Silver Wheaton Management Presents At Bank Of America Merrill Lynch 18th Annual Mining Conference (Transcript)

Silver Wheaton Corporation (SLW)

Bank of America Merrill Lynch 18th Annual Mining Conference Call

September 6, 2012 1:25 PM ET

Executives

Gary Brown – SVP and CFO

Analysts

Michael Jalonen – Bank of America/Merrill Lynch

Presentation

Michael Jalonen – Bank of America/Merrill Lynch

Now we’re moving on to Silver Wheaton. We have Gary Brown, the Senior VP and Chief Financial Officer to make the presentation, and this continues our streaming side, focusing now on the silver streams. Gary, you guys just made a transaction also.

Gary Brown

Great, thanks Mike, and it’s always a pleasure to speak at this conference, thanks for the invite back, and thank you for taking time out of your schedules to learn a little bit more about Silver Wheaton, and why we believe it represents the best investment vehicle out there to gain long-term exposure to silver.

Our vision is to become the premier silver focused streaming company out there and to provide shareholders with high quality long-term exposure to precious metals while at the same time offering mine owners with an attractive capital.

Just a quick refresher on what silver streaming is. Essentially in return for an upfront payment, Silver Wheaton acquires the rights to a certain percentage of silver that is produced from a specific mining asset and we make an additional downstream payment for every ounce of silver that’s delivered to us. Effectively, we view the upfront payment as being reflective of the value of the silver contained in the ore body and the production payment is intended to compensate the mining company for extracting what we consider to be our silver on our behalf.

The model works primarily because the silver is worth more to us and our shareholders than it is our counterparties. So we can structure deals that create value for both our shareholders and the mining company’s shareholders, so creating a win-win type structure. That’s the primary reason that the counterparties tend to subscribe to streaming as a form of capital but there is a host of other reasons, one of which is the flexible nature of the form of capital that we provide without – there is no fixed repayment terms under these streaming arrangements and so we take operating risk alongside with the mining company which really in these times of uncertain economic climates results in a form of capital that’s very attractive.

Who is Silver Wheaton? Well, Silver Wheaton is the largest of the metal streaming and royalty companies by market cap and we are the second largest silver company in the world by market cap. We are the largest silver company in the world by resource base and we not only have the largest resource base but the highest quality resource base with over 800 million ounces coming in the form of proven and probable reserves. Based upon our 2012 silver production guidance, we expect to produce just under 26 million ounces silver which sets us as the second largest silver producer of this year.

We have interest in 21 different mining assets, 17 of which are operational and four of which are in the development stage. Those are located in nine different countries and our arrangements with 14 different counterparties. So the portfolio of assets that we have is well diversified not only operationally and geographically but also by counterparty. And they are very high quality assets that underlie these streams and we measure quality by the – where those operations fall and the respective cost curves and the life of the mine remaining. And if you look at our 2012 to 2016 forecast production, about 80% of our production comes from mines that operate in the lowest quartile, which means that they can withstand virtually any commodity price cycle and continue operating for profit. And the life of the mines underlying our assets are also very long, with over half of 2012 production coming from mines that have over 15 years of mine life remaining, and that only gets better over time with over 70% of our production in 2016 coming from mines that have over 15 years of mine life remaining.

That high quality portfolio of assets is highlighted by two cornerstone assets, one is the 25% life of mine silver stream that we have relative to GoldCorp’s Penasquito asset located in Mexico and the other one is the 25% life of mine silver stream relative to Barrick’s Pascua Lama operation which is currently being built in straddles Chile and Argentina. Penasquito is expected to deliver about 7 million ounces of silver production to Silver Wheaton’s account over the life of mine and has been operational since 2010, and the Pascua Lama mine is expected to have first production in the middle of 2014 and will deliver about 9 million ounces to Silver Wheaton’s account for the first five years of production. Until that time we receive 100% of the silver produced from three currently operating mines of Barrick’s, which generate about 2.5 million ounces of silver production for our account per year. Barrick recently announced that there was a delay in initial start-up of Pascua Lama by a year which doesn’t really negatively affect us at all because of the – we will continue to receive silver from these other three operating mines until Pascua Lama satisfies a completion test.

And we just recently added to our high quality portfolio of assets with the deal that we struck with Hudbay. It was announced in early August and it is a deal that involves us receiving 100% of the silver from the currently operating 777 mine and 100% of the gold from that mine until the later of 2016 or when Hudbay completes Constancia, which time the gold stream will drop down to 50%. We also obtained 100% of the life of mine silver production from Constancia, an asset under development in Peru. We are paying $750 million for those two streams, $500 million will be paid upon the closing which is imminent and $250 million will be paid in two tranches; the first tranche will be paid to Hudbay once they have invested $500 million into Constancia and the second tranche of $125 million will be made once Hudbay has invested $1 billion into Constancia. And Constancia’s estimated CapEx is about $1.5 billion currently and that includes 15% contingency. So we are quite comfortable with that CapEx figure.

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