Going for gold

Silver Wheaton 30 August 2016 Update

Silver Wheaton

Going for gold

Q216 results

Metals & mining

 

30 August 2016

Price

C$34.92

Market cap

C$15bn

C$1.3040/US$

Net debt (US$m) at end-June 2016

581.5

Shares in issue

440.0m

Free float

100%

Code

SLW

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

(4.2)

47.1

113.2

Rel (local)

(4.9)

41.3

101.3

52-week high/low

C$39.7

C$14.8

Business description

Silver Wheaton is the world’s pre-eminent pure precious metals streaming company with more than 25 precious metals streaming and early deposit agreements relating to assets in Mexico, Peru, Canada, Brazil, Chile, Argentina, Sweden, Greece, Portugal, the US and Guyana.

Next events

Q3 results

November 2016

Fourth quarterly dividend payment

November 2016

Analyst

Charles Gibson

+44 (0)20 3077 5724

Silver Wheaton is a research client of Edison Investment Research Limited

Silver Wheaton’s (SLW’s) Q216 earnings were within 2.5% of our forecast and almost 50% better than the previous quarter (Q116). Performance was buoyed by record gold sales, driven by the continued ramp up at Salobo, a record production performance at Sudbury (which was almost 6,000oz ahead of our expectations), continued outperformance at Antamina (for a third consecutive quarter) and inventory drawdown (for a second consecutive quarter). As a result of increased precious metals’ prices, as well as the purchase of an additional gold stream at Salobo (see below), we have increased our earnings expectations for Q316, Q416 and FY16 by 60.0%, 46.7% and 27.3%, respectively.

Year end

Revenue (US$m)

PBT* (US$m)

EPS* (c)

DPS (c)

P/E (x)

Yield (%)

12/14

620.2

268.8

74

26

35.7

1.0

12/15

648.7

223.6

53

20

50.5

0.7

12/16e

923.7

306.8

70

23

38.0

0.9

12/17e

1,199.6

539.4

123

36

21.8

1.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Salobo stream acquisition (Au now 41% of revenues)

On 2 August, SLW announced it has agreed to acquire from Vale an additional amount of gold equal to 25% of the life-of-mine gold production from its Salobo mine in Brazil. We estimate total consideration for the stream (including re-negotiated warrants and cost inflation terms) to be US$820.8m, which compares with the US$900m it paid in March 2015 (when the gold price averaged US$1,179/oz) for an equivalent 25% gold stream from Salobo. The newly acquired Salobo stream will increase production attributable to Silver Wheaton by an average of 70,000oz pa for the next 10 years, followed by an estimated 60,000oz pa for the following 30 years of the mine’s estimated >50-year life.

Pyrite Leach Project to add 1.25Moz Ag to SLW

In addition to SLW’s acquisition of the Salobo stream, its counterparty at Penasquito, Goldcorp, has announced that it has approved the Pyrite Leach Project (PLP), which is expected to add c 100-140koz of gold and 4-6Moz of silver (of which SLW is entitled to 25%) to the mine’s production profile pa from Q119.

Valuation: Up US$3.19 or 8.5%

Assuming no material purchases of additional streams (which is unlikely), we forecast a value per share for SLW of US$40.81, or C$53.21, in FY19 (at prices of US$26.57/oz Ag and US$1,483/oz Au). This compares with an estimate of US$37.62, or C$48.27, at the time of our last note in May. The 25% Salobo gold stream acquisition (plus the PLP) is responsible for adding US$3.19 per share to SLW’s value in FY19 money terms. In the meantime, SLW is trading on near-term financial ratios that are cheaper than those of its royalty/streaming ‘peers’ on at least 79% of valuation measures and the miners themselves on at least 38% of measures considered, despite being associated with materially less operational and cost risk.

Investment summary

Gold sales reached another record in Q216, driven by the continued ramp up to 24Mtpa at Salobo, a record production performance at Sudbury (as a result of higher grades and mill recoveries at the Coleman, Copper Cliff and Totten mines), continued outperformance at Antamina (for a third consecutive quarter) and inventory drawdown (for a second consecutive quarter). While the performance of Salobo was in line with our expectations, Sudbury’s performance was almost 6,000oz ahead of them. Q2 represented a third quarter of material outperformance.

