Silver Wheaton Corp.

Silver Wheaton Corp.

March 07, 2005 16:20 ET

Silver Wheaton Reports Strong Operating Results for 2004


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: SILVER WHEATON CORP.

TSX SYMBOL: SLW
TSX SYMBOL: SLW.WT

MARCH 7, 2005 - 16:20 ET

Silver Wheaton Reports Strong Operating Results for
2004

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 7, 2005) - Silver
Wheaton Corp. (TSX:SLW)(TSX:SLW.WT) is pleased to report operating cash
flows of US$8.4 million (US$0.09 per share) for the four months ended
December 31, 2004. Net earnings for the period were US$1.8 million
(US$0.02 per share).

HIGHLIGHTS

- In October, 2004, the Company acquired the right to purchase 100% of
the silver produced by Wheaton River's Luismin mining operations in
Mexico, which are expected to produce approximately 8 million ounces per
annum for over 20 years.

- In December, 2004, the Company acquired the right to purchase 100% of
the silver produced by Lundin Mining's Zinkgruvan mining operations in
Sweden, which are expected to produce approximately 2 million ounces per
annum for over 20 years.

- During the period, Silver Wheaton acquired 1,628,000 ounces of silver
from Luismin and Zinkgruvan at a cash cost of US$3.90 per ounce, and
sold 1,505,000 ounces at an average price of US$7.30 per ounce.

- Cash holdings at December 31, 2004 were $20.0 million and working
capital was $18.1 million.

- On October 22, 2004 the Company began trading on the TSX 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.

"These results demonstrate the earning power of Silver Wheaton, the only
pure-play silver company in the world", said Eduardo Luna, Chairman and
CEO. "Strong production by Luismin and Zinkgruvan, together with good
silver prices and an aggressive growth focus, should continue to enhance
shareholder value."

The Company is also pleased to announce that Randy V.J. Smallwood,
P.Eng. is joining as Vice President, Corporate Development. Mr.
Smallwood is currently Director, Project Development for Wheaton River
Minerals Ltd., where he has played an important role in identifying the
opportunities that have lead to the spectacular growth of Wheaton River.
With Silver Wheaton, Mr. Smallwood will shift his focus to quality
silver based opportunities for the continued growth of the Company.

Silver Wheaton is the only mining company with 100% of its revenue from
the sale of silver, and expects to sell approximately 10 million ounces
in 2005. Silver Wheaton is debt-free, unhedged and aggressively seeking
further growth.

A conference call will be held Tuesday, March 8 at 2:00 pm (ET) to
discuss these results. You may join the call by dialling toll free
1-877-888-3490 or (416) 695-9757 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 dialling 1-866-518-1010 or (416) 695-5275. A
live and archived audio webcast will be available on the website at
www.silverwheaton.com.

Cautionary Note Regarding Forward Looking Statements

Safe Harbor 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 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 achievement 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, risks related to international operations, risks related
to joint venture operations, the actual results of current exploration
activities, conclusions of economic evaluations and changes in project
parameters as plans continue to be refined as well as future prices of
silver, as well as those factors discussed in the section entitled "Risk
Factors" in Silver Wheaton's Filing Statement dated October 8, 2004 as
filed with the securities regulatory authorities in Canada via SEDAR.
Although Silver Wheaton has attempted to identify important factors that
could cause actual results to differ materially, 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.



SILVER WHEATON CORP.
Annual Report
Four Months Ended December 31, 2004

Management's Discussion and Analysis
of Results of Operations and Financial Condition
Four Months Ended December 31, 2004 and Years Ended
August 31, 2004 and 2003


The following should be read in conjunction with the Company's
consolidated financial statements for the four months ended December 31,
2004 and related notes thereto which have been prepared in accordance
with Canadian generally accepted accounting principles. All figures are
in United States dollars unless otherwise noted.

HIGHLIGHTS

- In October, 2004, the Company acquired the right to purchase 100% of
the silver produced by Wheaton River's Luismin mining operations in
Mexico, which is expected to approximate 8 million ounces per annum for
over 20 years.

- In December, 2004, the Company acquired the right to purchase 100% of
the silver produced by Lundin Mining's Zinkgruvan mining operations in
Sweden, which is expected to approximate 2 million ounces per annum for
over 20 years.

- Net cash flow from operations of $8.4 million from the sale of 1.5
million ounces of silver.

- Net earnings of $1.8 million ($0.02 per share).

- Cash and cash equivalents at December 31, 2004 of $20.0 million and
working capital of $18.1 million.

- On October 22, 2004 the Company began trading on the TSX 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 Company is debt free, unhedged and seeking further acquisitions.

OVERVIEW

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

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

In connection with the acquisition of the Luismin and Zinkgruvan silver
contracts, the Company completed two equity financings during the period
for gross proceeds totalling $104.2 million (Cdn$130.7 million), of
which $86.7 million was paid to acquire the Luismin and Zinkgruvan
contracts.

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.



