slw6kexhibit99-2.htm

EX-99.2 3 slw6kexhibit99-2.htm THIRD QUARTER 2013 FINANCIAL STATEMENTS slw6kexhibit99-2.htm

Management’s Discussion and Analysis of Results of Operations and Financial Condition for the Three and Nine Months Ended September 30, 2013

This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with Silver Wheaton Corp.’s (“Silver Wheaton” or the “Company”) unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2013 and 2012 and related notes thereto which have been prepared in accordance with IAS 34, Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”). In addition, the following should be read in conjunction with the 2012 audited consolidated financial statements, the related MD&A and the 2012 Annual Information Form as well as other information relating to Silver Wheaton on file with the Canadian securities regulatory authorities and on SEDAR at www.sedar.com. This MD&A contains “forward looking” statements that are subject to risk factors set out in the cautionary note contained on page 37 of this MD&A. All figures are presented in United States dollars unless otherwise noted. This MD&A has been prepared as of November 8, 2013.

Highlights

•

Record attributable silver equivalent production for the three and nine months ended September 30, 2013 of 8.9 million ounces (6.8 million ounces of silver and 34,800 ounces of gold) and 25.9 million ounces (19.5 million ounces of silver and 108,600 ounces of gold), respectively, representing an increase of 17% and 23% over the comparable periods in 2012.

•

Attributable silver equivalent sales for the three and nine months ended September 30, 2013 of 7.8 million ounces (5.7 million ounces of silver and 35,300 ounces of gold) and 22.0 million ounces (16.8 million ounces of silver and 86,100 ounces of gold), respectively, representing an increase of 52% and 21% over the comparable periods in 2012, with ounces sold for the most recently completed nine month period representing a record for the Company.

•

Average realized sale price per silver equivalent ounce sold for the three and nine months ended September 30, 2013 of $21.26 ($21.22 per ounce of silver and $1,308 per ounce of gold) and $24.51 ($24.88 per ounce of silver and $1,417 per ounce of gold), representing a decrease of 32% and 21%, respectively, as compared to the comparable periods of 2012.

•

Revenue for the three and nine months ended September 30, 2013 of $166.4 million and $539.1 million, respectively, compared with $161.3 million and $562.3 million for the comparable periods in 2012, representing an increase of 3% during the three month period and a decrease of 4% during the nine month period as compared to the comparable periods in 2012.

•

Net earnings for the three and nine months ended September 30, 2013 of $77.1 million ($0.22 per share) and $281.6 million ($0.79 per share), respectively, compared with $119.7 million ($0.34 per share) and $408.3 million ($1.15 per share) for the comparable periods in 2012, representing a decrease of 36% and 31%, respectively.

•

Operating cash flows for the three and nine months ended September 30, 2013 of $118.7 million ($0.33 per share¹) and $409.5 million ($1.15 per share¹), respectively, compared with $128.7 million ($0.36 per share¹) and $465.4 million ($1.32 per share¹) for the comparable periods in 2012, representing a decrease of 8% and 12%, respectively.

•

On November 8, 2013, the Board of Directors declared a dividend in the amount of $0.09 per common share as per the Company’s stated dividend policy whereby the quarterly dividend will be equal to 20% of the average of the previous four quarters operating cash flow. This dividend is payable to shareholders of record on November 27, 2013 and is expected to be distributed on or about December 11, 2013.

•	Average cash costs² for the three and nine months ended September 30, 2013 of $4.73 and $4.63 per silver equivalent ounce, respectively, compared with $4.16 and $4.10 per silver equivalent ounce, respectively, for the comparable periods in 2012.

•	Cash operating margin³ for the three and nine months ended September 30, 2013 of $16.53 and $19.88 per silver equivalent ounce, respectively, compared with $27.20 and $26.80 per silver equivalent ounce, respectively, for the comparable periods in 2012.

___________________________________

1 Refer to discussion on non-IFRS measure (i) on page 22 of this MD&A.

2 Refer to discussion on non-IFRS measure (ii) on page 23 of this MD&A.

3 Refer to discussion on non-IFRS measure (iii) on page 24 of this MD&A.

SILVER WHEATON 2013 THIRD QUARTER REPORT [1]

•

As at September 30, 2013, approximately 5.3 million payable silver equivalent ounces attributable to the Company have been produced at the various mines and will be recognized in future sales as they are delivered to the Company under the terms of their contracts. This represents an increase of 0.3 million payable silver equivalent ounces during the three month period ended September 30, 2013.

•

As per Barrick Gold Corp.’s (“Barrick”) Q3 2013 MD&A, Barrick has decided to temporarily suspend construction activities at its Pascua-Lama project (“Pascua-Lama”), except those required for environmental protection and regulatory compliance, and to place the project on care and maintenance. Barrick also stated that the decision to re-start construction activities will depend on improved project economics such as go-forward costs, the outlook for metal prices, and reduced uncertainty associated with legal and other regulatory requirements. As a result of the suspension, Barrick no longer expects production by mid-2016.

•

On October 31, 2013, the Company announced that, as a result of Barrick’s decision to temporarily suspend construction activities at Pascua-Lama, the Company has amended its silver purchase agreement with Barrick. The amendment entails Silver Wheaton being entitled to 100% of the silver production from Barrick’s Lagunas Norte, Pierina and Veladero mines until the end of 2016 - an extension of one year, and extending the completion test deadline an additional year to December 31, 2017. As a reminder, if the requirements of the completion test have not been satisfied by the amended completion date, the agreement may be terminated by Silver Wheaton. In such an event, Silver Wheaton will be entitled to the return of the upfront cash consideration of $625 million less a credit for any silver delivered up to that date.

•	On November 4, 2013, the Company announced that it had amended its precious metal purchase agreement with Hudbay Minerals Inc. (“Hudbay”) to include the acquisition of an amount equal to 50% of the gold production from its Constancia project in Peru for the life of mine.

Overview

Silver Wheaton Corp. is a mining company which generates its revenue primarily from the sale of silver and gold. The Company is listed on the New York Stock Exchange and the Toronto Stock Exchange and trades under the symbol SLW.

To date, the Company has entered into 20 long-term purchase agreements associated with silver and/or gold (“precious metal purchase agreements”), relating to 23 different mining assets, whereby Silver Wheaton acquires silver and gold production from the counterparties for a per ounce cash payment which is fixed by contract, generally at or below the prevailing market price. Attributable silver and gold as referred to in this MD&A and financial statements is the silver and gold production to which Silver Wheaton is entitled pursuant to the various purchase agreements. During the three months ended September 30, 2013, the per ounce price paid by the Company for silver and gold under the agreements averaged $4.13 and $386, respectively. The primary drivers of the Company’s financial results are the volume of silver and gold production at the various mines and the price of silver and gold realized by Silver Wheaton upon sale.

Outlook

Silver Wheaton is the largest precious metals streaming company in the world. Based upon its current agreements, forecast 2013 attributable production is approximately 33.5 million silver equivalent ounces, including 145,000 ounces of gold. As per the Company’s November 4, 2013 press release, the Company has revised 2017 annual attributable production guidance to reflect recent developments, including a delay at Barrick's Pascua Lama project, partially offset by the addition of gold from Constancia. 2017 guidance is now forecast to be approximately 42.5 million silver equivalent ounces, including 210,000 ounces of gold. Growth from 2013 to 2017 is driven by the Company’s portfolio of low-cost and long-life assets, including the recently acquired gold streams on Vale S.A.’s (“Vale”) Salobo and Sudbury mines in addition to the silver and gold stream on Hudbay’s Constancia project.

The $62 million of cash and cash equivalents as at September 30, 2013 combined with the liquidity provided by the available credit under the $1 billion Revolving Facility and ongoing operating cashflows positions the Company well to fund all outstanding commitments as well as providing flexibility to acquire additional accretive precious metal stream interests.

Statements made in this section contain forward-looking information. Please see “Cautionary Note Regarding Forward-Looking Statements” for material risks, assumptions and important disclosure associated with this information.

