Silver Wheaton Corp.
TSX : SLW
AMEX : SLW

Silver Wheaton Corp.

July 26, 2005 17:20 ET

Silver Wheaton Reports Record Second Quarter Net Earnings of US$6.7 Million

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - July 26, 2005) - Silver Wheaton Corp. (TSX:SLW)(AMEX:SLW) is pleased to report second quarter results, as follows:

HIGHLIGHTS

- Record net earnings of $6.7 million ($0.04 per share) from the sale of 2.7 million ounces of silver.

- Record operating cash flows of $9.3 million ($0.06 per share).

- Cash and cash equivalents at June 30, 2005 of $33.3 million.

- The Company's shares began trading on the American Stock Exchange.

- The Company is debt free, unhedged and seeking further acquisitions.

"The Company had a spectacular second quarter," said Eduardo Luna, Chairman and CEO. "We expect to sell 10 million ounces in 2005 and we are following an aggressive growth strategy for the Company, which is the only pure silver mining company in the market."

A conference call will be held Wednesday, July 27, 2005 at 11:00 am (ET) to discuss these results. You may join the call by dialing toll free 1-888-789-0150 or (416) 695-5261 for calls from outside of Canada and the US.

The conference call will be recorded and you can listen to a playback of the call after the event by dialing 1-888-509-0082 or (416) 695-5275. A live and archived audio webcast will be available on the website at www.silverwheaton.com.

Silver Wheaton is the only mining company with 100% of its revenue from silver production. Silver Wheaton is debt-free, unhedged and well positioned for further growth.

CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS

Safe Harbour Statement under the United States Private Securities Litigation Reform Act of 1995: Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including but not limited to those with respect to the price of silver, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, reserve determination and reserve conversion rates involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Silver Wheaton to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks related to the integration of acquisitions, the absence of control over mining operations from which Silver Wheaton purchases silver and risks related to these mining operations, including risks related to international operations, actual results of current exploration activities, actual results of current reclamation activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, as well as those factors discussed in the section entitled "Description of the Business-Risk Factors" in Silver Wheaton's Annual Information Form for the year ended December 31, 2004 incorporated by reference into Silver Wheaton's Form 40-F on file with the U.S. Securities and Exchange Commission in Washington, D.C. Although Silver Wheaton has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED RESOURCES

This news release uses the terms "Measured", "Indicated" and "Inferred" Resources. U.S. investors are advised that while such terms are recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize them. "Inferred Resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that all or any part of Measured or Indicated Resources will ever be converted into reserves. U.S. investors are also cautioned not to assume that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable.

SILVER WHEATON CORP.

Second Quarter Report

June 30, 2005

Management's Discussion and Analysis of Operations and Financial Condition

Six Months Ended June 30, 2005

This Management's Discussion and Analysis should be read in conjunction with the Company's unaudited consolidated financial statements for the six months ended June 30, 2005 and related notes thereto which have been prepared in accordance with Canadian generally accepted accounting principles. In addition, the following should be read in conjunction with the 2004 audited consolidated financial statements, the related annual Management's Discussion and Analysis, and the Annual Information Form/40F on file with the Canadian provincial securities regulatory authorities and the US Securities and Exchange Commission. All figures are in United States dollars unless otherwise noted. This Management's Discussion and Analysis has been prepared as of July 26, 2005.

SECOND QUARTER HIGHLIGHTS

- Record net earnings of $6.7 million ($0.04 per share) from the sale of 2.7 million ounces of silver.

- Record operating cash flows of $9.3 million.

- Cash and cash equivalents at June 30, 2005 of $33.3 million.

- The Company's shares began trading on the American Stock Exchange.

- The Company is debt free, unhedged and seeking further acquisitions.

OVERVIEW

Silver Wheaton Corp. ("Silver Wheaton" or the "Company") is a growth-oriented silver company, and is the only mining company with 100% of its revenue from silver production. The Company's goal is to be recognized as the largest, most profitable and best managed pure silver company in the world.

During the four months ended December 31, 2004, Silver Wheaton acquired the rights to purchase all of the silver produced by Goldcorp Inc.'s ("Goldcorp", formerly Wheaton River) Luismin mines in Mexico, and by Lundin Mining's Zinkgruvan mine in Sweden (the "Luismin Transaction" and the "Zinkgruvan Transaction", respectively).