SUMMARIZED FINANCIAL RESULTS
--------------------------------------------------------------------
December 31 August 31 August 31 August 31
2004 2004 2003 2002
(4 Months)(12 Months) (12 Months)(12 Months)
----------- --------- --------- ---------
Silver sales ($000's) $ 10,986 $ - $ - $ -
Ounces (thousands) 1,505 - - $ -
Average realized silver
price ($'s per ounce)$ 7.30 $ - $ - $ -
Total cash cost
($'s per ounce) $ 3.90 $ - $ - $ -

Net earnings (loss) $ 1,765 $ (151) $ 59 $ (144)
($000's)

Basic and diluted earnings
(loss) per share $ 0.02 $ (0.09) $ 0.03 $ (0.08)

Cash flow from
operations ($000's) $ 8,356 $ (44) $ (15) $ (21)

Cash and cash
equivalents ($000's) $ 19,989 $ 320 $ 92

Total assets ($000's) $ 156,988 $ 53,491 $ 543

Shareholders'
equity ($000's) $ 154,431 $ 50,171 $ 446


RESULTS OF OPERATIONS AND OPERATIONAL REVIEW
--------------------------------------------------------------------
Luismin Zinkgruvan Corporate Total


Silver sales
($000's) $ 10,175 $ 811 $ - $ 10,986
Ounces (thousands) 1,387 118 - 1,505
Average realized
silver price
($'s per ounce) $ 7.34 $ 6.89 $ - $ 7.30
Total cash cost
($'s per ounce) $ 3.90 $ 3.90 $ - $ 3.90

Net earnings
(loss) ($000's) $ 4,179 $ 140 $ (2,554) $ 1,765


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 Wheaton River's Luismin mining operations
in Mexico. Between that date and December 31, 2004, SW Caymans purchased
1.387 million ounces of silver under the contract at a cash cost of
$3.90 per ounce, and sold it for an average price of $7.34 per ounce.
The Company's cash flows and net earnings under the Luismin silver
contract for the period were $4,765,000 and $4,179,000, 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.

As reported by Wheaton River, the results of the Luismin mine operations
for the three months ended December 31, 2004 are shown below:



Three Months
Ended
December 31
2004
------------

- Ore milled (tonnes) 199,900

- Grade (grams/tonne)
- Gold 5.35
- Silver 280.28

- Recovery (%)
- Gold 94%
- Silver 88%

- Production (ounces)
- Gold 32,300
- Silver 1,586,900
- Gold equivalent (Note 1) 58,900

- Sales (ounces)
- Gold 32,800
- Silver 1,615,100
- Gold equivalent (Note 1) 59,500

- TOTAL CASH COSTS ($'S PER GOLD EQUIVALENT OUNCE) $ 169

(1) Gold and silver are accounted for as co-products at the Luismin
mines. Silver sales are converted into gold sales using the ratio
of the average gold price to the average silver price for the
period. For the three months ended December 31, 2004 the
equivalency ratio was 62 ounces of silver equals one ounce
of gold sold.


Since October 15, 2004, all silver produced by Luismin, being 1,387,000
ounces, has been sold to Silver Wheaton Corp for $3.90 per ounce.

Total cash costs for the quarter were $169 per gold equivalent ounce due
primarily to continued high grade production at the San Dimas mine.
Significant exploration results have been achieved at San Dimas with
deep and on-strike extensions of the central block veins and new
discoveries, including the Itzel vein system and the Paula and Nancy
veins.

For 2005 a very intensive program of exploration and development will be
carried out throughout the recently discovered veins in San Dimas in
order to increase the conversion of resources into reserves.

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"). Between that date and December 31,
2004, SW Caymans purchased 240,500 ounces of silver under the contract
at a cash cost of $3.90 per ounce, and sold 117,800 ounces for an
average price of $6.89 per ounce. The earnings of SW Caymans are not
subject to income tax. The Company's cash flows and net earnings under
the Zinkgruvan silver contract for the period were $351,000 and
$140,000, respectively.

As at December 31, 2004, Zinkgruvan had proven and probable silver
reserves of 29.6 million ounces and measured, indicated, and inferred
silver resources of 37.1 million ounces. For the month ended December
31, 2004, Zinkgruvan mined ore with a silver head grade of 78 g / me ton
as a by-product. 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

December 31 August 31 August 31 August 31
2004 2004 2003 2002
(US dollars in thousands)(4 Months)(12 Months) (12 Months)(12 Months)
----------- --------- ---------- ----------
General and
administrative $ 381 $ 47 $ 22 $ 23

Share purchase options 5,046 10 - -

Project evaluation 69 - - -

Interest income (255) - - -

Foreign exchange gain (2,687) - - -

Other - (2) (5) (2)
----------- ---------- ---------- ---------

Corporate net loss $ 2,554 $ 55 $ 17 $ 21
----------- ---------- ---------- ---------
----------- ---------- ---------- ---------


General and administrative expenses totaled $381,000 for the four months
ended December 31, 2004, including $131,800 (Cdn$165,000) paid to
Wheaton River for management and administrative services at cost.

The non-cash share purchase options expense relates to a one-time grant
of share purchase options on October 15, 2004 upon successful completion
of the Cdn$70 million financing and the Luismin Transaction. This has
been estimated using the Black-Scholes option valuation method to
determine the fair value of the share purchase options granted.