Other features of the results were a continuation of the depletion charge at the relatively high levels witnessed since Q415. This was attributed to Antamina, which has the highest unit depletion charge (US$9.94/oz) of any of SLW’s major assets – however, it is non-cash and therefore does not affect cash flows. Excluding impairments, a summary of SLW’s Q116 results compared to previous quarters plus our prior expectations is as follows:

Exhibit 1: Silver Wheaton Q116, by quarter*

US$000s (unless otherwise stated)

FY15

Q215

Q315

Q415

Q116

Q216e

Q216a

Variance1 (%)

Change2 (%)

Silver production (koz)

30,717

7,201

6,890

10,284

7,570

7,587

7,581

-0.1

0.1

Gold production (oz)

228,764

50,509

54,513

69,176

64,942

63,126

70,249

11.3

8.2

AgE production (koz)

47,697

10,904

10,993

15,463

12,733

12,501

12,852

2.8

0.9

Silver sales (koz)

26,566

5,575

6,575

8,751

7,552

7,587

7,142

-5.9

-5.4

Gold sales (oz)

202,349

60,974

48,077

64,899

65,258

63,126

70,757

12.1

8.4

AgE sales (koz)

41,574

10,043

10,194

13,614

12,759

12,501

12,451

-0.4

-2.4

Avg realised Ag price (US$/oz)

15.64

16.42

15.05

14.75

14.68

16.25

17.18

5.7

17.0

Avg realised Au price (US$/oz)

1,152

1,195

1,130

1,100

1,175

1,265

1,267

0.2

7.8

Avg realised AgE price (US$/oz)

15.60

16.38

15.03

14.73

14.70

16.25

17.06

5.0

16.1

Avg Ag cash cost (US$/oz)

4.17

4.26

4.26

4.06

4.14

4.49

4.46

-0.7

7.7

Avg Au cash cost (US$/oz)

393

395

389

396

389

394

401

1.8

3.1

Avg AgE cash cost (US$/oz)

4.58

4.76

4.58

4.50

4.44

4.71

4.84

2.8

9.0

Sales

648,687

164,435

153,251

200,497

187,511

203,143

212,351

4.5

13.2

Cost of sales

 

 

Cost of sales, excluding depletion

190,214

47,795

46,708

61,247

56,636

58,911

60,208

2.2

6.3

Depletion

198,581

53,327

45,248

67,962

71,344

66,055

75,074

13.7

5.2

Total cost of sales

388,795

101,122

91,956

129,208

127,980

124,966

135,282

8.3

5.7

Earnings from operations

259,892

63,313

61,295

71,289

59,531

78,177

77,069

-1.4

29.5

Expenses and other income

 

 

- General and administrative

32,237

7,886

7,170

9,011

10,844

10,844

9,959

-8.2

-8.2

- Foreign exchange (gain)/loss

0

0

0

373

0

0

 

 

- Net interest paid/(received)

4,090

798

428

1,364

6,932

4,737

4,590

-3.1

-33.8

- Other (income)/expense

4,076

992

763

24

1,160

814

1,599

96.4

37.8

Total expenses and other income

40,403

9,676

8,361

10,772

18,936

16,395

16,148

-1.5

-14.7

Earnings before income taxes

219,489

53,637

52,934

60,517

40,595

61,781

60,921

-1.4

50.1

Income tax expense/(recovery)

9,132

(89)

**3,133

**3,107

(384)

0

615

N/A

-260.2

Marginal tax rate (%)

4.2

(0.2)

5.9

5.1

(0.9)

0.0

1.0

N/A

-211.1

Net earnings

210,357

53,726

49,801

57,410

40,979

61,781

60,306

-2.4

47.2

Basic EPS (US$)

0.53

0.15

0.12

0.14

0.10

0.14

0.14

0.0

40.0

Diluted EPS (US$)

0.53

0.15

0.12

0.14

0.10

0.14

0.14

0.0

40.0

Source: Silver Wheaton, Edison Investment Research. Note: *Excluding impairments. **After excluding taxation effect of impairments. 1Q216a vs Q216e. 2Q216a vs Q116a.

One feature of note in Q216 was the average achieved silver price of US$17.18/oz. This compared with monthly averages of US$16.26/oz, US$16.89/oz and US$17.18/oz in April, May and June, respectively (average US$16.78/oz for the quarter), and therefore demonstrated an excellent timing/trading performance by SLW’s traders, adding almost US$3m to sales in the period.