SILVER WHEATON 2013 THIRD QUARTER REPORT [2]

Silver and Gold Interests

The following table summarizes the silver and gold interests currently owned by the Company:

Silver and Gold Interests	Mine Owner	Location of Mine	Upfront Consideration 1			Attributable Production to be Purchased		Term of Agreement	Date of Contract
Silver and Gold Interests	Mine Owner	Location of Mine	Upfront Consideration 1			Silver	Gold	Term of Agreement	Date of Contract
San Dimas	Primero 2	Mexico	$	189,799	3	100% 2	-	Life of Mine	15-Oct-04
Yauliyacu	Glencore	Peru	$	285,000		100% 4	-	20 years	23-Mar-06
Peñasquito	Goldcorp	Mexico	$	485,000		25%	-	Life of Mine	24-Jul-07
Minto	Capstone	Canada	$	54,805	5	100%	100% 6	Life of Mine	20-Nov-08
777	Hudbay	Canada	$	455,100		100%	100%/50% 7	Life of Mine	8-Aug-12
Salobo	Vale	Brazil	$	1,330,000	8	-	25%	Life of Mine	28-Feb-13
Sudbury	Vale	Canada	$	623,572	9	-	70%	20 years	28-Feb-13
Barrick			$	625,000
Pascua-Lama	Barrick	Chile/Argentina				25%	-	Life of Mine	8-Sep-09
Lagunas Norte	Barrick	Peru				100%	-	6 years 10	8-Sep-09
Pierina	Barrick	Peru				100%	-	6 years 10	8-Sep-09
Veladero	Barrick	Argentina				100% 11	-	6 years 10	8-Sep-09
Other			$	1,094,028
Los Filos	Goldcorp	Mexico	$	4,463	3	100%	-	25 years	15-Oct-04
Zinkgruvan	Lundin	Sweden	$	77,866		100%	-	Life of Mine	8-Dec-04
Stratoni	Eldorado Gold 12	Greece	$	57,500		100%	-	Life of Mine	23-Apr-07
Cozamin	Capstone	Mexico	$	41,959	5	100%	-	10 years	4-Apr-07
Neves-Corvo	Lundin	Portugal	$	35,350	5	100%	-	50 years	5-Jun-07
Aljustrel	I'M SGPS	Portugal	$	2,451	5	100%	-	50 years	5-Jun-07
Mineral Park	Mercator	United States	$	42,000		100%	-	Life of Mine	17-Mar-08
Campo Morado	Nyrstar NV	Mexico	$	79,250		75%	-	Life of Mine	13-May-08
Keno Hill	Alexco	Canada	$	50,000		25%	-	Life of Mine	2-Oct-08
Rosemont	Augusta	United States	$	230,000	13	100%	100%	Life of Mine	10-Feb-10
Loma de La Plata	Pan American	Argentina	$	43,289	14	12.5%	-	Life of Mine	n/a 15
Constancia	Hudbay	Peru	$	429,900	16	100%	50% 17	Life of Mine	8-Aug-12

1)	Expressed in United States dollars, rounded to the nearest thousand; excludes closing costs and capitalized interest, where applicable.

Until August 6, 2014, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. After August 6, 2014, Primero will deliver a per annum amount to Silver Wheaton equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess.

As more fully described in the San Dimas section on page 4 of this MD&A, on August 6, 2010, Goldcorp completed the sale of the San Dimas mine, which was part of the Luismin mining operations (“Luismin”), to Primero. The original cost of Luismin was allocated to San Dimas and Los Filos based on the estimated fair values of these silver interests as at August 6, 2010.

To a maximum of 4.75 million ounces per annum. In the event that silver sold and delivered to Silver Wheaton in any year totals less than 4.75 million ounces, the amount sold and delivered to Silver Wheaton in subsequent years will be increased to make up for any cumulative shortfall, to the extent production permits.

5)	Comprised of the value allocated to the silver and gold interests upon the Company’s acquisition of Silverstone Resources Corp., which was closed on May 21, 2009 (the “Silverstone Acquisition”).

6)	The Company is entitled to acquire 100% of the first 30,000 ounces of gold produced per annum and 50% thereafter.

Silver Wheaton is entitled to acquire 100% of the life of mine gold production from Hudbay’s 777 mine until Hudbay’s Constancia project satisfies a completion test, or the end of 2016, whichever is later. At that point, Silver Wheaton’s share of gold production from 777 will be reduced to 50% for the life of the mine.

8)	Does not include the contingent payment related to the Salobo mine expansion (see the Other Contractual Obligations and Contingencies section of this MD&A).

9)	Comprised of a $570 million upfront cash payment plus warrants to purchase 10 million shares of Silver Wheaton common stock at a strike price of $65, with a term of 10 years.

10)	Barrick will deliver to Silver Wheaton silver production from the currently producing mines until December 31, 2016.

11)	Silver Wheaton's attributable silver production is subject to a maximum of 8% of the silver contained in the ore mined at Veladero during the period.

12)	95% owned by Eldorado Gold Corporation.

13)	Currently reflected as a contingent obligation, payable on an installment basis to partially fund construction of the Rosemont mine once certain milestones are achieved, including the receipt of key permits and securing the necessary financing to complete construction of the mine.

14)	Comprised of $10.9 million allocated to the silver interest upon the Silverstone Acquisition in addition to a contingent liability of $32.4 million, payable upon the satisfaction of certain conditions, including Pan American receiving all necessary permits to proceed with the mine construction.

15)	Definitive terms of the agreement are in the process of being finalized.

16)	Comprised of $169.9 million which has been paid to date, with further payments of $125 million and $135 million to be made once $1 billion and $1.35 billion, respectively, in capital expenditures have been incurred.

17)	Gold recoveries will be set at 55% for the Constancia deposit and 70% for the Pampacancha deposit until 265,000 ounces of gold have been delivered to the Company.

SILVER WHEATON 2013 THIRD QUARTER REPORT [3]

San Dimas

On October 15, 2004, the Company entered into an agreement with Goldcorp Inc. (“Goldcorp”) to acquire an amount equal to 100% of the silver produced by Goldcorp’s Luismin mining operations in Mexico (owned at the date of the transaction) for a period of 25 years. The Luismin mining operations consisted primarily of the San Dimas and the Los Filos mines.

On August 6, 2010, Goldcorp completed the sale of the San Dimas mine to Primero Mining Corp. (“Primero”). In conjunction with the sale, Silver Wheaton amended its silver purchase agreement relating to the mine. The term of the agreement, as it relates to San Dimas, was extended to the life of mine. During the first four years following the closing of the transaction, Primero will deliver to Silver Wheaton a per annum amount equal to the first 3.5 million ounces of payable silver produced at San Dimas and 50% of any excess, plus Silver Wheaton will receive an additional 1.5 million ounces of silver per annum to be delivered by Goldcorp. Beginning in the fifth year after closing, Primero will deliver a per annum amount to Silver Wheaton equal to the first 6 million ounces of payable silver produced at San Dimas and 50% of any excess. Goldcorp will continue to guarantee the delivery by Primero of all silver produced and owing to the Company until 2029. Primero has provided Silver Wheaton with a right of first refusal on any metal stream or similar transaction it enters into.

During the three months ended June 30, 2013, Primero achieved the 3.5 million ounce delivery threshold. Accordingly, Silver Wheaton will receive 50% of the silver produced from San Dimas above such threshold until August 6, 2013. During the three months ended September 30, 2013, there was approximately 0.7 million ounces produced from San Dimas in excess of the above noted threshold, of which Silver Wheaton received 50%.

As per Primero’s November 6, 2013 press release, expansion of the San Dimas mine from 2,150 tonnes per day (“TPD”) to 2,500 TPD is on track for commissioning during the first quarter of 2014. At September 30, 2013, the expansion of the mill to 2,500 TPD was 70% complete. Mine development to feed the mill also remains on track to be completed during the first quarter of 2014. In addition, Primero continues to review the option to further expand the San Dimas mine to 3,000 TPD and will provide an update no later than mid-2014.

As of September 30, 2013, the Company has received approximately 55.4 million ounces of silver related to San Dimas under the agreement, generating cumulative operating cash flows of approximately $774 million. As at December 31, 2012, the San Dimas mine had proven and probable silver reserves of 39.4 million ounces and inferred silver resources of 64.6 million ounces (as described in the Attributable Reserves and Resources section of this MD&A).

Yauliyacu

On March 23, 2006, the Company entered into an agreement with Glencore International AG (“Glencore”) to acquire an amount equal to 100% of the silver produced from Glencore’s Yauliyacu mining operations in Peru, up to a maximum of 4.75 million ounces per year, for a period of 20 years. In the event that silver sold and delivered to Silver Wheaton in any year totals less than 4.75 million ounces, the amount sold and delivered to Silver Wheaton in subsequent years will be increased to make up for any cumulative shortfall, to the extent production permits. The cumulative shortfall as at March 23, 2013, representing the seven year anniversary, was 15.2 million ounces. During the term of the agreement, Silver Wheaton has a right of first refusal on any future sales of silver streams from the Yauliyacu mine and a right of first offer on future sales of silver streams from any other mine owned by Glencore at the time of the initial transaction.

Since mid-2009, concentrate shipments from the Yauliyacu mine have been affected by the shut-down of the Doe Run Peru La Oroya smelter, historically the largest buyer of the silver bearing concentrate produced at the mine. Since that time, alternative arrangements have been made by Glencore, though sales of the bulk concentrate continue to have an inconsistent delivery schedule. As at September 30, 2013, approximately 1.6 million ounces of cumulative payable silver ounces have been produced at Yauliyacu but not yet delivered to the Company, representing an increase of 0.5 million payable silver ounces during the three month period ended September 30, 2013.

As of September 30, 2013, the Company has received approximately 18.7 million ounces of silver related to the Yauliyacu mine under the agreement, generating cumulative operating cash flows of approximately $282 million. As at December 31, 2012, the Yauliyacu mine had proven and probable silver reserves of 12.7 million ounces and measured and indicated silver resources of 39.7 million ounces (as described in the Attributable Reserves and Resources section of this MD&A).

SILVER WHEATON 2013 THIRD QUARTER REPORT [4]

Peñasquito

On July 24, 2007, the Company entered into an agreement with Goldcorp to acquire an amount equal to 25% of the silver produced from Goldcorp’s Peñasquito mining operations in Mexico for the life of mine.

As stated in Goldcorp’s third quarter 2013 MD&A, water production at Peñasquito continued in line with Goldcorp’s expectations during the third quarter. In addition, the year to date rainfall has already exceeded the annual average for Peñasquito, which should improve recharge in the basin over time. Goldcorp also stated that the Northern Well Field ("NWF") project continued on schedule and the final routing has been selected. Land access agreements continued as planned throughout the quarter and final engineering designs are essentially complete. Construction activities are planned to commence in the fourth quarter of 2013.