Both mines are low-cost producers and are expected to have remaining lives of over 20 years. The Company is actively pursuing further growth opportunities either by way of entering into long-term silver purchase contracts, or by acquiring silver exploration, development or production assets.

During 2004, the year end of the Company was changed from August 31 to December 31. The current fiscal period ended June 30, 2005 includes the results of operations for the six month period then ended. Comparative figures are for the six month period ended May 31, 2004.



SUMMARIZED FINANCIAL RESULTS

--------------------------------------------------------------------
June 30 March 31 December 31 August 31
2005 2005 2004 2004
(3 Months) (3 Months) (4 Months) (3 Months)
--------------------------------------------------------------------

Silver sales ($000's) $ 19,263 $ 16,077 $ 10,986 $ -
Ounces (000's) 2,668 2,323 1,505 -
Average realized
silver price ($'s
per ounce) $ 7.22 $ 6.92 $ 7.30 $ -
Total cash cost ($'s
per ounce) $ 3.90 $ 3.90 $ 3.90 $ -

Net earnings (loss)
($000's) $ 6,722 $ 5,182 $ 1,765 $ (16)

Basic and diluted
earnings (loss) per
share $ 0.04 $ 0.03 $ 0.02 $ (0.01)

Cash flow from
operations ($000's) $ 9,265 $ 5,150 $ 8,356 $ (56)

Cash and cash
equivalents ($000's) $ 33,279 $ 24,014 $ 19,989 $ 320

Total assets ($000's) $ 167,056 $ 160,355 $ 156,988 $ 53,491

Shareholders' equity
($000's) $ 166,470 $ 159,653 $ 154,431 $ 50,171


--------------------------------------------------------------------
May 31 February 29 November 30 August 31
2004 2004 2003 2003
(3 Months) (3 Months) (3 Months) (3 Months)
--------------------------------------------------------------------

Silver sales ($000's) $ - $ - $ - $ -
Ounces (000's) - - - -
Average realized
silver price ($'s
per ounce) $ - $ - $ - $ -
Total cash cost ($'s
per ounce) $ - $ - $ - $ -

Net earnings (loss)
($000's) $ (20) $ (152) $ 36 $ 26

Basic and diluted
earnings (loss) per
share $ (0.01) $ (0.09) $ 0.02 $ 0.02

Cash flow from
operations ($000's) $ (19) $ 8 $ (1) $ (67)

Cash and cash
equivalents ($000's) $ 324 $ 343 $ 82 $ 92

Total assets ($000's) $ 325 $ 343 $ 574 $ 543

Shareholders' equity
($000's) $ 320 $ 330 $ 482 $ 446


RESULTS OF OPERATIONS AND OPERATIONAL REVIEW

---------------------------------------------------------------------
Three Months Ended June 30, 2005
Luismin Zinkgruvan Corporate Total
---------------------------------------------------------------------

Silver sales ($000's) $ 14,970 $ 4,293 $ - $ 19,263
Ounces (000's) 2,088 580 - 2,668
Average realized silver
price ($'s per ounce) $ 7.17 $ 7.40 $ - $ 7.22
Total cash cost ($'s
per ounce) $ 3.90 $ 3.90 $ - $ 3.90

Net earnings (loss)
($000's) $ 6,034 $ 1,088 $ (400) $ 6,722


---------------------------------------------------------------------
Six Months Ended June 30, 2005
Luismin Zinkgruvan Corporate Total
---------------------------------------------------------------------

Silver sales ($000's) $ 28,654 $ 6,686 $ - $ 35,340
Ounces (000's) 4,062 929 - 4,991
Average realized silver
price ($'s per ounce) $ 7.05 $ 7.19 $ - $ 7.08
Total cash cost ($'s
per ounce) $ 3.90 $ 3.90 $ - $ 3.90

Net earnings (loss)
($000's) $ 11,304 $ 1,490 $ (890) $ 11,904


The Company has three business segments, the Luismin contract, the Zinkgruvan contract and corporate operations.