Project evaluation expenses of $69,000 were incurred in pursuing
additional silver acquisition opportunities. Project evaluation expenses
will continue to be incurred for the foreseeable future.

During the four months ended December 31, 2004 a foreign exchange gain
of $2.687 million was realized. This gain arose due to the Company
holding a significant portion of its cash balances in Canadian dollars
while the Canadian dollar increased in value against the US dollar (the
Company's functional currency).

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

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2004 the Company had cash and cash equivalents of $20.0
million and working capital of $18.1 million.

In the opinion of management, the working capital at December 31, 2004,
together with cash flows from operations, are sufficient to support the
Company's normal operating requirements on an ongoing basis.

The Company acquired the Luismin silver contract for a 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 an inflationary adjustment after three years, is due. This
inflationary adjustment is intended to reflect the effects of inflation
on Luismin's operating costs, and is subject to a minimum of 0.4% and a
maximum of 1.65% per annum.

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. Any capital expenditures paid by Silver
Wheaton will be reimbursed by 50% of the amount by which 90% of the
projected capital expenditures as outlined in the contract exceed the
actual capital expenditures during the period.

If Silver Wheaton or Wheaton River 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 Wheaton River 51% /
Silver Wheaton 49% and Wheaton River will be entitled to become operator
of the project.

For a period of three years, Wheaton River, 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.

The Company acquired the Zinkgruvan silver contract for a payment of $50
million, 6 million Silver Wheaton common shares (post-consolidation) and
30 million Silver Wheaton common share purchase warrants. Each warrant
grants the holder the right to purchase 0.20 of one of the Company's
post-consolidation common shares. In addition, a per ounce cash payment
of the lesser of $3.90 and the prevailing market price, subject to an
inflationary adjustment after three years, is due. This inflationary
adjustment is intended to reflect the effects of inflation on
Zinkgruvan's operating costs, and is subject to a minimum of 0.4% and a
maximum of 1.65% per annum. 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.

A total of 70,000 share purchase options were exercised during the four
months ended December 31, 2004. As of February 25, 2005, there were
167,010,000 post-consolidation common shares of the Company issued and
outstanding. In addition, at the same date, the Company had 6,550,000
post-consolidation share purchase options outstanding under its share
option plan and 158,000,000 share purchase warrants outstanding. On
December 21, 2004, the Company's common shares were consolidated 5 for
1. The warrants were not consolidated, resulting in each warrant
granting the holder the right to purchase 0.20 of one of the Company's
post-consolidation common shares.

Discontinued Operations

Effective February 25, 2004, the Company sold its subsidiary, Dial, for
cash proceeds of Cdn$325,000 to a group that included former directors
and shareholders of the Company.

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.

Related party transactions

At December 31, 2004, as a result of the Luismin Transaction, Wheaton
River owned 64.7% of the Company's outstanding common shares. Between
October 15 and December 31, 2004, the Company purchased 1.39 million
ounces of silver from a subsidiary of Wheaton River at a price of $3.90
per ounce for total consideration of approximately $5.4 million.

During October, 2004, the Company entered into an agreement with Wheaton
River whereby Wheaton provides management and administrative services at
cost, which approximates $51,900 (Cdn$65,000) per month. To December 31,
2004, total management fees paid to Wheaton were $131,800 (Cdn$165,000).
This agreement allows for cancellation with 30 days notice at any time.

During the four months ended December 31, 2004, Wheaton River funded a
portion of the Company's expenses during its start-up phase. Payments
made by Wheaton River on the Company's behalf totalled approximately
$1.5 million during this period, of which approximately $1 million
remained owing to Wheaton River at December 31, 2004.

RISKS AND UNCERTAINTIES

The main risks that can affect the profitability of the Company include
changes in silver prices, currency fluctuations, government regulation,
silver supply, foreign operations and income taxes.

Silver prices

Profitability of the Company depends on silver prices. A $0.50 per ounce
change in the price of silver would impact 2005 net earnings by
approximately $5 million.

Silver prices are affected by numerous factors such as the sale or
purchase of silver by various central banks and financial institutions,
interest rates, exchange rates, inflation or deflation, fluctuations in
the value of the US dollar and foreign currencies, global and regional
supply and demand, and the political and economic conditions of major
silver producing countries throughout the world. This risk is mitigated
through the downside silver price protection provided for in the silver
contracts, whereby silver is purchased at the lower of $3.90 per ounce
or the market price.

Currency fluctuations

Exchange rate fluctuations may affect the costs that the Company incurs
in its operations. Silver is sold in US dollars and a portion of the
Company's costs are incurred in Canadian dollars. From time to time, the
Company transacts currency hedging to reduce the risk associated with
currency fluctuations. There is no assurance that its hedging strategies
will be successful. Currency hedging may require margin activities.
Sudden fluctuations in currencies could result in margin calls that
could have an adverse effect on the Company's financial position.