As at September 30, 2013, approximately 1.1 million ounces of cumulative payable silver ounces have been produced at Peñasquito but not yet delivered to the Company, representing an increase of 0.1 million payable silver ounces during the three month period ended September 30, 2013.

As of September 30, 2013, the Company has received approximately 17.9 million ounces of silver related to the Peñasquito mine under the agreement, generating cumulative operating cash flows of approximately $431 million. As at December 31, 2012, the Company’s 25% share of the Peñasquito proven and probable silver reserves was 227.9 million ounces, measured and indicated silver resources was 63.1 million ounces and inferred silver resources was 9.9 million ounces (as described in the Attributable Reserves and Resources section of this MD&A).

Minto

On May 21, 2009, the Company completed the acquisition of Silverstone Resources Corp. (the “Silverstone Acquisition”). As part of the Silverstone Acquisition, the Company acquired a precious metals purchase agreement with Capstone Mining Corp. (“Capstone”) to acquire 100% of the silver and gold produced (subject to certain thresholds) from Capstone’s Minto mine in Canada for the life of mine. The Company is entitled to acquire 100% of all the silver produced and 100% of the first 30,000 ounces of gold produced per annum and 50% thereafter. The silver production, sales and related costs associated with this agreement are reflected in this MD&A and financial statements as part of Other mines.

As of September 30, 2013, the Company has received approximately 0.6 million ounces of silver and 95,000 ounces of gold related to the Minto mine under the agreement, generating cumulative operating cash flows of approximately $150 million. As at December 31, 2012, Minto had proven and probable reserves of 2.2 million ounces of silver and 250,000 ounces of gold, measured and indicated resources of 4.3 million ounces of silver and 420,000 ounces of gold and inferred resources of 1.7 million ounces of silver and 180,000 ounces of gold (as described in the Attributable Reserves and Resources section of this MD&A).

Barrick

On September 8, 2009, the Company entered into an agreement with Barrick to acquire an amount equal to 25% of the life of mine silver production from its Pascua-Lama project which is located in Chile and Argentina, as well as 100% of the silver production from its Lagunas Norte mine and Pierina mine, which are both located in Peru, and its Veladero1 mine which is located in Argentina (collectively referred to as the “Barrick mines”) until the end of 2013.

As per Barrick’s third quarter 2013 MD&A, Barrick has decided to temporarily suspend construction activities at Pascua-Lama, except those required for environmental protection and regulatory compliance, and to place the project on care and maintenance. As disclosed by Barrick, Barrick’s decision to re-start will depend on improved project economics such as go-forward costs, the outlook for metal prices, and reduced uncertainty associated with legal and other regulatory requirements. Barrick notes that the suspension could generate adverse reactions from governmental and regulatory authorities, contractors, and other stakeholders, which could have a negative impact on both Pascua-Lama itself and, in Argentina, Veladero.

As part of the original agreement, Barrick provided Silver Wheaton with a completion guarantee, requiring Barrick to complete Pascua-Lama to at least 75% of design capacity by December 31, 2015, which was subsequently extended to December 31, 2016. During 2014 and 2015, Silver Wheaton was to be entitled to the silver production from the currently producing mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies the completion guarantee. As a result of Barrick’s decision to temporarily suspend construction activities at Pascua-Lama, the Company has amended its silver purchase agreement with Barrick. The amendment entails Silver Wheaton being entitled to 100% of the silver production from Barrick’s Lagunas Norte, Pierina and Veladero mines until the end of 2016 - an extension of one year. In addition, Silver Wheaton has agreed to extend the completion test deadline an additional year to the end of December 31, 2017. If the requirements of the completion guarantee have not been satisfied by the revised outside completion date, the agreement may be terminated by Silver Wheaton. In such an event, Silver Wheaton will be entitled to the return of the upfront cash consideration of $625 million less a credit for silver delivered up to that date.

1	Silver Wheaton's attributable silver production is subject to a maximum of 8% of the silver contained in the ore mined at Veladero during the period.

SILVER WHEATON 2013 THIRD QUARTER REPORT [5]

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 silver production attributable to Pascua-Lama is expected to average 9 million ounces annually.

As of September 30, 2013, the Company has received approximately 10.6 million ounces of silver related to the Barrick mines under the agreement, generating cumulative operating cash flows of approximately $254 million. As at December 31, 2012, the Company’s 25% share of the Pascua-Lama proven and probable silver reserves was 169.1 million ounces, measured and indicated silver resources was 46.3 million ounces and inferred silver resources was 4.0 million ounces (as described in the Attributable Reserves and Resources section of this MD&A). In addition, the Company’s estimated share of the proven and probable silver reserves contained in the Lagunas Norte, Pierina, and Veladero mines is 77.9 million ounces.

Update on Matters Relating to Project Development

i.	Pascua-Lama Challenge to SMA Regulatory Sanction

As per Barrick’s second quarter 2013 MD&A, in June 2013, a group of local farmers and indigenous communities challenged the resolution issued by Chile’s Superintendence of the Environment (Superintendencia del Medio Ambiente or “SMA”) in May 2013 (the “Resolution”). The challenge, which was brought in the Environmental Court of Santiago, Chile (the “Environmental Court”), claims that the fine was inadequate and requests more severe sanctions against CMN, Barrick’s Chilean subsidiary that holds the Chilean portion of the Pascua-Lama project, including the revocation of the Pascua-Lama project’s environmental permit. The SMA presented its defense of the Resolution in July 2013.

As per Barrick’s third quarter 2013 MD&A, in August, 2013, CMN joined as a party to this proceeding and has vigorously defended the Resolution. The hearing was held before the Environmental Court on September 4, 2013, and the decision of the Court is pending.

ii.	Pascua-Lama Environmental Damage Claim

As per Barrick’s second and third quarter 2013 MD&A, on September 23, 2013, CMN was formally notified that a group of local farmers filed an environmental damage claim against CMN in the Environmental Court, alleging that CMN has damaged glaciers located in the Pascua-Lama project area. The plaintiffs are seeking a court order requiring CMN to remedy the alleged damage and implement measures to prevent such environmental impact from continuing, including by halting construction of the Pascua-Lama project in Chile. CMN presented its defense on October 9, 2013.

iii.	Constitutional Protection Actions

As per Barrick’s third quarter 2013 MD&A, on September 25, 2013, the Chilean Supreme Court rejected the plaintiffs’ appeal and confirmed the July 15, 2013 decision of the Court of Appeals of Copiapo, which ruled that CMN must complete the Pascua-Lama project’s water management system in compliance with the environmental permit to the satisfaction of Chile’s environmental regulator, the SMA, before resuming construction activities in Chile.

Barrick also stated that it is aware of information indicating that, in September 2013, a new constitutional protection action was filed against CMN alleging that the company is conducting activities at the Pascua-Lama project that are not authorized by the July 15, 2013 decision of the Court of Appeals of Copiapo or the May 2013 resolution of the SMA (for more information on the SMA resolution see “Pascua-Lama SMA Regulatory Sanction” on page 6 of the Company’s second quarter 2013 MD&A). Barrick stated that it is also aware of information indicating that the action was referred to the Court of Appeals of Antofagasta, which admitted the case for review but declined to issue the preliminary injunction requested by the plaintiff. The challenged activities include the Pascua-Lama project’s environmental monitoring as well as the operation and maintenance of facilities in connection with the completion of the Pascua-Lama project’s water management system. The plaintiff, a lawyer acting on her own behalf, alleges that these activities infringe her constitutional right to life and to live in an environment free of contamination. The relief sought in the action is the complete suspension of these activities and the adoption by the SMA of administrative measures to, among other things, inspect the works and commence sanction proceedings against CMN as appropriate. CMN has not yet been formally notified of the action. Barrick states that it intends to vigorously defend any such action.

SILVER WHEATON 2013 THIRD QUARTER REPORT [6]

777

On August 8, 2012, the Company entered into an agreement with Hudbay Minerals Inc. ("Hudbay") to acquire an amount equal to 100% of the life of mine silver and gold production from its currently producing 777 mine, located in Canada. Silver Wheaton’s share of gold production at 777 will remain at 100% until the later of the end of 2016 or the satisfaction of a completion test relating to Hudbay’s Constancia project, after which it will be reduced to 50% for the remainder of the mine life. Hudbay has granted Silver Wheaton a right of first refusal on any future streaming agreement, royalty agreement, or similar transaction related to the production of silver or gold from 777. The silver production, sales and related costs associated with this agreement are reflected in this MD&A and financial statements as part of Other mines.

As of September 30, 2013, the Company has received approximately 0.7 million ounces of silver and 78,000 ounces of gold related to the 777 mine under the agreement, generating cumulative operating cash flows of approximately $71 million. As at December 31, 2012, the Company's share of 777's proven and probable reserves was 10.3 million ounces of silver and 520,000 ounces of gold and inferred resources was 0.8 million ounces of silver and 20,000 ounces of gold (as described in the Attributable Reserves and Resources section of this MD&A).