Luismin

On October 15, 2004, a 100% subsidiary of the Company, Silver Wheaton (Caymans) Corp. ("SW Caymans"), entered into an agreement to purchase all of the silver produced by Goldcorp's Luismin mining operations in Mexico. During the three months ended June 30, 2005, SW Caymans purchased 2,088,000 ounces (six months ended June 30, 2005 - 4,062,000 ounces) of silver under the contract at a total cash cost of $3.90 per ounce, and sold it for an average price of $7.17 per ounce (six months - $7.05 per ounce). The Company's cash flows and net earnings under the Luismin silver contract for the three months ended June 30, 2005 were $6,829,000 (six months - $12,646,000) and $6,034,000 (six months - $11,304,000), respectively.

As at December 31, 2004, Luismin had proven and probable silver reserves of 40.3 million ounces and inferred silver resources of 145.6 million ounces. Luismin has historically converted resources into reserves at a rate of 90%, which would result in a remaining mine life of over 20 years.

The results of the Luismin mine operations for the three months ended June 30, 2005 are shown below:



2005 2004
Q2 Q1 Q4 Q3 Q2
--------------------------------------------------------------------

Ore milled
(tonnes) 218,700 199,000 199,900 187,800 192,600

Grade (grams/
tonne)
- Gold 6.23 6.59 5.35 5.95 5.61
- Silver 310.35 334.63 280.28 326.23 302.17

Recovery (%)
- Gold 95% 95% 94% 95% 95%
- Silver 91% 88% 88% 91% 89%

Production
(ounces)
- Gold 41,800 40,000 32,300 34,200 33,300
- Silver 1,974,400 1,894,000 1,586,900 1,798,700 1,664,400

Sales (ounces)
- Gold 44,000 38,300 32,800 33,400 33,500
- Silver 2,088,000 1,974,400 1,615,100 1,792,000 1,654,500


Zinkgruvan

On December 8, 2004, SW Caymans entered into an agreement to purchase all of the silver produced by Lundin Mining's Zinkgruvan mining operations in Sweden ("Zinkgruvan"). During the three months ended June 30, 2005, SW Caymans purchased 476,200 ounces (six months ended June 30, 2005 - 807,000 ounces) of silver under the contract at a cash cost of $3.90 per ounce, and sold 580,400 ounces (six months - 929,400 ounces) for an average price of $7.40 per ounce (six months - $7.19 per ounce). The Company's cash flows and net earnings under the Zinkgruvan silver contract for the period were $1,624,000 (six months - $2,113,000) and $1,088,000 (six months - $1,490,000), respectively.

As at December 31, 2004, Zinkgruvan had proven and probable silver reserves of 28.7 million ounces, measured and indicated resources of 8.1 million ounces and inferred silver resources of 27.5 million ounces. The Zinkgruvan mine is expected to produce approximately 2 million ounces of silver annually for a minimum of 20 years, and is one of the lowest cost zinc mines in the world. The mine is located in south-central Sweden and has been in production on a continuous basis since 1857.



Corporate

---------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 May 31 June 30 May 31
(in thousands) 2005 2004 2005 2004
---------------------------------------------------------------------

General and administrative $ 508 $ 21 $ 923 $ 41

Share purchase options 38 - 78 -

Project evaluation 54 - 62 -

Interest income (183) - (259) -

Foreign exchange (gain) loss (17) - 86 -
----------------- ------------------

Corporate net loss $ 400 $ 21 $ 890 $ 41
----------------- ------------------
----------------- ------------------


General and administrative expenses totalled $508,000 for the three months ended June 30, 2005 (six months ended June 30, 2005 - $923,000), including $107,700 (six months - $266,800) paid to Goldcorp for management and administrative services at cost. Also included in general and administrative expenses were professional service fees, including legal, accounting and audit fees, totalling $162,000 (six months - $289,600), and investor relations and regulatory fees of $95,000 (six months - $146,000).

Increased interest income of $183,000 for the three months ended June 30, 2005 was the result of increased cash balances held in short-term money market instruments.

Prior period expenses relate to managing Dial, the Company's former subsidiary, which was sold on February 25, 2004.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2005 the Company had cash and cash equivalents of $33.3 million (December 31, 2004 - $20.0 million) and working capital of $33.3 million (December 31, 2004 - $18.1 million).