Penasquito

Production at Penasquito declined 35.9% to 867oz in Q2 relative to an already depressed Q1 figure. This was a result of lower ore grades and recoveries from the upper transitional ore and low grade stockpiles as well as a 10-day shutdown for planned mill maintenance (both of which had been gazetted to the market at the time of SLW’s Q1 results). In addition, however, there was a longer than anticipated period to ramp the plant back up again to full production.

In a change to previous guidance, however, Goldcorp now expects mining activities in the pit to focus on lower grade ore in the upper sections of the Penasco pit for the next three years, while stripping is prioritised to ensure an economically optimised pit shell design. As a result, mining will not return to the heart of the deposit at the bottom of the Penasco pit (where it was concentrated in FY15, for example) until FY19.

Pyrite Leach Project

Unrelated to the above guidance, Goldcorp has approved the PLP, which is expected to recover 40% of the gold and 48% of the silver currently reporting to the tailings by treating the zinc tailings prior to discharge to the tailings storage facility. Commercial production is expected from Q119, with the PLP adding c 100-140koz of gold and 4-6Moz of silver (of which SLW will be entitled to 25%) to Penasquito’s per-year production profile. Note that, according to Goldcorp, the project will have a minimal impact on the site water balance as the Pyrite Leach processing plant recirculates existing plant process water.

Additional Salobo acquisition

On 2 August, SLW announced that its wholly owned subsidiary, Silver Wheaton (Caymans) Ltd, had agreed to acquire from Vale an additional amount of gold equal to 25% of the life-of-mine gold production from its Salobo mine in Brazil. Note that SLW was already the owner of a stream relating to 50% of Salobo’s gold output, such that this latest acquisition takes SLW’s interest to 75%.

Consideration for the additional 25% stream is:

US$800m in cash; and

an amended strike price of US$43.75 per common share relating to 10m warrants already held by Vale relating to a previous stream acquisition (vs US$65 per common share previously).

In addition, SLW will make ongoing payments of the lesser of US$400/oz and the prevailing market price of gold. Whereas these had been inflated at 1% per year from FY17, however (for the pre-existing 50% stream), they will now be inflated from FY19 for the entire 75% gold stream. Moreover, while deliveries for the entire 75% gold stream will still be the obligation of a wholly owned subsidiary of Vale, they will now be guaranteed by Vale and the direct holder of Salobo, Salobo Metais SA.

Considering each element in turn:

Applying a current stock price (S) of US$26.78/sh, a risk-free rate of return (r) of 1.522% (the yield to maturity on the US 10-year Treasury bond), a historic stock price volatility (s) of 46.29% (source: Bloomberg), a time to expiry (t) of 6.5 years and reducing the option strike (K) from US$65/sh to US$43.75/sh, a simple application of the Black-Scholes equation yields an updated warrant value of US$9.05/wt cf US$6.42/wt previously. As such, the value of each warrant has increased by US$2.63/wt, adding US$26.3m (for 10m warrants) to the price of the 25% Salobo stream acquisition.

In the meantime, we calculate that deferring the 1% price increases on the pre-existing 50% stream from FY17 to FY19 will save SLW US$7.9m (in FY16 money terms, discounted at 10% per year) over the next 17 years to FY33.

As such, the total consideration of the 25% Salobo stream acquisition may be considered to be US$818.4m (800+26.3-7.9=818.4), which compares with the US$900m that it paid in March 2015 (when the gold price averaged US$1,179/oz) for an equivalent 25% gold stream from Salobo.

Mill throughput at the Salobo mine is currently 24Mtpa. If throughput capacity is expanded within a predetermined period and depending on the grade of material processed, SLW will be required to make an additional payment to Vale regarding its 75% stream. The additional payments range in size from US$113m if throughput is expanded beyond 28Mtpa by 1 January 2036 to US$953m if throughput is expanded beyond 40Mtpa by 1 January 2021. If Salobo is expanded to 36Mtpa between 2021 and 2025, for example, the expansion payment due from SLW to Vale would range between US$514m and US$692m. These expansion payments can be shown graphically, as follows:

Exhibit 2: Future Salobo payments versus expanded throughput

Source: Edison Investment Research, Silver Wheaton

Note that, currently, in its long-term forecasts, we make no provision for either future expansion at Salobo or related expansion payments.