Salobo

On February 28, 2013, the Company entered into an agreement to acquire from Vale an amount of gold equal to 25% of the life of mine gold production from its currently producing Salobo mine, located in Brazil. Silver Wheaton made a total upfront cash payment of $1.33 billion on March 12, 2013 and, in addition, will make ongoing payments of the lesser of $400 per ounce of gold (subject to an inflationary adjustment of 1% beginning in the fourth year) or the prevailing market price per ounce of gold delivered.

Vale is in the process of expanding the mill throughput capacity at the Salobo mine to 24 million tonnes per annum (“Mtpa”) from its current 12 Mtpa. If the expansion to 24 Mtpa is not completed by December 31, 2016, Silver Wheaton would be entitled to a gross up (a temporary increased percentage of gold production) based on the pro-rata achievement of the target production. If throughput capacity is expanded above 28 Mtpa within a predetermined period, Silver Wheaton will be required to make an additional payment to Vale based on a set fee schedule ranging from $67 million if throughput capacity is expanded to 28 Mtpa by January 1, 2031 up to $400 million if throughput capacity is expanded to 40 Mtpa prior to January 1, 2021.

As of September 30, 2013, the Company has received approximately 10,000 ounces of gold related to the Salobo mine under the agreement, generating cumulative operating cash flows of approximately $10 million. As at December 31, 2012, the Company's 25% share of the Salobo proven and probable gold reserves was 3.4 million ounces, measured and indicated gold resources was 770,000 ounces and inferred gold resources was 370,000 ounces (as described in the Attributable Reserves and Resources section of this MD&A).

Sudbury

On February 28, 2013, the Company entered into an agreement to acquire from Vale an amount of gold equal to 70% of the gold production from certain of its currently producing Sudbury mines located in Canada, including the Coleman mine, Copper Cliff mine, Garson mine, Stobie mine, Creighton mine, Totten mine and the Victor project (the “Sudbury mines”) for a period of 20 years. Silver Wheaton made a total upfront cash payment on March 12, 2013 of $570 million plus warrants to purchase 10 million shares of Silver Wheaton common stock at a strike price of $65 per warrant, with a term of 10 years. In addition, Silver Wheaton will make ongoing payments of the lesser of $400 per ounce of gold or the prevailing market price per ounce of gold delivered.

As at September 30, 2013, approximately 0.7 million cumulative payable silver equivalent ounces (approximately 11,100 cumulative payable ounces of gold) have been produced at Sudbury but not yet delivered to the Company, representing a decrease of 0.1 million payable silver equivalent ounces during the three month period ended September 30, 2013.

As of September 30, 2013, the Company has received approximately 10,800 ounces of gold related to the Sudbury mines under the agreement, generating cumulative operating cash flows of approximately $10 million. As at December 31, 2012, the Company's 70% share of the Sudbury mines proven and probable gold reserves was 720,000 ounces, measured and indicated gold resources was 400,000 ounces and inferred gold resources was 190,000 ounces (as described in the Attributable Reserves and Resources section of this MD&A).

SILVER WHEATON 2013 THIRD QUARTER REPORT [7]

Other

Other silver and gold interests consist of the following:

As part of the agreement with Goldcorp to acquire silver from the Luismin mining operations, on October 15, 2004, the Company entered into an agreement with Goldcorp to acquire 100% of the silver production from its Los Filos mine in Mexico for a period of 25 years, commencing October 15, 2004. In addition, pursuant to Goldcorp’s sale of the San Dimas mine, Goldcorp is obligated to deliver to Silver Wheaton 1.5 million ounces of silver per year until August 6, 2014, which is reflected in this MD&A and financial statements as part of the silver production and sales relating to San Dimas;

ii.	On December 8, 2004, the Company entered into an agreement with Lundin Mining Corporation (“Lundin”) to acquire 100% of the silver produced by Lundin’s Zinkgruvan mining operations in Sweden for the life of mine;

iii.	On April 23, 2007, the Company entered into an agreement with European Goldfields Limited, which was acquired by Eldorado Gold Corporation (“Eldorado Gold”) on February 24, 2012, to acquire 100% of the life of mine silver production from its 95% owned Stratoni mine in Greece;

iv.	As part of the Silverstone Acquisition, the Company acquired a silver purchase agreement with Capstone to acquire 100% of the silver produced from Capstone’s Cozamin mine in Mexico for a period of 10 years, commencing on April 4, 2007;

v.	As part of the Silverstone Acquisition, the Company acquired an agreement with Lundin to acquire 100% of the silver production from its Neves-Corvo mine in Portugal for a period of 50 years, commencing June 5, 2007;

vi.	As part of the Silverstone Acquisition, the Company acquired an agreement with I’M SGPS to acquire 100% of the silver production from its Aljustrel mine in Portugal for a period of 50 years, commencing June 5, 2007;

vii.	On March 17, 2008, the Company entered into an agreement with Mercator Minerals Ltd. (“Mercator”) to acquire an amount equal to 100% of the life of mine silver production from its Mineral Park mine in the United States;

viii.

On May 13, 2008, the Company entered into an agreement with Farallon Mining Ltd., which was acquired by Nyrstar NV (“Nyrstar”) on January 5, 2011, to acquire an amount equal to 75% of the life of mine silver production from its Campo Morado mine in Mexico;

ix.	On October 2, 2008, the Company entered into an agreement with Alexco Resource Corp. (“Alexco”) to acquire an amount equal to 25% of the life of mine silver production from its Keno Hill silver district in Canada, including the Bellekeno mine;

On February 10, 2010, the Company entered into an agreement with Augusta Resource Corporation (“Augusta”) to acquire an amount equal to 100% of the life of mine silver and gold production from the Rosemont Copper project (“Rosemont”) in the United States. The Company is committed to pay Augusta total upfront cash payments of $230 million, payable on an installment basis to partially fund construction of the Rosemont mine once certain milestones are achieved, including the receipt of key permits and securing the necessary financing to complete construction of the mine;

xi.

As part of the Silverstone Acquisition, the Company acquired an agreement with Aquiline Resources Inc., which was acquired by Pan American Silver Corp. (“Pan American”) on December 22, 2009, to acquire an amount equal to 12.5% of the life of mine silver production from the Loma de La Plata zone of the Navidad project in Argentina, the definitive terms of which are in the process of being finalized. The Company is committed to pay Pan American total upfront cash payments of $32.4 million following the satisfaction of certain conditions, including Pan American receiving all necessary permits to proceed with the mine construction; and

xii.	On August 8, 2012, the Company entered into an agreement with Hudbay to acquire an amount equal to 100% of the life of mine silver production from the Constancia project (“Constancia”) in Peru.

SILVER WHEATON 2013 THIRD QUARTER REPORT [8]

On November 4, 2013, the Company amended its agreement with Hudbay to include the acquisition of an amount equal to 50%1 of the life of mine gold production from Constancia. Under the amended agreement, Silver Wheaton will pay Hudbay total cash consideration of $429.9 million, of which $169.9 million has been paid as at September 30, 2013, with additional payments of $125 million and $135 million to be made once capital expenditures of $1 billion and $1.35 billion, respectively, have been incurred at Constancia. Silver Wheaton has the option to make the $135 million payment in either cash or Silver Wheaton shares, with the number of shares to be determined at the time the payment is made2. In addition, Silver Wheaton will make ongoing payments of the lesser of $5.90 per ounce of silver and $400 per ounce of gold (both subject to an inflationary adjustment of 1% beginning in the fourth year) or the prevailing market price per ounce of silver and gold delivered. If the Constancia processing plant fails to achieve at least 90% of expected throughput and silver recovery by December 31, 2020, Silver Wheaton would be entitled to a proportionate return of the upfront cash consideration relating to Constancia. In addition, Silver Wheaton will be entitled to additional compensation in respect of the gold stream should there be a delay in achieving completion or mining the Pampacancha deposit beyond the end of 2018. Hudbay has granted Silver Wheaton a right of first refusal on any future streaming agreement, royalty agreement, or similar transaction related to the production of silver or gold from Constancia.

As disclosed in Alexco’s September 23, 2013 press release, as a result of a decline in silver prices, operations at the Bellekeno mine were suspended in early September under the previously-announced winter suspension plan. Alexco has previously stated that they plan to use the winter period to significantly restructure the underlying fixed costs at Keno Hill and plan to re-open the mine and mill after the winter, providing that the silver market has improved from current levels and that the underlying fixed costs related to Keno Hill have been reduced.

As per Mercator’s press release dated September 30, 2013, in light of the commodity price environment, capital market conditions and the challenges these pose for Mercator, Mercator’s board of directors has advanced and accelerated its ongoing process to review strategic alternatives. In conjunction with this, pursuant to an amendment to the Mineral Park silver purchase agreement, Mercator exercised its option to defer delivery of 50% of the required silver deliveries for one year starting July 1, 2013. All deferred silver will be delivered in equal installments over 18 months after the one year deferral period. Mercator will compensate Silver Wheaton for any shortfall arising from a decrease in the silver spot price between the time of the original delivery date and the date of actual delivery, including a 12% annualized interest rate. The amendment also grants Silver Wheaton a right of first refusal on any future precious metals streams relating to the El Creston project. To September 30, 2013, Mercator has deferred delivery of approximately 59,000 ounces.

As of September 30, 2013, the Company has received approximately 39.6 million ounces of silver under these agreements, generating cumulative operating cash flows of approximately $731 million.

