 

14.56

 

 

3.91

 

 

3.95

 

 

5,224

 

 

7,398

 

3,980

3,974

$

60,194

$

15.14

 

$

3.97

 

$

2.59

 

$

34,114

 

$

42,838

 

Gold

Minto

3,698

9,953

$

9,573

 

$

962

 

$

300

 

$

288

 

$

3,724

 

$

5,330

 

Silver Equivalent 6

4,213

4,600

$

69,767

$

15.16

 

$

4.08

 

$

2.86

 

$

37,838

 

$

48,168

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,272)

 

 

(2,788)

 

 

4,213

4,600

$

69,767

 

$

15.16

 

$

4.08

 

$

2.86

 

$

33,566

 

$

45,380

 

 

1) All figures in thousands except gold ounces produced and sold and per ounce amounts.
2) Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.
3) Refer to discussion on non-GAAP measures.
4) Comprised of the Lagunas Norte, Pierina and Veladero mines.
5) Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.
6) Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.



- 10 -

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2010

 

Ounces produced 3

Ounces sold

Sales

Average realized
price
($'s per ounce)

Total cash cost
($'s per ounce) 4

Total depletion
($'s per ounce) 4

Net earnings
(loss)

Cash flow from
(used in) operations

Silver

San Dimas

3,571

3,556

$

66,463

$

18.69

 

$

4.04

 

$

0.78

 

$

49,308

 

$

52,099

 

Zinkgruvan

1,373

1,446

26,964

18.64

 

4.04

 

1.72

 

18,635

 

19,578

 

Yauliyacu

2,062

1,185

21,372

18.04

 

3.98

 

3.47

 

12,545

 

16,662

 

Peñasquito

2,337

1,772

32,466

18.32

 

3.90

 

2.54

 

21,050

 

25,556

 

Minto

157

133

2,562

19.19

 

3.90

 

3.69

 

1,549

 

1,795

 

Cozamin

1,068

999

18,226

18.26

 

4.03

 

4.62

 

9,590

 

14,524

 

Barrick 5

2,159

2,043

36,942

18.08

 

3.90

 

3.54

 

21,749

 

25,896

 

Other 6

3,099

2,214

 

40,635

 

 

18.35

 

 

3.92

 

 

4.38

 

 

22,254

 

 

31,935

 

15,826

13,348

$

245,630

$

18.40

 

$

3.97

 

$

2.69

 

$

156,680

 

$

188,045

 

Gold

Minto

24,665

23,321

$

28,146

 

$

1,207

 

$

300

 

$

235

 

$

15,658

 

$

19,357

 

Silver Equivalent 7

17,395

14,826

$

273,776

$

18.47

 

$

4.05

 

$

2.79

 

$

172,338

 

$

207,402

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,217)

 

 

(12,327)

 

 

17,395

14,826

$

273,776

 

$

18.47

 

$

4.05

 

$

2.79

 

$

167,121

 

$

195,075

 

 

1)     

All figures in thousands except gold ounces produced and sold and per ounce amounts.

2)     

Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.

3)     

Certain production figures are based on management estimates.

4)     

Refer to discussion on non-GAAP measures.

5)     

Comprised of the Lagunas Norte, Pierina and Veladero mines.

6)     

Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.

7)     

Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.

 



- 11 -

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2009

 

Ounces produced

Ounces sold

Sales

Average realized
price
($'s per ounce)

Total cash cost
($'s per ounce) 3

Total depletion
($'s per ounce) 3

Net earnings
(loss)

Cash flow from
(used in) operations

Silver

San Dimas

3,819

3,840

$

52,990

$

13.81

 

$

4.02

 

$

0.71

 

$

34,817

 

$

37,553

 

Zinkgruvan

1,356

1,353

19,023

14.06

 

4.02

 

1.78

 

11,175

 

12,793

 

Yauliyacu

2,359

1,987

26,881

13.53

 

3.93

 

3.47

 

12,184

 

19,082

 

Peñasquito

487

455

6,106

13.42

 

3.90

 

2.35

 

3,260

 

4,331

 

Minto

83

67

1,036

15.31

 

3.90

 

4.48

 

469

 

808

 

Cozamin

628

597

8,671

14.53

 

4.00

 

4.70

 

3,479

 

7,617

 

Barrick 4

223

187

3,008

16.07

 

3.90

 

3.46

 

1,631

 

2,278

 

Other 5

2,092

1,584

 

21,319

 

 

13.44

 

 

3.91

 

 

4.03

 

 

8,715

 

 

14,883

 

11,047

10,070

$

139,034

$

13.80

 

$

3.97

 

$

2.31

 

$

75,730

 

$

99,345

 

Gold

Minto

10,521

10,098

$

9,708

 

$

961

 

$

300

 

$

288

 

$

3,773

 

$

5,522

 

Silver Equivalent 6

11,708

10,708

$

148,742

$

13.89

 

$

4.02

 

$

2.44

 

$

79,503

 

$

104,867

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,388)

 

 

(9,914)

 

 

11,708

10,708

$

148,742

 

$

13.89

 

$

4.02

 

$

2.44

 

$

67,115

 

$

94,953

 

1)     

All figures in thousands except gold ounces produced and sold and per ounce amounts.

2)     

Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.

3)     

Refer to discussion on non-GAAP measures.

4)     

Comprised of the Lagunas Norte, Pierina and Veladero mines.

5)     

Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.

6)     

Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.




- 12 -

Non-GAAP Measures

Silver Wheaton has included, throughout this press release, certain non-GAAP performance measures, including total cash costs of silver and gold on a sales basis, as well as operating cash flows per share and cash operating margin. These non-GAAP measures do not have any standardized meaning prescribed by GAAP, nor are they necessarily comparable with similar measures presented by other companies. Cash costs are presented as they represent an industry standard method of comparing certain costs on a per unit basis. Cash operating margin is defined as the realized selling price less total cash cost per silver equivalent ounce. The Company believes that certain investors use this information to evaluate the Company’s performance. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. During the three months ended September 30, 2010, the Company’s tot al cash costs, which were equivalent to the Company’s cost of sales in accordance with GAAP, were $3.98 per ounce of silver and $300 per ounce of gold (2009 – $3.97 per ounce of silver and $300 per ounce of gold).

For further information, please contact: 
 
Brad Kopp 
Vice President, Investor Relations 
Silver Wheaton Corp. 
Tel: 1-800-380-8687 
Email: info@silverwheaton.com 
Website: www.silverwheaton.com 



EX-99.2 3 exhibit99-2.htm THIRD QUARTER FINANCIAL STATEMENTS Exhibit 99.2
Exhibit 99.2





Management’s Discussion and Analysis of Results of Operations and Financial Condition for the Three and Nine Months Ended September 30, 2010

This Management’s Discussion and Analysis should be read in conjunction with Silver Wheaton Corp.’s (“Silver Wheaton” or the “Company”) interim unaudited consolidated financial statements for the three and nine months ended September 30, 2010 and related notes thereto which have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). In addition, the following should be read in conjunction with the 2009 audited consolidated financial statements, the related Management’s Discussion and Analysis and the 2009 Annual Information Form as well as other information relating to Silver Wheaton on file with the Canadian provincial securities regulatory authorities and on SEDAR at www.sedar.com. This Management’s Discussion and Analysis contains “forward looking” statements that are subject to risk factors set out in the cautionary note contained herein. All figures are in United States dollars unless otherwise noted. This Management’s Discussion and Analysis has been prepared as of November 8, 2010.

Third Quarter Highlights

  • Record net earnings for the three and nine months ended September 30, 2010 of $69.2 million ($0.20 per share) and $167.1 million ($0.49 per share), respectively, compared with $33.6 million ($0.11 per share) and $67.1 million ($0.23 per share) for the comparable periods in 2009.

  • Operating cash flows for the three and nine months ended September 30, 2010 of $70.5 million ($0.20 per share1 ) and $195.1 million ($0.57 per share1 ), respectively, compared with $45.4 million ($0.14 per share1 ) and $95.0 million ($0.32 per share1 ) for the comparable periods in 2009.

  • Attributable silver equivalent production for the three and nine months ended September 30, 2010 was 5.9 million ounces (5.5 million ounces of silver and 7,000 ounces of gold) and 17.4 million ounces (15.8 million ounces of silver and 24,700 ounces of gold), respectively, representing an increase of 41% and 49% over the comparable periods in 2009.

  • Silver equivalent sales for the three and nine months ended September 30, 2010 were 4.7 million ounces (4.3 million ounces of silver and 7,100 ounces of gold) and 14.8 million ounces (13.3 million ounces of silver and 23,300 ounces of gold), respectively, representing an increase of 2% and 38% over the comparable periods in 2009.

  • Total cash costs for the three and nine months ended September 30, 2010 were $4.09 and $4.05 per silver equivalent ounce, respectively, compared with $4.08 and $4.02 per silver equivalent ounce for the comparable periods in 2009.

  • Cash operating margin1 (defined as revenue less cash costs) for the three and nine months ended September 30, 2010 was $15.72 and $14.42 per silver equivalent ounce, respectively, representing an increase of 42% and 46% over the comparable periods in 2009.

  • As at September 30, 2010, approximately 2.2 million payable silver equivalent ounces attributable to the Company have been produced at the various mines and will be recognized in future sales as they are delivered to the Company under the terms of their contracts.

  • Goldcorp Inc. (“Goldcorp”) announced that its world-class gold-silver-lead-zinc Peñasquito mine achieved commercial production during the quarter with peak throughput rates as high as 105,000 tonnes per day. The ramp up to full production capacity of 130,000 tonnes per day is anticipated by early 2011. Annual production attributable to Silver Wheaton from the mine is expected to average approximately 7 million ounces of silver over the estimated 22 year mine life.

  • During August, Goldcorp completed the sale of the San Dimas mine to Primero Mining Corp. (“Primero”). In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, which was set to expire in 2029, has been extended to the life of mine. During the first four years following closing of the transaction, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Primero will deliver to the Company a per annum amount equal to the first 6 millio n ounces of payable silver produced at San Dimas and 50% of any excess. Goldcorp will continue to guarantee the delivery by Primero of all silver produced and owing to the Company until 2029, and a payment of $0.50 per ounce for any shortfall below 215 million cumulative silver ounces delivered to Silver Wheaton by the end of 2031. Primero has provided Silver Wheaton with a right of first refusal on any metal stream or similar transaction it enters into.

 
1Refer to discussion on non-GAAP measures.

SILVER WHEATON THIRD QUARTER REPORT [1]




  • Barrick Gold Corp.’s world-class gold-silver Pascua-Lama project remains on track to enter production in the first quarter of 2013, with detailed engineering and procurement nearing completion and earthworks underway. Once in production, Pascua Lama is forecast to be one of the largest and lowest cost gold mines in the world with an expected mine life in excess of 25 years. In its first five years of operation, Silver Wheaton’s attributable silver production is expected to average 9 million ounces annually.

Overview

Silver Wheaton Corp. (“Silver Wheaton” or the “Company”) is a mining company which generates its revenue primarily from the sale of silver. The Company is listed on the New York Stock Exchange (symbol: SLW) and the Toronto Stock Exchange (symbol: SLW). In addition, the Company has share purchase warrants that trade on the Toronto Stock Exchange (symbols: SLW.WT.B and SLW.WT.U, respectively).

To date, the Company has entered into fifteen long-term silver purchase agreements and two long-term precious metal purchase agreements whereby Silver Wheaton acquires silver and gold production from the counterparties for a per ounce cash payment at or below the prevailing market price. During the three months ended September 30, 2010, the per ounce price paid by the Company for silver and gold under the agreements averaged $3.98 and $300, respectively. The primary drivers of the Company’s financial results are the volume of silver production at the various mines and the price of silver realized by Silver Wheaton upon sale.

SILVER WHEATON THIRD QUARTER REPORT [2]




Outlook

Silver Wheaton is the largest silver streaming company in the world. Forecast 2010 attributable production, based upon its current agreements, is 22.0 million ounces of silver and 28,000 ounces of gold, for total attributable production of 23.5 million silver equivalent ounces. By 2013, annual attributable production is anticipated to increase significantly to approximately 40 million silver equivalent ounces. This growth is driven by the Company’s portfolio of world-class assets, including silver streams on Goldcorp’s Peñasquito mine and Barrick’s Pascua-Lama project.

At September 30, 2010, the Company had approximately $255 million of cash on hand and $400 million of available credit under its revolving bank debt facility. This cash and available credit, together with strong operating cash flows, positions the Company well to pursue the acquisition of additional accretive silver interests.

The following table summarizes the silver and gold interests currently owned by the Company:

Silver and Gold Interests

Owner

Location of Mine

Attributable Production to be Purchased

Term of Agreement

Date of Contract

Silver

Gold

San Dimas

Primero Mining Corp. 1

Mexico

100%1

-

Life of Mine 1

15-Oct-04

Zinkgruvan

Lundin Mining Corporation

Sweden

100%

-

Life of Mine

8-Dec-04

Yauliyacu

Glencore International AG

Peru

100% 2

-

20 years

23-Mar-06

Peñasquito

Goldcorp Inc.

Mexico

25%

-

Life of Mine

24-Jul-07

Minto

Capstone Mining Corp.

Canada

100%

100% 3

Life of Mine

1-Dec-08

Cozamin

Capstone Mining Corp.

Mexico

100%

-

10 years

4-Apr-07

Barrick

 

 

 

 

Pascua-Lama

Barrick Gold Corporation

Chile/Argentina

25%

-

Life of Mine

8-Sep-09

Lagunas Norte

Barrick Gold Corporation

Peru

100%

-

4 years 4

8-Sep-09

Pierina

Barrick Gold Corporation

Peru

100%

-

4 years 4

8-Sep-09

Veladero

Barrick Gold Corporation

Argentina

100% 5

-

4 years 4

8-Sep-09

Other

 

 

 

 

 

 

Los Filos

Goldcorp Inc.

Mexico

100%

-

25 years

15-Oct-04

Keno Hill

Alexco Resources Corp.

Canada

25%

-

Life of Mine

2-Oct-08

La Negra

Aurcana Corporation 6

Mexico

50%

-

Life of Mine

2-Jun-08

Mineral Park

Mercator Minerals Ltd.

USA

100%

-

Life of Mine

17-Mar-08

Neves-Corvo

Lundin Mining Corporation

Portugal

100%

-

Life of Mine 7

5-Jun-07

Stratoni

European Goldfields Ltd. 8

Greece

100%

-

Life of Mine

23-Apr-07

Campo Morado

Farallon Mining Ltd.

Mexico

75%

-

Life of Mine

13-May-08

Aljustrel

I'M SGPS

Portugal

100%

-

Life of Mine 7

5-Jun-07

Loma de La Plata

Pan American Silver Corp.

Argentina

12.5%

-

Life of Mine

n/a 9

Rosemont

Augusta Resource Corporation

USA

100%

100%

Life of Mine

11-Feb-10

 

1) On August 6, 2010, Goldcorp completed the sale of the San Dimas mine, which was previously part of the Luismin mines, to Primero. In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, which was set to expire in 2029, has been extended to the life of mine. During the first four years following closing of the transaction, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Primero will deliver to the Company a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess.
2) To a maximum of 4.75 million ounces per annum. In the event that silver produced at Yauliyacu in any year totals less than 4.75 million ounces, the amount sold to Silver Wheaton in subsequent years will be increased to make up for the shortfall, so long as production allows.
3) The Company is entitled to acquire 100% of the first 50,000 ounces of gold produced per annum and 50% thereafter, through to December 1, 2010. Following that date, the Company is entitled to acquire 100% of the first 30,000 ounces of gold produced per annum and 50% thereafter.
4) Barrick will deliver to Silver Wheaton silver production from the currently producing mines until December 31, 2013. In addition, during 2014 and 2015, Silver Wheaton will be entitled to all or a portion of the silver production from these mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies a completion guarantee.
5) Silver Wheaton's attributable silver production is subject to a maximum of 8% of the silver contained in the ore mined at Veladero during the period.
6) 92% owned by Aurcana Corporation.
7) With a nominal term of 50 years.
8) 95% owned by European Goldfields Ltd.
9) Terms of the agreement not yet finalized.

SILVER WHEATON THIRD QUARTER REPORT [3]




SAN DIMAS

On October 15, 2004, the Company entered into an agreement (amended on March 30, 2006) with Goldcorp to acquire an amount equal to 100% of the silver produced by Goldcorp’s Luismin mining operations (the “Luismin Agreement”) in Mexico (owned at the date of the transaction) for a period of 25 years. The Luismin operations consisted primarily of the San Dimas and the Los Filos mines.

On August 6, 2010, Goldcorp completed the sale of the San Dimas mine to Primero. In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, as it relates to San Dimas, has been extended to the life of mine. During the first four years following closing of the transaction, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Primero will deliver to the Company a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess. Goldcorp will continue to guarantee the delivery by Primero of all silver produced and owing to the Company until 2029, and a payment of $0 .50 per ounce for any shortfall below 215 million cumulative silver ounces delivered to Silver Wheaton by the end of 2031. Primero has provided Silver Wheaton with a right of first refusal on any metal stream or similar transaction it enters into.

As of September 30, 2010, the Company has received nearly 40 million ounces of silver under the above noted agreements, generating cumulative operating cash flows of approximately $337 million. Approximately 95% of this silver was from the San Dimas mine. As at December 31, 2009, the San Dimas mine had proven and probable reserves of 60.9 million ounces of silver and inferred resources of 154.6 million ounces of silver (as described in the Reserves and Resources section of this Management’s Discussion and Analysis).

ZINKGRUVAN

On December 8, 2004, the Company entered into an agreement with Lundin Mining Corporation (“Lundin”) to acquire 100% of the silver produced by Lundin’s Zinkgruvan mining operations in Sweden for the life of mine.

As of September 30, 2010, the Zinkgruvan mine has delivered in excess of 10 million ounces of silver to the Company under the agreement, generating cumulative operating cash flows of $92 million. As at June 30, 2010, Zinkgruvan had proven and probable silver reserves of 36.4 million ounces, measured and indicated silver resources of 15.7 million ounces and inferred silver resources of 12.6 million ounces (as described in the Reserves and Resources section of this Management’s Discussion and Analysis).

YAULIYACU

On March 23, 2006, the Company entered into an agreement with Glencore International AG (“Glencore”) to acquire an amount equal to 100% of the silver produced from Glencore’s Yauliyacu mining operations in Peru, up to a maximum of 4.75 million ounces per year, for a period of 20 years. In the event that silver produced at Yauliyacu in any year totals less than 4.75 million ounces, the amount sold to Silver Wheaton in subsequent years will be increased to make up for the shortfall, so long as production allows. During the term of the agreement, Silver Wheaton has a right of first refusal on any future sales of silver streams from the Yauliyacu mine and a right of first offer on future sales of silver streams from any other mine owned by Glencore at the time of the initial transaction. In addition, Silver Wheaton has an option to extend the 20 year term of the agreement in five year increments, on substantially the same terms as the existing agr eement, subject primarily to an adjustment related to silver price expectations at the time.