In the opinion of management, the working capital at June 30, 2005, together with cash flows from operations, are sufficient to support the Company's normal operating requirements on an ongoing basis. During the three and six month periods ending June 30, 2005 the Company generated operating cash flows of $9.3 million and $14.4 million respectively.

No share purchase options were exercised during the three months ended June 30, 2005. As of July 26, 2005, there were 167,052,500 outstanding common shares, 6,575,000 share purchase options and 157,912,500 share purchase warrants, which each give the holder the right to purchase 0.20 of one of the Company's common shares.

Contractual obligations

In connection with the Luismin and Zinkgruvan Transactions, the Company has committed to purchase 100% of the silver produced by each mine for a per-ounce cash payment of the lesser of $3.90 and the then prevailing market price, subject to adjustment. This inflationary adjustment which will begin in 2007, is intended to reflect the effects of inflation on operating costs, and is subject to a minimum of 0.4% and a maximum of 1.65% per annum. Under the Luismin agreement, Silver Wheaton will be obligated to pay 50% of any capital expenditure required to be made by Luismin at its mining operations in excess of 110% of the projected capital expenditures outlined in the contract, however, these costs will be reimbursed during periods where actual capital expenditures fall below 90% of projected capital expenditures.

Related party transactions

At June 30, 2005, as a result of the Luismin Transaction, Goldcorp owned 64.7% of the Company's outstanding common shares. Between April 1 and June 30, 2005, the Company purchased 2,088,000 ounces (six months ended June 30, 2005 - 4,062,000 ounces) of silver from a subsidiary of Goldcorp at a price of $3.90 per ounce for total consideration of approximately $8.1 million (six months - $15.8 million).

The Company has an agreement with Goldcorp whereby Goldcorp provides management and administrative services at cost. During the three months ended June 30, 2005, total management fees paid to Goldcorp were $107,700 (six months - $266,800). This agreement allows for cancellation with 30 days notice at any time.

In addition, during the three months ended June 30, 2005, payments made by Goldcorp on the Company's behalf totalled approximately $120,700 (six months - $158,800). At June 30, 2005, the Company owed Goldcorp $31,500.

OUTLOOK

The Company expects to sell approximately 10.0 million and 10.5 million ounces of silver in 2005 and 2006 respectively, at a cash cost of $3.90 per ounce.

The Company is actively pursuing further growth opportunities, either by way of entering into long-term silver purchase contracts, or by acquiring silver exploration, development or production assets.

Additional information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com.

This Management's Discussion & Analysis contains certain forward-looking statements. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed in Company documents filed from time to time with the Toronto Stock Exchange and other regulatory authorities.



Consolidated Statements of Operations
(US dollars and shares in thousands, except per share amounts
- Unaudited)

Three Months Ended Six Months Ended
June 30 May 31 June 30 May 31
Note 2005 2004 2005 2004
--------------------- ---------------------

Silver sales $ 19,263 $ - $ 35,340 $ -
--------------------- ---------------------

Cost of sales 10,405 - 19,466 -
Depreciation and
amortization 1,736 - 3,080 -
--------------------- ---------------------
12,141 - 22,546 -
--------------------- ---------------------

Earnings from
operations 7,122 - 12,794 -
--------------------- ---------------------

Expenses and other
income
General and
administrative 508 21 923 41
Share purchase
options 5 38 - 78 -
Project evaluation 54 - 62 -
Interest income (183) - (259) -
Foreign exchange
(gain) loss (17) - 86 -
--------------------- ---------------------

400 21 890 41
--------------------- ---------------------

Earnings (loss)
before
discontinued
operations 6,722 (21) 11,904 (41)

Loss from
discontinued
operations - - - (100)
--------------------- ---------------------

Net earnings (loss) $ 6,722 $ (21) $ 11,904 $ (141)
--------------------- ---------------------
--------------------- ---------------------


Basic and diluted
earnings (loss)
per share from
continuing
operations $ 0.04 $ (0.01) $ 0.07 $ (0.02)

Basic and diluted
earnings (loss)
per share from
discontinued
operations $ 0.00 $ 0.00 $ 0.00 $ (0.06)

Basic and diluted
earnings (loss)
per share $ 0.04 $ (0.01) $ 0.07 $ (0.08)

Weighted average
number of shares
outstanding
- basic 167,026 1,720 167,018 1,720

- diluted 167,899 1,720 167,862 1,720

The accompanying notes form an integral part of these consolidated
financial statements.