Guidance

As before, the Salobo stream acquisition will add an estimated 70,000oz pa to SLW’s production profile for 10 years, followed by an estimated 60,000oz pa increase for the following 30 years of the mine’s estimated >50-year life.

In the aftermath of the Salobo (gold) stream acquisition, SLW’s updated guidance for FY16 (compared with our estimates) is as follows:

Exhibit 3: Production guidance, FY16-FY20e

2016

Next five years (inc FY16)

Metal

Updated guidance

Edison estimate

Previous guidance

Updated guidance

Edison estimate

Previous guidance

Silver (koz)

32,000

31,271

32,800

31,000

*30,919

31,000

Gold (oz)

305,000

298,443

265,000

330,000

320,330

260,000

Source: Silver Wheaton, Edison Investment Research. Note: * Includes the PLP.

Within the context of our estimates for FY16 in particular, investors should note that there is downside risk regarding its estimates for Penasquito in particular and upside opportunity regarding our estimates for Antamina and Sudbury.

FY16 by quarter and FY17

Our forecasts for SLW’s FY16 and FY17 have now been updated to include the acquisition of the incremental 25% Salobo stream as well as increased precious metals’ prices. Note that SLW still forecasts non-stock general & administrative expenses to be in the range US$31-34m for the full year, including additional legal costs relating to SLW’s dispute with the Canadian Revenue Agency:

Exhibit 4: Silver Wheaton FY16 forecasts, by quarter*

US$000s (unless otherwise stated)

Q116

Q216

Q316e

(previous)

Q316e

(current)

Q416e

(previous)

Q416e

(current)

FY16e

(previous)

FY16e

(current)

FY17e (previous)

FY17e (current)

Silver production (koz)

7,570

7,581

7,760

8,060

7,760

8,060

30,677

31,271

29,539

30,939

Gold production (oz)

64,942

70,249

63,126

81,626

63,126

81,626

254,320

298,443

254,788

335,062

AgE production (koz)

12,733

12,852

12,321

13,657

12,332

13,818

49,886

52,968

43,734

49,607

Silver sales (koz)

7,552

7,142

7,760

8,060

7,760

8,060

30,659

30,814

29,539

30,939

Gold sales (oz)

65,258

70,757

63,126

81,626

63,126

81,626

254,320

299,267

254,788

335,062

AgE sales (koz)

12,759

12,451

12,321

13,657

12,332

13,818

49,912

52,593

43,734

49,607

Avg realised Ag price (US$/oz)

14.68

17.18

17.01

19.44

16.97

18.70

16.24

17.56

24.18

24.18

Avg realised Au price (US$/oz)

1,175

1,267

1,229

1,333

1,229

1,319

1,224

1,279

1,347

1,347

Avg realised AgE price (US$/oz)

14.70

17.06

17.01

19.44

16.97

18.70

16.22

17.56

24.18

24.18

Avg Ag cash cost (US$/oz)

4.14

4.46

4.52

4.64

4.52

4.62

4.42

4.47

5.22

5.17

Avg Au cash cost (US$/oz)

389

401

394

395

394

395

385

398

396

395

Avg AgE cash cost (US$/oz)

4.44

4.84

4.86

5.10

4.86

5.03

4.72

4.88

5.84

5.90

Sales

187,511

212,351

209,577

265,495

209,266

258,387

809,496

923,744

1,057,595

1,199,606

Cost of sales

Cost of sales, excluding depletion

56,636

60,208

59,914

69,632

59,937

69,463

235,398

255,939

255,347

292,496

Depletion

71,344

75,074

66,582

77,548

66,582

77,548

270,563

301,514

259,974

302,737

Total cost of sales

127,980

135,282

126,496

147,180

126,520

147,011

505,962

557,453

515,321

595,233

Earnings from operations

59,531

77,069

83,081

118,315

82,746

111,376

303,534

366,291

542,274

604,374

Expenses and other income

- General and administrative

10,844

9,959

10,844

8,754

10,844

8,754

43,376

38,311

43,376

38,311

- Foreign exchange (gain)/loss

0

0

0

0

0

0

0

0

- Net interest paid/(received)