Government regulations

The mining, processing, development and mineral exploration activities
of the companies that Silver Wheaton purchases silver from are subject
to various laws governing prospecting, development, production, taxes,
labour standards and occupational health, mine safety, toxic substances,
land use, water use, land claims of local people and other matters. No
assurance can be given that new rules and regulations will not be
enacted or that existing rules and regulations will not be applied in a
manner which could result in production disturbances.

Silver supply

The Company has agreed to purchase all of the silver produced by the
Luismin and Zinkgruvan mines. Other than the security interests which
have been granted to Silver Wheaton, the Company has no contractual
rights relating to the operations of Luismin or Zinkgruvan nor does it
have any ownership interest in the mines. Other than the penalties
payable by Wheaton River and Zinkgruvan to Silver Wheaton if, at the end
of the Luismin or Zinkgruvan Guarantee Period, as applicable, the total
number of ounces of silver sold to Silver Wheaton is less than the
applicable Minimum Amount, the Company will not be entitled to any
compensation if Luismin or Zinkgruvan does not meet its forecasted
silver production targets in any specified period or if Luismin or
Zinkgruvan shut down or discontinue their mining operations in Mexico
and Sweden, respectively, on a temporary or permanent basis.

Foreign operations

Silver Wheaton purchases silver from companies that operate in Mexico
and Sweden, and as such the Company's operations are exposed to various
levels of political, economic and other risks and uncertainties. These
risks and uncertainties vary between the two countries and include, but
are not limited to, terrorism; hostage taking; military repression;
extreme fluctuations in currency exchange rates; high rates of
inflation; labour unrest; the risk of war or civil unrest; expropriation
and nationalization; renegotiation or nullification of existing
concessions, licenses, permits and contracts; illegal mining; changes in
taxation policies; restrictions on foreign exchange and repatriation;
and changing political conditions, currency controls and governmental
regulations that favour or require the awarding of contracts to local
contractors or require foreign contractors to employ citizens of, or
purchase supplies from, a particular jurisdiction.

Failure for these companies to comply strictly with applicable laws,
regulations and local practices relating to mineral right applications
and tenure, could result in loss, reduction or expropriation of
entitlements.

The occurrence of these various factors and uncertainties cannot be
accurately predicted and could have an adverse effect on the Company's
operations or profitability.

Income taxes

All of the Company's silver trading activities are performed by it's
wholly owned subsidiary Silver Wheaton (Caymans) Corp., which is not
subject to income taxes. Changes to taxations laws in either Canada or
the Cayman Islands, could result in some or all of the Company's profits
being subject to income tax. No assurance can be given that new taxation
rules will not be enacted or that existing rules will not be applied in
a manner which could result in the Company's profits being subject to
income tax.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities
and disclosure of contingent liabilities at the date of the financial
statements, and the reported amounts of revenues and expenditures during
the reporting period. Note 2 of the Company's consolidated financial
statements describes all of the significant accounting policies.

Silver contracts

Silver contracts are the most significant asset of the Company, with a
carrying value of $136,254,000 at December 31, 2004. This amount
represents the capitalized expenditures related to the acquisition of
the Luismin and Zinkgruvan silver purchase contracts. Luismin and
Zinkgruvan estimates the reserves and resources relating to each
contract to calculated the corresponding depreciation expense. These
assets are depreciated on a unit-of-sale basis over the estimated
recoverable reserves and resources at the mine corresponding to the
specific contract.

The Luismin Transaction resulted in the acquisition of control of Silver
Wheaton by Wheaton River. As a result, the cost of the Luismin silver
contract has been recorded in Silver Wheaton's books at Wheaton River's
book value.

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)
--------------------------------------------------------------------

Four Months Year Year Year
Ended Ended Ended Ended
December 31 August 31 August 31 August 31
Note 2004 2004 2003 2002
----------- --------- --------- ---------
Silver sales $ 10,986 $ - $ - $ -
----------- --------- --------- ---------

Cost of sales 5,870 - - -
Depreciation 797 - - -
----------- --------- --------- ---------
6,667 - - -
----------- --------- --------- ---------

Earnings from operations 4,319 - - -
----------- --------- --------- ---------

Expenses and other income
General and
administrative 381 47 22 23
Share purchase options 5(C) 5,046 10 - -
Project evaluation 69 - - -
Interest income (255) - - -
Foreign exchange gain (2,687) - - -
Other - (2) (5) (2)
----------- --------- --------- ---------

2,554 55 17 21
----------- --------- --------- ---------

Earnings (loss) before
discontinued operations 1,765 (55) (17) (21)

(Loss) earnings from
discontinued operations 11 - (96) 76 (123)
----------- --------- --------- ---------

Net earnings (loss) $ 1,765 $ (151) $ 59 $ (144)
----------- --------- --------- ---------
----------- --------- --------- ---------

Earnings (loss) per share
from continuing operations $ 0.02 $ (0.03) $ (0.01) $ (0.01)

Earnings (loss) per share from
discontinued operations $ 0.00 $ (0.06) $ 0.04 $ (0.07)

Basic and diluted earnings
(loss) per share $ 0.02 $ (0.09) $ 0.03 $ (0.08)