As at December 31, 20123, unless otherwise noted, these silver and gold interests had proven and probable reserves of 352.2 million ounces of silver and 490,000 ounces of gold, measured and indicated resources of 376.2 million ounces of silver and 260,000 ounces of gold and inferred resources of 209.5 million ounces of silver and 130,000 ounces of gold (as described in the Attributable Reserves and Resources section of this MD&A).

1	Gold recoveries will be set at 55% for the Constancia deposit and 70% for the Pampacancha deposit until 265,000 ounces of gold have been delivered to the Company.

2	If Silver Wheaton shares are used, the number of common shares will be calculated based on the volume weighted average trading price of the Company on the Toronto Stock Exchange for the ten consecutive trading days immediately prior to the date the consideration is payable.

3	Mineral reserves and mineral resources are reported as of December 31, 2012, other than as disclosed in footnote 6 to the Attributable Reserves and Resources tables on page 35 of this MD&A.

SILVER WHEATON 2013 THIRD QUARTER REPORT [9]

Long-Term Investments

The Company will, from time to time, invest in securities of publicly listed mining companies for strategic purposes. The Company held the following investments as at September 30, 2013:

	September 30		December 31
(in thousands)	2013		2012
Common shares held	$	58,643	$	118,683
Warrants held		-		2,694
	$	58,643	$	121,377

Common Shares Held

	Sep 30, 2013	Three Months Ended Sep 30, 2013	Nine Months Ended Sep 30, 2013	Dec 31, 2012
(in thousands)	Fair Value	Fair Value Adjustment Gains (Losses) Included in OCI		Fair Value
Bear Creek	$ 29,921	$ 8,470	$ (14,209)	$ 44,130
Revett	6,013	2,493	(8,811)	14,824
Sabina	10,011	(897)	(21,153)	31,164
Other	12,698	268	(15,867)	28,565
	$ 58,643	$ 10,334	$ (60,040)	$ 118,683

	Sep 30, 2012	Three Months Ended Sep 30, 2012	Nine Months Ended Sep 30, 2012
(in thousands)	Fair Value	Fair Value Adjustment Gains (Losses) Included in OCI
Bear Creek	$ 50,026	$ 12,931	$ 3,855
Revett	18,915	1,591	(5,656)
Sabina	39,012	16,166	(5,165)
Other	38,804	11,359	3,906
	$ 146,757	$ 42,047	$ (3,060)

SILVER WHEATON 2013 THIRD QUARTER REPORT [10]

Warrants Held

	Sep 30, 2013		Three Months Ended Sep 30, 2013		Nine Months Ended Sep 30, 2013		Dec 31, 2012
(in thousands)	Fair Value		Fair Value Adjustment Losses Included in Net Earnings				Fair Value
Warrants held	$	-	$	-	$	(2,694)	$	2,694

	Sep 30, 2012		Three Months Ended Sep 30, 2012		Nine Months Ended Sep 30, 2012
(in thousands)	Fair Value			Fair Value Adjustment Gains Included in Net Earnings
Warrants held	$	4,135	$	1,539	$	1,937

The Company’s long-term investments in common shares (“LTI’s”) are held for long-term strategic purposes and not for trading purposes. As such, the Company has elected to reflect any fair value adjustments as a component of other comprehensive income (“OCI”).

While long-term investments in warrants are also held for long-term strategic purposes, they meet the definition of a derivative and therefore are classified as financial assets with fair value adjustments being recorded as a component of net earnings under the classification Other Expense (Income). Warrants that do not have a quoted market price have been valued using a Black-Scholes option pricing model.

By holding these long-term investments, the Company is inherently exposed to various risk factors including currency risk, market price risk and liquidity risk.

During the nine months ended September 30, 2013, the value of the Company’s LTI’s decreased by $60.0 million. As a result of this decrease, the deferred tax liability attributable to the LTI’s was reduced and during the nine months ended September 30, 2013, the Company recorded a deferred income tax recovery in OCI of $1.8 million. The reduction in the deferred tax liability attributable to the LTI’s resulted in the reversal of previously recognized deferred income tax assets which increased the deferred income tax expense reflected in net earnings.

SILVER WHEATON 2013 THIRD QUARTER REPORT [11]

Summary of Ounces Produced and Sold

	2013			2012				2011
	Q3	Q2	Q1	Q4	Q3	Q2	Q1	Q4
Silver ounces produced ²
San Dimas 3	1,660	1,160	1,743	1,694	1,288	1,231	1,692	1,578
Yauliyacu	639	668	624	616	640	606	550	583
Peñasquito	1,636	1,440	1,093	1,445	1,940	1,822	1,365	1,633
Barrick ⁴	465	556	741	769	617	455	630	728
Other 5	2,418	2,570	2,038	2,345	2,251	2,378	2,335	2,212
Total silver ounces produced	6,818	6,394	6,239	6,869	6,736	6,492	6,572	6,734
Gold ounces produced 2
Minto	2,894	4,226	5,967	6,785	5,200	3,710	3,348	3,891
777	18,259	16,986	16,951	19,615	11,8247	-	-	-
Sudbury	5,575	8,896	9,741	-	-	-	-	-
Salobo	8,061	6,342	4,677	-	-	-	-	-
Total gold ounces produced	34,789	36,450	37,336	26,400	17,024	3,710	3,348	3,891
Silver equivalent ounces of gold produced6	2,130	2,273	2,089	1,432	881	218	172	202
Silver equivalent ounces produced 6	8,948	8,667	8,328	8,301	7,617	6,710	6,744	6,936
Silver ounces sold
San Dimas 3	1,560	1,194	1,850	1,629	1,178	1,295	1,701	1,488
Yauliyacu	13	559	149	1,097	184	1,155	497	655
Peñasquito	1,388	1,058	1,459	1,642	1,304	1,845	1,189	851
Barrick ⁴	447	560	753	826	528	470	656	755
Other 5	2,257	1,771	1,741	2,153	1,592	2,024	1,885	2,029
Total silver ounces sold	5,665	5,142	5,952	7,347	4,786	6,789	5,928	5,778
Gold ounces sold
Minto	5,287	3,409	6,698	4,876	6,905	2,369	3,860	3,777
777	16,972	23,483	9,414	28,084	-	-	-	-
Sudbury	6,534	4,184	111	-	-	-	-	-
Salobo	6,490	2,793	720	-	-	-	-	-
Total gold ounces sold	35,283	33,869	16,943	32,960	6,905	2,369	3,860	3,777
Silver equivalent ounces of gold sold 6	2,163	2,097	971	1,784	357	139	198	196
Silver equivalent ounces sold6	7,828	7,239	6,923	9,131	5,143	6,928	6,126	5,974
Gold / silver ratio 6	61.3	61.9	57.3	54.1	51.7	58.7	51.2	51.9
Cumulative payable silver equivalent ounces produced but not yet delivered 8	5,289	5,022	4,051	3,824	5,195	3,212	4,166	4,127

1)	All figures in thousands except gold ounces produced and sold.

Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions. Production figures are based on information provided by the operators of the mining operations to which the silver or gold interests relate or management estimates in those situations where other information is not available. Certain production figures may be updated in future periods as additional information is received. The Company has been informed by Glencore that reported production related to the Yauliyacu mine may have been overstated by a total of approximately 200,000 ounces for all or some portion of the period between April 1, 2011 and June 30, 2012. The required adjustments to production, if any, related to the Yauliyacu mine for these periods will be made once management completes a review of the timing and amount of any production variance.

3)	The ounces produced and sold include ounces received from Goldcorp in connection with Goldcorp’s four year commitment to deliver to Silver Wheaton 1.5 million ounces of silver per annum resulting from their sale of San Dimas to Primero.

4)	Comprised of the Lagunas Norte, Pierina and Veladero silver interests.

5)	Comprised of the Los Filos, Zinkgruvan, Mineral Park, Cozamin, Neves-Corvo, Stratoni, Keno Hill, Minto, 777, Aljustrel and Campo Morado silver interests.

Gold ounces produced and sold are converted to a silver equivalent basis based on either (i) the ratio of the average silver price received to the average gold price received during the period from the assets that produce both gold and silver; or (ii) the ratio of the price of silver to the price of gold on the date of sale as per the London Bullion Metal Exchange for the assets which produce only gold.

7)	Represents production for the period August 8, 2012 to September 30, 2012.

8)	Based on management estimates.