6,932

4,590

4,737

4,811

4,737

4,811

21,144

21,144

10,390

26,663

- Other (income)/expense

1,160

1,599

814

814

814

814

3,602

4,387

Total expenses and other income

18,936

16,148

16,395

14,379

16,395

14,379

68,122

63,842

53,766

64,974

Earnings before income taxes

40,595

60,921

66,685

103,936

66,351

96,997

235,412

302,449

488,509

539,400

Income tax expense/(recovery)

(384)

615

0

0

0

0

(384)

231

0

0

Marginal tax rate (%)

(0.9)

1.0

0.0

0.0

0.0

0.0

(0.2)

0.1

0.0

0.0

Net earnings

40,979

60,306

66,685

103,936

66,351

96,997

235,796

302,218

488,509

539,400

Ave. no. shares in issue (000s)

402,952

436,726

438,453

438,453

438,453

438,453

429,578

429,146

438,453

438,453

Basic EPS (US$)

0.10

0.14

0.15

0.24

0.15

0.22

0.55

0.70

1.11

1.23

Diluted EPS (US$)

0.10

0.14

0.15

0.24

0.15

0.22

0.55

0.70

1.11

1.23

Source: Silver Wheaton, Edison Investment Research. Note: * Excludes stock-based compensation costs. Our estimates also exclude any exceptional, non-cash charges that may arise in future periods as a result of the re-negotiation of the terms of the existing warrants issued to Vale by SLW and/or the re-negotiation of the cost inflation terms of the existing Salobo stream (see pages 3-4).

Our EPS estimates of 24c for Q316 and 22c for Q416 compare to average consensus basic EPS estimates of 22c (within a range 16-28c) and 25c (within a range 18-36c), respectively (source: Bloomberg, 30 August 2016). They also compare to average consensus estimates of 14c and 15c, respectively, in May and 14.6c and 15.7c, respectively, in April.

Our updated FY16 EPS estimate of 70c compares to an average consensus basic EPS estimate of 72c within a range 60-89c (source: Bloomberg, 30 August 2016). By contrast, our basic EPS estimate of 123c for FY17 compares to an average consensus estimate of 98c within a range 70-139c (cf 65c, within a range 33-82c in May). If silver and gold prices remain at their current levels of US$18.70/oz and US$1,319/oz (at the time of writing), we estimate that basic EPS in FY17 will instead be 84c per share (all other things being equal).

Valuation

Excluding FY04 (part year) and FY08 (when there was an exceptional write-down), SLW’s shares have historically traded on an average P/E multiple of 25.9x current year basic EPS (cf 38.0x Edison FY16e or 37.1x consensus FY16e, currently).

Exhibit 5: Silver Wheaton historic current year P/E multiples

1

Source: Edison Investment Research. Note: FY14 EPS excludes impairment charge.

Applying this multiple to our long-term EPS forecast of US$1.58 per share in FY19 implies a potential share value of US$40.81, or C$53.21 in that year (cf US$37.62, or C$48.38, at the time of our last note in May).

From a relative perspective, meanwhile, it is notable that SLW is cheaper than its royalty/streaming ‘peers’ on at least 79% of valuation measures in Exhibit 6 (whether consensus or Edison forecasts are used) and on multiples that are cheaper than the gold miners themselves on at least 38% of the same valuation measures, despite being associated with materially less operational and cost risk, in particular.

Exhibit 6: Silver Wheaton comparative valuation vs a sample of operating and royalty/streaming companies

P/E (x)

Yield (%)

P/CF

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

Royalty companies

Franco-Nevada

81.0

64.8

1.2

1.2

29.1

27.2

Royal Gold

39.6

34.8

1.2

1.2

16.8

15.3

Sandstorm Gold

89.1

61.3

0.0

0.0

20.3

18.1

Osisko

57.8

51.4

1.0

1.0

32.7

30.0

Average

66.9

53.1

0.8

0.9

24.7

22.6

Silver Wheaton (Edison forecasts)

38.0

21.8

0.9

1.3

18.7

13.9

SLW (consensus)