Weighted average number
of shares outstanding
- basic 96,606 1,723 1,720 1,720

- diluted 97,485 1,723 1,720 1,720

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


Consolidated Balance Sheets
(US dollars and shares in thousands)
--------------------------------------------------------------------
December 31 August 31 August 31
Note 2004 2004 2003
----------- ---------- ----------
Assets
Current
Cash and cash equivalents $ 19,989 $ 320 $ 92
Cash in escrow - 53,163 -
Accounts receivable 163 8 -
Silver inventory 478 - -
Other 49 - -
----------- ---------- ----------

20,679 53,491 92

Deferred project
evaluation costs 55 - -
Silver contracts 4 136,254 - -
Assets of discontinued
operations 11 - - 451
----------- ---------- ----------

$ 156,988 $ 53,491 $ 543
----------- ---------- ----------
----------- ---------- ----------
Liabilities
Current
Accounts payable and
accrued liabilities $ 2,557 $ 3,320 $ 5
Liabilities of
discontinued operations 11 - - 92

2,557 3,320 97
Shareholders' Equity
Share purchase options 5,046 8 -
Subscription receipts - 49,855 -
Warrants 5(b) 28,579 - -
Share capital
Common shares
Authorized: unlimited
shares, no par value;
Issued and outstanding:
167,010 (August 31,
2004 - 1,740 ; 2003
- 1,720) 5 119,464 731 718
Retained earnings
(deficit) 1,342 (423) (272)
----------- ---------- ----------

154,431 50,171 446
----------- ---------- ----------

$ 156,988 $ 53,491 $ 543
----------- ---------- ----------
----------- ---------- ----------

Commitments (Note 9)

Approved by the Board

Director

Director

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


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

Common Shares Warrants Share
Purchase
Shares Amount Warrants Amount Options
---------------- ---------------- ----------
At August 31, 2001 1,720 $ 718 - $ - $ -
Net loss - - - - -
---------------- ---------------- ----------

At August 31, 2002 1,720 718 - - -
Net earnings - - - - -
---------------- ---------------- ----------

At August 31, 2003 1,720 718 - - -

Subscription
receipts - - - - -
Share purchase
options exercised 20 13 - - (2)
Fair value of share
purchase options
issued - - 10
Net loss - - - - -
---------------- ---------------- ----------

At August 31, 2004 1,740 731 - - 8

Shares issued 165,200 125,481 - - -
Share issue costs - (6,790) - - -
Share purchase
options exercised 70 42 - - (8)
Warrants issued - - 158,000 28,579 -
Fair value of share
purchase options
issued - - - - 5,046
Net earnings - - - - -
---------------- ---------------- ----------

At December 31,
2004 167,010 $ 119,464 158,000 $28,579 $ 5,046
----------------- --------------- ----------
----------------- --------------- ----------

Shareholders' Equity (Note 5)


Retained
Subscription Earnings
Receipts (Deficit) Total
------------ -------- --------
At August 31, 2001 $ - $ (187) $ 531
Net loss - (144) (144)
------------ -------- --------

At August 31, 2002 - (331) 387
Net earnings - 59 59
------------ -------- --------

At August 31, 2003 - (272) 446

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

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

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

At December 31, 2004 $ - $ 1,342 $154,431
------------ -------- --------
------------ -------- --------

Shareholders' Equity (Note 5)

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


Consolidated Statements of Cash Flows
(US dollars in thousands)
--------------------------------------------------------------------
Four Months Year Year Year
Ended Ended Ended Ended
December 31 August 31 August 31 August 31
Note 2004 2004 2003 2002
----------- --------- --------- ---------
Operating Activities
Net earnings (loss)
from continuing
operations $ 1,765 $ (55) $ (17) $ (21)
Items not affecting cash
Depreciation 797 - - -
Share purchase options 5(C) 5,046 10 - -

Change in non-cash
working capital 6 748 1 2 -
----------- --------- --------- ---------

8,356 (44) (15) (21)
----------- --------- --------- ---------

Financing Activities
Shares issued 5 104,202 11 - -
Share issue costs (6,145) - - -
----------- --------- --------- ---------

98,057 11 - -
----------- --------- --------- ---------

Investing Activities
Silver contracts 3 (86,744) - - -
----------- --------- --------- ---------
----------- --------- --------- ---------

Cash flows from
discontinued operations
Sale of discontinued
operations 11 - 247 - -
Advances from discontinued
operations - 14 17 16
----------- --------- --------- ---------

- 261 17 16
----------- --------- --------- ---------

Increase (decrease) in cash
and cash equivalents 19,669 228 2 (5)
Cash and cash equivalents,
beginning of period 320 92 90 95
----------- --------- --------- ---------

Cash and cash equivalents,
end of period $ 19,989 $ 320 $ 92 $ 90
----------- --------- --------- ---------
----------- --------- --------- ---------

The Company paid no interest or income taxes for the four months
ended December 31, 2004, and the years ended August 31, 2004, 2003
and 2002.

