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Silver Wheaton Reports Record 2012 Operating And Financial Results

Stocks in this article: SLW

At December 31, 2012, the Company had approximately $778 million of cash on hand. Subsequent to the year end, Silver Wheaton announced the acquisition of two gold streams from Vale for a cash consideration of $1.90 billion (plus 10 million Silver Wheaton warrants with a strike price of $65 and a term of 10 years).  As part of the funding for this transaction, Silver Wheaton entered into two new unsecured credit facilities, comprised of (1) a $1 billion revolving credit facility having a 5 year term (the "Revolving Facility"); and (2) a $1.5 billion bridge financing facility having a 1 year term (the "Bridge Facility"). The Revolving Facility and Bridge Facility replaced the $400 million Revolver Loan and the Term Loan, with the latter being repaid in full on February 22, 2013.  The $778 million of cash and cash equivalents as at December 31, 2012 combined with the liquidity provided by the $2.5 billion of new credit facilities positions the Company well to fund all outstanding commitments as well as providing flexibility to acquire additional accretive precious metal stream interests.

Operational Highlights

Attributable silver equivalent production was a record 8.5 million ounces (7.0 million ounces of silver and 26,400 ounces of gold) in the fourth quarter of 2012, a 22% increase compared to the fourth quarter of 2011. In 2012, Silver Wheaton experienced its fourth year of record annual attributable production of 29.6 million silver equivalent ounces (26.9 million ounces of silver and 50,000 ounces of gold), a 17% increase compared to 2011.

_____________________________ [ 1] Please refer to non-IFRS measures at the end of this press release.

Operational highlights for the year ended December 31, 2012 are as follows:

Peñasquito - In 2012, the Peñasquito mine produced 6.6 million ounces of attributable silver, an increase of 24% over 2011.  Though production was higher than 2011, an unprecedented regional drought resulted in water shortages causing mill throughput to average 100,000 tonnes per day in 2012, below the design capacity of 130,000 tonnes per day.  As stated in Goldcorp Inc.'s ("Goldcorp") press release dated January 7, 2013, the Peñasquito mine continues to be impacted by the drought and as a result, throughput is expected to average 105,000 tonnes per day in 2013 as additional water wells are brought into production within the Cedros Basin in addition to new dewatering wells within the Chile Colorado pit.  A water and tailings study to develop a comprehensive long-term water strategy for the Peñasquito district is underway and Goldcorp expects this study to be completed during the first half of 2013.  

San Dimas - Attributable production from the San Dimas mine was 5.9 million ounces [ 1] in 2012, an increase of 6% over 2011.  On October 15, 2012, Primero Mining Corp. ("Primero") announced a mine and mill expansion of San Dimas. Primero has elected a staged approach to the full expansion and has approved the expenditure of a total of $14.4 million to expand the San Dimas mine and mill from 2,000 tonnes per day currently to 2,500 tonnes per day.  Construction of the mine and mill expansion began in October 2012, with an estimated completion during the first quarter of 2014.  A further plant expansion to 3,000 tonnes per day continues to be assessed and is dependent on future exploration success by Primero.

Zinkgruvan - Attributable production in 2012 was a record 2.5 million ounces, an increase of 48% over 2011, due to high ore grades, good recoveries, and continued strong throughput levels.  Production for 2013 is forecast to be 2.4 million ounces as more normalized grades are expected while throughput and recoveries are expected to remain strong.

Barrick & Pascua-Lama - Silver Wheaton's 2012 attributable production from the currently producing Barrick silver interests, consisting of Veladero, Lagunas Norte and Pierina mines, was 2.7 million ounces of silver.

As per Barrick's year-end 2012 MD&A, during the fourth quarter of 2012 Barrick finalized the cost estimate and schedule for its Pascua-Lama project. Initial production remains on track for the second half of 2014 and the total pre-production capital budget remained at $8.0 to $8.5 billion, of which $4.2 billion had been spent as of the end of 2012.  At the end of 2012, construction was approximately 40% complete with the four kilometer long conveyance tunnel approximately 70% complete.  Construction of the primary crusher in Chile commenced in January 2013, and, in Argentina, construction of the process plant facility advanced with approximately 60% of structural steel erected.  Also noted in Barrick's 2012 MD&A, Barrick halted all pre-stripping activities during the fourth quarter as increased dust, exacerbated by stronger than normal winds, was observed in the open pit area.  Regulatory authorities in Chile subsequently issued an order to suspend pre-stripping activities until strengthened dust mitigation and control measures could be implemented. To date, the suspension of pre-stripping has not altered Barrick's target of first production in the second half of 2014.

Until December 31, 2015, Silver Wheaton will be entitled to all or a portion of the silver production from Barrick's Veladero, Pierina and Lagunas Norte mines, to the extent Pascua-Lama is operating below 75% of design capacity. 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 full five years of operation, Silver Wheaton's attributable silver production is expected to average nine million ounces annually.

Produced But Not Yet Delivered    - Payable silver equivalent ounces produced but not yet delivered to Silver Wheaton by its partners decreased by 1.4 million ounces in the fourth quarter, resulting in a total of approximately 3.8 million payable ounces at December 31, 2012. This was primarily due to decreases in concentrate inventories at the 777, Yauliyacu, and Peñasquito mines.

Detailed mine by mine production and sales figures can be found in the Appendix of this press release and in Silver Wheaton's Management's Discussion and Analysis ("MD&A") in the 'Results of Operations and Operational Review' section.

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