As of September 30, 2010, Glencore has delivered in excess of 13 million ounces of silver to the Company under the agreement, generating cumulative operating cash flows of $139 million. As at December 31, 2009, Yauliyacu had proven and probable silver reserves of 11.0 million ounces, measured and indicated silver resources of 43.3 million ounces and inferred silver resources of 78.2 million ounces (as described in the Reserves and Resources section of this Management’s Discussion and Analysis).

SILVER WHEATON THIRD QUARTER REPORT [4]




PEÑASQUITO

On July 24, 2007, the Company entered into an agreement to acquire an amount equal to 25% of the silver produced from Goldcorp’s Peñasquito mining operations in Mexico for the life of mine.

On September 12, 2010, Goldcorp announced that the Peñasquito mine achieved commercial production during the quarter with peak throughput rates as high as 105,000 tonnes per day. The ramp up to full production capacity of 130,000 tonnes per day is anticipated by early 2011. Annual production attributable to Silver Wheaton from the mine is expected to average approximately 7 million ounces of silver over the estimated 22 year mine life.

As of September 30, 2010, Goldcorp has delivered nearly 3 million ounces of silver to the Company under the agreement, generating cumulative operating cash flows of approximately $35 million. As at December 31, 2009, the Company’s 25% share of the Peñasquito proven and probable silver reserves was 267.5 million ounces, measured and indicated silver resources was 97.8 million ounces and inferred silver resources was 20.4 million ounces (as described in the Reserves and Resources section of this Management’s Discussion and Analysis).

MINTO

On May 21, 2009, the Company completed the acquisition of Silverstone Resources Corp. (the “Silverstone Acquisition”). As part of the Silverstone Acquisition, the Company acquired a precious metal purchase agreement with Capstone Mining Corp. (“Capstone”) to acquire 100% of the silver and gold produced from Capstone’s Minto mine in Canada for the life of mine. The Company is entitled to acquire 100% of the first 50,000 ounces of gold produced per annum and 50% thereafter through to December 1, 2010. Following that date, the Company is entitled to acquire 100% of the first 30,000 ounces of gold produced per annum and 50% thereafter.

As of September 30, 2010, the Minto mine has delivered 0.3 million ounces of silver and in excess of 40,000 ounces of gold to the Company under the agreement, generating cumulative operating cash flows of approximately $36 million. As at December 31, 2009, Minto had proven and probable reserves of 2.1 million ounces of silver and 220,000 ounces of gold, measured and indicated resources of 2.4 million ounces of silver and 230,000 ounces of gold and inferred resources of 0.6 million ounces of silver and 60,000 ounces of gold (as described in the Reserves and Resources section of this Management’s Discussion and Analysis).

COZAMIN

As part of the Silverstone Acquisition, the Company acquired a silver purchase agreement with Capstone to acquire 100% of the silver produced from Capstone’s Cozamin mine in Mexico for a period of 10 years, commencing on April 4, 2007.

As of September 30, 2010, the Cozamin mine has delivered approximately 2 million ounces of silver to the Company under the agreement, generating cumulative operating cash flows of $27 million. As at December 31, 2009, Cozamin had proven and probable silver reserves of 17.4 million ounces, measured and indicated silver resources of 3.3 million ounces and inferred silver resources of 5.7 million ounces (as described in the Reserves and Resources section of this Management’s Discussion and Analysis).

BARRICK

On September 8, 2009, the Company entered into an agreement with Barrick Gold Corporation (“Barrick”) to acquire an amount equal to 25% of the life of mine silver production from its Pascua-Lama project, as well as 100% of the silver production from its Lagunas Norte, Pierina and Veladero1 mines until the end of 2013. Silver Wheaton will make total upfront cash payments of $625 million, of which $350 million has been paid to date. The remaining $275 million is payable in annual installments of $137.5 million due on the second and third anniversaries of the transaction.

Barrick has provided Silver Wheaton with a completion guarantee, requiring them to complete Pascua-Lama to at least 75% of design capacity by December 31, 2015. During 2014 and 2015, Silver Wheaton will be entitled to the silver production from the currently producing mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies the completion guarantee. If the requirements of the completion guarantee have not been satisfied by December 31, 2015, the agreement may be terminated by Silver Wheaton. In such an event, Silver Wheaton will be entitled to the return of the upfront cash consideration of $625 million less a credit for silver delivered up to the date of that event.

 
1 Silver Wheaton's attributable silver production is subject to a maximum of 8% of the silver contained in the ore mined at Veladero during the period.

SILVER WHEATON THIRD QUARTER REPORT [5]




Argentina recently passed a federal glacier protection law that restricts mining in areas on or near the nation's glaciers. As stated by Barrick in their third quarter Management Discussion & Analysis, Barrick's view is that their activities do not take place on glaciers and are undertaken pursuant to existing environmental approvals issued on the basis of comprehensive environmental impact studies that fully considered potential impacts on water resources, glaciers and other sensitive environmental areas. Barrick also states that it believes that the new federal law is unconstitutional and that it believes it is legally entitled to continue their current activities on the basis of existing approvals. It is possible that others may attempt to bring legal challenges seeking to restrict Barrick's activities based on the new federal law. Barrick indicates in their disclosure that they will vigorously oppose any such challenges.

As of September 30, 2010, Barrick has delivered approximately 3 million ounces of silver to the Company under the agreement, generating cumulative operating cash flows of approximately $38 million. As at December 31, 2009, the Company’s 25% share of the Pascua-Lama proven and probable silver reserves was 167.8 million ounces, measured and indicated silver resources was 34.0 million ounces and inferred silver resources was 3.3 million ounces (as described in the Reserves and Resources section of this Management’s Discussion and Analysis). In addition, the Company’s estimated share of the silver resources contained in the Lagunas Norte, Pierina, and Veladero mines is 81.5 million ounces of proven and probable silver reserves, 1.6 million ounces of measured and indicated silver resources and 1.6 million ounces of inferred silver resources.

OTHER

Other silver and gold interests consist of the following:

i.     

An agreement with Goldcorp to acquire 100% of the silver production from its Los Filos mine in Mexico for a period of 25 years, commencing October 15, 2004. In addition, pursuant to Goldcorp’s sale of the San Dimas mine, Goldcorp is obligated to deliver to Silver Wheaton 1.5 million ounces of silver per year until August 6, 2014, which is reflected in these financial statements as part of the silver production and sales relating to San Dimas.

ii.     

An agreement with Mercator Minerals Ltd. to acquire an amount equal to 100% of the life of mine silver production from its Mineral Park mine in the United States;

iii.     

An agreement with Aurcana Corporation1 to acquire an amount equal to 50% of the life of mine silver production from its 92% owned La Negra mine in Mexico;

iv.     

An agreement with Hellas Gold S.A., a subsidiary of European Goldfields Ltd., to acquire 100% of the life of mine silver production from its 95% owned Stratoni mine in Greece;

v.     

An agreement with Farallon Mining Ltd. to acquire an amount equal to 75% of the life of mine silver production from its Campo Morado mine in Mexico;

vi.     

An agreement with Alexco Resources Corp. to acquire an amount equal to 25% of the life of mine silver production from its Keno Hill project in Canada;

vii.     

An agreement with I’M SGPS to acquire 100% of the life of mine silver production from its Aljustrel mine in Portugal;

viii.     

An agreement with Lundin to acquire 100% of the life of mine silver production from its Neves-Corvo mine in Portugal;

ix.     

An agreement with Pan American Silver Corp. to acquire an amount equal to 12.5% of the life of mine silver production from the Loma de La Plata zone of the Navidad project in Argentina, the definitive terms of which are expected to be finalized by the end of 2010;

x.     

An agreement with Augusta Resource Corporation to acquire an amount equal to 100% of the life of mine silver and gold production from the Rosemont Copper project in the United States.

 
1 Since January 1, 2009, the La Negra mine produced approximately 701,000 ounces of silver attributable to Silver Wheaton, of which approximately 166,000 ounces have not been delivered to Silver Wheaton pursuant to the terms of the related silver purchase agreement as at November 8, 2010. The Company is currently working with the management of Aurcana Corporation in order to remedy this.

SILVER WHEATON THIRD QUARTER REPORT [6]




During the quarter, Alexco Resources Corp. completed construction of its Bellekeno mine and initiated mill commissioning. Bellekeno is located within the Keno Hill Silver District in Canada's Yukon Territory, which is historically one of the highest-grade and most prolific silver producing districts in the world. With more than 35 past-producing mines, the 230 square kilometer land package possesses exceptional exploration upside. Between 1921 and 1988, the Keno Hill Silver District produced more than 217 million ounces of silver with average grades of 40.5 ounces per ton silver, 5.6% lead and 3.1% zinc (Yukon Government's Minfile database).

As of September 30, 2010, the Company has received nearly 8 million ounces of silver under these agreements, generating cumulative operating cash flows of $79 million.

SILVER WHEATON THIRD QUARTER REPORT [7]




SUMMARY OF OUNCES PRODUCED AND SOLD

2010

2009

 

2008

 

(in thousands)

 

Q3 2

   

Q2

   

Q1

   

Q4

   

Q3

   

Q2

   

Q1

   

Q4

 
 

 

   

 

   

 

 

Silver ounces produced

 

 

   

 

   

 

 

San Dimas 3

 

1,255

   

1,110

   

1,206

   

1,275

   

1,232

   

1,264

   

1,323

   

1,275

 

Zinkgruvan

 

508

   

478

   

387

   

505

   

415

   

480

   

461

   

374

 

Yauliyacu

 

633

   

692

   

737

   

783

   

750

   

870

   

739

   

787

 

Peñasquito

 

1,017

   

800

   

520

   

441

   

165

   

162

   

160

   

198

 

Minto

 

46

   

49

   

62

   

89

   

46

   

37

   

-

   

-

 

Cozamin

 

381

   

286

   

401

   

388

   

366

   

262

   

-

   

-

 

Barrick 4

 

682

   

697

   

780

   

756

   

223

   

-

   

-

   

-

 

Other 5

 

1,023

   

1,191

   

885

   

979

   

783

   

750

   

559

   

583

 

 

 

5,545

   

5,303

   

4,978

   

5,216

   

3,980

   

3,825

   

3,242

   

3,217

 

Silver equivalent ounces of
   gold produced 6

 

 

   

 

   

 

 

Minto

 

402

   

522

   

645

   

552

   

233

   

428

   

-

   

-

 

Silver equivalent
    ounces produced

 

5,947

   

5,825

   

5,623

   

5,768

   

4,213

   

4,253

   

3,242

   

3,217

 
 

 

   

 

   

 

 

Silver ounces sold

 

 

   

 

   

 

 

San Dimas 3

 

1,274

   

1,076

   

1,206

   

1,264

   

1,234

   

1,254

   

1,352

   

1,245

 

Zinkgruvan

 

635

   

313

   

498

   

357

   

433

   

469

   

451

   

303

 

Yauliyacu

 

87

   

517

   

581

   

1,027

   

698

   

546

   

743

   

602

 

Peñasquito

 

692

   

656

   

424

   

191

   

190

   

130

   

135

   

190

 

Minto

 

40

   

46

   

47

   

55

   

68

   

(1)

   

-

   

-

 

Cozamin

 

306

   

412

   

281

   

359

   

384

   

213

   

-

   

-

 

Barrick 4

 

533

   

727

   

783

   

751

   

187

   

-

   

-

   

-

 

Other 5

 

710

   

897

   

607

   

670

   

780

   

327

   

477

   

398

 

 

 

4,277

   

4,644

   

4,427

   

4,674

   

3,974

   

2,938

   

3,158

   

2,738

 

Silver equivalent ounces of
   gold sold 6

 

 

   

 

   

 

 

Minto

 

411

   

496

   

571

   

441

   

626

   

12

   

-

   

-

 

Silver equivalent
    ounces sold

 

4,688

   

5,140

   

4,998

   

5,115

   

4,600

   

2,950

   

3,158

   

2,738

 

1)
Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.  As at September 30, 2010, approximately 2.2 million payable silver equivalent ounces attributable to the Company have been produced and the respective payable ounces will be recognized in future sales as they are delivered to the Company under the terms of their contracts.
2)
Certain production figures are based on management estimates.
3)
The ounces produced and sold during the third quarter of 2010 include 250,000 ounces received from Goldcorp, in connection with Goldcorp’s four year commitment to deliver to Silver Wheaton 1.5 million ounces of silver per annum resulting from their sale of San Dimas to Primero.
4)
Comprised of the Lagunas Norte, Pierina and Veladero mines.
5)
Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.
6)
Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.

SILVER WHEATON THIRD QUARTER REPORT [8]



QUARTERLY FINANCIAL REVIEW

 

2010

2009

2008

 

 

Q3

 

 

Q2

 

 

Q1

 

 

Q4

 

 

Q3

 

 

Q2

 

 

Q1

 

 

Q4

 

Total silver ounces sold (000's)

 

4,277

 

 

4,644

 

 

4,427

 

4,674

3,974

2,938

3,158

2,738

Average realized silver price 1

$

19.51

 

$

18.46

 

$

17.27

 

$

17.63

 

$

15.14

 

$

14.04

 

$

11.90

 

$

10.49

Silver sales (000's)

$

83,409

 

$

85,759

 

$

76,462

 

$

82,409

 

$

60,194

 

$

41,268

 

$

37,572

 

$

28,725

 

Total gold ounces sold

 

7,127

 

 

7,584

 

 

8,611

 

7,033

9,953

145

-

-

Average realized gold price 1

$

1,323

 

$

1,219

 

$

1,100

 

$

1,158

 

$

962

 

$

925

 

$

-

 

$

-

 

Gold sales (000's)

$

9,425

 

$

9,245

 

$

9,476

 

$

8,142

 

$

9,573

 

$

135

 

$

-

 

$

-

 

Total silver equivalent
     ounces sold 2

 

4,688

 

 

5,140

 

 

4,998

 

5,115

4,600

2,950

3,158

2,738

Average realized silver
     equivalent price 1

$

19.81

 

$

18.48

 

$

17.20

 

$

17.70

 

$

15.16

 

$

14.04

 

$

11.90

 

$

10.49

 

Total sales (000's)

$

92,834

 

$

95,004

 

$

85,938

 

$

90,551

 

$

69,767

 

$

41,403

 

$

37,572

 

$

28,725

 

Average cash cost, silver 1, 3

$

3.98

 

$

3.97

 

$

3.97

 

$

3.97

 

$

3.97

 

$

3.99

 

$

3.97

 

$

3.97

Average cash cost, gold 1, 3

$

300

 

$

300

 

$

300

 

$

300

 

$

300

 

$

300

 

$

-

 

$

-

 

Net earnings (loss)
     (000's)

$

69,234

 

$

53,258

 

$

44,630

 

$

50,811

 

$

33,565

 

$

18,437

 

$

15,111

 

$

(54,193

)4

Earnings (loss) per share

 

 

 

 

 

 

 

 

 

Basic

$

0.20

 

$

0.16

 

$

0.13

 

$

0.15

 

$

0.11

 

$

0.07

 

$

0.06

 

$

(0.22

)

Diluted

$

0.20

 

$

0.15

 

$

0.13

 

$

0.15

 

$

0.11

 

$

0.06

 

$

0.06

 

$

(0.22

)

Cash flow from
     operations (000's)

$

70,485

 

$

66,990

 

$

57,600

 

$

70,981

 

$

45,379

 

$

26,452

 

$

23,120

 

$

15,446

 

Cash flow from operations per share 3

 

 

 

 

 

 

 

 

 

Basic

$

0.20

 

$

0.20

 

$

0.17

 

$

0.21

 

$

0.14

 

$

0.09

 

$

0.09

 

$

0.06

Diluted

$

0.20

 

$

0.19

 

$

0.17

 

$

0.21

 

$

0.14

 

$

0.09

 

$

0.08

 

$

0.06

Total assets (000's)

$

2,363,625

 

$

2,379,472

 

$

2,286,100

 

$

2,237,224

 

$

2,299,770

 

$

1,462,514

 

$

1,291,750

 

$

1,270,646

 

Total liabilities (000's)

$

385,964

 

$

530,645

 

$

508,337

 

$

513,299

 

$

652,591

 

$

156,614

 

$

160,336

 

$

382,621

Shareholders' equity
     (000's)

$

1,977,661

 

$

1,848,827

 

$

1,777,763

 

$

1,723,925

 

$

1,647,179

 

$

1,305,900

 

$

1,131,414

 

$

888,025

 

 

1) Expressed as United States dollars per ounce.
2) Gold ounces sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.
3) Refer to discussion on non-GAAP measures.
4) Includes a $64 million non-cash write-down of long-term investments held.

Changes in sales, net earnings and cash flow from operations from quarter to quarter are affected primarily by fluctuations in production at the mines, the timing of shipments, changes in the price of silver as well as acquisitions of silver purchase agreements.

SILVER WHEATON THIRD QUARTER REPORT [9]




Results of Operations and Operational Review

The Company currently has nine business segments: the silver produced by the San Dimas, Zinkgruvan, Yauliyacu, Peñasquito, Cozamin, Barrick and Other mines, the silver and gold produced by the Minto mine and corporate operations.

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2010

 

Ounces produced 3

Ounces sold

Sales

Average realized
price
($'s per ounce)

Total cash cost
($'s per ounce)
4

Total depletion
($'s per ounce) 4

Net earnings
(loss)

Cash flow from
(used in) operations

Silver

San Dimas

1,255

1,274

$

25,613

$

20.11

 

$

4.04

 

$

0.78

 

$

19,471

 

$

20,468

 

Zinkgruvan

508

635

12,680

19.95

 

4.04

 

1.72

 

9,021

 

9,522

 

Yauliyacu

633

87

1,548

17.79

 

3.98

 

3.47

 

900

 

1,202

 

Peñasquito

1,017

692

12,980

18.76

 

3.90

 

2.54

 

8,521

 

10,281

 

Minto

46

40

912

22.92

 

3.90

 

3.69

 

610

 

567

 

Cozamin

381

306

5,825

19.06

 

4.04

 

4.62

 

3,177

 

4,868

 

Barrick 5

682

533

10,202

19.16

 

3.90

 

3.58

 

6,218

 

8,281

 

Other 6

1,023

710

 

13,649

 

 

19.22

 

 

3.93

 

 

4.51

 

 

7,658

 

 

10,518

 

5,545

4,277

$

83,409

$

19.51

 

$

3.98

 

$

2.53

 

$

55,576

 

$

65,707

 

Gold

Minto

6,961

7,127

$

9,425

 

$

1,323

 

$

300

 

$

237

 

$

5,599

 

$

5,972

 

Silver Equivalent 7

5,947

4,688

$

92,834

$

19.81

 

$

4.09

 

$

2.67

 

$

61,175

 

$

71,679

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,059

 

 

(1,194

)

 

5,947

4,688

$

92,834

 

$

19.81

 

$

4.09

 

$

2.67

 

$

69,234

 

$

70,485

 

 

1)     

All figures in thousands except gold ounces produced and sold and per ounce amounts.

2)     

Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.

3)     

Certain production figures are based on management estimates.

4)     

Refer to discussion on non-GAAP measures.

5)     

Comprised of the Lagunas Norte, Pierina and Veladero mines.

6)     

Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.

7)     

Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.