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

Notes to the Consolidated Financial Statements
Four Months Ended December 31, 2004 and Years Ended August 31, 2004,
2003 and 2002
(US dollars)


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 US$3.90 or the prevailing market rate per ounce of delivered
silver, subject to adjustment (Note 3).

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 US$3.90
or the prevailing market rate per ounce of delivered silver, subject to
adjustment (Note 3).

On October 22, 2004 the Company began trading on the TSX 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 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

(a) Canadian generally accepted accounting principles

These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles ("GAAP"). 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.

(b) Principles of consolidation

The consolidated financial statements include the accounts of the
Company and its 100% owned subsidiary Silver Wheaton (Caymans) Corp. The
Company's former subsidiary, Dial Locksmith Ltd ("Dial"), was
consolidated to the date of disposal, February 25, 2004.

(C) Silver contracts

Contracts for which settlement is called for in silver are recorded at
cost. These assets are depreciated on a unit-of-sale basis over the
estimated recoverable reserves and resources at the mine corresponding
to the specific contract.

Evaluations of the carrying values of each contract are undertaken in
each reporting period to determine if estimated undiscounted future net
cash flows are less than the carrying value. Estimated undiscounted
future net cash flows are calculated using estimated production, sales
prices and purchase costs. If it is determined that the future net cash
flows from an operations are less than the carrying value then a
write-down is recorded with a charge to operations.

(d) Discontinued operations

The Company disposed of Dial effective February 25, 2004.

(e) Change in functional and reporting currency

Effective September 1, 2004, the functional currency of the Company was
changed from the Canadian to the United States dollar. This resulted
from a change in the nature of the business as all sales and the
majority of expenses occur in United States dollars. Concurrent with
this change in functional currency, the Company adopted the United
States dollar as its reporting currency. In accordance with Canadian
GAAP, the change was effected by translating assets and liabilities, at
the end of prior reporting periods, at the existing United States /
Canadian dollar foreign exchange spot rate, while earnings, losses and
shareholders' equity were translated at historic rates.

(f) Foreign currency translation

Foreign currency monetary assets and liabilities are translated into
United States dollars at the exchange rates prevailing at the balance
sheet date. Non-monetary assets denominated in foreign currencies are
translated using the rate of exchange at the transaction date. Foreign
currency transactions are translated at the United States dollar rate
prevailing on the transaction dates. Foreign exchange gains and losses
are included in the determination of earnings.

(g) Income taxes

The future income tax asset and liability method of accounting for
income taxes is used. As the Company's profit is derived from its
subsidiary, Silver Wheaton (Caymans) Corp., which is incorporated and
operated in the Cayman Islands, the Company's profits bear no tax.
Management views the subsidiary's profits as part of its permanent
investment in the subsidiary, and it has determined that those profits
will be reinvested in foreign jurisdictions for the foreseeable future,
therefore, no taxes have been recorded.

(h) Use of estimates

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Significant areas where management's
judgment is applied are asset valuations, depreciation, and income
taxes. Actual results could differ from those reported.

(i) Stock-based compensation

Effective September 1, 2003, the Company adopted the amended
recommendations of the CICA Handbook Section 3870, Stock-based
Compensation and Other Stock-based Payments. Under the amended standards
of this Section, the fair value of all stock-based awards granted are
estimated using the Black-Scholes model and are recorded in operations.
The compensation cost related to stock options granted to employees and
directors is recorded in the consolidated statements of operations.

The Company did not issue stock-based compensation prior to the year
ended August 31, 2003.

Stock-based compensation expense during the four months ended December
31, 2004, 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.



(j) Financial instruments

(i) Financial instruments

The Company's financial instruments consist of cash, accounts
receivable, and accounts payable. Unless otherwise noted, it
is management's opinion that the Company is not exposed to
significant interest, currency or credit risk arising from
these financial instruments.

(ii) Fair value

The carrying value of the company's financial instruments
approximates their fair value.


(k) Revenue recognition

Revenue from the sale of silver is recognized in the accounts when title
and risk passes to the buyer, collection is reasonably assured and the
price is reasonably determinable. Revenue from the sale of silver may be
subject to adjustment upon final settlement of estimated metal prices,
weights, and assays. Adjustments to revenue for metal prices are
recorded monthly and other adjustments are recorded on final settlement.

(l) Earnings per share

Earnings per share calculations are based on the weighted average number
of common shares and common share equivalents issued and outstanding
during the period. Diluted earnings per share are calculated using the
treasury method.

(m) Cash and cash equivalents

Cash and cash equivalents include cash, and those short-term money
market instruments that are readily convertible to cash with an original
term of less than 91 days.

(n) Silver inventory

Silver inventory is valued at the lower of average cost and net
realizable value.

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. Any capital expenditures paid by
Silver Wheaton will be reimbursed by 50% of the amount by which 90% of
the projected capital expenditures as outlined in the contract exceed
the actual capital expenditures during the period.

If Silver Wheaton or Wheaton River 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 Wheaton River 51% /
Silver Wheaton 49% and Wheaton River will be entitled to become operator
of the project.

