(Kitco News) - After releasing first-quarter earnings Thursday, Silver Wheaton Corp.'s (TSX:SLW)(NYSE:SLW) Randy Smallwood, president and chief executive officer, said he believes the results lay the proper groundwork for the next level of the company's production.
Silver Wheaton's attributable silver equivalent production rose 8% to 9 million ounces in the first quarter compared to 8.3 million ounces in last year's first quarter. The 9 million silver equivalent ounces the company produced broke down to 6.9 million ounces of silver and 33,800 ounces of gold produced in the quarter.
"To be at 25% production in the first quarter of the year is good for us," Smallwood told Kitco News during a telephone interview. "We have the second line coming on stream with Salobo any day now and Constancia coming on towards the end of this year.
"So to be at 25% production, after the first quarter, is definitely a strong quarter for us because I do think this is the year where we're going to see the next step up in Silver Wheaton," he said. "It's really laying the groundwork this year and we'll really see it next year."
Smallwood said the company's five-year forecast is 48 million ounces, but the bulk of that growth will occur in the next two years.
While lower metals prices year-on-year generally impacted profit margins across the sector, Smallwood thinks commodity prices are nearing a bottom.
"I am confident that we're closer to a bottom than a top in terms of commodity prices, mainly because we're hitting the wall of the higher-cost producers right now," Smallwood said. "Prices lower than this aren't sustainable long-term, and so I do think we're sort of at the bottom of that cycle and it's just a matter of when it decides to move."
The lower price environment offers the potential for mergers and acquisitions, as the mining sector saw some M&A action during the first-quarter. For Smallwood, this is the ideal environment to get value, especially in a cash-starved junior mining market.
"We've got proposals out, it's only a matter of agreeing on value, agreeing on structure and hopefully we close a few in the next while," Smallwood said. "There's definitely a big appetite out there, especially this early-deposit structure.
"It's something that works so well in this business environment for the juniors that just have no market support and they need to develop these deposits," he added. "I think it's the only way they can fund without diluting their shareholders."
Net earnings were down 40% year-on-year to $79.8 million, or 22 cents per share, compared with $133.4 million, or 38 cents per share due to lower metals prices.
Attributable silver equivalent sales jumped 17% to 8.1 million ounces, 6.2 million ounces of silver and 30,100 ounces of gold, compared to 6.9 million ounces in the first quarter of 2013.
Average cash costs in the first quarter came in at $4.12 per silver ounce and $381 per gold ounce, while on a silver equivalent basis, average cash costs were to $4.57 compared to $4.39 in 2013's first-quarter.
Revenues totaled $165.4 million in the quarter, compared with $205.8 million in the first quarter of 2013.
Silver Wheaton saw an average realized sale price per silver equivalent ounce sold of $20.38 in the first quarter, broken down to $20.36 per ounce of silver and $1,283 per ounce of gold, a 31% decrease year-on-year.
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