SILVER WHEATON 2013 THIRD QUARTER REPORT [12]

Quarterly Financial Review

	2013									2012												2011
	Q3			Q2			Q1			Q4			Q3			Q2			Q1			Q4
Total silver ounces sold (000's)			5,665			5,142			5,952			7,347			4,786			6,789			5,928			5,778
Average realized silver price¹		$	21.22		$	23.12		$	29.89		$	31.47		$	31.16		$	29.12		$	32.58		$	32.09
Silver sales (000's)		$	120,255		$	118,885		$	177,898		$	231,226		$	149,086		$	197,694		$	193,162		$	185,401
Total gold ounces sold			35,283			33,869			16,943			32,960			6,905			2,369			3,860			3,777
Average realized gold price¹		$	1,308		$	1,417		$	1,645		$	1,699		$	1,765		$	1,568		$	1,678		$	1,712
Gold sales (000's)		$	46,150		$	48,005		$	27,863		$	56,015		$	12,187		$	3,714		$	6,476		$	6,466
Total silver equivalent ounces sold (000's) 2			7,828			7,239			6,923			9,131			5,143			6,928			6,126			5,974
Average realized silver equivalent price 1, 2		$	21.26		$	23.05		$	29.72		$	31.46		$	31.36		$	29.07		$	32.59		$	32.12
Total sales (000's)		$	166,405		$	166,890		$	205,761		$	287,241		$	161,273		$	201,408		$	199,638		$	191,867
Average cash cost, silver 1, 3		$	4.13		$	4.14		$	4.08		$	4.12		$	4.04		$	4.04		$	4.02		$	4.01
Average cash cost, gold 1, 3		$	386		$	391		$	362		$	386		$	303		$	303		$	303		$	301
Average cash cost, silver equivalent 1, 2, 3		$	4.73		$	4.77		$	4.39		$	4.70		$	4.16		$	4.06		$	4.08		$	4.06
Net earnings (000's)		$	77,057		$	71,117		$	133,421		$	177,744		$	119,697		$	141,414		$	147,181		$	144,747
Earnings per share
Basic		$	0.22		$	0.20		$	0.38		$	0.50		$	0.34		$	0.40		$	0.42		$	0.41
Diluted		$	0.22		$	0.20		$	0.37		$	0.50		$	0.34		$	0.40		$	0.41		$	0.41
Cash flow from operations (000's)		$	118,672		$	125,258		$	165,612		$	254,026		$	128,651		$	172,916		$	163,811		$	163,714
Cash flow from operations per share 4
Basic		$	0.33		$	0.35		$	0.47		$	0.72		$	0.36		$	0.49		$	0.46		$	0.46
Diluted		$	0.33		$	0.35		$	0.46		$	0.71		$	0.36		$	0.49		$	0.46		$	0.46
Dividends
Dividends declared (000's)		$	35,629		$	42,573		$	49,646 5		$	24,806		$	35,388		$	31,829		$	31,829 6		$	31,814
Dividends declared per share		$	0.10		$	0.12		$	0.14		$	0.07		$	0.10		$	0.09		$	0.09		$	0.09
Total assets (000's)		$	4,398,445		$	4,396,012		$	4,400,253		$	3,189,337		$	3,046,564		$	3,056,825		$	3,005,839		$	2,872,335
Total liabilities (000's)		$	1,078,137		$	1,178,859		$	1,174,470		$	82,263		$	71,076		$	212,147		$	242,873		$	218,118
Total shareholders' equity (000's)		$	3,320,308		$	3,217,153		$	3,225,783		$	3,107,074		$	2,975,488		$	2,844,678		$	2,762,966		$	2,654,217

1)	Expressed as United States dollars per ounce.

3)	Refer to discussion on non-IFRS measure (ii) on page 23 of this MD&A.

4)	Refer to discussion on non-IFRS measure (i) on page 22 of this MD&A.

5)	On March 21, 2013, the Company declared dividends of $0.14 per common share for total dividends of $49.6 million, which was paid on April 12, 2013.

6)	On March 22, 2012, the Company declared dividends of $0.09 per common share for total dividends of $31.8 million, which was paid on April 17, 2012.

Changes in sales, net earnings and cash flow from operations from quarter to quarter are affected primarily by fluctuations in production at the mines, the timing of shipments, changes in the price of silver or gold, the commencement of operations of mines under construction, as well as acquisitions of precious metal purchase agreements and any related capital raising activities.

SILVER WHEATON 2013 THIRD QUARTER REPORT [13]

Results of Operations and Operational Review

The Company currently has ten reportable operating segments: the silver produced by the San Dimas, Yauliyacu, Peñasquito, Barrick and Other mines, the gold produced by the Minto, 777, Sudbury and Salobo mines and corporate operations.

Three Months Ended September 30, 2013
	Ounces Produced²	Ounces Sold	Sales		Average Realized Price ($'s Per Ounce)		Average Cash Cost ($'s Per Ounce)3		Average Depletion ($'s Per Ounce)		Net Earnings		Cash Flow From Operations		Total Assets
Silver
San Dimas 4	1,660	1,560	$	33,856	$	21.70	$	4.16	$	0.82	$	26,089	$	27,361	$	159,180
Yauliyacu	639	13		260		20.02		4.12		5.75		132		207		211,151
Peñasquito	1,636	1,388		27,815		20.03		4.02		2.96		18,119		22,233		476,473
Barrick 5	465	447		10,250		22.93		3.90		3.31		7,026		5,541		599,993
Other 6	2,418	2,257		48,074		21.30		4.22		4.07		29,371		35,157		556,224
	6,818	5,665	$	120,255	$	21.22	$	4.13	$	2.85	$	80,737	$	90,499	$	2,003,021
Gold
Minto	2,894	5,287	$	6,944	$	1,313	$	306	$	115	$	4,716	$	5,254	$	28,440
777	18,259	16,972		22,040		1,299		400		802		1,647		15,252		292,763
Sudbury	5,575	6,534		8,636		1,322		400		829		605		6,023		1,325,726
Salobo	8,061	6,490		8,530		1,314		400		462		2,937		5,934		614,889
	34,789	35,283	$	46,150	$	1,308	$	386	$	641	$	9,905	$	32,463	$	2,261,818
Silver equivalent 7	8,948	7,828	$	166,405	$	21.26	$	4.73	$	4.95	$	90,642	$	122,962	$	4,264,839
Corporate
General and administrative											$	(9,390)
Other												(4,195)
Total corporate											$	(13,585)	$	(4,290)	$	133,606
	8,948	7,828	$	166,405	$	21.26	$	4.73	$	4.95	$	77,057	$	118,672	$	4,398,445

1)	All figures in thousands except gold ounces produced and sold and per ounce amounts.

3)	Refer to discussion on non-IFRS measure (ii) on page 23 of this MD&A.

4)	Results for San Dimas include 375,000 ounces received from Goldcorp in connection with Goldcorp’s four year commitment to deliver to Silver Wheaton 1.5 million ounces of silver per annum resulting from their sale of San Dimas to Primero.

5)	Comprised of the operating Lagunas Norte, Pierina and Veladero silver interests in addition to the non-operating Pascua-Lama silver interest.

6)	Comprised of the operating Los Filos, Zinkgruvan, Keno Hill, Mineral Park, Cozamin, Neves-Corvo, Stratoni, Campo Morado, Minto, 777 and Aljustrel silver interests in addition to the non-operating Rosemont silver and gold interest and Loma de La Plata and Constancia silver interests.

SILVER WHEATON 2013 THIRD QUARTER REPORT [14]

Three Months Ended September 30, 2012
	Ounces Produced²	Ounces Sold	Sales		Average Realized Price ($'s Per Ounce)		Average Cash Cost ($'s Per Ounce)3		Average Depletion ($'s Per Ounce)		Net Earnings		Cash Flow From Operations		Total Assets
Silver
San Dimas 4	1,288	1,178	$	37,565	$	31.90	$	4.12	$	0.79	$	31,776	$	32,710	$	164,227
Yauliyacu	640	184		5,378		29.23		4.08		5.02		3,704		2,181		220,799
Peñasquito	1,940	1,304		40,431		30.99		3.99		2.96		31,364		35,226		492,132
Barrick 5	617	528		15,752		29.85		3.90		4.34		11,404		13,425		601,187
Other 6	2,251	1,592		49,960		31.39		4.05		3.32		38,238		39,570		464,681
	6,736	4,786	$	149,086	$	31.16	$	4.04	$	2.78	$	116,486	$	123,112	$	1,943,026
Gold
Minto	5,200	6,905	$	12,187	$	1,765	$	303	$	171	$	8,917	$	8,930	$	31,418
777	11,824	-		-		-		-		-		-		-		354,364
	17,024	6,905	$	12,187	$	1,765	$	303	$	171	$	8,917	$	8,930	$	385,782
Silver equivalent 7	7,617	5,143	$	161,273	$	31.36	$	4.16	$	2.81	$	125,403	$	132,042	$	2,328,808
Corporate
General and administrative											$	(6,762)
Other												1,056
Total corporate											$	(5,706)	$	(3,391)	$	717,756
	7,617	5,143	$	161,273	$	31.36	$	4.16	$	2.81	$	119,697	$	128,651	$	3,046,564

1)	All figures in thousands except gold ounces produced and sold and per ounce amounts.

3)	Refer to discussion on non-IFRS measure (ii) on page 23 of this MD&A.

4)	Results for San Dimas include 375,000 ounces received from Goldcorp in connection with Goldcorp’s four year commitment to deliver to Silver Wheaton 1.5 million ounces of silver per annum resulting from their sale of San Dimas to Primero.

5)	Comprised of the operating Lagunas Norte, Pierina and Veladero silver interests in addition to the non-operating Pascua-Lama silver interest.

6)	Comprised of the operating Los Filos, Zinkgruvan, Keno Hill, Mineral Park, Cozamin, Neves-Corvo, Stratoni, Campo Morado, Minto, 777 and Aljustrel silver interests in addition to the non-operating Rosemont silver and gold interest and Loma de La Plata and Constancia silver interests.