For a period of three years, Wheaton River, 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 Wheaton River. As a result, the cost of the Luismin silver
contract has been recorded in Silver Wheaton's books at Wheaton River'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

Accumulated
(in thousands) Cost Depreciation Net
--------- ------------ ---------

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


5. SHAREHOLDERS' EQUITY

(a) Shares issued

A summary of the Company's issued and outstanding shares at
December 31, 2004, and August 31, 2004, 2003 and 2002, and
the changes for the periods ending on those dates is presented
below:

Number of Price
Shares (Cdn$)
----------- --------
At August 31, 2003 and 2002 1,720,000

Options Exercised 20,000 $ 0.75
-----------

At August 31, 2004 1,740,000

Shares issued to Wheaton in connection
with Luismin Transaction (Note 3(a)) 108,000,000 2.00
Private placement to finance
Luismin Transaction 35,000,000 2.00
Shares issued to Lundin in connection
with Zinkgruvan Transaction (Note 3(a)) 6,000,000 4.25
Private placement to finance
Zinkgruvan Transaction 16,200,000 3.75
Options exercised 70,000 0.75
-----------
At December 31, 2004 167,010,000
-----------
-----------


On August 5, 2004, in connection with the Luismin Transaction, the
Company raised gross proceeds of $53.2 million (Cdn$70 million) from a
private placement of 175 million subscription receipts at a price of
Cdn$0.40 per unit. On October 22, 2004, each of the subscription
receipts was automatically converted without payment of additional
consideration into 0.2 common shares (post-consolidation), and one-half
of one common share purchase warrant of the Company. Five common share
purchase warrants entitle the holder to purchase one common share
(post-consolidation) at a price of Cdn$4.00 per share for a period of
five years expiring August 5, 2009.

On November 30, 2004, in connection with the Zinkgruvan Transaction, the
Company raised gross proceeds of $51.0 million (Cdn$60.75 million) from
a private placement of 81 million subscription receipts at a price of
Cdn$0.75 per unit. Each subscription receipt is comprised of 0.2 Silver
Wheaton common shares (post-consolidation) and one-half of one Series
"A" common share purchase warrant of Silver Wheaton. Five Series "A"
warrants entitle the holder to purchase one Silver Wheaton common share
(post-consolidation) at a price of Cdn$5.50 until November 30, 2009.

On December 21, 2004 the Company's common shares were consolidated on a
5 for 1 basis, reducing the number of common shares outstanding at
December 31, 2004 to 167,010,000.

(b) Warrants

A summary of the Company's warrants at December 31, 2004 and August 31,
2004, 2003 and 2002 and the changes for the periods ending on those
dates is presented below:



Weighted
Warrants Avg Exercise
Outstanding Price (Cdn$)
----------- ------------
At August 31, 2004, 2003 and 2002 -
-----------
Issued in connection with
Luismin private placement 87,500,000 $ 0.80
Issued in connection with
Zinkgruvan private placement 40,500,000 1.10
Issued to Lundin Mining in
connection with Zinkgruvan Transaction 30,000,000 0.80
-----------
At December 31, 2004 158,000,000 $ 0.88
-----------
-----------


At issuance, each warrant granted the holder the right to purchase one
common share of the Company at the applicable exercise price. On
December 21, 2004, the company's common shares were consolidated 5 for
1. The warrants were not consolidated, resulting in each warrant
granting the holder the right to purchase 0.20 of one of the Company's
post-consolidation common shares.

Warrants issued during the four months ended December 31, 2004, have
been included in shareholders' equity at their fair value of
$28,579,000. Fair value 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 following table summarizes information about the warrants
outstanding at December 31, 2004:



Warrants Exercise Price
Expiry Date Outstanding (Cdn$)
----------- --------------

August 5, 2009 117,500,000 $ 0.80
November 30, 2009 40,500,000 1.10
----------- --------------
158,000,000 $ 0.88
----------- --------------
----------- --------------


(c) Share purchase options

The Company has established a share purchase option plan whereby the
Company's directors may from time to time grant options to directors,
employees or consultants. The maximum term of any option may be ten
years, but generally options are granted for five years or less. The
exercise price of an option is not less than the closing price on the
TSX on the last trading day preceding the grant date.

Stock-based compensation expense during the four months ended December
31, 2004, of $5,046,000 (August 31, 2004 - $10,000), 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.

On December 21, 2004 the Company's common shares were consolidated on a
5 for 1 basis, therefore, all of the option figures below are presented
on a consolidated basis. At December 31, 2004 there were 4,960,000
options available for grant under the plan.

A summary of the Company's options at December 31, 2004, August 31,
2004, 2003 and 2002 and the changes for the periods ending on those
dates is presented below:



Weighted
Average
Number of Exercise
Shares Price (Cdn$)
--------- -----------

At August 31, 2003 and 2002 - -
--------- -----------
Granted 90,000 $ 0.75
Exercised (20,000) 0.75
--------- -----------
At August 31, 2004 70,000 $ 0.75

Granted 6,500,000 3.26
Exercised (70,000) 0.75
--------- -----------
At December 31, 2004 6,500,000 $ 3.26
--------- -----------
--------- -----------


The following table summarizes information about the options
outstanding at December 31, 2004.