SILVER WHEATON THIRD QUARTER REPORT [10]




 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2009

 

Ounces produced

Ounces sold

Sales

Average realized
price
($'s per ounce)

Total cash cost
($'s per ounce) 3

Total depletion
($'s per ounce) 3

Net earnings
(loss)

Cash flow from
(used in) operations

Silver

San Dimas

1,232

1,234

$

18,886

$

15.30

 

$

4.02

 

$

0.65

 

$

13,120

 

$

13,925

 

Zinkgruvan

415

433

6,861

15.85

 

4.02

 

1.78

 

4,350

 

4,415

 

Yauliyacu

750

698

10,600

15.19

 

3.94

 

3.47

 

5,426

 

7,849

 

Peñasquito

165

190

2,691

14.15

 

3.90

 

2.36

 

1,502

 

1,950

 

Minto

46

68

1,043

15.29

 

3.90

 

4.48

 

472

 

794

 

Cozamin

366

384

5,736

14.94

 

4.00

 

4.72

 

2,389

 

4,229

 

Barrick 4

223

187

3,008

16.07

 

3.90

 

3.46

 

1,631

 

2,278

 

Other 5

783

780

 

11,369

 

 

14.56

 

 

3.91

 

 

3.95

 

 

5,224

 

 

7,398

 

3,980

3,974

$

60,194

$

15.14

 

$

3.97

 

$

2.59

 

$

34,114

 

$

42,838

 

Gold

Minto

3,698

9,953

$

9,573

 

$

962

 

$

300

 

$

288

 

$

3,724

 

$

5,330

 

Silver Equivalent 6

4,213

4,600

$

69,767

$

15.16

 

$

4.08

 

$

2.86

 

$

37,838

 

$

48,168

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,272)

 

 

(2,788)

 

 

4,213

4,600

$

69,767

 

$

15.16

 

$

4.08

 

$

2.86

 

$

33,566

 

$

45,380

 

 

1) All figures in thousands except gold ounces produced and sold and per ounce amounts.
2) Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.
3) Refer to discussion on non-GAAP measures.
4) Comprised of the Lagunas Norte, Pierina and Veladero mines.
5) Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.
6) Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.

For the three months ended September 30, 2010, net earnings and cash flow from operations were $69.2 million and $70.5 million, respectively, compared with $33.6 million and $45.4 million for the comparable periods in 2009, with the variance being primarily attributable to the following factors:

  • 2% increase in the number of silver equivalent ounces sold, due to:

      i.

    An increase in deliveries relating to Peñasquito, reflecting the ramping up of the milling operations which commenced in late 2009 and achieved commercial production in the third quarter of 2010; and

      ii.

    An increase in deliveries related to the Barrick silver interest, which was acquired on September 8, 2009; partially offset by

      iii.

    Shipment timing differences of stockpiled concentrate, primarily relating to Yauliyacu, Zinkgruvan, Stratoni and Campo Morado;

  • 31% increase in the average realized selling price of silver; and

  • A $12.3 million decrease in corporate costs as explained in the Corporate Costs section of this Management’s Discussion and Analysis ($1.6 million decrease from an operating cash-flow perspective).

    SILVER WHEATON THIRD QUARTER REPORT [11]




     

     

     

     

     

     

     

     

     

     

     

     

    Nine Months Ended September 30, 2010

     

    Ounces produced 3

    Ounces sold

    Sales

    Average realized
    price
    ($'s per ounce)

    Total cash cost
    ($'s per ounce) 4

    Total depletion
    ($'s per ounce) 4

    Net earnings
    (loss)

    Cash flow from
    (used in) operations

    Silver

    San Dimas

    3,571

    3,556

    $

    66,463

    $

    18.69

     

    $

    4.04

     

    $

    0.78

     

    $

    49,308

     

    $

    52,099

     

    Zinkgruvan

    1,373

    1,446

    26,964

    18.64

     

    4.04

     

    1.72

     

    18,635

     

    19,578

     

    Yauliyacu

    2,062

    1,185

    21,372

    18.04

     

    3.98

     

    3.47

     

    12,545

     

    16,662

     

    Peñasquito

    2,337

    1,772

    32,466

    18.32

     

    3.90

     

    2.54

     

    21,050

     

    25,556

     

    Minto

    157

    133

    2,562

    19.19

     

    3.90

     

    3.69

     

    1,549

     

    1,795

     

    Cozamin

    1,068

    999

    18,226

    18.26

     

    4.03

     

    4.62

     

    9,590

     

    14,524

     

    Barrick 5

    2,159

    2,043

    36,942

    18.08

     

    3.90

     

    3.54

     

    21,749

     

    25,896

     

    Other 6

    3,099

    2,214

     

    40,635

     

     

    18.35

     

     

    3.92

     

     

    4.38

     

     

    22,254

     

     

    31,935

     

    15,826

    13,348

    $

    245,630

    $

    18.40

     

    $

    3.97

     

    $

    2.69

     

    $

    156,680

     

    $

    188,045

     

    Gold

    Minto

    24,665

    23,321

    $

    28,146

     

    $

    1,207

     

    $

    300

     

    $

    235

     

    $

    15,658

     

    $

    19,357

     

    Silver Equivalent 7

    17,395

    14,826

    $

    273,776

    $

    18.47

     

    $

    4.05

     

    $

    2.79

     

    $

    172,338

     

    $

    207,402

     

    Corporate

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (5,217)

     

     

    (12,327)

     

     

    17,395

    14,826

    $

    273,776

     

    $

    18.47

     

    $

    4.05

     

    $

    2.79

     

    $

    167,121

     

    $

    195,075

     

     

    1)     

    All figures in thousands except gold ounces produced and sold and per ounce amounts.

    2)     

    Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.

    3)     

    Certain production figures are based on management estimates.

    4)     

    Refer to discussion on non-GAAP measures.

    5)     

    Comprised of the Lagunas Norte, Pierina and Veladero mines.

    6)     

    Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.

    7)     

    Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.

    SILVER WHEATON THIRD QUARTER REPORT [12]




     

     

     

     

     

     

     

     

     

     

    Nine Months Ended September 30, 2009

     

    Ounces produced

    Ounces sold

    Sales

    Average realized
    price
    ($'s per ounce)

    Total cash cost
    ($'s per ounce) 3

    Total depletion
    ($'s per ounce) 3

    Net earnings
    (loss)

    Cash flow from
    (used in) operations

    Silver

    San Dimas

    3,819

    3,840

    $

    52,990

    $

    13.81

     

    $

    4.02

     

    $

    0.71

     

    $

    34,817

     

    $

    37,553

     

    Zinkgruvan

    1,356

    1,353

    19,023

    14.06

     

    4.02

     

    1.78

     

    11,175

     

    12,793

     

    Yauliyacu

    2,359

    1,987

    26,881

    13.53

     

    3.93

     

    3.47

     

    12,184

     

    19,082

     

    Peñasquito

    487

    455

    6,106

    13.42

     

    3.90

     

    2.35

     

    3,260

     

    4,331

     

    Minto

    83

    67

    1,036

    15.31

     

    3.90

     

    4.48

     

    469

     

    808

     

    Cozamin

    628

    597

    8,671

    14.53

     

    4.00

     

    4.70

     

    3,479

     

    7,617

     

    Barrick 4

    223

    187

    3,008

    16.07

     

    3.90

     

    3.46

     

    1,631

     

    2,278

     

    Other 5

    2,092

    1,584

     

    21,319

     

     

    13.44

     

     

    3.91

     

     

    4.03

     

     

    8,715

     

     

    14,883

     

    11,047

    10,070

    $

    139,034

    $

    13.80

     

    $

    3.97

     

    $

    2.31

     

    $

    75,730

     

    $

    99,345

     

    Gold

    Minto

    10,521

    10,098

    $

    9,708

     

    $

    961

     

    $

    300

     

    $

    288

     

    $

    3,773

     

    $

    5,522

     

    Silver Equivalent 6

    11,708

    10,708

    $

    148,742

    $

    13.89

     

    $

    4.02

     

    $

    2.44

     

    $

    79,503

     

    $

    104,867

     

    Corporate

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (12,388)

     

     

    (9,914)

     

     

    11,708

    10,708

    $

    148,742

     

    $

    13.89

     

    $

    4.02

     

    $

    2.44

     

    $

    67,115

     

    $

    94,953

     

    1)     

    All figures in thousands except gold ounces produced and sold and per ounce amounts.

    2)     

    Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.

    3)     

    Refer to discussion on non-GAAP measures.

    4)     

    Comprised of the Lagunas Norte, Pierina and Veladero mines.

    5)     

    Comprised of the Los Filos, San Martin, La Negra, Mineral Park, Neves-Corvo, Stratoni and Campo Morado mines.

    6)     

    Gold ounces produced and sold are converted to a silver equivalent basis on the ratio of the average silver price received to the average gold price received during the period.

    For the nine months ended September 30, 2010, net earnings and cash flow from operations were $167.1 million and $195.1 million, respectively, compared with $67.1 million and $95.0 million for the comparable periods in 2009, with the variance being primarily attributable to the following factors:

     
  • 38% increase in the number of silver equivalent ounces sold, due to;

        i.     

    An increase in deliveries relating to Peñasquito, reflecting the ramping up of the milling operations which commenced in late 2009 and achieved commercial production in the third quarter of 2010; and

        ii.     

    An increase in deliveries relating to the precious metal interests acquired in the Silverstone acquisition that closed on May 21, 2009 and the Barrick silver interest that was acquired on September 8, 2009; partially offset by

        iii.     

    Shipment timing differences of stockpiled concentrate primarily relating to Yauliyacu and Stratoni;

     
  • 33% increase in the average realized selling price of silver; and

         
     
  • A $7.2 million decrease in corporate costs as explained in the Corporate Costs section of this Management’s Discussion and Analysis ($2.4 million increase from an operating cash-flow perspective).

       

    SILVER WHEATON THIRD QUARTER REPORT [13]




    Corporate Costs

        Three Months Ended   Nine Months Ended  
        September 30   September 30  
    (in thousands)    2010     2009     2010     2009  
                             
    General and administrative 
    $ 
    3,641   $ 3,283   $ 11,829   $ 9,605  
    Stock based compensation (a non-cash item)    1,306     623     6,431     3,312  
    Total general and administrative    4,947     3,906     18,260     12,917  
    Gain on mark-to-market of warrants held    (7,861 )    -     (8,094 )    (33 ) 
    Future income tax recovery    (4,785 )    -     (4,785 )    -  
    Other    (360 )    366     (164 )    (496 ) 
    Total corporate costs 
    $ 
    (8,059 )   $ 4,272   $ 5,217   $ 12,388  

    Warrants held by the Company are for long-term investment purposes, however, due to their nature they meet the definition of a derivative and are marked-to-market on a quarterly basis. Mark-to-market gains and losses relating to the warrants are included in net earnings in the period they occur.

    For the three months ended September 30, 2010, corporate costs decreased by $12.3 million over the comparable period in the previous year, primarily as a result of (i) a non-cash $7.9 million mark-to-market gain during the current period relating to warrants held as long-term investments; and (ii) a non-cash future income tax recovery of $4.8 million relating to the Company’s long-term investments. The Company’s future income tax expense or recovery in a given period is largely determined by changes in the unrealized gains or losses recorded with respect to its long-term investments. As a result of a significant increase in the value of these long-term investments during the third quarter of 2010, the Company recorded a future income tax liability, with the associated expense being reflected as a component of Other Comprehensive Income. The Company currently has future tax assets, which have not been previously recognized, which fully offset this f uture tax liability. As a result, the Company decreased its valuation allowance on its future income tax assets in order to fully offset the future tax liability, with the resulting future income tax recovery being reflected in net earnings.

    For the nine months ended September 30, 2010, corporate costs decreased by $7.2 million over the comparable period in 2009, resulting primarily from (i) a non-cash $8.1 million mark-to-market gain during the nine months ended September 30, 2010 relating to warrants held as long-term investments; and (ii) a non-cash future income tax recovery of $4.8 million relating to the Company’s long-term investments. These gains were offset by an increase in total general and administrative costs of $5.3 million, attributable to (i) a $3.1 million increase in stock based compensation (a non-cash item); and (ii) a $2.2 million increase in general and administrative expenses, primarily due to increased corporate activity.

    During the third quarter of 2010, the Company incurred interest costs of $6.7 million (nine months - $20.0 million), of which $6.4 million (nine months - $18.9 million) represents accreted interest on the future payments due in relation to the Barrick silver interest, with the remainder being attributable to interest on bank debt. All of the interest costs incurred during the three months ended September 30, 2010 have been capitalized in relation to the Keno Hill and Barrick silver interests (nine months – capitalized to the Peñasquito, Keno Hill and Barrick silver interests). For the same period in 2009, the Company incurred interest costs of $0.6 million (nine months - $3.4 million), all of which were capitalized to the cost of the Peñasquito, Keno Hill and Barrick silver interests.

    SILVER WHEATON THIRD QUARTER REPORT [14]




    Non-GAAP Measures

    Silver Wheaton has included, throughout this document, certain non-GAAP performance measures, including total cash costs of silver and gold on a sales basis, as well as operating cash flows per share and cash operating margin. These non-GAAP measures do not have any standardized meaning prescribed by GAAP, nor are they necessarily comparable with similar measures presented by other companies. Cash costs are presented as they represent an industry standard method of comparing certain costs on a per unit basis. Cash operating margin is defined as the realized selling price less total cash cost per silver equivalent ounce. The Company believes that certain investors use this information to evaluate the Company’s performance. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. During the three months ended September 30, 2010, the Com pany’s total cash costs, which were equivalent to the Company’s cost of sales in accordance with GAAP, were $3.98 per ounce of silver and $300 per ounce of gold (2009 – $3.97 per ounce of silver and $300 per ounce of gold).

    Liquidity and Capital Resources

    As at September 30, 2010, the Company had cash and cash equivalents of $255.2 million (December 31, 2009 -$227.6 million) and working capital of $84.0 million (December 31, 2009 – $64.2 million). The Company invests surplus cash in short-term, high credit quality, money market instruments.

    During the three months ended September 30, 2010, the Company generated operating cash flows of $70.5 million compared with $45.4 million during the comparable period in 2009, with the increase primarily as a result of a higher realized average silver price.

    During the quarter, the Company had net cash inflows from financing activities of $6.5 million, primarily related to proceeds from share purchase options and share purchase warrants exercised during the period, partially offset by a scheduled principal repayment of the Company’s non-revolving bank debt facility. During the third quarter of 2009, the Company had net cash inflows from financing activities of $423.5 million, which related primarily to the completion of a bought deal equity financing (in conjunction with the Barrick acquisition), raising net proceeds of $275.4 million.

    During the quarter, the Company had net cash outflows relating to investing activities of $145.1 million, primarily related to the scheduled upfront payment of $137.5 million to Barrick and an upfront payment of $6.4 million to Alexco. During the same period in 2009, the Company had net cash outflows relating to investing activities of $212.5 million, which related primarily to the upfront cash payment made to Barrick.

    As at September 30, 2010, the Company has cash on hand of $255.2 million and $400 million available under its revolving bank debt facility as more fully described in Note 6 to the Financial Statements. In the opinion of management, cash flows, cash balances and available credit facilities are sufficient to support the Company’s normal operating requirements on an ongoing basis.

    SILVER WHEATON THIRD QUARTER REPORT [15]




    CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

    SILVER AND GOLD INTERESTS

    The following table summarizes the Company’s commitments to purchase silver and gold in connection with the silver purchase agreements or precious metal purchase agreements:

      Attributable Payable Production To Be Purchased Per Ounce Cash Payment 1, 2     
    Silver and Gold Interests  Silver Gold Silver  Gold  Term of Agreement  Date of Contract 
                 
    San Dimas  100%3 - $4.04  n/a  Life of Mine 3  15-Oct-04 
    Zinkgruvan  100% - $4.04  n/a  Life of Mine  8-Dec-04 
    Yauliyacu  100%4 - $3.98  n/a  20 years  23-Mar-06 
    Peñasquito  25% - $3.90  n/a  Life of Mine  24-Jul-07 
    Minto  100% 100%5 $3.90  $300  Life of Mine  1-Dec-08 
    Cozamin  100% - $4.04  n/a  10 years  4-Apr-07 

    Barrick 

               

    Pascua-Lama 

    25% - $3.90  n/a  Life of Mine  8-Sep-09 

    Lagunas Norte 

    100% - $3.90  n/a  4 years 6  8-Sep-09 

    Pierina 

    100% - $3.90  n/a  4 years 6  8-Sep-09 

    Veladero 

    100%7 - $3.90  n/a  4 years 6  8-Sep-09 

    Other 

               

    Los Filos 

    100% - $4.04  n/a  25 years  15-Oct-04 

    Keno Hill 

    25% - $3.90  n/a  Life of Mine  2-Oct-08 

    La Negra 

    50% - $3.90  n/a  Life of Mine  2-Jun-08 

    Mineral Park 

    100% - $3.90  n/a  Life of Mine  17-Mar-08 

    Neves-Corvo 

    100% - $3.94  n/a  Life of Mine 8  5-Jun-07 

    Stratoni 

    100% - $3.94  n/a  Life of Mine  23-Apr-07 

    Campo Morado 

    75% - $3.90  n/a  Life of Mine  13-May-08 

    Aljustrel 

    100% - $3.90  n/a  Life of Mine 8  5-Jun-07 

    Loma de La Plata 

    12.5% - $4.00  n/a  Life of Mine  n/a 9 

    Rosemont 

    100% 100% $3.90  $450  Life of Mine  11-Feb-10 

    1) Subject to an annual inflationary adjustment with the exception of Loma de La Plata. 
    2) Should the prevailing market price for silver or gold be lower than this amount, the per ounce cash payment will be reduced to the prevailing market price, with the exception of Yauliyacu.
    3) On August 6, 2010, Goldcorp completed the sale of the San Dimas mine, which was previously part of the Luismin mines, to Primero. In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, which was set to expire in 2029, has been extended to the life of mine. During the first four years following closing of the transaction, Silver Wheaton is committed to purchase from Primero a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton is committed to purchase an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth ye ar after closing, Silver Wheaton is committed to purchase from Primero a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess.
    4) To a maximum of 4.75 million ounces per annum. In the event that silver produced at Yauliyacu in any year totals less than 4.75 million ounces, the amount sold to Silver Wheaton in subsequent years will be increased to make up for the shortfall, so long as production allows. The cumulative shortfall as at March 23, 2010, representing the four year anniversary, was 6.8 million ounces.
    5) The Company is committed to acquire 100% of the first 50,000 ounces of gold produced per annum and 50% thereafter, through to December 1, 2010. Following that date, the Company is committed to acquire 100% of the first 30,000 ounces of gold produced per annum and 50% thereafter.
    6) The Company is committed to purchase silver production from the currently producing mines until December 31, 2013. In addition, during 2014 and 2015, the Company is committed to purchase all or a portion of the silver production from these mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies a completion guarantee.
    7) Silver Wheaton's attributable silver production is subject to a maximum of 8% of the silver contained in the ore mined at Veladero during the period. 
    8) With a nominal term of 50 years. 
    9) Terms of the agreement not yet finalized. 