37.1

27.4

0.9

1.3

18.4

15.6

Operators

Barrick

27.1

18.9

0.4

0.4

8.2

6.9

Newmont

23.0

21.6

0.3

0.5

8.3

8.3

Goldcorp

50.5

25.4

0.7

0.5

10.7

8.2

Newcrest

20.2

18.8

1.0

1.4

9.1

9.1

Kinross

43.6

21.0

0.0

0.0

5.1

4.2

Agnico-Eagle

83.3

48.2

0.7

0.7

15.1

13.0

Eldorado

46.9

24.3

0.1

0.5

15.1

11.1

Yamana

31.1

19.4

0.5

0.5

6.5

5.4

Randgold Resources

31.1

23.9

0.7

0.8

18.4

13.9

Average

39.6

24.6

0.5

0.6

10.7

8.9

Source: Bloomberg, Edison Investment Research. Note: *Edison FY17 forecasts assume precious metals’ prices of US$24.18/oz Ag and US$1,347/oz Au. Peers priced on 30 August 2016.

Financials

As at 30 June, SLW had net debt of US$582m (cf US$1,284.2m at the end of March and US$1,362.7m at the end of December 2015).

In the aftermath of its March bought deal and the additional Salobo stream purchase, we estimate that SLW’s net debt will be US$1,144.3m by the end of FY16 and that it will be net debt free by the end of FY18, all other things being equal and contingent on its making no further major acquisitions (which is unlikely).

We estimate that net debt of US$1,144.3m as at end-2016 will equate to gearing (net debt/equity) of 23.1% and a leverage (net debt/[net debt+equity]) of 18.7%. Self-evidently, such a level of debt is well within the tolerances required of its banking covenants that:

net debt should be no more than 0.75x tangible net worth (which was US$4,839.2m as at end-June 2016 and is forecast to be US$4,959.8m as at end-December 2016); and

interest should be no less than 3x covered by EBITDA (we estimate that net interest cover will be 29.8x in FY16).

Note that the C$191.7m letter of guarantee that SLW has posted re 50% of the disputed taxes relating to its dispute with the CRA has been done under a separate agreement and is therefore specifically excluded from calculations regarding SLW’s banking covenants. SLW’s revolving debt facility attracts an interest rate of Libor plus 120-220bp.

Potential future stream acquisitions

SLW estimates the size of the potential market open to it to be the 70% of total silver production of c 870Moz in FY16 that is produced as a by-product of either gold or base metals’ mines – ie approximately 609Moz silver per year. This compares to SLW’s estimated production of 31.3Moz Ag in FY16 – ie SLW has penetrated only c 5.1% of its potential market.

While it is difficult (or impossible) to predict with any degree of certainty potential future stream acquisition targets, it is perhaps possible to highlight three that may be of interest to Silver Wheaton in due course and regarding which it already has strong, existing counterparty relationships:

The 75% silver stream at Penasquito that is currently not subject to any streaming arrangement.

The platinum group metal (PGM) by-product stream at Sudbury.

The 75% silver stream at Pascua-Lama that is currently not subject to any streaming arrangement (subject to permitting and development).

Canadian Revenue Agency (CRA)

There have been no further substantive developments regarding SLW’s dispute with the CRA since our last update note.

SLW notes the CRA’s position is that the transfer pricing provisions of the Income Tax Act (Canada) in relation to income earned by SLW’s foreign subsidiaries should apply “such that the income of Silver Wheaton subject to tax in Canada should be increased by an amount equal to substantially all of the income earned outside of Canada by the Company’s foreign subsidiaries for the 2005-2010 taxation years.” Should this interpretation be upheld, we would expect it to have potentially profound consequences for Canada’s status as an investment destination for suppliers of finance and capital to overseas destinations in general (ie not just in respect of mining).

Any further developments will be communicated to investors as and when they occur. In the meantime, a study of Silver Wheaton’s share price (in US dollars) reveals that it has recouped all of its losses since the announcement of the CRA’s proposal letter on 6 July 2015, having returned 113.0% in US dollar terms during the period and having similarly outperformed the silver price by 68.7%:

Exhibit 7: Silver Wheaton share price return vs peers, 06/07/2015-present (underlying US$)

Source: Thomson Reuters Datastream, Edison Investment Research

Exhibit 8: Financial summary

US$'000s

2012

2013

2014

2015

2016e

2017e

Dec

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

849,560

706,472

620,176

648,687

923,744

1,199,606

Cost of Sales

(117,489)

(139,352)

(151,097)

(190,214)

(255,939)

(292,496)

Gross Profit

732,071

567,120

469,079

458,473

667,804

907,111

EBITDA

 

 

701,232

531,812

431,219

426,236

629,493

868,800

Operating Profit (before amort. and except.)

