Silver Wheaton (NYSE:WPM) will release its quarterly report on Thursday, and investors are still shell-shocked from the plunge in silver and gold prices early last year that have sent ripples throughout the mining industry. Yet even as streaming partners Barrick Gold (NYSE:GOLD), Goldcorp (NYSE:GG), and other smaller miners have gone through immense challenges lately that have had a direct impact on Silver Wheaton, the silver streamer's future could be a lot brighter if it can take maximum advantage of unique opportunities in the current market environment for silver.

Silver Wheaton doesn't own or operate a single mining operation, making it an unusual play on precious metals. Rather, Silver Wheaton's business model involves providing financing to cash-hungry companies in exchange for the rights to buy future metals production at below-market prices. As partners like Barrick and Goldcorp have made changes to their future development plans, Silver Wheaton has found itself in an uncomfortable position with some of its agreements with its streaming partners. But the company also has the opportunity to enter new deals now and get better terms on future agreements. Let's take an early look at what's been happening with Silver Wheaton over the past quarter and what we're likely to see in its report.

Mines like this one at Primero Mining are essential to Silver Wheaton's future revenue. Image source: Primero Mining.

Stats on Silver Wheaton

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$197.09 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Silver Wheaton earnings ever recover?
In recent months, analysts have continued to remain downbeat about Silver Wheaton earnings, keeping fourth-quarter estimates stable but cutting projections for 2014 by 9%. The stock has done a lot better lately, though, climbing more than 25% since mid-December.

Silver Wheaton's third-quarter report shows the challenges the silver streamer faces. The company reported a 17% jump in silver-equivalent production, with a more than 50% increase in silver output. Yet dollar-value sales only jumped 3%, reflecting the drop in precious metals prices of nearly a third. In addition, the company's foray into gold streaming arrangements has increased its average cash costs per silver-equivalent ounce, putting a bit of extra pressure on margins.

One huge problem that Silver Wheaton faces is that its streaming partners have encountered tough conditions. For instance, Barrick Gold announced late last year that it would see further delays with its Pascua-Lama mining project, and that forced Barrick and Silver Wheaton to modify their streaming agreement to account for the delay. That in turn has led Silver Wheaton to revise its 2017 guidance, reflecting the extended time frame under which Pascua-Lama could begin to produce results for Barrick.

Still, those challenges haven't stopped Silver Wheaton from entering into new arrangements. A deal with relatively new partner HudBay Minerals (NYSE:HBM) to expand its relationship by taking a 50% interest in production from HudBay's Constancia project should boost Silver Wheaton's share of revenue from gold even further. Even more encouragingly, Silver Wheaton has been willing to work with junior miners in ways that are riskier but could produce even bigger payoffs, such as its deal with Sandspring Resources to take a small interest in a Guyana gold mine. With further deals pending, Silver Wheaton has the cash to get good terms from cash-starved miners that need capital to survive the tough pricing environment.

Moreover, some miners have had good news. Silver miner Primero Mining (NYSE:PPP) said last week that it had met its initial threshold commitment of silver production to Silver Wheaton, giving Primero the right to keep half of any additional silver for itself. Nevertheless, Silver Wheaton will still get the other half, and that represents a big potential win for the streaming giant going forward.

In the Silver Wheaton earnings report, watch to see how the company is planning its strategy for the future. If silver prices can continue to rebound, then Silver Wheaton could be a sleeping giant waiting for production at its miner partners to explode higher.

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