    SILVER WHEATON THIRD QUARTER REPORT [16]




    In connection with the Rosemont precious metal purchase agreement, the Company is committed to pay Augusta total upfront cash payments of $230 million, payable on an installment basis to partially fund construction of the mine once certain milestones are achieved, including the receipt of key permits and securing the necessary financing to complete construction of the Rosemont mine.

    In connection with the Company’s election to convert the debenture with Pan American into a silver purchase agreement, the Company is committed to pay Pan American total upfront cash payments of $32.4 million following the satisfaction of certain conditions, including Pan American receiving all necessary permits to proceed with the mine construction.

    OTHER CONTRACTUAL OBLIGATIONS

    (in thousands)    2010    2011 - 2013    2014 - 2015    After 2015    Total   
    Bank debt1  $  7,140  $  85,680  $  21,500  $  -  $  114,320   
    Silver interest payments2    16,691    275,000    -    -    291,691   
    Operating leases    120    1,479    1,033    594    3,226   
    Other    -    283    -    -    283   
    Total contractual obligations  $  23,951  $  362,442  $  22,533  $  594  $  409,520   

    1) Does not include payments of interest related to bank debt. 
    2) Comprised of payments due to Barrick and Alexco. 

    CONTINGENCIES

    Due to the size, complexity and nature of the Company’s operations, various legal and tax matters are outstanding from time to time. In the opinion of management, these matters will not have a material effect on the Company’s consolidated financial position or results of operations.

    SHARE CAPITAL

    During the three months ended September 30, 2010, the Company received cash proceeds of $8.6 million (2009 -$4.2 million) from the exercise of 793,912 share purchase options (2009 – 1,105,420 share purchase options) at a weighted average exercise price of Cdn$11.21 per option (2009 – Cdn$4.11 per option). During the nine months ended September 30, 2010, the Company received cash proceeds of $26.9 million (2009 - $5.8 million) from the exercise of 2,336,555 share purchase options (2009 – 1,597,994 share purchase options) at a weighted average exercise price of Cdn$11.90 per option (2009 – Cdn$3.96 per option).

    On February 12, 2009, the Company announced that it had closed an equity financing, raising gross proceeds of Cdn$287.5 million ($230.4 million) through the issuance of 35,937,500 common shares at Cdn$8.00 per share (approximately $6.41 per share). The proceeds were primarily used to repay outstanding debt under the revolving bank loan facility.

    On May 21, 2009, the Company closed the acquisition of Silverstone through the issuance of 23,434,332 common shares and 1,367,364 share purchase options of Silver Wheaton which were issued on conversion of previously issued fully vested share purchase options of Silverstone. Including acquisition costs, the transaction was valued at approximately $152 million.

    On September 30, 2009, in conjunction with the Barrick acquisition, the Company closed a bought deal equity financing, raising gross proceeds of $287.5 million through the issuance of 25,903,750 common shares at $11.10 per share. Subsequent to September 30, 2009, $140.2 million of the net proceeds from the equity financing were used to repay the temporary draw under the Company’s revolving bank debt facility which had been utilized to partially finance the initial upfront payment of $212.5 million made to Barrick. The remaining net proceeds from the equity financing are available to fund the acquisition of future silver interests.

    SILVER WHEATON THIRD QUARTER REPORT [17]




    As of November 8, 2010, there were 346,560,444 outstanding common shares, 3,021,290 share purchase options, 190,991 restricted share units and 8,568,605 share purchase warrants.

    Financial Instruments

    In order to mitigate the effect of short-term volatility in silver and gold prices, the Company will occasionally enter into forward contracts in relation to silver and gold deliveries it is highly confident will occur within a given quarter. The Company does not hedge its long-term exposure to commodity prices. Other than these very short-term forward contracts, the Company has not used derivative financial instruments to manage the risks associated with its operations and therefore, in the normal course of business, it is inherently exposed to currency, interest rate and commodity price fluctuations.

    The Company owns equity interests in certain junior mining companies as long-term investments and therefore is inherently exposed to various risk factors including currency risk, market price risk and liquidity risk.

    Subsequent Event

    On November 5, 2010, Bear Creek Mining Corporation (“Bear Creek”) closed its previously announced equity financing. As part of that financing, the Company subscribed for 2,978,000 common shares of Bear Creek for total consideration of Cdn$19 million, thereby maintaining the Company’s approximate 15% interest in Bear Creek.

    Future Changes in Accounting Policies

    BUSINESS COMBINATIONS

    In January 2009, the Canadian Institute of Chartered Accountants (“CICA”) issued Handbook Section 1582, Business Combinations (“Section 1582”), which replaces Handbook Section 1581, Business Combinations. In addition, the CICA issued Handbook Section 1601, Consolidated Financial Statements and Handbook Section 1602, Non-Controlling Interests (“Section 1602”), which replace Handbook Section 1600, Consolidated Financial Statements. These new sections are effective January 1, 2011 with earlier adoption permitted. Sections 1582 and 1602 will require net assets, non-controlling interests and goodwill acquired in a business combination to be recorded at fair value and non-controlling interests will be reported as a component of equity. In addition, the definition of a business is expanded and is described as an integrated set of activities and assets that are capable of being managed to provide a return to i nvestors or economic benefits to owners. Under these new sections, acquisition costs are not treated as consideration and are to be expensed when incurred rather than capitalized. The Company has not early adopted these sections and does not anticipate the adoption of these sections to have a material impact on its financial position and results of operations.

    SILVER WHEATON THIRD QUARTER REPORT [18]




    INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)

    In 2008, the Canadian Accounting Standards Board confirmed that publicly listed companies will be required to adopt IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Early adoption may be permitted, however it will require exemptive relief on a case by case basis from the Canadian Securities Administrators. Silver Wheaton expects its first consolidated financial statements presented in accordance with IFRS to be for the three month period ended March 31, 2011, which includes presentation of its comparative results for fiscal 2010 under IFRS.

    In order to prepare for the changeover to IFRS, the Company has developed an IFRS conversion plan comprised of three phases:

    Phase

    Description and Status

    Preliminary Planning and Scoping

    This phase, which has been completed, involves development of the IFRS conversion plan.

     

    The IFRS conversion plan includes consideration of the impacts of IFRS on the Company’s consolidated financial statements, internal controls over financial reporting, information systems and business activities such as foreign operations, compensation metrics, personnel and training requirements and calculation of debt covenants.  Based on management’s review of IFRS and current Company processes, the adoption of IFRS is expected to have minimal impact on information systems, operations of foreign subsidiaries, debt covenants and compensation metrics.

    The Company has designed internal controls to facilitate its conversion to IFRS and has implemented controls relevant at this stage of the process.  A training program has been developed for appropriate personnel and training activities have taken place as planned.

    Detailed Impact Assessment

    This phase, which has been completed, involves a detailed review of IFRS relevant to the Company and identification of all differences between existing Canadian GAAP and IFRS that are expected to result in accounting and/or disclosure differences in the Company’s consolidated financial statements, along with quantifying the impact on key line items. This phase includes identification, evaluation and selection of accounting policies necessary for the Company’s conversion to IFRS and evaluation of the impact on outstanding operational elements such as debt covenants and budgeting.

     

    Implementation

    During this phase the changes required for conversion to IFRS will be embedded in the associated business, financial close and reporting processes.  This will include finalization and approval of accounting policy changes, collection of financial information necessary to prepare IFRS compliant consolidated financial statements, implementation of additional internal controls, and preparation and approval of completed IFRS consolidated financial statements.

     

     


    SILVER WHEATON THIRD QUARTER REPORT [19]




    The following table summarizes the key elements of the Company’s plan for transitioning to IFRS and the progress made against each activity:

    Accounting Policies and Procedures    
    Main Activities Completion Status

    ·    

    Identify differences between the Company’s current accounting policies under
    Canadian GAAP and IFRS

    ·    

    Major accounting policy decisions, including IFRS 1 exemptions, have been reviewed
    and approved by senior management and the board of directors

    ·    

    Analyze and select ongoing policies where IFRS permits alternatives

    ·    

    Revisions to accounting policies are currently being prepared as required

    ·    

    Analyze and determine which IFRS 1 exemptions will be taken on transition to IFRS
     
     
           
    Financial Statement Preparation    
    Main Activities Completion Status

    ·    

    Prepare financial statements and note disclosures in compliance with IFRS

    ·    

    Preliminary January 1, 2010 opening balance sheet has been prepared and reviewed

    ·    

    Quantify the effects of converting to IFRS   by senior management and the board of directors

    ·    

    Prepare first-time adoption reconciliations as required under IFRS 1

    ·    

    The Company is currently preparing IFRS compliant financial statements and MD&A
    in parallel with its Canadian GAAP financial statements and MD&A, on a quarterly basis
           
    Training and Communication    
    Main Activities Completion Status

    ·    

    Provide training to key employees involved with the implementation of IFRS

    ·    

    Key employees involved with implementation have completed or are in the process of

    ·    

    Develop awareness of how the transition to IFRS is going to affect the Company’s
      completing training

    ·    


    ·    

    financial statements and MD&A disclosures
    Provide company specific training on revised policies and procedures to affected
    personnel
    Provide timely communication to the Company’s external stakeholders regarding the
    expected impacts of converting to IFRS

    ·    

    Training has been conducted using a two-tiered approach, with detailed training
    having been provided to practitioners while non-practitioners have received a higher
    level overview of the transition process and the key impacts of implementing IFRS
           
    IT Systems    
    Main Activities Completion Status

    ·    

    Identify changes required to IT systems and implement solutions

    ·    

    Systems and process changes have been completed and are operational

    ·    

    Identify changes required to financial reporting processes required to capture financial
    information under Canadian GAAP, US GAAP and IFRS
       
           
    Internal Control Environment    
    Main Activities Completion Status

    ·    

    For all changes to policies and procedures identified, assess the effectiveness of
    internal controls over financial reporting and disclosure controls and
    procedures and implement any necessary changes

    ·    

    Specific controls in relation to the IFRS implementation to be identified and
    documented during the fourth quarter of 2010

    ·    

    Design and implement internal controls over the IFRS changeover process
       
           

    SILVER WHEATON THIRD QUARTER REPORT [20]




    The following list represents a summary of the most significant identified differences between the Company’s current accounting policies in accordance with Canadian GAAP and IFRS as at September 30, 2010. This list should not be regarded as a complete list of changes that will result from the transition to IFRS. Rather, it is intended to highlight those areas which management believes to be the most significant. In addition, changes to IFRS standards or changes to interpretations of existing IFRS standards could alter the information presented below.

    FIRST-TIME ADOPTION OF IFRS

    IFRS 1, First-Time Adoption of International Financial Reporting (“IFRS 1”), provides entities adopting IFRS for the first time with a number of optional exemptions and mandatory exceptions to the general requirement for full retrospective application of IFRS. During the third quarter of 2010, the Company finalized its choice of optional exemptions expected to be taken under IFRS, with the only exemption being related to Business Combinations (see below).

    BUSINESS COMBINATIONS

    Under IFRS 3, Business Combinations (“IFRS 3”), there are several differences when compared to current Canadian GAAP. The most significant of these changes to the Company are:

    • The fair value of equity securities issued by the acquirer is determined at the date of acquisition;

    • Consideration transferred does not include acquisition-related costs; and

    • Any change in the assessment of the recoverability of the acquirer’s deferred tax assets as a result of the business combination is recognized in profit or loss.

    In accordance with IFRS 1, the Company will elect not to apply this standard on a retrospective basis and will apply this standard to any acquisitions completed on or after January 1, 2010.

    ASSET IMPAIRMENT

    Canadian GAAP generally uses a two-step approach to impairment testing: (1) comparing asset carrying values with undiscounted future cash flows to determine whether impairment exists; and (2) measuring any impairment by comparing asset carrying values with fair values. Under International Accounting Standard 36, Impairment of Assets (“IAS 36”), a one-step approach for both testing for and measuring impairment is used, with asset carrying values compared directly with (i) the higher of fair value less costs to sell; and (ii) value in use (which uses discounted future cash flows). This may potentially result in more write-downs where carrying values of assets were previously supported under Canadian GAAP on an undiscounted cash flow basis, but could not be supported on a discounted cash flow basis. However, the extent of any new write-downs may be partially offset by the requirement under IAS 36 to reverse any previous impairment losses where circums tances have changed such that the impairments have been reduced. Canadian GAAP prohibits reversal of previously recorded impairment losses.

    LONG-TERM INVESTMENTS

    In November 2009, the International Accounting Standards Board introduced IFRS 9 – Financial Instruments (“IFRS 9”), which is part of a project to replace IAS 39 – Financial Instruments: Recognition and Measurement. Adoption of IFRS 9 is required by January 1, 2013 with early adoption permitted. The Company intends to adopt IFRS 9 effective January 1, 2011, with retrospective application.

    Under IFRS 9, the Company’s long-term investments must be recorded at fair market value, with all fair value changes being reflected in net earnings. However, as the Company’s long-term investments are strategic in nature and are not held for trading, the Company intends to make a one time, irrevocable election to present all fair value changes from the long-term investments in other comprehensive income (“OCI”). No amount recognized in OCI is ever reclassified to net earnings at a later date. Under current Canadian GAAP, fair value changes in the Company’s long-term investments are reflected in OCI unless there is an impairment which is deemed to be other-than-temporary, in which case the unrealized loss is reflected in net earnings. In December 2008, management concluded that the Company’s long-term investments were other-than-temporarily impaired, resulting in a $64 million loss being recorded in net earnings. This non-cash w rite down will be reallocated within shareholder’s equity from retained earnings to accumulated other comprehensive income when the Company prepares its consolidated financial statements in accordance with IFRS.

    SILVER WHEATON THIRD QUARTER REPORT [21]




    SHARE PURCHASE WARRANTS

    For Canadian GAAP purposes, share purchase warrants are classified and accounted for as equity in the Company’s consolidated financial statements. Under International Accounting Standard 32, Financial Instruments: Presentation (“IAS 32”), share purchase warrants with an exercise price denominated in a currency other than the Company’s functional currency are to be classified and accounted for as a financial liability which is then marked to market on a quarterly basis with the gain or loss being reflected in the Company’s statement of operations. This non-cash adjustment will have no effect on the Company’s cash flow or liquidity. The impact of this adjustment to shareholders’ equity is summarized below.

    IFRS IMPACT ON SHAREHOLDERS’ EQUITY AS AT JANUARY 1, 2010

    The following table summarizes the impact to shareholders’ equity of the significant differences identified at this time between Canadian GAAP and IFRS as at January 1, 2010:

    (US dollars in thousands - unaudited)    Increase /  
    Standard  Description of Change    (decrease)  
    IAS 32  To record the mark-to market adjustment on the Company's share-purchase warrants with a strike price in CAD $  $  (208,318 ) 
    IAS 32  To record the fair value increment on the exercise of the Company's share purchase warrants with a strike price in CAD $    166,626  
    IAS 32  To reclassify share purchase warrants with a strike price in CAD$    (10,275 ) 
             
          (51,967 ) 
    Shareholders' equity - January 1, 2010 (per Canadian GAAP)    1,723,925  
           
    Shareholders' equity - January 1, 2010 (per IFRS, estimated)  $  1,671,958  

    Controls and Procedures

    DISCLOSURE CONTROLS AND PROCEDURES

    Silver Wheaton’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the design and effectiveness of Silver Wheaton’s disclosure controls and procedures, as defined in the rules of the U.S. Securities and Exchange Commission and Canadian Securities Administrators, as of September 30, 2010. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that Silver Wheaton’s disclosure controls and procedures were effective as of September 30, 2010.

    INTERNAL CONTROL OVER FINANCIAL REPORTING

    The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, are responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of the Chief Financial Officer, the Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s controls include policies and procedures that:

    • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

    • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and,

    SILVER WHEATON THIRD QUARTER REPORT [22]




    • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the annual financial statements or interim financial statements.

    There have been no significant changes in the Company’s internal control over financial reporting during the three months ended September 30, 2010.

    LIMITATION OF CONTROLS AND PROCEDURES

    The Company’s management, including its Chief Executive Officer and Chief Financial Officer, believe that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individua l acts of some persons, by collusion of two or more people, or by unauthorized override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

    SILVER WHEATON THIRD QUARTER REPORT [23]




    Attributable Reserves and Resources (1)

    The following tables sets forth the estimated Mineral Reserves and Mineral Resources (silver only, except where a purchase agreement includes gold) for the mines relating to which the Company has purchase agreements, adjusted where applicable to reflect the Company’s percentage entitlement to silver and/or gold produced from such mines, as of December 31, 2009, unless otherwise noted:

    ATTRIBUTABLE PROVEN AND PROBABLE RESERVES (1,2,3,8,16,17)
    AS OF DECEMBER 31, 2009 UNLESS OTHERWISE NOTED(6)

     

    Proven

    Probable

    Proven & Probable

     

     

    Tonnage

    Grade

    Contained

    Tonnage

    Grade

    Contained

    Tonnage

    Grade

    Contained

    Process Recovery
    % (7)

    SILVER

    Mt

    g/t

    M oz

    Mt

    g/t

    M oz

    Mt

    g/t

    M oz

    Peñasquito (25%)

     

     

     

     

     

     

    Mill

    145.1

    33.1

    154.5

    141.0

    23.0

    104.4

    286.2

    28.1

    258.9

    70%

    Heap Leach

    18.1

    14.8

    8.6

    -

    -

    -

    18.1

    14.8

    8.6

    26%

    San Dimas(10)

    2.0

    371.0

    24.0

    3.6

    320.8

    36.9

    5.6

    338.9

    60.9

    94%

    Pascua-Lama (25%)

    9.6

    59.9

    18.4

    86.6

    53.7

    149.4

    96.1

    54.3

    167.8

    82%

    Lagunas Norte(11)

    7.3

    4.0

    0.9

    84.2

    3.6

    9.8

    91.5

    3.6

    10.7

    21%

    Pierina

    19.4

    12.6

    7.8

    20.2

    11.7

    7.6

    39.5

    12.1

    15.4

    37%

    Veladero(12)

    6.6

    13.6

    2.9

    106.0

    15.4

    52.5

    112.7

    15.3

    55.4

    6%

    Yauliyacu(13)

    1.0

    106.1

    3.5

    1.8

    130.8

    7.6

    2.8

    121.9

    11.0

    86%

    Neves-Corvo

     

     

     

     

     

     

    Copper

    21.2

    43.0

    29.3

    2.1

    48.0

    3.2

    23.2

    43.4

    32.5

    35%

    Zinc

    34.3

    63.9

    70.5

    8.2

    56.0

    14.8

    42.6

    62.4

    85.3

    23%

    Rosemont(14)

    128.8

    4.5

    18.5

    366.8

    3.8

    44.5

    495.6

    3.9

    62.9

    80%

    Mineral Park(14)

    309.1

    2.7

    27.1

    79.0

    2.9

    7.4

    388.0

    2.8

    34.5

    42%

    Zinkgruvan

     

     

     

     

     

     

    Zinc

    8.3

    105.0

    28.1

    2.7

    63.0

    5.4

    11.0

    94.8

    33.4

    70%

    Copper

    2.8

    32.0

    2.9

    0.1

    29.0

    0.1

    2.9

    31.9

    2.9

    78%

    Aljustrel

     