Consolidated Balance Sheets
(US dollars and shares in thousands - Unaudited)

June 30 December 31
Note 2005 2004
--------- -----------
Assets
Current
Cash and cash equivalents $ 33,279 $ 19,989
Accounts receivable 487 163
Silver inventory - 478
Other 71 49
--------- -----------

33,837 20,679

Other 45 -
Deferred project evaluation
costs - 55
Silver contracts 4 133,174 136,254
--------- -----------

$ 167,056 $ 156,988
--------- -----------
--------- -----------
Liabilities
Current
Accounts payable $ 549 $ 2,496
Accrued liabilities 37 61
--------- -----------

586 2,557
Shareholders' Equity
Share purchase options 5,124 5,046
Warrants 28,562 28,579
Share capital
Common shares
Authorized: unlimited
shares, no par value;
Issued and outstanding:
167,028 (December 31,
2004 - 167,010) 119,538 119,464
Retained earnings 13,246 1,342
--------- -----------

166,470 154,431
--------- -----------

$ 167,056 $ 156,988
--------- -----------
--------- -----------
Commitments (Note 8)

The accompanying notes form an integral part of these consolidated
financial statements.


Consolidated Statements of Shareholders' Equity
(US dollars and shares in thousands - Unaudited)

Common Shares Warrants

Shares Amount Warrants Amount
----------------------- -----------------------

At September
1, 2003 1,720 $ 718 - $ -
- -
Subscription
receipts - - - -
Share purchase
options
exercised 20 13 - -
Fair value of
share purchase
options issued - -
Net loss - - - -
----------------------- -----------------------

At August 31,
2004 1,740 731 - -
- -
Shares issued 165,200 125,481 - -
Share issue
costs - (6,790) - -
Share purchase
options
exercised 70 42 - -
Warrants
issued - - 158,000 28,579
Fair value of
share purchase
options issued - - - -
Net earnings - - - -
----------------------- -----------------------

At December
31, 2004 167,010 119,464 158,000 28,579

Fair value of
share purchase
options
issued - - - -
Warrants
exercised 18 74 (88) (17)
Net earnings - - - -
----------------------- -----------------------

At June 30,
2005 167,028 $ 119,538 157,912 $ 28,562
----------------------- -----------------------
----------------------- -----------------------


Share Retained
Purchase Subscription Earnings
Options Receipts (Deficit) Total
--------- ------------ --------- ------------

At September
1, 2003 $ - $ - $ (272) $ 446

Subscription
receipts - 49,855 - 49,855
Share purchase
options
exercised (2) - - 11
Fair value of
share purchase
options issued 10 - - 10
Net loss - - (151) (151)
--------- ------------ --------- ------------

At August 31,
2004 8 49,855 (423) 50,171

Shares issued - (49,855) - 75,626
Share issue
costs - - - (6,790)
Share purchase
options
exercised (8) - - 34
Warrants
issued - - - 28,579
Fair value of
share purchase
options issued 5,046 - - 5,046
Net earnings - - 1,765 1,765
--------- ------------ --------- ------------

At December
31, 2004 5,046 - 1,342 154,431

Fair value of
share purchase
options
issued 78 - - 78
Warrants
exercised - - - 57
Net earnings - - 11,904 11,904
--------- ------------ --------- ------------

At June 30,
2005 $ 5,124 $ - $ 13,246 $ 166,470
--------- ------------ --------- ------------
--------- ------------ --------- ------------

The accompanying notes form an integral part of these consolidated
financial statements.