600,003

387,659

271,039

227,655

327,980

566,063

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

0

0

(68,151)

(384,922)

0

0

Other

788

(11,202)

(1,830)

(4,076)

(4,387)

0

Operating Profit

600,791

376,457

201,058

(161,343)

323,593

566,063

Net Interest

0

(6,083)

(2,277)

(4,090)

(21,144)

(26,663)

Profit Before Tax (norm)

 

 

600,003

381,576

268,762

223,565

306,836

539,400

Profit Before Tax (FRS 3)

 

 

600,791

370,374

198,781

(165,433)

302,449

539,400

Tax

(14,755)

5,121

1,045

3,391

(231)

0

Profit After Tax (norm)

586,036

375,495

267,977

222,880

302,218

539,400

Profit After Tax (FRS 3)

586,036

375,495

199,826

(162,042)

302,218

539,400

Average Number of Shares Outstanding (m)

353.9

355.6

359.4

395.8

429.1

438.5

EPS - normalised (c)

 

 

166

106

75

53

70

123

EPS - normalised and fully diluted (c)

 

165

105

74

53

70

123

EPS - (IFRS) (c)

 

 

166

106

56

(-41)

70

123

Dividend per share (c)

35

45

26

20

23

36

Gross Margin (%)

86.2

80.3

75.6

70.7

72.3

75.6

EBITDA Margin (%)

82.5

75.3

69.5

65.7

68.1

72.4

Operating Margin (before GW and except.) (%)

70.6

54.9

43.7

35.1

35.5

47.2

BALANCE SHEET

Fixed Assets

 

 

2,403,958

4,288,557

4,309,270

5,526,335

6,129,302

5,898,565

Intangible Assets

2,281,234

4,242,086

4,270,971

5,494,244

6,097,211

5,866,474

Tangible Assets

1,347

5,670

5,427

12,315

12,315

12,315

Investments

121,377

40,801

32,872

19,776

19,776

19,776

Current Assets

 

 

785,379

101,287

338,493

105,876

4,602

335,556

Stocks

966

845

26,263

1,455

2,071

2,690

Debtors

6,197

4,619

4,132

1,124

2,531

3,287

Cash

778,216

95,823

308,098

103,297

0

329,580

Other

0

0

0

0

0

0

Current Liabilities

 

 

(49,458)

(21,134)

(16,171)

(12,568)

(312,478)

(30,753)

Creditors

(20,898)

(21,134)

(16,171)

(12,568)

(27,147)

(30,753)

Short term borrowings

(28,560)

0

0

0

(285,330)

0

Long Term Liabilities

 

 

(32,805)

(1,002,164)

(1,002,856)

(1,468,908)

(861,677)

(861,677)

Long term borrowings

(21,500)

(998,136)

(998,518)

(1,466,000)

(859,000)

(859,000)

Other long term liabilities

(11,305)

(4,028)

(4,338)

(2,908)

(2,677)

(2,677)

Net Assets

 

 

3,107,074

3,366,546

3,628,736

4,150,735

4,959,750

5,341,691

CASH FLOW

Operating Cash Flow

 

 

720,209

540,597

434,582

435,783

637,663

871,031

Net Interest

0

(6,083)

(2,277)

(4,090)

(21,144)

(26,663)

Tax

(725)

(154)

(204)

(208)

(462)

0

Capex

(641,976)

(2,050,681)

(146,249)

(1,791,275)

(904,481)

(72,000)

Acquisitions/disposals

0

0

0

0

0

0

Financing

12,919

58,004

6,819

761,824

607,000

0

Dividends

(123,852)

(160,013)

(79,775)

(68,593)

(100,203)

(157,458)

Net Cash Flow

(33,425)

(1,618,330)

212,896

(666,559)

218,373

614,910

Opening net debt/(cash)

 

 

(761,581)

(728,156)

902,313

690,420

1,362,703

1,144,330

HP finance leases initiated

0

0

0

0

0

0

Other

0

(12,139)

(1,003)

(5,724)

0

0

Closing net debt/(cash)

 

 

(728,156)

902,313

690,420

1,362,703

1,144,330

529,420

Source: Silver Wheaton, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Silver Wheaton and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

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New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Silver Wheaton and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). 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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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