     

     

     

     

     

    Zinc

    -

    -

    -

    13.1

    62.9

    26.6

    13.1

    62.9

    26.6

    37%

    Copper

    -

    -

    -

    1.7

    14.6

    0.8

    1.7

    14.6

    0.8

    30%

    Campo Morado (75%)

    0.4

    273.7

    3.5

    1.1

    186.6

    6.4

    1.5

    210.0

    9.9

    50%

    Stratoni

    1.7

    174.0

    9.3

    0.1

    225.0

    0.7

    1.8

    177.0

    10.0

    88%

    Minto

    9.8

    6.1

    1.9

    1.1

    4.3

    0.2

    10.9

    5.9

    2.1

    81%

    Cozamin

     

     

     

     

     

     

    Copper

    1.6

    76.3

    4.0

    5.9

    59.0

    11.3

    7.5

    62.7

    15.2

    74%

    Zinc

    -

    -

    -

    1.9

    37.2

    2.2

    1.9

    37.2

    2.2

    74%

    Los Filos(15)

    48.5

    6.4

    10.0

    155.3

    5.4

    26.9

    203.8

    5.6

    36.9

    5%

    La Negra (50%)

    0.1

    76.9

    0.3

    0.1

    69.5

    0.2

    0.2

    73.9

    0.6

    74%

    Total Silver

     

     

    425.9

     

     

    518.6

     

     

    944.6

     

    GOLD

     

     

     

     

     

     

    Minto

    9.8

    0.67

    0.21

    1.1

    0.38

    0.01

    10.9

    0.64

    0.22

    74%

    Total Gold

     

     

    0.21

     

     

    0.01

     

     

    0.22

     

     


    SILVER WHEATON THIRD QUARTER REPORT [24]




    ATTRIBUTABLE MEASURED & INDICATED RESOURCES (1,2,3,4,5,9,16,17)
    AS OF DECEMBER 31, 2009 UNLESS OTHERWISE NOTED(6)

     

    Measured

    Indicated

    Measured & Indicated

    Tonnage

    Grade

    Contained

    Tonnage

    Grade

    Contained

    Tonnage

    Grade

    Contained

    SILVER

    Mt

    g/t

    M oz

    Mt

    g/t

    M oz

    Mt

    g/t

    M oz

    Peñasquito (25%)

     

     

     

     

     

     

    Mill

    -

    -

    -

    117.9

    25.7

    97.2

    117.9

    25.7

    97.2

    Heap Leach

    -

    -

    -

    1.9

    8.6

    0.5

    1.9

    8.6

    0.5

    Pascua-Lama (25%)

    3.0

    31.3

    3.0

    31.8

    30.4

    31.0

    34.8

    30.4

    34.0

    Pierina

    3.0

    9.5

    0.9

    2.7

    7.9

    0.7

    5.8

    8.7

    1.6

    Yauliyacu(13)

    0.5

    128.9

    2.2

    5.9

    215.9

    41.1

    6.5

    208.6

    43.3

    Neves-Corvo

     

     

     

     

     

     

    Copper

    16.7

    55.9

    30.1

    1.9

    55.7

    3.4

    18.6

    55.9

    33.5

    Zinc

    25.2

    53.1

    43.0

    6.1

    45.4

    8.8

    31.3

    51.6

    51.8

    Rosemont(14)

    7.2

    3.9

    0.9

    103.0

    2.7

    8.8

    110.2

    2.7

    9.7

    Mineral Park(14)

    101.0

    2.6

    8.4

    175.6

    2.7

    15.2

    276.6

    2.7

    23.6

    Zinkgruvan

     

     

     

     

     

     

    Zinc

    1.6

    82.8

    4.4

    2.8

    113.0

    10.0

    4.4

    101.7

    14.4

    Copper

    1.4

    26.2

    1.2

    0.2

    25.4

    0.1

    1.6

    26.1

    1.3

    Aljustrel

     

     

     

     

     

     

    Zinc

    5.5

    50.5

    9.0

    7.8

    56.0

    14.0

    13.3

    53.7

    23.0

    Copper

    0.9

    24.1

    0.7

    3.7

    13.3

    1.6

    4.6

    15.5

    2.3

    Campo Morado (75%)

    0.04

    58.0

    0.1

    3.8

    164.2

    19.9

    3.8

    163.2

    20.0

    Loma de La Plata (12.5%)

    -

    -

    -

    3.6

    169.0

    19.8

    3.6

    169.0

    19.8

    Minto

    5.7

    4.4

    0.8

    13.8

    3.5

    1.6

    19.5

    3.8

    2.4

    Cozamin

     

     

     

     

     

     

    Copper

    0.6

    81.5

    1.5

    1.0

    54.9

    1.8

    1.6

    64.3

    3.3

    Keno Hill (25%)

     

     

     

     

     

     

    Underground

    -

    -

    -

    0.1

    920.5

    3.0

    0.1

    920.5

    3.0

    Elsa Tailings

    -

    -

    -

    0.6

    119.0

    2.4

    0.6

    119.0

    2.4

    Los Filos(15)

    2.1

    6.6

    0.4

    31.4

    5.3

    5.4

    33.5

    5.4

    5.8

    La Negra (50%)

    0.3

    124.0

    1.0

    0.1

    124.1

    0.5

    0.4

    124.1

    1.5

    Total Silver

     

     

    107.6

     

     

    286.8

     

     

    394.4

    GOLD

     

     

     

     

     

     

    Minto

    5.7

    0.45

    0.08

    13.8

    0.33

    0.15

    19.5

    0.37

    0.23

    Total Gold

     

     

    0.08

     

     

    0.15

     

     

    0.23

     


    SILVER WHEATON THIRD QUARTER REPORT [25]




    ATTRIBUTABLE INFERRED RESOURCES (1,2,3,4,5,9,16,17)
    AS OF DECEMBER 31, 2009 UNLESS OTHERWISE NOTED (6)

     

     

    Inferred

    Tonnage

    Grade

    Contained

    SILVER

    Mt

    g/t

    M oz

    Peñasquito (25%)

     

     

     

    Mill

    36.7

    17.3

    20.4

    San Dimas(10)

    15.2

    317.1

    154.6

    Pascua-Lama (25%)

    5.5

    18.9

    3.3

    Pierina

    3.7

    13.8

    1.6

    Yauliyacu(13)

    15.4

    158.3

    78.2

    Neves-Corvo

     

     

     

    Copper

    26.3

    41.0

    34.7

    Zinc

    26.8

    52.8

    45.5

    Rosemont(14)

    163.0

    2.1

    11.2

    Mineral Park(14)

    320.1

    2.3

    23.9

    Zinkgruvan

     

     

     

    Zinc

    5.1

    70.0

    11.5

    Copper

    1.0

    33.0

    1.0

    Aljustrel

     

     

     

    Zinc

    10.6

    48.6

    16.6

    Copper

    2.2

    11.7

    0.8

    Campo Morado (75%)

    1.1

    177.8

    6.1

    Stratoni

    0.7

    217.0

    4.7

    Loma de La Plata (12.5%)

    0.2

    76.0

    0.4

    Minto

    6.1

    3.1

    0.6

    Cozamin

     

     

     

    Copper

    2.4

    52.6

    4.0

    Zinc

    1.7

    30.1

    1.6

    Keno Hill (25%)

     

     

     

    Underground

    0.03

    320.2

    0.3

    Elsa Tailings

    -

    -

    -

    Los Filos(15)

    122.5

    4.2

    16.4

    La Negra (50%)

    0.1

    78.6

    0.3

    Total Silver

     

     

    437.9

    GOLD

     

     

     

    Minto

    6.1

    0.28

    0.06

    Total Gold

     

     

    0.06

     


    SILVER WHEATON THIRD QUARTER REPORT [26]




    Notes:

    1. All Mineral Reserves and Mineral Resources have been calculated in accordance with the CIM Standards and NI 43-101, or the AusIMM JORC equivalent.
    2. Mineral Reserves and Mineral Resources are reported above in millions of metric tonnes (“Mt”), grams per metric tonne (“g/t”) and millions of ounces (“Moz”).
    3. Individual qualified persons (“QPs”), as defined by the NI 43-101, for the Mineral Reserve and Mineral Resource estimates are as follows:
      a.  Peñasquito – Robert H. Bryson, MMSA 
      b.  San Dimas – Reynaldo Rivera, MAusIMM (Vice President, Exploration, Luismin, S.A. de C.V., the Mexican operating subsidiary of Goldcorp); Velasquez Spring, P.Eng. (Senior Geologist, Watts, Griffis and McOuat Limited)
      c.  Pascua-Lama – Dino Pilotto, P.Eng. (Principal Mining Consultant, SRK Consulting (Canada) Inc.); 
        Bart A. Stryhas, Ph.D., CPG (Principal Resource Geologist, SRK Consulting (U.S.) Inc.) 
      d.  Yauliyacu – Neil Burns, M.Sc., P.Geo. (Director of Geology, Silver Wheaton); Samuel Mah, M.A.Sc., P.Eng. (Director of Engineering, Silver Wheaton), both employees of the Company (the “Company’s QPs”)
      The Company’s QPs are responsible for overall corporate review and all other operations and development projects.
    4. The Mineral Resources reported in the above tables are exclusive of Mineral Reserves. The Minto, Cozamin, Neves-Corvo, Zinkgruvan and Aljustrel mines report Mineral Resources inclusive of Mineral Reserves. The Company’s QPs have made the exclusive Mineral Resource estimates for these mines based on average mine recoveries and dilution.
    5. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. 
    6. Mineral Reserves and Mineral Resources are reported as of December 31, 2009, other than the following: 
      a.  Resources and Reserves for Neves-Corvo and Zinkgruvan are reported as of June 30, 2010. 
      b.  Resources for Rosemont are reported as of October 22, 2008 and Reserves as of March 17, 2009. 
      c.  Resources for Mineral Park are reported as of December 29, 2006. 
      d.  Resources and Reserves for Aljustrel are reported as of December 31, 2007. 
      e.  Resources for Campo Morado’s El Largo, El Rey, Naranjo and Reforma deposits are reported as of February 29, 2008.
      f.  Resources and Reserves for Stratoni are reported as of August 10, 2010. 
      g.  Resources for Minto East are reported as of June 23, 2010. 
      h.  Resources for Loma de La Plata are reported as of April 16, 2009. 
      i.  Resources for Keno Hill are reported as of November 9, 2009 and April 22, 2010 for the Elsa Tailings.
      j.  Resources and Reserves for La Negra are reported as of February 15, 2008 for the Alacran deposit and March 14, 2008 for the Monica deposit Resources.
    7. Process recoveries are the average percentage of silver in a saleable product (doré or concentrate) recovered from mined ore at the applicable site process plants as reported by the operators.
    8. Mineral Reserves are estimated using appropriate process recovery rates and commodity prices of $13.00 per ounce of silver, unless otherwise noted below:
      a.  Pascua-Lama, Lagunas Norte, Veladero and Pierina – $14.00 per ounce 
      b.  Neves-Corvo – 1.6% Cu cut-off for the copper Reserve and 4.3% Zn cut-off for the zinc Reserves above the 550 level and 6% Zn cut-off for zinc Reserves below the 550 level.
      c.  Rosemont – NSR cut-off of $3.56 based on $1.75 per pound copper, $15.00 per pound molybdenum and $10.00 per ounce silver
      d.  Mineral Park – 0.237% Cu equivalent cut-off grade (hypogene), 0.283% Cu equivalent cut-off grade (supergene); copper equivalent considers only copper and molybdenum values
      e.  Zinkgruvan – 3.1% Zn equivalent cut-off for the zinc Reserve and 2.0% Cu cut-off for the copper Reserve
      f.  Aljustrel – 1.5% Cu cut-off for all copper Reserves and zinc cut-offs of 4.5%, 4.0% and 4.0%, respectively, for the Feitais, Moinho and Estação zinc Reserves
      g.  Campo Morado - 3.0% Zn cut-off for the Abajo, West Extension and South East zones and 5% Zn cut-off for the North zone.
      h.  Minto – copper cut-off grades of 0.62%, 0.55%, 0.58% and 0.56% for Minto Main, Minto North, Ridgetop and Area 2/118 respectively.
      i.  Cozamin – $4.00 per ounce 
    9. Mineral Resources are estimated using appropriate recovery rates and commodity prices of $15.00 per ounce of silver, unless otherwise noted below:

    SILVER WHEATON THIRD QUARTER REPORT [27]




      a.  Yauliyacu – $13.00 per ounce 
      b.  Neves-Corvo – 1.0% Cu cut-off for the copper Resource and 3.0% Zn cut-off for the zinc Resource 
      c.  Rosemont – 0.2% Cu cut-off 
      d.  Zinkgruvan – 3.1% Zn equivalent cut-off for the zinc Resource and 1.5% Cu cut-off for the copper Resource
      e.  Mineral Park – 0.225% Cu equivalent cut-off grade; copper equivalent considers only copper and molybdenum values
      f.  Aljustrel – 1.5% Cu cut-off for all copper Resources and zinc cut-offs of 4.5%, 4.0% and 4.0%, respectively, for the Feitais, Moinho and Estação zinc Resources
      g.  Campo Morado – 3.0% Zn only cut-off grade for the G-9 zones and 5% Zn cut-off for the South West zone and El Largo, El Rey, Naranjo and Reforma deposits.
      h.  Loma de La Plata – 50 g/t silver equivalent cut-off based on $12.50 per ounce silver and $0.50 per pound lead
      i.  Minto – 0.5% Cu cut-off for open pits resources, 1.5% Cu cut-off for Minto East 
      j.  Cozamin – 1.15% Cu cut-off for San Roberto Area and 3.0% Zn cut-off for San Rafael Area 
      k.  Keno Hill – $15.25 per ounce for the Southwest and 99 Zones and $14.50 per ounce for the East Zone. A cut-off of 50 g/t silver was used for Elsa Tailings.
      l.  La Negra (Alacran) – $12.00 per ounce; La Negra (Monica) – $13.50 per ounce 
    10. From August 6, 2010 until August 5, 2014, Primero Mining Corp. (“Primero”) will deliver to the Company a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus the Company will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning August 6, 2014, Primero will deliver to the Company a per annum amount equal to the first 6.0 million ounces of payable silver produced at San Dimas and 50% of any excess, for the life of the mine.
    11. The Company’s attributable tonnage at Lagunas Norte was estimated by assuming 2008 production levels for four years. This tonnage was pro-rated between Proven and Probable Mineral Reserves according to the ratio of the December 31, 2009 Proven and Probable Mineral Reserves for Lagunas Norte as published by Barrick Gold Corporation (“Barrick”), applying average reserve grades.
    12. The Company’s attributable tonnage at Veladero is estimated based on a production rate of 85,000 tonnes per day for four years. This tonnage was pro-rated between Proven and Probable Mineral Reserves according to the ratio of the December 31, 2009 Proven and Probable Mineral Reserves for Veladero as published by Barrick, applying average reserve grades.
    13. The Company’s Yauliyacu purchase agreement (March 2006) with Glencore International AG provides for the delivery of up to 4.75 million ounces of silver per year for 20 years so long as production allows. In the event that silver produced at Yauliyacu in any year totals less than 4.75 million ounces, the maximum amount to be sold to the Company in subsequent years will be increased to make up the shortfall.
    14. The Mineral Park and Rosemont Resources and Reserves do not include the SX/EW leach material since this process does not recover silver.
    15. Los Filos Resources and Reserves include both the Los Filos and Bermejal deposits. 
    16. The Company has filed a technical report for each of its mineral projects considered to be material to the Company, being San Dimas, Yauliyacu, Peñasquito and Pascua-Lama, which are available on SEDAR at www.sedar.com.
    17. Silver is produced as a by-product metal at all operations with the exception of the Keno Hill and Loma de La Plata projects; therefore, the economic cut-off applied to the reporting of silver Resources and Reserves will be influenced by changes in the commodity prices of other metals at the time.

    SILVER WHEATON THIRD QUARTER REPORT [28]




    Cautionary Note Regarding Forward-Looking Statements

    The information contained herein contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements with respect to the future price of silver or gold, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, reserve determination and reserve conversion rates. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”,  7;forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Silver Wheaton to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: fluctuations in the price of silver or gold; the absence of control over mining operations from which Silver Wheaton purchases silver and gold and risks related to these mining operations including risks related to fluctuations in the price of the primary commodities mined at such operations, actual results of mining and explorat ion activities, economic and political risks of the jurisdictions in which the mining operations are located and changes in project parameters as plans continue to be refined; and differences in the interpretation or application of tax laws and regulations; as well as those factors discussed in the section entitled “Description of the Business - Risk Factors” in Silver Wheaton's Annual Information Form available on SEDAR at www.sedar.com and in Silver Wheaton's Form 40-F on file with the U.S. Securities and Exchange Commission in Washington, D.C. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to: the continued operation of the mining operations from which Silver Wheaton purchases silver and gold, no material adverse change in the market price of commodities, that the mining operations will operate and the mining projects will be completed in accordance with their public statements and achieve their stated production outcomes, and such other assumptions and factors as set out herein. Although Silver Wheaton has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements. Silver Wheaton does not undertake to update any forward-looking statements that are included or incorporated by reference herein, except in accordance with applicable securities laws.

    Cautionary Language Regarding Reserves And Resources

    For further information on Mineral Reserves and Mineral Resources and on Silver Wheaton more generally, readers should refer to Silver Wheaton’s Annual Information Form for the year ended December 31, 2009 and other continuous disclosure documents filed by Silver Wheaton since January 1, 2010, available on SEDAR at www.sedar.com. Silver Wheaton’s Mineral Reserves and Mineral Resources are subject to the qualifications and notes set forth therein. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

    Cautionary Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Resources: The information contained herein uses the terms “Measured”, “Indicated” and “Inferred” Mineral Resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them and expressly prohibits U.S. registered companies from including such terms in their filings with the SEC. “Inferred Mineral Resources” have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable. United States investors are urged to consider closely the disclosure in Silver Wheaton’s Form 40-F, a copy of which may be obtained from Silver Wheaton or from http://www.sec.gov/edgar.shtml.