Consolidated Statements of Cash Flows
(US dollars in thousands - Unaudited)

Three Months Ended Six Months Ended
June 30 May 31 June 30 May 31
Note 2005 2004 2005 2004
------------------ ------------------
Operating Activities
Net earnings (loss)
from continuing
operations $ 6,722 $ (21) $ 11,904 $ (41)
Items not
affecting cash
Depreciation and
amortization 1,736 - 3,080 -
Project evaluation
costs written off 54 - 54 -
Share purchase
options 5 38 10 78 10

Change in non-cash
working capital 6 703 (8) (713) 20
------------------ ------------------

Cash generated by
(applied to)
operating activities 9,253 (19) 14,403 (11)
------------------ ------------------

Financing Activities
Share issue costs - - (642) -
Warrants exercised 57 - 57 -
------------------ ------------------

Cash generated by
(applied to)
financing activities 57 - (585) -
------------------ ------------------

Investing Activities
Other (45) - (45) -
Silver contracts - - (483) -
------------------ ------------------

Cash applied to
investing activities (45) - (528) -
------------------ ------------------

Cash flows from
discontinued
operations
Sale of discontinued
operations - - - 247
------------------ ------------------

Increase (decrease)
in cash and cash
equivalents 9,265 (19) 13,290 236
Cash and cash
equivalents,
beginning of period 24,014 343 19,989 88
------------------ ------------------

Cash and cash
equivalents,
end of period $ 33,279 $ 324 $ 33,279 $ 324
------------------ ------------------

The Company paid no interest or income taxes for the six months ended
June 30, 2005 and May 31, 2004.

The accompanying notes form an integral part of these consolidated
financial statements.


Notes to the Consolidated Financial Statements
Six Months Ended June 30, 2005
(US dollars - Unaudited)


1. NATURE OF OPERATIONS

Silver Wheaton Corp. ("Silver Wheaton" or "the Company") is engaged in the silver mining business.

On October 15, 2004, the Company entered into an agreement to purchase all of the silver produced by Wheaton River Minerals Ltd's ("Wheaton River") Luismin mining operations in Mexico for a payment equal to the lesser of $3.90 or the prevailing market price per ounce of delivered silver, subject to adjustment (Note 3). On April 15, 2005, Wheaton River amalgamated with Goldcorp Inc. to form Goldcorp Inc. ("Goldcorp") and the silver purchase agreement with Silver Wheaton was assumed by Goldcorp.

In addition, on December 8, 2004, the Company entered into an agreement to purchase all of the silver produced by Lundin Mining Corporation's Zinkgruvan mine in Sweden for a payment equal to the lesser of $3.90 or the prevailing market price per ounce of delivered silver, subject to adjustment (Note 3).

The Company began trading on the TSX on October 22, 2004 and on the AMEX on July 6, 2005, under the symbol SLW. In December, 2004, the Company's name was changed from Chap Mercantile Inc to Silver Wheaton Corp. and the outstanding shares were consolidated on a 5 for 1 basis. The year end of the Company was changed from August 31 to December 31.

The Company is actively pursuing further growth opportunities, either by way of entering into long-term silver purchase contracts, or by acquiring silver exploration, development or production assets.

2. ACCOUNTING POLICIES

These unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") for interim financial information and they follow the same accounting policies and methods of application as the audited consolidated financial statements of the Company for the year ended December 31, 2004. These unaudited interim consolidated financial statements do not include all the information and note disclosure required by generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the most recent annual audited consolidated financial statements and the note below. There are no material differences between Canadian GAAP and accounting principles generally accepted in the United States ("US GAAP") that affect the Company's financial statements.

3. ACQUISITIONS

(a) Luismin silver contract

On October 15, 2004, the Company entered into an agreement to purchase all of the silver produced by Wheaton River's Luismin mining operations in Mexico, for an upfront payment of $36.7 million (Cdn$46.0 million) in cash and 108 million common shares (post-consolidation) of the Company. In addition, a per ounce cash payment of the lesser of $3.90 and the prevailing market price, subject to adjustment, is due (the "Luismin Transaction"). Under the agreement Luismin is required to deliver a minimum of 120 million ounces over the 25 year period following the contract date. If the actual amount of silver delivered is less than this minimum, a penalty of $0.50 per ounce of the shortfall is payable. In addition, under the agreement, Silver Wheaton will be obligated to pay 50% of any capital expenditure required to be made by Luismin at its mining operations in excess of 110% of the projected capital expenditures outlined in the contract, however, these costs will be reimbursed during periods where actual capital expenditures fall below 90% of projected capital expenditures.