For the three months ended September 30, 2013, attributable silver equivalent production was 8.9 million ounces (6.8 million ounces of silver and 34,800 ounces of gold), compared with 7.6 million ounces (6.7 million ounces of silver and 17,000 ounces of gold) for the comparable period in 2012, with the 1.3 million ounce increase being primarily attributable to the following factors:

•	845,000 silver equivalent ounces of gold production from the recently acquired Sudbury and Salobo mines;

•	492,000 silver equivalent ounce (80%) increase related to gold production at the 777 mine (6,400 gold ounces), with figures for the third quarter of 2012 representing production for the period August 8, 2012 to September 30, 2012;

•	372,000 ounce (29%) increase related to the San Dimas mine, due primarily to higher grades and higher processed tonnage;

•	167,000 ounce (7%) increase related to Other mines, due primarily to silver production at the Cozamin, Zinkgruvan and 777 mines, with figures for the 777 mine during the third quarter of 2012 representing production for the period August 8, 2012 to September 30, 2012; partially offset by

•	304,000 ounce (16%) decrease related to the Peñasquito mine, due primarily to lower grades;

•	152,000 ounce (25%) decrease related to the Barrick mines, due primarily to lower grades at Veladero; and

SILVER WHEATON 2013 THIRD QUARTER REPORT [15]

•	87,000 silver equivalent ounce (33%) decrease related to gold production at the Minto mine (2,300 gold ounces), due primarily to lower grades.

For the three months ended September 30, 2013, net earnings and cash flow from operations were $77.1 million and $118.7 million, respectively, compared with $119.7 million and $128.7 million for the comparable period in 2012, with the $42.6 million decrease in net earnings being primarily attributable to the following factors:

•	$0.4 million increase related to payable silver production; and

•	$1.6 million increase related to payable gold production; and

•	$21.6 million increase as a result of the timing of shipments of stockpiled concentrate and doré, primarily attributable to the following factors:

i.	$8.6 million increase relating to the Peñasquito mine having stockpiled concentrate produced during the three months ended September 30, 2012; and

ii.

$13.2 million increase relating to Other mines, primarily attributable to the Zinkgruvan, Neves-Corvo and Cozamin mines having sold concentrate produced in prior periods during the three months ended September 30, 2013 compared with stockpiling concentrate in the comparable period of the previous year; partially offset by

iii.	$3.4 million decrease relating to the Yauliyacu mine, which continues to have an inconsistent delivery schedule as a result of the shut-down of the Doe Run Peru La Oroya smelter; and

•	$58.4 million decrease due to a reduction in the operating margin per ounce, due primarily to a 32% decrease in the average realized selling price per silver equivalent ounce sold; and

•	$7.9 million decrease as a result of an increase in corporate costs, as explained in the Corporate Costs section of this MD&A ($0.9 million decrease from a cash flow perspective).

SILVER WHEATON 2013 THIRD QUARTER REPORT [16]

Nine Months Ended September 30, 2013
	Ounces Produced²	Ounces Sold	Sales		Average Realized Price ($'s Per Ounce)		Average Cash Cost ($'s Per Ounce)3		Average Depletion ($'s Per Ounce)		Net Earnings		Cash Flow From Operations		Total Assets
Silver
San Dimas 4	4,563	4,604	$	115,079	$	24.99	$	4.14	$	0.82	$	92,249	$	96,005	$	159,180
Yauliyacu	1,931	721		18,372		25.48		4.11		5.75		11,263		15,407		211,151
Peñasquito	4,169	3,905		96,079		24.60		4.02		2.77		69,582		80,381		476,473
Barrick 5	1,762	1,760		48,205		27.39		3.90		2.98		36,095		42,706		599,993
Other 6	7,026	5,769		139,303		24.15		4.22		4.30		90,175		115,215		556,224
	19,451	16,759	$	417,038	$	24.88	$	4.11	$	2.91	$	299,364	$	349,714	$	2,003,021
Gold
Minto	13,087	15,394	$	22,568	$	1,466	$	305	$	139	$	15,720	$	17,731	$	28,440
777	52,196	49,869		71,284		1,429		400		802		11,363		47,365		292,763
Sudbury	24,212	10,829		14,638		1,352		400		829		1,329		10,307		1,325,726
Salobo	19,080	10,003		13,528		1,352		400		462		4,906		9,527		614,889
	108,575	86,095	$	122,018	$	1,417	$	383	$	647	$	33,318	$	84,930	$	2,261,818
Silver equivalent 7	25,943	21,990	$	539,056	$	24.51	$	4.63	$	4.75	$	332,682	$	434,644	$	4,264,839
Corporate
General and administrative											$	(28,159)
Other												(22,928)
Total corporate											$	(51,087)	$	(25,102)	$	133,606
	25,943	21,990	$	539,056	$	24.51	$	4.63	$	4.75	$	281,595	$	409,542	$	4,398,445

1)	All figures in thousands except gold ounces produced and sold and per ounce amounts.

3)	Refer to discussion on non-IFRS measure (ii) on page 23 of this MD&A.

4)	Results for San Dimas include 1,125,000 ounces received from Goldcorp in connection with Goldcorp’s four year commitment to deliver to Silver Wheaton 1.5 million ounces of silver per annum resulting from their sale of San Dimas to Primero.

5)	Comprised of the operating Lagunas Norte, Pierina and Veladero silver interests in addition to the non-operating Pascua-Lama silver interest.

6)	Comprised of the operating Los Filos, Zinkgruvan, Keno Hill, Mineral Park, Cozamin, Neves-Corvo, Stratoni, Campo Morado, Minto, 777 and Aljustrel silver interests in addition to the non-operating Rosemont silver and gold interest and Loma de La Plata and Constancia silver interests.

SILVER WHEATON 2013 THIRD QUARTER REPORT [17]

Nine Months Ended September 30, 2012
	Ounces Produced²	Ounces Sold	Sales		Average Realized Price ($'s Per Ounce)		Average Cash Cost ($'s Per Ounce)3		Average Depletion ($'s Per Ounce)		Net Earnings		Cash Flow From Operations		Total Assets
Silver
San Dimas 4	4,211	4,174	$	129,825	$	31.11	$	4.10	$	0.79	$	109,409	$	112,709	$	164,227
Yauliyacu	1,796	1,836		55,432		30.19		4.06		5.02		38,758		47,971		220,799
Peñasquito	5,127	4,338		132,387		30.52		3.99		2.96		102,237		115,078		492,132
Barrick 5	1,702	1,654		51,439		31.11		3.90		4.34		37,814		45,943		601,187
Other 6	6,964	5,501		170,859		31.06		4.04		3.36		130,142		142,367		464,681
	19,800	17,503	$	539,942	$	30.85	$	4.03	$	2.92	$	418,360	$	464,068	$	1,943,026
Gold
Minto	12,258	13,134	$	22,377	$	1,704	$	303	$	171	$	16,157	$	17,007	$	31,418
777	11,824	-		-		-		-		-		-		-		354,364
	24,082	13,134	$	22,377	$	1,704	$	303	$	171	$	16,157	$	17,007	$	385,782
Silver equivalent 7	21,071	18,197	$	562,319	$	30.90	$	4.10	$	2.93	$	434,517	$	481,075	$	2,328,808
Corporate
General and administrative											$	(21,680)
Other												(4,545)
Total corporate											$	(26,225)	$	(15,697)	$	717,756
	21,071	18,197	$	562,319	$	30.90	$	4.10	$	2.93	$	408,292	$	465,378	$	3,046,564

1)	All figures in thousands except gold ounces produced and sold and per ounce amounts.

3)	Refer to discussion on non-IFRS measure (ii) on page 23 of this MD&A.

4)	Results for San Dimas include 1,125,000 ounces received from Goldcorp in connection with Goldcorp’s four year commitment to deliver to Silver Wheaton 1.5 million ounces of silver per annum resulting from their sale of San Dimas to Primero.

5)	Comprised of the operating Lagunas Norte, Pierina and Veladero silver interests in addition to the non-operating Pascua-Lama silver interest.

6)	Comprised of the operating Los Filos, Zinkgruvan, Keno Hill, Mineral Park, Cozamin, Neves-Corvo, Stratoni, Campo Morado, Minto, 777 and Aljustrel silver interests in addition to the non-operating Rosemont silver and gold interest and Loma de La Plata and Constancia silver interests.

For the nine months ended September 30, 2013, attributable silver equivalent production was 25.9 million ounces (19.5 million ounces of silver and 108,600 ounces of gold), compared with 21.1 million ounces (19.8 million ounces of silver and 24,100 ounces of gold) for the comparable period in 2012, with the 4.9 million ounce increase being primarily attributable to the following factors:

•	5.1 million silver equivalent ounces of gold production from the recently acquired 777, Sudbury and Salobo mines (84,000 ounces of gold); partially offset by

•	957,000 silver ounce (19%) decrease related to the Peñasquito mine, due primarily to lower grades.

For the nine months ended September 30, 2013, net earnings and cash flow from operations were $281.6 million and $409.5 million, respectively, compared with $408.3 million and $465.4 million for the comparable period in 2012, with the $126.7 million decrease in net earnings being primarily attributable to the following factors:

•	$21.5 million decrease related to a 4% decrease in payable silver ounces produced during the nine months ended September 30, 2013;

•	$21.5 million increase related to payable gold production; and

•	$1.4 million decrease as a result of the timing of shipments of stockpiled concentrate and doré, primarily attributable to:

SILVER WHEATON 2013 THIRD QUARTER REPORT [18]

i.	$26.1 million decrease relating to the Yauliyacu mine, which continues to have an inconsistent delivery schedule; partially offset by

ii.	$10.3 million increase relating to the Peñasquito mine having sold concentrate produced in prior periods during the nine months ended September 30, 2013 compared with stockpiling concentrate during the comparable period of the previous year;

iii.	$2.1 million increase relating to the San Dimas mine having sold doré produced in prior periods during the nine months ended September 30, 2013 as compared to stockpiling doré during the comparable period of the previous year; and

iv.