    SILVER WHEATON THIRD QUARTER REPORT [29]





    Consolidated Statements of Operations

    Three Months Ended
    September 30

    Nine Months Ended
    September 30

    (US dollars and shares in thousands, except per share amounts - unaudited)

    Note

    2010

    2009

    2010

    2009

    Sales

     

    $

    92,834

     

    $

    69,767

     

    $

    273,776

     

    $

    148,742

     

     

     

     

     

     

     

    Cost of sales

     

    19,154

     

    18,765

     

     

    60,022

     

    43,069

     

    Depletion

     

     

    12,505

     

     

    13,164

     

     

    41,416

     

     

    26,170

     

     

    31,659

     

    31,929

     

     

    101,438

     

    69,239

     

    Earnings from operations

     

     

    61,175

     

     

    37,838

     

     

    172,338

     

     

    79,503

     

     

     

     

     

     

     

    Expenses and other income

     

     

     

     

     

     

    General and administrative 1

     

    4,947

     

    3,906

     

     

    18,260

     

    12,917

     

    Gain on mark-to-market of warrants held

    4

     

    (7,861)

     

    -

     

     

    (8,094)

     

    (33)

     

    Other

     

     

    (360)

       

    366

     

     

    (164)

       

    (496)

     

     

     

    (3,274)

     

     

    4,272

     

     

    10,002

     

     

    12,388

     

     

     

     

     

     

     

    Earnings before tax

     

    64,449

     

    33,566

     

     

    162,336

     

    67,115

     

    Future income tax recovery

    4

     

    4,785

     

     

    -

     

     

    4,785

     

     

    -

     

    Net earnings

    $

    69,234

     

    $

    33,566

     

    $

    167,121

     

    $

    67,115

     

     

     

     

    0.11

     

     

     

     

    0.23

     

    Basic earnings per share

    $

    0.20

     

    $

    $

    0.49

     

    $

    Diluted earnings per share

    $

    0.20

     

    $

    0.11

     

    $

    0.48

     

    $

    0.23

     

    Weighted average number of shares
         outstanding

     

     

     

     

     

     

    Basic

    8(e)

     

    344,253

     

    313,445

     

     

    343,168

     

    294,208

     

    Diluted

    8(e)

     

    350,361

     

     

    317,431

     

     

    348,469

     

     

    297,936

     
                             

    1) Stock based compensation (a non-cash item) included in general and administrative

     

    $

    1,306

    $

    623

     

    $

    6,431

     

    $

    3,312

     

    Consolidated Statements of Comprehensive Income

    Three Months Ended
    September 30

    Nine Months Ended
    September 30

    (US dollars and shares in thousands, except per share amounts - unaudited)

    Note

    2010

    2009

    2010

    2009

     

     

     

     

     

     

    Net earnings

    $

    69,234

     

    $

    33,566

     

    $

    167,121

     

    $

    67,115

     

    Other comprehensive income

     

     

     

     

     

     

    Gain on available-for-sale securities

    4

     

    49,483

     

    17,105

     

     

    52,066

     

    27,785

     

    Future income tax expense

    4

     

    (4,785)

       

    -

     

     

    (4,785)

       

    -

     

    Total other comprehensive income

     

    $

    113,932

     

    $

    50,671

     

    $

    214,402

     

    $

    94,900

     

    The accompanying notes form an integral part of these unaudited consolidated financial statements.

    SILVER WHEATON THIRD QUARTER REPORT [30]





    Consolidated Balance Sheets

    Note

    September 30

    December 31

    (US dollars in thousands - unaudited)

    2010

    2009

     

     

     

    Assets

     

     

     

    Current

     

     

     

    Cash and cash equivalents

    $

    255,189

     

    $

    227,566

     

    Accounts receivable

     

    7,798

     

    4,881

     

     

    Other

     

     

    924

     

     

    1,027

     

     

    263,911

     

    233,474

     

     

     

     

    Long-term investments

    4

     

    155,122

     

    73,747

     

    Silver and gold interests

    5

     

    1,943,224

     

    1,928,476

     

    Other

     

     

    1,368

     

     

    1,527

     

     

     

    $

    2,363,625

     

    $

    2,237,224

     

     

     

     

    Liabilities

     

     

     

    Current

     

     

     

    Accounts payable

    $

    1,398

     

    $

    5,397

     

    Accrued liabilities

     

    4,606

     

    4,578

     

    Current portion of bank debt

    6

     

    28,560

     

    28,560

     

     

    Current portion of silver interest payments

    7

     

    145,317

     

     

    130,788

     

     

    179,881

     

    169,323

     

    6

     

     

     

    Long-term portion of bank debt

     

    85,760

     

    107,180

     

    Long-term portion of silver interest payments

    7

     

    120,323

     

     

    236,796

     

     

     

     

     

    385,964

     

     

    513,299

     

    Shareholders' Equity

     

     

     

    Issued capital and contributed surplus

    8

     

    1,372,525

     

     

    1,333,191

     

    Retained earnings

     

    510,955

     

    343,834

     

    Accumulated other comprehensive income

     

    94,181

     

    46,900

     

     

     

     

     

    605,136

     

     

    390,734

     

     

     

     

     

    1,977,661

     

     

    1,723,925

     

     

     

     

    $

    2,363,625

     

    $

    2,237,224

     

    Commitments and contingencies

    6, 10

     

     

    The accompanying notes form an integral part of these unaudited consolidated financial statements.

    SILVER WHEATON THIRD QUARTER REPORT [31]





    Consolidated Statements of Cash Flows

    Three Months Ended
    September 30

    Nine Months Ended
    September 30

    (US dollars in thousands - unaudited)

    Note

    2010

    2009

    2010

    2009

     

     

     

     

     

     

    Operating Activities

     

     

     

     

     

     

    Net earnings

    $

    69,234

     

    $

    33,566

     

    $

    167,121

     

    $

    67,115

     

    Items not affecting cash

     

     

     

     

     

     

        Depreciation and depletion

     

    12,573

     

    13,229

     

     

    41,615

     

    26,359

     

        Stock based compensation

     

    1,306

     

    623

     

     

    6,431

     

    3,312

     

        Gain on mark-to-market of warrants held

    4

     

    (7,861)

     

     -

     

     

    (8,094)

     

    (33)

     

        Future income tax recovery

    4

     

    (4,785)

     

     -

     

     

    (4,785)

     

     -

     

        Other

     

    (1,251)

     

    (338)

     

     

    (879)

     

    (148)

     

    Change in non-cash operating working capital

    9

     

    1,269

     

    (1,700)

     

     

    (6,334)

     

    (1,652)

     

    Cash generated by operating activities

     

    70,485

     

     

    45,380

     

     

    195,075

     

     

    94,953

     

     

     

     

     

     

     

    Financing Activities

     

     

     

     

     

     

    Bank debt drawn down

    6

     

    -

     

    140,200

     

     

    -

     

    140,200

     

    Bank debt repaid

    6

     

    (7,140)

     

    (7,140)

     

     

    (21,420)

     

    (234,920)

     

    Shares issued

    8(a)

     

    -

     

    287,531

     

     

    -

     

    517,955

     

    Share issue costs

     

    -

     

    (11,645)

     

     

    (85)

     

    (21,620)

     

    Share purchase warrants exercised

     

    5,017

     

    10,345

     

     

    6,022

     

    10,508

     

    Share purchase options exercised

     

    8,579

     

    4,200

     

     

    26,881

     

    5,789

     

    Cash generated by financing activities

     

    6,456

     

     

    423,491

     

     

    11,398

     

     

    417,912

     

     

     

     

     

     

     

    Investing Activities

     

     

     

     

     

     

    Silver and gold interests

     

    (144,465)

     

    (213,819)

     

     

    (158,176)

     

    (218,466)

     

    Acquisition of Silverstone Resources Corp.,
         net of cash acquired

     

     -

     

    (261)

     

     

    (201)

     

    2,407

     

    Long-term investments

    4

     

    (644)

     

     -

     

     

    (21,533)

     

    -

     

    Other

     

    (10)

     

    1,599

     

     

    396

     

    1,615

     

    Cash applied to investing activities

     

    (145,119)

     

     

    (212,481)

     

     

    (179,514)

     

     

    (214,444)

     

    Effect of exchange rate changes on cash and cash
        equivalents

     

    471

     

     

    (122)

     

     

    664

     

     

    (673)

     

    (Decrease) increase in cash and cash equivalents

     

    (67,707)

     

    256,268

     

     

    27,623

     

    297,748

     

    Cash and cash equivalents, beginning of period

     

    322,896

       

    48,590

     

     

    227,566

       

    7,110

     

    Cash and cash equivalents, end of period

    $

    255,189

     

    $

    304,858

     

    $

    255,189

     

    $

    304,858

     

    At September 30, 2010, the Company’s cash and cash equivalents consisted of $80.2 million in cash (December 31, 2009 - $227.6 million) and $175 million in cash equivalents (December 31, 2009 - $Nil). Cash equivalents include term deposits and treasury bills with original maturities of less than 90 days.

    The accompanying notes form an integral part of these unaudited consolidated financial statements.

    SILVER WHEATON THIRD QUARTER REPORT [32]





    Consolidated Statements of Shareholders’ Equity

    (US dollars in thousands - unaudited)

    Common Shares

    Share Purchase Warrants

    Share Purchase Options

    Restricted Share Units

    Retained Earnings

    Accumulated Other Comprehensive Income

    Total

     

     

     

    At December 31, 2008

    $

    630,842

     

    $

    20,979

     

    $

    9,756

     

    $

    538

     

    $

    225,910

     

    $

                      -  

     

    $

    888,025

     

    Shares issued

    376,602

     

     -

     

     -

     

     -

     

     -

     

                      -  

     

     

    376,602

     

    Fair value of SBC 1

     -

     

     -

     

    2,457

     

    232

     

     -

     

                      -  

     

     

    2,689

     

    Options exercised 1

    3,081

     

     -

     

    (1,492)

     

     -

     

     -

     

                      -  

     

     

    1,589

     

    Options issued 1

     -

     

                -

     

    2,578

     

                -

     

                  -

     

                      -  

     

     

    2,578

     

    RSU's exercised 1

    106

     

     -

     

     -

     

    (106)

     

     -

     

                      -  

     

     

                   -  

     

    Warrants exercised 1

    213

     

    (50)

     

     -

     

     -

     

     -

     

                      -  

     

     

    163

     

    Share issue costs

    (9,975)

     

     -

     

     -

     

     -

     

     -

     

                      -  

     

     

    (9,975)

     

    Net earnings

     -

     

     -

     

     -

     

     -

     

    33,549

     

                      -  

     

     

    33,549

     

    OCI 1

     -

     

     -

     

     -

     

     -

     

     -

     

    10,680

     

     

    10,680

     

    At June 30, 2009

    $

    1,000,869

     

    $

    20,929

     

    $

    13,299

     

    $

    664

     

    $

    259,459

     

    $

    10,680

     

    $

    1,305,900

     

    Shares issued

    287,531

     

                -  

     

                -  

     

                -  

     

                  -  

     

                      -  

     

     

    287,531

     

    Fair value of SBC 1

     -

     

                -  

     

    561

     

    62

     

                  -  

     

                      -  

     

     

    623

     

    Options exercised 1

    5,697

     

                -  

     

    (1,497)

     

                -  

     

                  -  

     

                      -  

     

     

    4,200

     

    Warrants exercised 1

    13,181

     

    (2,836)

     

                -  

     

                -  

     

                  -  

     

                      -  

     

     

    10,345

     

    Share issue costs

    (12,091)

     

                -  

     

                -  

     

                -  

     

                  -  

     

                      -  

     

     

    (12,091)

     

    Net earnings

     -

     

                -  

     

                -  

     

                -  

     

    33,566

     

                      -  

     

     

    33,566

     

    OCI 1

     -

     

                -  

     

                -  

     

                -  

     

                  -  

     

    17,105

     

     

    17,105

     

    At September 30, 2009

    $

    1,295,187

     

    $

    18,093

     

    $

    12,363

     

    $

    726

     

    $

    293,025

     

    $

    27,785

     

    $

    1,647,179

     

    Fair value of SBC 1

     -

     

                -  

     

    610

     

    88

     

                  -  

     

                      -  

     

     

    698

     

    Options exercised 1

    3,573

     

                -  

     

    (586)

     

                -  

     

                  -  

     

                      -  

     

     

    2,987

     

    Warrants exercised 1

    3,675

     

    (404)

     

                -  

     

                -  

     

                  -  

     

                      -  

     

     

    3,271

     

    Share issue costs

    (134)

     

                -  

     

                -  

     

                -  

     

                  -  

     

                      -  

     

     

    (134)

     

    Net earnings

     -

     

                -  

     

                -  

     

                -  

     

    50,809

     

                      -  

     

     

    50,809

     

    OCI 1

     -

     

                -  

     

                -  

     

                -  

     

                  -  

     

    19,115

     

     

    19,115

     

    At December 31, 2009

    $

    1,302,301

     

    $

    17,689

     

    $

    12,387

     

    $

    814

     

    $

    343,834

     

    $

    46,900

     

    $

    1,723,925

     

    Fair value of SBC 1

     -

     

                -  

     

    4,002

     

    1,123

     

                  -  

     

                      -  

     

     

    5,125

     

    Options exercised 1

    22,841

     

                -  

     

    (4,539)

     

                -  

     

                  -  

     

                      -  

     

     

    18,302

     

    RSU's exercised 1

    622

     

                -  

     

                -  

     

    (622)

     

                  -  

     

                      -  

     

     

                   -  

     

    Warrants exercised

    1,143

     

    (138)

     

                -  

     

                -  

     

                  -  

     

                      -  

     

     

    1,005

     

    Net earnings

     -

     

                -  

     

                -  

     

                -  

     

    97,887

     

                      -  

     

     

    97,887

     

    OCI 1

     -

     

                -  

     

                -  

     

                -  

     

                  -  

     

    2,583

     

     

    2,583

     

    At June 30, 2010

    $

    1,326,907

     

    $

    17,551

     

    $

    11,850

     

    $

    1,315

     

    $

    441,721

     

    $

    49,483

     

    $

    1,848,827

     

    Fair value of SBC 1

     -

     

                -  

     

    987

     

    319

     

                  -  

     

                      -  

     

     

    1,306

     

    Options exercised 1

    11,006

     

                -  

     

    (2,427)

     

                -  

     

                  -  

     

                      -  

     

     

    8,579

     

    Warrants exercised 1

    5,708

     

    (691)

     

                -  

     

                -  

     

                  -  

     

                      -  

     

     

    5,017

     

    Net earnings

     -

     

                -  

     

                -  

     

                -  

     

    69,234

     

                      -  

     

     

    69,234

     

    OCI 1

     

                  -

       

                -  

       

                -  

       

                -  

       

                  -  

       

    44,698

     

     

    44,698

     

    At September 30, 2010

    $

    1,343,621

     

    $

    16,860

     

    $

    10,410

     

    $

    1,634

     

    $

    510,955

     

    $

    94,181

     

    $

    1,977,661

     
       
    1) Definitions as follows: “SBC” = Stock Based Compensation; “Options” = Share Purchase Options; “RSU’s” = Restricted Share Units; “Warrants” = Share Purchase Warrants; “OCI” = Other Comprehensive Income.

    The accompanying notes form an integral part of these unaudited consolidated financial statements.

    SILVER WHEATON THIRD QUARTER REPORT [33]





    1. Description of Business and Nature of Operations

    Silver Wheaton Corp. (“Silver Wheaton” or the “Company”) is a mining company which generates its revenue primarily from the sale of silver. The Company is listed on the New York Stock Exchange (symbol: SLW) and the Toronto Stock Exchange (symbol: SLW). In addition, the Company has share purchase warrants that trade on the Toronto Stock Exchange (symbols: SLW.WT.B and SLW.WT.U, respectively).

    To date, the Company has entered into fifteen long-term silver purchase agreements and two long-term precious metal purchase agreements whereby Silver Wheaton acquires silver and gold production from the counterparties for a per ounce cash payment at or below the prevailing market price. During the three months ended September 30, 2010, the per ounce price paid by the Company for silver and gold under the agreements averaged $3.98 and $300, respectively. The primary drivers of the Company’s financial results are the volume of silver production at the various mines and the price of silver realized by Silver Wheaton upon sale.

    2. Basis of Presentation

    These interim unaudited consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information and they follow the same accounting policies and methods of application as the audited consolidated financial statements for the year ended December 31, 2009. These interim unaudited consolidated financial statements do not include all the information and note disclosure required by the generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the most recent annual audited consolidated financial statements.

    In the opinion of management, all adjustments (including normal recurring adjustments) necessary to present fairly the financial position at September 30, 2010 and the results of operations and cash flows for all periods presented have been made. The interim results are not necessarily indicative of results for a full year.

    3. Changes in Accounting Policies

    FUTURE CHANGES IN ACCOUNTING POLICIES

    BUSINESS COMBINATIONS

    In January 2009, the Canadian Institute of Chartered Accountants (“CICA”) issued Handbook Section 1582, Business Combinations (“Section 1582”), which replaces Handbook Section 1581, Business Combinations. In addition, the CICA issued Handbook Section 1601, Consolidated Financial Statements and Handbook Section 1602, Non-Controlling Interests (“Section 1602”), which replace Handbook Section 1600, Consolidated Financial Statements. These new sections are effective January 1, 2011 with earlier adoption permitted. Sections 1582 and 1602 will require net assets, non-controlling interests and goodwill acquired in a business combination to be recorded at fair value and non-controlling interests will be reported as a component of equity. In addition, the definition of a business is expanded and is described as an integrated set of activities and assets that are capable of being managed to provide a return to investors or economic benefi ts to owners. Under these new sections, acquisition costs are not treated as consideration and are to be expensed when incurred rather than capitalized. The Company has not early adopted these sections and does not anticipate the adoption of these sections to have a material impact on its financial position and results of operations.

    INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)

    In 2008, the Canadian Accounting Standards Board confirmed that publicly listed companies will be required to adopt IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Early adoption may be permitted, however it will require exemptive relief on a case by case basis from the Canadian Securities Administrators. Silver Wheaton expects its first consolidated financial statements presented in accordance with IFRS to be for the three month period ended March 31, 2011, which includes presentation of its comparative results for fiscal 2010 under IFRS.

    SILVER WHEATON THIRD QUARTER REPORT [34]





    4. Long-Term Investments

     

    (in thousands)

    September 30, 2010

    December 31, 2009

     

     

     

    Available-for-sale

    $

    145,723

     

    $

    72,502

     

    Warrants

     

    9,399

       

    1,245

     

     

    $

    155,122

     

    $

    73,747

     


    AVAILABLE-FOR-SALE


    September 30, 2010

    Three Months Ended
    September 30, 2010

    Nine Months Ended
    September 30, 2010

    December 31, 2009

    (in thousands)

    Fair Value

    Mark-to-Market Gains Included in OCI

    Mark-to-Market
    Gains (Losses)
    Included in OCI

    Fair Value

     

     

     

     

     

     

     

     

     

    Bear Creek

    $

    60,631

     

    $

    19,509

     

    $

    22,399

     

    $

    38,232

     

    Revett

     

    11,634

     

     

    4,949

     

     

    4,083

     

    5,815

     

    Mines Management

     

    5,632

     

     

    1,083

     

     

    (1,224)

     

    6,856

     

    Other

     

    67,826

     

     

    23,942

     

     

    26,808

       

    21,599

     

     

    $

    145,723

     

    $

    49,483

     

    $

    52,066

     

    $

    72,502

     

     

     


    September 30, 2009

    Three Months Ended
    September 30, 2009

    Nine Months Ended
    September 30, 2009

    December 31, 2008

    (in thousands)

    Fair Value

    Mark-to-Market Gains Included in OCI

    Mark-to-Market Gains Included in OCI

    Fair Value

    Bear Creek

    $

    26,444

     

    $

    9,724

     

    $

    15,668

     

    $

    10,776

     

    Revett

    2,337

     

    412

     

    1,354

     

    607

     

    Mines Management

    6,389

     

    2,604

     

    3,225

     

    3,164

     

    Other

     

    14,540

     

     

    4,365

     

     

    7,538

     

     

    7,277

     

     

    $

    49,710

     

    $

    17,105

     

    $

    27,785

     

    $

    21,824

     

    SILVER WHEATON THIRD QUARTER REPORT [35]





    WARRANTS

    September 30, 2010

    Three Months Ended
    September 30, 2010

    Nine Months Ended
    September 30, 2010

    December 31, 2009

    (in thousands)

    Fair Value

    Mark-to-Market Gains Included in Earnings

    Mark-to-Market Gains Included in Earnings

    Fair Value

     

     

     

     

     

     

     

     

     

     

     

     

    Revett

    $

    706

     

    $

    433

     

    $

    380

     

    $

    282

     

    Other

     

    8,693

     

     

    7,428

     

     

    7,714

       

    963

     

     

    $

    9,399

     

    $

    7,861

     

    $

    8,094

     

    $

    1,245

     

     

     


    September 30, 2009

    Three Months Ended
    September 30, 2009

    Nine Months Ended
    September 30, 2009

    December 31, 2008

    (in thousands)

    Fair Value

    Mark-to-Market (Losses) Gains Included in Earnings

    Mark-to-Market (Losses) Gains Included in Earnings

    Fair Value

    Revett

    $

    56

     

    $

    38

     

    $

    49

     

    $

    -

     

    Other

     

    -

       

    (38

    )  

    (16

    )  

    16

     

     

    $

    56

     

    $

    -

     

    $

    33

     

    $

    16

     

    By holding these long-term investments, the Company is inherently exposed to various risk factors including currency risk, market price risk and liquidity risk.