If Silver Wheaton or Goldcorp acquires a direct or indirect interest in a precious metal exploration or development property situated anywhere in Mexico, which it does not currently own an interest in, and the property becomes the subject of a positive feasibility study or consists of active mining operations within a period of three years from the date of the contract, then the owner of the interest must offer the other party the opportunity to purchase and participate in the project so the resulting project ownership would be Goldcorp 51% / Silver Wheaton 49% and Goldcorp will be entitled to become operator of the project.

For a period of three years, Goldcorp, so long as it owns at least 20% of the outstanding shares of the Company, has the right to maintain its pro-rata interest in Silver Wheaton should Silver Wheaton issue any additional Silver Wheaton shares pursuant to an equity financing or otherwise.

Luismin operations are expected to produce approximately 8 million ounces of silver per annum for a minimum of 20 years. The allocation of the purchase price is summarized in the table below:



(in thousands)

Purchase Price
Cash $ 36,744
Shares 21,958
Acquisition costs 430
------------
$ 59,132
------------
------------


The Luismin Transaction resulted in the acquisition of control of Silver Wheaton by Goldcorp. As a result, the cost of the Luismin silver contract was recorded in Silver Wheaton's books at Goldcorp's book value, plus acquisition costs of $430,000.

(b) Zinkgruvan silver contract

On December 8, 2004, the Company entered into an agreement to purchase all of the silver produced by Lundin Mining Corporation's Zinkgruvan mine in Sweden for an upfront payment of $50 million in cash, 6 million Silver Wheaton common shares (post-consolidation) and 30 million Silver Wheaton common share purchase warrants. In addition, a per ounce cash payment of the lesser of $3.90 and the prevailing market price, subject to adjustment, is due (the "Zinkgruvan Transaction"). Under the agreement Zinkgruvan is required to deliver a minimum of 40 million ounces over the 25 year period following the contract date. If the actual amount of silver delivered is less than this minimum, a penalty of $1.00 per ounce of the shortfall is payable. In addition, under the Zinkgruvan agreement, the Company is not liable for any capital asset expenditures.

Each warrant grants the holder the right to purchase 0.20 of one of the Company's post-consolidation common shares. The Warrants have been recorded at their fair value, which has been determined using the Black-Scholes option pricing model assuming no dividends are to be paid, a weighted average volatility of the Company's share price of 40%, an annual risk free interest rate of 3.0% and expected lives of three years.

The Zinkgruvan mine is expected to produce approximately 2 million ounces of silver annually for a minimum of 20 years. The allocation of the purchase price is summarized in the table below:



(in thousands)

Purchase Price
Cash $ 50,000
Shares and warrants 27,866
Acquisition costs 53
------------
$ 77,919
------------
------------

4. SILVER CONTRACTS

June 30, 2005
Accumulated
(in thousands) Cost Depreciation Net
------------------------------------------

Luismin (Note 3a) $ 59,132 $ (2,095) $ 57,037
Zinkgruvan (Note 3b) 77,919 (1,782) 76,137
------------------------------------------
$ 137,051 $ (3,877) $ 133,174
------------------------------------------
------------------------------------------


December 31, 2004
Accumulated
(in thousands) Cost Depreciation Net
------------------------------------------

Luismin (Note 3a) $ 59,132 $ (586) $ 58,546
Zinkgruvan (Note 3b) 77,919 (211) 77,708
------------------------------------------
$ 137,051 $ (797) $ 136,254
------------------------------------------
------------------------------------------


5. SHARE PURCHASE OPTIONS

During the three months ended June 30, 2005, the Company granted 50,000 (six months - 100,000) share purchase options at an exercise price of Cdn$3.25 which expire on May 2, 2010. The share purchase option expense for the three and six month periods ended June 30, 2005 was determined using an option pricing model assuming no dividends are to be paid, a weighted average volatility of the Company's share price of 40%, an annual risk free interest rate of 3.0% and expected lives of three years. During the period, no options were exercised.