$12.2 million increase relating to Other mines, primarily attributable to the Zinkgruvan, Campo Morado and Neves-Corvo mines having sold concentrate produced in prior periods during the nine months ended September 30, 2013 compared with stockpiling concentrate in the comparable period of the previous year; and

•	$100.4 million decrease due to a reduction in the operating margin per ounce, due primarily to a 21% decrease in the average realized selling price per silver equivalent ounce sold; and

•	$24.9 million decrease as a result of an increase in corporate costs, as explained in the Corporate Costs section of this MD&A ($9.4 million decrease from a cash flow perspective).

Corporate Costs

	Three Months Ended September 30		Nine Months Ended September 30
(in thousands)	2013	2012	2013	2012
General and administrative	$ 9,390	$ 6,762	$ 28,159	$ 21,680
Foreign exchange loss (gain)	71	77	(115)	86
Interest expense	1,653	-	4,858	-
Other expense (income)	858	(1,646)	10,629	(2,152)
Income tax expense	1,613	513	7,556	6,611
Total corporate costs	$ 13,585	$ 5,706	$ 51,087	$ 26,225

SILVER WHEATON 2013 THIRD QUARTER REPORT [19]

General and Administrative

	Three Months Ended September 30		Nine Months Ended September 30
(in thousands)	2013	2012	2013	2012
Salaries and benefits
Salaries and benefits, excluding PSUs	$ 2,700	$ 2,280	$ 8,596	$ 6,511
PSUs	1,330	831	1,449	1,213
Total salaries and benefits	$ 4,030	$ 3,111	$ 10,045	$ 7,724
Depreciation	64	59	168	179
Charitable donations	1,068	29	2,629	1,207
Professional fees	267	336	3,288	2,140
Other	1,693	1,706	5,916	5,581
Cash settled general and administrative	$ 7,122	$ 5,241	$ 22,046	$ 16,831
Equity settled stock based compensation (a non-cash expense)	2,268	1,521	6,113	4,849
Total general and administrative	$ 9,390	$ 6,762	$ 28,159	$ 21,680

For the three and nine months ended September 30, 2013, general and administrative expense increased by $2.6 and $6.5 million, respectively, relative to the comparable periods in the previous year. This increase was primarily due to increased charitable donations, professional fees and salaries and benefits (including stock based compensation). The increase in salaries and benefits is primarily attributable to the increase in the number of employees from 25 as at September 30, 2012 to 29 as at September 30, 2013.

Other Expense (Income)

	Three Months Ended September 30		Nine Months Ended September 30
(in thousands)	2013	2012	2013	2012
Dividend income	$ (57)	$ (23)	$ (170)	$ (57)
Interest income	(7)	(344)	(188)	(984)
Stand-by fees	890	214	3,694	683
(Gain) loss on long-term investments - share purchase warrants held	-	(1,539)	2,694	(1,937)
Credit facility origination fees re Bridge Facility	-	-	4,490	-
Other	32	46	109	143
Total other expense (income)	$ 858	$ (1,646)	$ 10,629	$ (2,152)

During the three months ended September 30, 2013, other expense was $0.9 million (nine months - $10.6 million) as compared to other income of $1.6 million (nine months – $2.2 million) during the comparable period of the previous year. This change during the nine month period was primarily the result of:

·	a $2.7 million unrealized loss related to the fair value adjustment in warrants held during the current period as compared to a $1.9 million unrealized gain during the comparable period of the previous year; and

a $4.5 million credit facility origination fee related to the Company’s Bridge Facility. As further explained in Note 10 to the financial statements, on February 28, 2013, the Company entered into two new unsecured credit facilities, comprised of (i) a $1 billion revolving credit facility having a 5 year term; and (ii) a $1.5 billion bridge financing facility having a 1 year term (the “Bridge Facility”). The Company paid upfront costs of $11.7 million in connection with these new facilities which have been recorded under Other assets and which are being amortized over the life of the respective credit facilities. On May 28, 2013, the Bridge Facility was terminated, with the remaining unamortized upfront costs of $4.5 million associated with this credit facility being fully expensed on that date.

SILVER WHEATON 2013 THIRD QUARTER REPORT [20]

Stand-by fees in the amount of $3.7 million during the current period as compared to $0.7 during the comparable period of the previous year, with the increase being primarily attributable to the Company replacing its pre-existing $400 million revolving credit facility with the new $1 billion revolving credit facility on February 28, 2013 (see above).

Interest Costs

During the three months ended September 30, 2013, the Company incurred interest costs of $4.8 million at an effective interest rate of 1.72% (nine months - $13.6 million at an effective interest rate of 2.18%), of which $3.2 million (nine months - $8.7 million) has been capitalized in relation to the Barrick and Constancia silver interests, with the remainder being expensed. During the three months ended September 30, 2012, the Company incurred interest costs of $2.4 million (nine months - $7.3 million), comprised of $0.1 million on bank debt at an effective interest rate of 1.12% (nine months - $0.6 million at an effective interest rate of 1.13%), and $2.3 million (nine months - $6.7 million) of accreted interest on the future payments due in relation to the Barrick silver interest. All of the interest costs incurred during the three and nine months ended September 30, 2012 were capitalized in relation to the Barrick silver interest.

Income Tax Expense

	Three Months Ended September 30		Nine Months Ended September 30
(in thousands)	2013	2012	2013	2012
Current income tax expense related to foreign jurisdictions	$ 40	$ 152	$ 114	$ 684
Deferred income tax expense related to:
Origination and reversal of temporary differences ¹	$ 1,585	$ 2,852	$ 5,336	$ 5,214
Write down (reversal of write down) of previously recognized temporary differences	(12)	(2,491)	2,106	713
	$ 1,573	$ 361	$ 7,442	$ 5,927
Total income tax expense	$ 1,613	$ 513	$ 7,556	$ 6,611

1)	Primarily related to income from Canadian operations.

For the three and nine months ended September 30, 2013, income tax expense increased by $1.1 and $0.9 million, respectively, relative to the comparable periods in the previous year. Income tax expense is, for the most part, comprised of the change in deferred income tax assets recognized, which is primarily affected by the change in unrealized gains in long-term investments in common shares held, and the change in deferred income tax expense associated with income from Canadian operations.

SILVER WHEATON 2013 THIRD QUARTER REPORT [21]

Non-IFRS Measures

Silver Wheaton has included, throughout this document, certain non-IFRS performance measures, including (i) operating cash flow per share (basic and diluted); (ii) average cash costs of silver and gold on a per ounce basis; and (iii) cash operating margin.

Operating cash flow per share (basic and diluted) is calculated by dividing cash generated by operating activities by the weighted average number of shares outstanding (basic and diluted). The Company presents operating cash flow per share as management and certain investors use this information to evaluate the Company’s performance in comparison to other companies in the precious metals mining industry who present results on a similar basis.

The following table provides a reconciliation of operating cash flow per share (basic and diluted).

	Three Months Ended September 30					Nine Months Ended September 30
(in thousands, except for per share amounts)		2013		2012			2013		2012
Cash generated by operating activities		$	118,672	$	128,651		$	409,542	$	465,378
Divided by:
Basic weighted average number of shares outstanding			355,707		353,927			354,981		353,730
Diluted weighted average number of shares outstanding			356,557		355,928			356,239		355,811
Equals:
Operating cash flow per share - basic		$	0.33	$	0.36		$	1.15	$	1.32
Operating cash flow per share - diluted		$	0.33	$	0.36		$	1.15	$	1.31

SILVER WHEATON 2013 THIRD QUARTER REPORT [22]

ii.

Average cash cost of silver and gold on a per ounce basis is calculated by dividing the total cost of sales, less depletion, by the ounces sold. In the precious metals mining industry, this is a common performance measure but does not have any standardized meaning. In addition to conventional measures prepared in accordance with IFRS, management and certain investors use this information to evaluate the Company’s performance and ability to generate cash flow.

The following table provides a reconciliation of average cash cost of silver and gold on a per ounce basis.

	Three Months Ended September 30					Nine Months Ended September 30
(in thousands, except for gold ounces sold and per ounce amounts)		2013		2012			2013		2012
Cost of sales		$	75,763	$	35,870		$	206,374	$	127,802
Less: depletion			(38,756)		(14,464)			(104,460)		(53,261)
Cash cost of sales		$	37,007	$	21,406		$	101,914	$	74,541
Cash cost of sales is comprised of:
Total cash cost of silver sold		$	23,391	$	19,314		$	68,933	$	70,562
Total cash cost of gold sold			13,616		2,092			32,981		3,979
Total cash cost of sales		$	37,007	$	21,406		$	101,914	$	74,541
Divided by:
Total silver ounces sold			5,665		4,786			16,759		17,503
Total gold ounces sold			35,283		6,905			86,095