    The Company’s future income tax expense or recovery in a given period is largely determined by changes in the unrealized gains or losses recorded with respect to its long-term investments. As a result of a significant increase in the value of these long-term investments during the third quarter of 2010, the Company recorded a future income tax liability of $4.8 million, with the associated expense being reflected as a component of Other Comprehensive Income. The Company currently has future tax assets, which have not been previously recognized, which fully offset this future tax liability. As a result, the Company decreased its valuation allowance on its future income tax assets in order to fully offset the future tax liability, with the resulting future income tax recovery being reflected in net earnings.

    On November 5, 2010, Bear Creek Mining Corporation (“Bear Creek”) closed its previously announced equity financing. As part of that financing, the Company subscribed for 2,978,000 common shares of Bear Creek for total consideration of Cdn$19 million, thereby maintaining the Company’s approximate 15% interest in Bear Creek.

    SILVER WHEATON THIRD QUARTER REPORT [36]





    5. Silver and Gold Interests

     

    September 30, 2010

    December 31, 2009

    (in thousands)

    Cost

    Accumulated Depletion

    Net

    Cost

    Accumulated Depletion

    Net

     

     

     

     

     

     

     

     

     

    San Dimas

    $

    190,638

     

    $

    (17,690

    ) 

    $

    172,948

     

    $

    190,331

     

    $

    (14,895

    )

    $

    175,436

     

    Zinkgruvan

     

    77,919

     

     

    (17,084

    )

     

    60,835

     

    77,919

     

    (14,599

    )

    63,320

     

    Yauliyacu

     

    285,292

     

     

    (47,341

    )

     

    237,951

     

    285,292

     

    (43,227

    )

    242,065

     

    Peñasquito

     

    524,625

     

     

    (6,723

    )

     

    517,902

     

    524,365

     

    (2,217

    )

    522,148

     

    Minto

     

    55,296

     

     

    (11,462

    )

     

    43,834

     

    54,805

     

    (5,478

    )

    49,327

     

    Cozamin

     

    41,959

     

     

    (9,111

    )

     

    32,848

     

    41,959

     

    (4,497

    )

    37,462

     

    Barrick 1

     

    603,135

     

     

    (10,566

    )

     

    592,569

     

    583,485

     

    (3,339

    )

    580,146

     

    Other 2

     

    312,103

     

     

    (27,766

    )

     

    284,337

       

    276,744

       

    (18,172

    )  

    258,572

     

     

    $

    2,090,967

     

    $

    (147,743

    )

    $

    1,943,224

     

    $

    2,034,900

     

    $

    (106,424

    )

    $

    1,928,476

     
       
    1) Comprised of the Pascua-Lama, Lagunas Norte, Pierina and Veladero mines.
    2) Comprised of the Los Filos, Keno Hill, La Negra, Mineral Park, Neves-Corvo, Stratoni, Campo Morado, Aljustrel and Loma de La Plata mines.

    The value allocated to reserves is classified as depletable upon a mining operation achieving commercial production and is depleted on a units-of-sale basis over the estimated recoverable proven and probable reserves at the mine. The value associated with resources and exploration potential is allocated at acquisition and is classified as non-depletable until such time as it is transferred to the depletable category, generally as a result of the conversion of resources or exploration potential into reserves.

    September 30, 2010

    December 31, 2009

    (in thousands)

    Depletable

    Non-Depletable

    Total

    Depletable

    Non-Depletable

    Total

     

     

     

     

     

     

     

     

     

    San Dimas

    $

    41,936

     

    $

    131,012

     

    $

    172,948

     

    $

    35,942

     

    $

    139,494

     

    $

    175,436

     

    Zinkgruvan

     

    38,485

     

     

    22,350

     

     

    60,835

     

    41,829

     

    21,491

     

    63,320

     

    Yauliyacu

     

    11,018

     

     

    226,933

     

     

    237,951

     

    15,132

     

    226,933

     

    242,065

     

    Peñasquito

     

    401,605

     

     

    116,297

     

     

    517,902

     

    10,895

     

    511,253

     

    522,148

     

    Minto

     

    32,224

     

     

    11,610

     

     

    43,834

     

    34,445

     

    14,882

     

    49,327

     

    Cozamin

     

    32,848

     

     

    -

     

     

    32,848

     

    36,419

     

    1,043

     

    37,462

     

    Barrick 1, 2

     

    36,145

     

     

    556,424

     

     

    592,569

     

    33,907

     

    546,239

     

    580,146

     

    Other 3

     

    113,808

     

     

    170,529

     

     

    284,337

       

    98,722

       

    159,850

       

    258,572

     

     

    $

    708,069

     

    $

    1,235,155

     

    $

    1,943,224

     

    $

    307,291

     

    $

    1,621,185

     

    $

    1,928,476

     
       
    1) Comprised of the Pascua-Lama, Lagunas Norte, Pierina and Veladero mines.
    2) The amount reflected as depletable is based on the value of the reserves relating to the Lagunas Norte, Pierina and Veladero mines.
    3) Comprised of the Los Filos, Keno Hill, La Negra, Mineral Park, Neves-Corvo, Stratoni, Campo Morado, Aljustrel and Loma de La Plata mines.

    SILVER WHEATON THIRD QUARTER REPORT [37]





    SAN DIMAS

    On October 15, 2004, the Company entered into an agreement (amended on March 30, 2006) with Goldcorp Inc. (“Goldcorp”) to acquire an amount equal to 100% of the silver produced by Goldcorp’s Luismin mining operations in Mexico (owned at the date of the transaction) for a period of 25 years. The Luismin operations consisted primarily of the San Dimas and Los Filos mines.

    On August 6, 2010, Goldcorp completed the sale of the San Dimas mine to Primero Mining Corp. (“Primero”). In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, as it relates to San Dimas, has been extended to the life of mine. During the first four years following closing of the transaction, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Primero will deliver to the Company a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess. Goldcorp will continue to guarantee the delivery by Primero of all silver produced and owing to the Comp any until 2029, and a payment of $0.50 per ounce for any shortfall below 215 million cumulative silver ounces delivered to Silver Wheaton by the end of 2031. Primero has provided Silver Wheaton with a right of first refusal on any metal stream or similar transaction it enters into.

    ROSEMONT

    On February 11, 2010, the Company entered into an agreement with Augusta Resource Corporation (“Augusta”) to acquire an amount equal to 100% of the life of mine silver and gold production from its Rosemont Copper project (“Rosemont”) in the United States. The Company will make total upfront cash payments of $230 million payable in installments to partially fund construction of the mine commencing once certain milestones are achieved, including the receipt of key permits and securing the necessary financing to complete construction of Rosemont. In addition, a cash payment of the lesser of $3.90 per ounce of silver and $450 per ounce of gold (both subject to an inflationary adjustment) or the prevailing market price is due, for silver and gold delivered under the agreement. Augusta anticipates that key operating permits will be received in 2011 and has provided a completion guarantee with certain minimum production criteria required to be m et by specific dates.

    LOMA DE LA PLATA

    On February 25, 2010, the Company elected to convert the debenture with Pan American Silver Corp. ("Pan American") into an agreement to acquire an amount equal to 12.5% of the life of mine silver production from the Loma de La Plata zone of the Navidad project located in Argentina. Silver Wheaton will make total upfront cash payments of $32.4 million following the satisfaction of certain conditions, including Pan American receiving all necessary permits to proceed with the mine construction. In addition, a cash payment of $4.00 per ounce is due for silver delivered under the agreement. Silver Wheaton and Pan American expect to finalize the definitive terms of the silver purchase agreement by the end of 2010.

    6. Bank Debt

    The Company has a $200 million non-revolving term loan (the “Term Loan”) and a $400 million revolving term loan (the “Revolving Loan”). The current term of the Revolving Loan and the Term Loan matures on July 20, 2014 with the Term Loan requiring equal quarterly principal repayments of approximately $7 million (together with accrued interest). Silver Wheaton has committed to pay down the Revolving Loan, within 61 days after the end of each fiscal quarter, by an amount equal to 90% of the increase in cash balances reported for the quarter. The Revolving Loan can be drawn down at any time to finance acquisitions or investments, with $10 million being available for general corporate purposes.

    Amounts drawn incur interest at LIBOR plus 0.875% to 1.75% per annum dependent upon the Company’s leverage ratio. Undrawn amounts are subject to a commitment fee of 0.2% to 0.45% per annum, dependent on the Company’s leverage ratio. Under the credit agreement, the Company is required to maintain a debt service coverage ratio greater than or equal to 1.25:1, a leverage ratio less than or equal to 3.5:1, and a tangible net worth greater than 80% of the tangible net worth at June 30, 2007 plus 50% of net earnings for each fiscal quarter thereafter. Both the Term Loan and the Revolving Loan are secured against the Company’s assets, including the Company’s silver and gold interests and long-term investments.

    SILVER WHEATON THIRD QUARTER REPORT [38]





    During the three months ended September 30, 2010, the Company repaid $7.1 million (nine months - $21.4 million) of the balance outstanding on the Term Loan. As at September 30, 2010, the Company had $400 million available under its revolving debt facility.

    The Company is in compliance with the debt covenants described above.

    September 30, 2010

    (in thousands)

    Term Loan

    Revolving Loan

    Total

     

     

     

     

     

     

     

     

     

    Current portion

    $

    28,560

     

    $

    -

     

    $

    28,560

     

    Long-term portion

     

    85,760

     

     

    -

     

     

    85,760

     

     

    $

    114,320

     

    $

    -

     

    $

    114,320

     

     

     

     

     

     

     

     

     

     

    Three months:

     

     

     

     

     

     

     

     

     

    Interest capitalized during period

    $

    352

     

    $

    -

     

    $

    352

     

    Effective interest rate

     

    1.18

    % 

     

    0.00

    % 

     

    1.18

    %

    Nine months:

     

     

     

     

     

     

     

     

     

    Interest capitalized during period

    $

    1,092

     

    $

    -

     

    $

    1,092

     

    Effective interest rate

     

    1.16

    %

     

    0.00

    %

     

    1.16

    %

     


    September 30, 2009

    (in thousands)

    Term Loan

    Revolving Loan

    Total

    Current portion

    $

    28,560

     

    $

    140,200

     

    $

    168,760

     

    Long-term portion

     

    114,320

       

    -

       

    114,320

     

     

    $

    142,880

     

    $

    140,200

     

    $

    283,080

     

    Three months:

    Interest capitalized during period

    $

    543

     

    $

    42

     

    $

    585

     

    Effective interest rate

    1.47

    %

    1.20

    %

    1.45

    %  

    Nine months:

    Interest capitalized during period

    $

    2,682

     

    $

    690

     

    $

    3,372

     

    Effective interest rate

    2.33

    %

    1.92

    %

    2.23

    %

    The Company’s bank debt is classified as held to maturity and reported at amortized cost using the effective interest method.

    SILVER WHEATON THIRD QUARTER REPORT [39]





    The required principal payments under the Term Loan and the Revolving Loan over the remaining terms are as follows:

    Fiscal Year

    Term Loan
     (000's)

    Revolving Loan
    (000's)

    Total
    (000's)

    2010

    $

    7,140

     

    $

    -

     

    $

    7,140

     

    2011

    28,560

     

    -

     

    28,560

     

    2012

    28,560

     

    -

     

    28,560

     

    2013

    28,560

     

    -

     

    28,560

     

    2014

     

    21,500

       

    -

       

    21,500

     

     

    $

    114,320

     

    $

    -

     

    $

    114,320

     

     

     

    7. Silver Interest Payments

    On October 2, 2008, the Company entered into an agreement with Alexco Resource Corp. (“Alexco”) to acquire an amount equal to 25% of the silver produced from Alexco’s Keno Hill project located in Canada, for the life of mine. Silver Wheaton will make total upfront cash payments of $50 million payable in installments, of which $33.3 million has been paid to date. The remaining $16.7 million is expected to be paid by the end of 2010.

    On September 8, 2009, the Company entered into an agreement with Barrick Gold Corporation (“Barrick”) to acquire an amount equal to 25% of the life of mine silver production from its Pascua-Lama project, as well as 100% of the silver production from its Lagunas Norte, Pierina and Veladero mines until the end of 2013. Silver Wheaton will make total upfront cash payments of $625 million payable in installments, of which $350 million has been paid to date. The remaining $275 million is payable in annual installments of $137.5 million due on the second and third anniversaries of the transaction. The financial liability relating to these future payments has been discounted using an annual discount rate of 6.9%, which represents management’s best estimate of the market rate of interest at which the Company could borrow money under similar terms and conditions at the time the agreement was entered into. The silver interest payments due are classified as held to maturity and reported at amortized cost using the effective interest method. Total interest costs of $51 million will accrete over the term of this obligation and will be capitalized to the cost of the Barrick silver interest, until the Pascua-Lama mining operation is commissioned. To date, $24.9 million of the interest costs have been accreted to the cost of the Barrick silver interest, of which $6.4 million and $18.9 million were capitalized during the three and nine months ended September 30, 2010, respectively.

    8. Issued Capital and Contributed Surplus

    Note

    September 30

    December 31

    (US dollars and shares in thousands)

    2010

    2009

     

     

     

    Issued Capital

     

     

     

           Share capital issued and outstanding: 345,198
               (December 31, 2009:  342,187)

    8(a)

    $

    1,343,621

     

    $

    1,302,301

     

     

     

    $

    1,343,621

     

    $

    1,302,301

     

    Contributed Surplus

     

     

     

    Share purchase options

    8(b)

    $

    10,410

     

    $

    12,387

     

    Restricted share units

    8(c)

     

    1,634

     

    814

     

    Share purchase warrants

    8(d)

     

    16,860

     

    17,689

     

     

     

     

    28,904

     

     

    30,890

     

     

     

    $

    1,372,525

     

    $

    1,333,191

     

     

    SILVER WHEATON THIRD QUARTER REPORT [40]




    a) Shares Issued

    The Company is authorized to issue an unlimited number of common shares having no par value and an unlimited number of preference shares issuable in series. As at September 30, 2010, the Company had no preference shares outstanding.

    A summary of the Company’s issued and outstanding common shares at September 30, 2010 and December 31, 2009 and the changes for the periods ending on those dates is presented below:

     

    Number of Shares

    Weighted Average
    Price (Cdn$)

    At December 31, 2008

    251,497,746

    Shares issued

    85,275,582

    9.19

    Share purchase options exercised

    1,945,305

    4.86

    Share purchase warrants exercised

    3,455,636

    4.27

    Restricted share units exercised

    12,355

                                        -  

    At December 31, 2009

    342,186,624

     

    Share purchase options exercised

    1,542,643

    12.26

    Share purchase warrants exercised

    104,250

    10.00

    Restricted share units exercised

    46,955

                                        -  

    At June 30, 2010

    343,880,472

     

    Share purchase options exercised

    793,912

    11.21

    Share purchase warrants exercised

    523,460

    10.00

    At September 30, 2010

    345,197,844

     

     


    On February 12, 2009, the Company announced that it had closed a bought deal equity financing, raising gross proceeds of Cdn$287.5 million ($230.4 million) through the issuance of 35,937,500 common shares at Cdn$8.00 per share (approximately $6.41 per share). The proceeds were primarily used to repay outstanding debt under the revolving bank loan facility.

    On May 21, 2009, the Company closed the acquisition of Silverstone Resources Corp. (“Silverstone”) through the issuance of 23,434,332 common shares and 1,367,364 share purchase options of Silver Wheaton which were issued on conversion of previously issued fully vested share purchase options of Silverstone. Including acquisition costs, the transaction was valued at approximately $152 million.

    On September 30, 2009, in conjunction with the Barrick acquisition, the Company closed a bought deal equity financing, raising gross proceeds of $287.5 million through the issuance of 25,903,750 common shares at $11.10 per share, with part of the net proceeds being used to finance the initial upfront payment of $212.5 million made to Barrick. The remaining net proceeds from the equity financing are available for general corporate purposes including funding the acquisition of future silver interests.

    b) Share Purchase Options

    The Company has established a share purchase option plan whereby the Company’s Board of Directors may, from time to time, grant options to employees or consultants. The maximum term of any option may be ten years, but generally options are granted for five years. The exercise price of an option is not less than the closing price on the TSX on the last trading day preceding the grant date.

    SILVER WHEATON THIRD QUARTER REPORT [41]




    Stock based compensation expense during the three months ended September 30, 2010 included $1.0 million (nine months - $5.0 million) of amortization of the fair value of share purchase options issued, compared to $0.6 million (nine months - $3.3 million) during the comparable period of 2009.

    During the third quarter of 2010, the Company did not issue any new share purchase options (nine months –1,288,700 options were issued with a weighted average exercise price of Cdn$15.89 per option and a fair value of $6.9 million or Cdn$5.54 per option, which was determined using the Black-Scholes option value method). For the same period in 2009, no share purchase options were issued (nine months – 1,137,000 share purchase options with a weighted average exercise price of Cdn$9.09 per option and a fair value of $2.6 million or Cdn$2.90 per option, also determined using the Black-Scholes option value method). The following weighted average assumptions were used in computing the fair value of share purchase options:

    Three Months Ended
    September 30

    Nine Months Ended
    September 30

     

    2010

    2009

    2010

    2009

     

     

    Black-Scholes weighted average assumptions

     

     

    Expected dividend yield

    -

    -

    -

    -

    Expected volatility

    -

    -

    55%

    50%

    Risk-free interest rate

    -

    -

    1.84%

    1.38%

    Expected option life, in years

    -

    -

    2.5

    2.5

    Weighted average fair value per option granted

    -

    -

    Cdn$5.54

    Cdn$2.90


    At September 30, 2010, there were 3,081,040 share purchase options outstanding with a weighted average exercise price of Cdn$13.55 per option.