6. SUPPLEMENTAL CASH FLOW INFORMATION



Three Months Ended Six Months Ended
June 30 May 31 June 30 May 31
(in thousands) 2005 2004 2005 2004
-------------------- ---------------------
Change in non-cash
working capital
Accounts receivable $ 397 $ - $ (324) $ -
Silver inventory 406 - 478 -
Other 15 - (22) -
Accounts payable (57) (8) (821) 20
Accrued liabilities (58) - (24) -
-------------------- ---------------------

$ 703 $ (8) $ (713) $ 20
-------------------- ---------------------
-------------------- ---------------------


7. RELATED PARTY TRANSACTIONS

At June 30, 2005, as a result of the Luismin Transaction, Goldcorp owned 64.7% of the Company's outstanding common shares. Between April 1 and June 30, 2005, the Company purchased 2,088,000 ounces (six months ended June 30, 2005 - 4,062,000 ounces) of silver from a subsidiary of Goldcorp at a price of $3.90 per ounce for total consideration of approximately $8.1 million (six months - $15.8 million).

The Company has an agreement with Goldcorp whereby Goldcorp provides management and administrative services at cost. During the three months ended June 30, 2005, total management fees paid to Goldcorp were $107,700 (six months - $266,800). This agreement allows for cancellation with 30 days notice at any time.

In addition, during the three months ended June 30, 2005, payments made by Goldcorp on the Company's behalf totalled approximately $120,700 (six months - $158,800). At June 30, 2005, the Company owed Goldcorp $31,500.

8. COMMITMENTS

In connection with the Luismin and Zinkgruvan Transactions (Note 3), the Company has committed to purchase 100% of the silver produced by each mine for a per-ounce cash payment of the lesser of $3.90 and the then prevailing market price, subject to adjustment.

9. SEGMENTED INFORMATION

The Company's reportable operating segments are summarized in the table below. This information has been segmented on a silver contract basis. Prior to the Luismin Transaction on October 15, 2004, the Company operated in one business segment, which was discontinued. As a result, similar figures are not applicable for prior periods.



Three Months Ended June 30, 2005
--------------------------------------------------
(in thousands) Luismin Zinkgruvan Corporate Consolidated
---------- ---------- --------- ------------
Statements of
Operations

Sales $ 14,970 $ 4,293 $ - $ 19,263
---------- ---------- --------- ------------

Cost of sales 8,141 2,264 - 10,405
Depreciation 795 941 - 1,736
---------- ---------- --------- ------------

Earnings from
operations 6,034 1,088 - 7,122
---------- ---------- --------- ------------

Expenses and
other income
General and
administrative - - 508 508
Share purchase
options - - 38 38
Project
evaluation - - 54 54
Interest
income - - (183) (183)
Foreign
exchange gain - - (17) (17)
---------- ---------- --------- ------------

- - 400 400
---------- ---------- --------- ------------

Net earnings
(loss) $ 6,034 $ 1,088 $ (400) $ 6,722
---------- ---------- --------- ------------
---------- ---------- --------- ------------


Six Months Ended June 30, 2005
--------------------------------------------------
(in thousands) Luismin Zinkgruvan Corporate Consolidated
---------- ---------- --------- ------------
Statements of
Operations

Sales $ 28,654 $ 6,686 $ - $ 35,340
---------- ---------- --------- ------------

Cost of sales 15,841 3,625 - 19,466
Depreciation 1,509 1,571 - 3,080
---------- ---------- --------- ------------

Earnings from
operations 11,304 1,490 - 12,794
---------- ---------- --------- ------------

Expenses and
other income
General and
administrative - - 923 923
Share purchase
options - - 78 78
Project
evaluation - - 62 62
Interest
income - - (259) (259)
Foreign
exchange loss - - 86 86
---------- ---------- --------- ------------

- - 890 890
---------- ---------- --------- ------------

Net earnings
(loss) $ 11,304 $ 1,490 $ (890) $ 11,904
---------- ---------- --------- ------------
---------- ---------- --------- ------------


(in thousands) Luismin Zinkgruvan Corporate Consolidated
---------- ---------- --------- ------------

Total assets
(June 30,
2005) $ 57,037 $ 76,513 $ 33,506 $ 167,056

Total assets
(December 31,
2004) $ 58,546 $ 77,708 $ 20,734 $ 156,988



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