Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Factors That Will Impact Silver Wheaton Corp's Second-Quarter Results

Silver Wheaton (NYSE: SLW  ) hit its goals in the first quarter. Can the company do even better in the second quarter? With nearly a month left in the period, let's look at three factors that could influence the company's quarterly results.

1. Precious metals prices
During the past couple of months, the prices of gold and silver continued their downward trend. So far in the second quarter of 2014, average prices of gold and silver reached $1,293 and $19.50, respectively. These gold and silver prices are 8.7% and 15.8% lower, respectively, than the market prices in the parallel quarter in 2013. Moreover, the lower prices of bullion could cut down the company's operating cash flow, which will reduce its dividend payment. Keep in mind, the company's dividend payment is based on 20% of its average operating cash flow of the past four quarters.

Other precious metals companies such as Royal Gold (NASDAQ: RGLD  ) , a gold royalty company, and Barrick Gold (NYSE: ABX  ) , a gold producer, are likely to be negatively affected by the recent fall in precious metals prices. But unlike Silver Wheaton, these companies heavily rely on gold rather than silver. Therefore, since gold outperformed silver, these companies, assuming all things equal, are likely to show a smaller adverse price effect in the second quarter of 2014.

2. Attributed production -- reaching goals
The company reached its quarterly goals with respect to its attributed silver production. In the coming months, the company is likely to further increase its attributed gold production from Silver Wheaton's streaming contract with Vale and its Totten mine in Sudbury. The mine started to produce during the first quarter and is likely to further augment the total output Silver Wheaton will receive from Sudbury. Further, Vale's Salobo mine also keeps progressing and is projected to start producing in the coming months.

Looking forward, based on its annual guidance, Silver Wheaton's attributed production is expected to reach over 40,000 ounces of gold and 6.6 million ounces of silver. If the company were to reach these goals, and assuming it sells 90% of this output, then its sales (in ounces) are likely to rise in the coming quarter by nearly 7% and 16% in gold and silver, respectively.

Data from Silver Wheaton
*Gold and silver prices are based on market prices of the past couple months; sales are calculated using the company's sales in the first quarter and annual guidance. 

3. Delivery delays
The final issue worth noticing are the changes in the amount of precious metals produced and not yet delivered. During the first quarter, the amount of silver equivalent produced and not yet delivered reached 6.3 million silver equivalent ounces, which wasn't far off from the fourth quarter of 2013. If the amount of precious metals produced and not yet delivered remains relatively unchanged, it could suggest the majority of gold and silver its streaming partners produced were delivered and sold.

If the company reaches its quarterly goals in terms of attributed production, and if the amount of precious metals produced and not yet delivered doesn't rise, then these factors could partly offset the lower prices of metals. Nonetheless, the weak gold and silver markets are likely to further drag down Silver Wheaton's revenue and profitability in the second quarter.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2980240, ~/Articles/ArticleHandler.aspx, 8/28/2015 1:32:08 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Lior Cohen

Lior has been a contributor for the Fool since 2012. His main interests are in commodities, and energy and materials companies.You can follow him on Twitter to stay up to date with his industry analysis. @tradingnrg

Today's Market

updated 4 hours ago Sponsored by:
DOW 16,654.77 369.26 2.27%
S&P 500 1,987.66 47.15 2.43%
NASD 4,812.71 115.17 2.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:02 PM
SLW $12.00 Up +0.47 +4.08%
Silver Wheaton Cor… CAPS Rating: ****
ABX $6.84 Up +0.31 +4.67%
Barrick Gold Corp. CAPS Rating: ***
RGLD $48.02 Up +0.67 +1.41%
Royal Gold, Inc. CAPS Rating: ***