     

    c) Restricted Share Units

    During the third quarter of 2010, the Company did not issue any new restricted share units (nine months - 143,400 restricted share units were issued with a fair value of $2.3 million or Cdn$16.01 per restricted share unit). For the same period in 2009, no restricted share units were issued (nine months – 42,954 restricted share units were issued with a fair value of $0.3 million or Cdn$9.08 per restricted share unit).

    Stock based compensation expense during the three months ended September 30, 2010 included $0.3 million (nine months - $1.4 million) of amortization of the fair value of restricted share units issued, compared to $0.1 million (nine months - $0.3 million) during the comparable period of 2009.

    At September 30, 2010, there were 190,991 restricted share units outstanding.

    d) Share Purchase Warrants

    The following table summarizes information about the warrants outstanding at September 30, 2010:

     

    Share Purchase Warrants Outstanding

    Exercise Price

    Expiry Date

    Series “B” warrants

    7,153,250

    Cdn$10.00

    December 22, 2010

    New warrants

    2,718,205

    $20.00

    September 5, 2013

     

    9,871,455

     

     

     


    Each warrant entitles the holder the right to purchase one of the Company’s common shares.

    SILVER WHEATON THIRD QUARTER REPORT [42]




    e) Diluted Earnings Per Share

    Diluted earnings per share is calculated using the treasury method which requires the calculation of diluted earnings per share by assuming that outstanding share purchase options and warrants, with exercise prices that are lower than the average market price for the relevant period, are exercised and the proceeds are used to repurchase shares of the Company at the average market price of the common shares for the relevant period.

    Diluted earnings per share is calculated based on the following weighted average number of shares outstanding:

    Three Months Ended
    September 30

    Nine Months Ended
    September 30

    (in thousands)

     

    2010

       

    2009

       

    2010

       

    2009

     

    Basic weighted average number of
         shares outstanding

     

    344,253

       

    313,445

       

    343,168

       

    294,208

     

    Effect of dilutive securities

     

     

       

     

     

    Share purchase options

     

    1,517

       

    880

       

    1,439

       

    808

     

    Share purchase warrants

     

    4,400

       

    3,015

       

    3,690

       

    2,836

     
     

    Restricted share units

     

    191

       

    91

       

    172

       

    84

     

    Diluted weighted average number of
         shares outstanding

     

    350,361

       

    317,431

       

    348,469

       

    297,936

     

     


    The following lists the share purchase options and share purchase warrants excluded from the computation of diluted earnings per share because the exercise prices exceeded the average market value of the common shares of Cdn$22.30 (nine months - Cdn$19.30), compared to Cdn$11.07 (nine months – Cdn$9.90) for the comparable period in 2009.

     

    Three Months Ended
    September 30

    Nine Months Ended
    September 30

    (in thousands)

     

    2010

       

    2009

       

    2010

       

    2009

     

    Share purchase options

     

    -

       

    2,243

       

    -

       

    3,030

     

    Share purchase warrants

     

    -

       

    2,718

       

    2,718

       

    10,499

     

    Total

     

    -

       

    4,961

       

    2,718

       

    13,529

     

     


    9. Supplemental Cash Flow Information

    Three Months Ended
    September 30

    Nine Months Ended
    September 30

    (in thousands)

    2010

    2009

    2010

    2009

     

     

     

     

     

     

    Change in non-cash working capital

     

     

     

     

     

     

    Accounts receivable

    $

    114

     

    $

    (2,306

    )

    $

    (2,916

    )

    $

    (694

    )

    Accounts payable

     

    (362

    )

    (418

    )

     

    (3,999

    )

    (2,825

    )

    Accrued liabilities

     

    470

     

    523

     

     

    479

     

    1,012

     

    Other

     

    1,047

     

     

    501

     

     

    102

     

     

    855

     

     

    $

    1,269

     

    $

    (1,700

    )

    $

    (6,334

    )

    $

    (1,652

    )

     

     

     

     

     

     

    Interest paid

    $

    486

     

    $

    835

     

    $

    1,253

     

    $

    4,776

     

     


    SILVER WHEATON THIRD QUARTER REPORT [43]




    10. Commitments And Contingencies

    The following table summarizes the Company’s commitments to purchase silver and gold in connection with the silver purchase agreements or precious metal purchase agreements:

    Silver and Gold Interests

    Attributable Payable Production To Be Purchased

    Per Ounce Cash Payment 1, 2

    Term of Agreement

    Date of Contract

    Silver

    Gold

    Silver

    Gold

     

     

     

     

     

     

     

    San Dimas

    100% 3

    -

    $ 4.04

    n/a

      Life of Mine 3

    15-Oct-04

    Zinkgruvan

    100%

    -

    $ 4.04

    n/a

    Life of Mine

    8-Dec-04

    Yauliyacu

    100% 4

    -

    $ 3.98

    n/a

    20 years

    23-Mar-06

    Peñasquito

    25%

    -

    $ 3.90

    n/a

    Life of Mine

    24-Jul-07

    Minto

    100%

    100% 5

    $ 3.90

    $ 300

    Life of Mine

    1-Dec-08

    Cozamin

    100%

    -

    $ 4.04

    n/a

    10 years

    4-Apr-07

    Barrick

     

     

     

     

    Pascua-Lama

    25%

    -

    $ 3.90

    n/a

    Life of Mine

    8-Sep-09

    Lagunas Norte

    100%

    -

    $ 3.90

    n/a

    4 years 6

    8-Sep-09

    Pierina

    100%

    -

    $ 3.90

    n/a

    4 years 6

    8-Sep-09

    Veladero

    100% 7

    -

    $ 3.90

    n/a

    4 years 6

    8-Sep-09

    Other

     

     

     

     

     

    Los Filos

    100%

    -

    $ 4.04

    n/a

    25 years

    15-Oct-04

    Keno Hill

    25%

    -

    $ 3.90

    n/a

    Life of Mine

    2-Oct-08

    La Negra

    50%

    -

    $ 3.90

    n/a

    Life of Mine

    2-Jun-08

    Mineral Park

    100%

    -

    $ 3.90

    n/a

    Life of Mine

    17-Mar-08

    Neves-Corvo

    100%

    -

    $ 3.94

    n/a

      Life of Mine 8

    5-Jun-07

    Stratoni

    100%

    -

    $ 3.94

    n/a

    Life of Mine

    23-Apr-07

    Campo Morado

    75%

    -

    $ 3.90

    n/a

    Life of Mine

    13-May-08

    Aljustrel

    100%

    -

    $ 3.90

    n/a

      Life of Mine 8

    5-Jun-07

    Loma de La Plata

    12.5%

    -

    $ 4.00

    n/a

    Life of Mine

    n/a 9

    Rosemont

    100%

    100%

    $ 3.90

    $ 450

    Life of Mine

    11-Feb-10


    1) Subject to an annual inflationary adjustment with the exception of Loma de La Plata.
    2) Should the prevailing market price for silver or gold be lower than this amount, the per ounce cash payment will be reduced to the prevailing market price, with the exception of Yauliyacu.
    3) On August 6, 2010, Goldcorp completed the sale of the San Dimas mine, which was previously part of the Luismin mines, to Primero. In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the silver purchase agreement, which was set to expire in 2029, has been extended to the life of mine. During the first four years following closing of the transaction, Silver Wheaton is committed to purchase from Primero a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton is committed to purchase an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Silver Wheaton is committed to purchase from Primero a per annum amount equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess.
    4) To a maximum of 4.75 million ounces per annum. In the event that silver produced at Yauliyacu in any year totals less than 4.75 million ounces, the amount sold to Silver Wheaton in subsequent years will be increased to make up for the shortfall, so long as production allows. The cumulative shortfall as at March 23, 2010, representing the four year anniversary, was 6.8 million ounces.
    5) The Company is committed to acquire 100% of the first 50,000 ounces of gold produced per annum and 50% thereafter, through to December 1, 2010. Following that date, the Company is committed to acquire 100% of the first 30,000 ounces of gold produced per annum and 50% thereafter.
    6) The Company is committed to purchase silver production from the currently producing mines until December 31, 2013. In addition, during 2014 and 2015, the Company is committed to purchase all or a portion of the silver production from these mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies a completion guarantee.
    7) Silver Wheaton's attributable silver production is subject to a maximum of 8% of the silver contained in the ore mined at Veladero during the period.
    8) With a nominal term of 50 years.
    9) Terms of the agreement not yet finalized.

    SILVER WHEATON THIRD QUARTER REPORT [44]




    In connection with the Keno Hill silver purchase agreement, the Company is committed to pay Alexco further upfront cash payments of $16.7 million which will be made on a drawdown basis to fund mill construction and mine development costs.

    In connection with the Barrick silver purchase agreement, the Company is committed to pay Barrick further upfront cash payments of $275 million, payable in two annual installments of $137.5 million each due in September of 2011 and 2012.

    In connection with the Rosemont precious metal purchase agreement, the Company is committed to pay Augusta total upfront cash payments of $230 million, payable on an installment basis to partially fund construction of the mine once certain milestones are achieved, including the receipt of key permits and securing the necessary financing to complete construction of the Rosemont mine.

    In connection with the Company’s election to convert the debenture with Pan American into a silver purchase agreement, the Company is committed to pay Pan American total upfront cash payments of $32.4 million following the satisfaction of certain conditions, including Pan American receiving all necessary permits to proceed with the mine construction.

    The Company is committed to an annual operating lease for the Company’s office space and certain other commitments. The minimum annual payments for the next five years and thereafter are as follows:

    (in thousands)

     

     

    2010

    $

    120

     

    2011

    771

     

    2012

    492

     

    2013

    499

     

    2014

    514

     

    Thereafter

    1,113

     

    Total

    $

    3,509

     

     

     


    Due to the size, complexity and nature of the Company’s operations, various legal and tax matters are outstanding from time to time. In the opinion of management, these matters will not have a material effect on the Company’s consolidated financial position or results of operations.

    SILVER WHEATON THIRD QUARTER REPORT [45]




    11. Segmented Information

    The Company’s reportable operating segments are summarized in the table below:

    Three Months Ended September 30, 2010

    (in thousands)

    Sales

     

    Cost of sales

    Depletion

    Earnings from operations

    Cash flow from (used in) operations

    Total assets

    San Dimas

    $

    25,613

    $

    5,145

     

    $

    997

     

    $

    19,471

     

    $

    20,468

     

    $

    172,948

     

    Zinkgruvan

    12,680

    2,567

     

    1,092

     

    9,021

     

    9,522

     

    60,835

     

    Yauliyacu

    1,548

    346

     

    302

     

    900

     

    1,202

     

    237,951

     

    Peñasquito

    12,980

    2,699

     

    1,760

     

    8,521

     

    10,281

     

    517,902

     

    Minto

    10,337

    1

    2,293

     

    1,835

     

    6,209

     

    6,539

     

    43,834

     

    Cozamin

    5,825

    1,235

     

    1,413

     

    3,177

     

    4,868

     

    32,848

     

    Barrick

    10,202

    2,078

     

    1,906

     

    6,218

     

    8,281

     

    592,569

     

    Other 2

    13,649

    2,791

     

    3,200

     

    7,658

     

    10,518

     

    284,337

     

    Corporate

                             

    (1,194)

       

    420,401

     

    Consolidated

    $

    92,834

     

    $

    19,154

     

    $

    12,505

     

    $

    61,175

     

    $

    70,485

     

    $

    2,363,625

     
       
    1)     

    Comprised of silver sales in the amount of $0.912 million and gold sales in the amount of $9.425 million.

    2)     

    Comprised of the Los Filos, San Martin, Keno Hill, La Negra, Mineral Park, Neves-Corvo, Stratoni, Campo Morado, Aljustrel and Loma de La Plata mines.


    Three Months Ended September 30, 2009

    (in thousands)

    Sales

     

    Cost of sales

    Depletion

    Earnings from operations

    Cash flow from (used in) operations

    Total assets

    San Dimas

    $

    18,886

    $

    4,961

     

    $

    805

     

    $

    13,120

     

    $

    13,925

     

    $

    176,264

     

    Zinkgruvan

    6,861

    1,740

     

    771

     

    4,350

     

    4,415

     

    63,956

     

    Yauliyacu

    10,600

    2,750

     

    2,424

     

    5,426

     

    7,849

     

    245,630

     

    Peñasquito

    2,691

    741

     

    448

     

    1,502

     

    1,950

     

    523,239

     

    Minto

    10,616

    1

    3,251

     

    3,169

     

    4,196

     

    6,124

     

    51,597

     

    Cozamin

    5,736

    1,535

     

    1,812

     

    2,389

     

    4,229

     

    39,155

     

    Barrick

    3,008

    730

     

    647

     

    1,631

     

    2,278

     

    576,184

     

    Other 2

    11,369

    3,057

     

    3,088

     

    5,224

     

    7,398

     

    261,353

     

    Corporate

     

     

     

     

     

     

     

     

     

     

     

     

     

    (2,788)

     

     

    362,392

     

    Consolidated

    $

    69,767

     

    $

    18,765

     

    $

    13,164

     

    $

    37,838

     

    $

    45,380

     

    $

    2,299,770

     
       
    1)     

    Comprised of silver sales in the amount of $1.043 million and gold sales in the amount of $9.573 million.

    2)     

    Comprised of the Los Filos, San Martin, Keno Hill, La Negra, Mineral Park, Neves-Corvo, Stratoni, Campo Morado, Aljustrel and Loma de La Plata mines.

    SILVER WHEATON THIRD QUARTER REPORT [46]




    Nine Months Ended September 30, 2010

    (in thousands)

    Sales

     

    Cost of sales

    Depletion

    Earnings from operations

    Cash flow from (used in) operations

    Total assets

    San Dimas

    $

    66,463

    $

    14,365

     

    $

    2,790

     

    $

    49,308

     

    $

    52,099

     

    $

    172,948

     

    Zinkgruvan

    26,964

    5,844

     

    2,485

     

    18,635

     

    19,578

     

    60,835

     

    Yauliyacu

    21,372

    4,713

     

    4,114

     

    12,545

     

    16,662

     

    237,951

     

    Peñasquito

    32,466

    6,910

     

    4,506

     

    21,050

     

    25,556

     

    517,902

     

    Minto

    30,708

    1

    7,518

     

    5,983

     

    17,207

     

    21,152

     

    43,834

     

    Cozamin

    18,226

    4,022

     

    4,614

     

    9,590

     

    14,524

     

    32,848

     

    Barrick

    36,942

    7,967

     

    7,226

     

    21,749

     

    25,896

     

    592,569

     

    Other 2

    40,635

    8,683

     

    9,698

     

    22,254

     

    31,935

     

    284,337

     

    Corporate

                             

    (12,327)

       

    420,401

     

    Consolidated

    $

    273,776

     

    $

    60,022

     

    $

    41,416

     

    $

    172,338

     

    $

    195,075

     

    $

    2,363,625

     
       
    1)     

    Comprised of silver sales in the amount of $2.562 million and gold sales in the amount of $28.146 million.

    2)     

    Comprised of the Los Filos, San Martin, Keno Hill, La Negra, Mineral Park, Neves-Corvo, Stratoni, Campo Morado, Aljustrel and Loma de La Plata mines.


    Nine Months Ended September 30, 2009

    (in thousands)

    Sales

     

    Cost of sales

    Depletion

    Earnings from operations

    Cash flow from (used in) operations

    Total assets

    San Dimas

    $

    52,990

    $

    15,437

     

    $

    2,736

     

    $

    34,817

     

    $

    37,553

     

    $

    176,264

     

    Zinkgruvan

    19,023

    5,438

     

    2,410

     

    11,175

     

    12,793

     

    63,956

     

    Yauliyacu

    26,881

    7,799

     

    6,898

     

    12,184

     

    19,082

     

    245,630

     

    Peñasquito

    6,106

    1,774

     

    1,072

     

    3,260

     

    4,331

     

    523,239

     

    Minto

    10,744

    1

    3,294

     

    3,208

     

    4,242

     

    6,330

     

    51,597

     

    Cozamin

    8,671

    2,387

     

    2,805

     

    3,479

     

    7,617

     

    39,155

     

    Barrick

    3,008

    730

     

    647

     

    1,631

     

    2,278

     

    576,184

     

    Other 2

    21,319

    6,210

     

    6,394

     

    8,715

     

    14,883

     

    261,353

     

    Corporate

                             

    (9,914)

       

    362,392

     

    Consolidated

    $

    148,742

     

    $

    43,069

     

    $

    26,170

     

    $

    79,503

     

    $

    94,953

     

    $

    2,299,770

     

    1)     

    Comprised of silver sales in the amount of $1.036 million and gold sales in the amount of $9.708 million.

    2)     

    Comprised of the Los Filos, San Martin, Keno Hill, La Negra, Mineral Park, Neves-Corvo, Stratoni, Campo Morado, Aljustrel and Loma de La Plata mines.

    SILVER WHEATON THIRD QUARTER REPORT [47]










    ________________

    SILVER WHEATON CORP. 666  Burrard Street, Suite 3150, Vancouver, BC Canada V6C 2X8
    T 604-684-9648 F 604-684-3123 www.silverwheaton.com



    EX-99.3 4 exhibit99-3.htm FORM 52-109F2 CEO CERTIFICATION Exhibit 99.3

    Exhibit 99.3

    FORM 52-109F2
    CERTIFICATION OF INTERIM FILINGS
    FULL CERTIFICATE

    I, Peter Barnes, Chief Executive Officer of Silver Wheaton Corp., certify the following:

    1.     

    Review: I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of Silver Wheaton Corp. (the “issuer”) for the interim period ended September 30, 2010.

    2.     

    No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

    3.     

    Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

    4.     

    Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

    5.     

    Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

    (a)  designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that 
     
      (i)  material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and 
     
      (ii)  information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and 
     
    (b)  designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. 

    5.1     

    Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.




    5.2     

    N/A

       
    5.3     

    N/A

       
    6.     

    Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2010 and ended on September 30, 2010 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

    Date:  November 8, 2010 
     
     
    /s/ Peter Barnes 
    Name: Peter Barnes
    Title:  Chief Executive Officer 




    EX-99.4 5 exhibit99-4.htm FORM 52-109F2 CFO CERTIFICATION Exhibit 99.4

    Exhibit 99.4

    FORM 52-109F2
    CERTIFICATION OF INTERIM FILINGS
    FULL CERTIFICATE

    I, Gary Brown, Chief Financial Officer of Silver Wheaton Corp., certify the following:

    1.     

    Review: I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of Silver Wheaton Corp. (the “issuer”) for the interim period ended September 30, 2010.

    2.     

    No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

    3.     

    Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

    4.     

    Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

    5.     

    Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

    (a)  designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that 
     
      (i)  material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and 
     
      (ii)  information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and 
     
    (b)  designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. 

    5.1     

    Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.




    5.2     

    N/A

       
    5.3     

    N/A

       
    6.     

    Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2010 and ended on September 30, 2010 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

    Date:  November 8, 2010 
     
     
    /s/ Gary Brown 
    Name: Gary Brown
    Title:  Chief Financial Officer 




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