Weighted
Average
Options Remaining
Outstanding Contractual Life
----------- ----------------

Exercise Prices (Cdn$)
$3.25 6,460,000 4.6 years
$4.10 40,000 4.7 years
----------- ----------------
6,500,000 4.6 years
----------- ----------------
----------- ----------------


6. SUPPLEMENTAL CASH FLOW INFORMATION

December 31 August 31 August 31 August 31
(in thousands) Note 2004 2004 2003 2002
----------- --------- --------- ---------

Change in non-cash
working capital
Accounts receivable $ (155) $ (8) $ 1 $ (2)
Silver inventory (478) - - -
Accounts payable and
accrued liabilities 1,430 9 - (2)
Other (49) - 1 4
----------- --------- --------- ---------

$ 748 $ 1 $ 2 $ -
----------- --------- --------- ---------
----------- --------- --------- ---------


Non-cash financing
and investing activities
Shares issued in the
Luismin Transaction 3(a) $ 21,958 $ - $ - $ -
Shares issued in the
Zinkgruvan
Transaction 3(b) $ 27,866 $ - $ - $ -


7. RELATED PARTY TRANSACTIONS

At December 31, 2004, as a result of the Luismin Transaction (Note
3(a)), Wheaton River owned 64.7% of the Company's outstanding common
shares. Between October 15 and December 31, 2004, the Company purchased
1.39 million ounces of silver from a subsidiary of Wheaton River at a
price of $3.90 per ounce for total consideration of approximately $5.4
million.

During October, 2004, the Company entered into an agreement with Wheaton
River whereby Wheaton provides management and administrative services at
cost, which approximates $51,900 (Cdn$65,000) per month. To December 31,
2004, total management fees paid to Wheaton were $131,800 (Cdn$165,000).
This agreement allows for cancellation with 30 days notice at any time.

During the four months ended December 31, 2004, Wheaton River funded a
portion of the Company's expenses during its start-up phase. Payments
made by Wheaton River on the Company's behalf totalled approximately
$1.5 million during this period, of which approximately $1 million
remained owing to Wheaton River at December 31, 2004.

8. INCOME TAXES

The provision for income taxes differs from the amount that would be
obtained by applying the statutory income tax rate to consolidated
earnings before income taxes due to the following:



(in thousands) December 31 August 31 August 31 August 31
2004 2004 2003 2003
----------- --------- --------- ---------
Earnings (loss) from
continuing operations
before income taxes $ 1,765 $ (55) $ (17) $ (21)
Canadian federal and
provincial income
tax rates 35.6% 34.2% 37.6% 37.6%
----------- --------- --------- ---------
Income tax expense (recovery)
based on above rates 629 (19) (6) (8)
Tax effect of
non-deductible expenditures 1,797 3 - -
Lower effective tax rates on
earnings of foreign
subsidiary (2,426) - - -
Income tax losses carried
forward not recognized
for accounting purposes - 16 6 6
----------- --------- --------- ---------
Actual tax expense $ - $ - $ - $ -
----------- --------- --------- ---------
----------- --------- --------- ---------


The components of future income taxes are as follows:

(in thousands) December 31 August 31 August 31 August 31
2004 2004 2003 2002
----------- --------- --------- ---------

Non-capital losses $ 251 $ 30 $ 15 $ 10
Deductible temporary
differences 1,245 17 20 25
----------- --------- --------- ---------
1,496 47 35 35
Valuation allowance (1,496) (47) (35) (35)
----------- --------- --------- ---------
$ - $ - $ - $ -
----------- --------- --------- ---------
----------- --------- --------- ---------


Prior to the Luismin transaction, the Company operated primarily in
Canada and was subject to taxation at the applicable statutory rates.
Subsequent to the Luismin transaction, all of the Company's income
generating activities, including the sale of silver, are conducted by
its 100% owned subsidiary Silver Wheaton (Caymans) Corp. ("SW Caymans").
SW Caymans operates in the Cayman Islands and is subject to a statutory
tax rate of nil%. The Company does not have any plans to repatriate this
money to Canada. As a result, no future income tax assets or liabilities
have been recognized.

9. 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.

10. 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.



(in thousands) Luismin Zinkgruvan Corporate Consolidated
-------- ---------- --------- ------------
Statements of Operations

Sales $ 10,175 $ 811 $ - $ 10,986
-------- ---------- --------- ------------

Cost of sales 5,410 460 - 5,870
Depreciation 586 211 - 797
-------- ---------- --------- ------------

Earnings from operations 4,179 140 - 4,319
-------- ---------- --------- ------------

Expenses and other income
General and administrative - - 381 381
Share purchase options - - 5,046 5,046
Project investigation - - 69 69
Interest income - - (255) (255)
Foreign exchange
(gain) loss - - (2,687) (2,687)
-------- ---------- --------- ------------

- - 2,554 2,554
-------- ---------- --------- ------------

Net earnings (loss) $ 4,179 $ 140 $ (2,554) $ 1,765
-------- ---------- --------- ------------
-------- ---------- --------- ------------


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

Total assets $ 58,546 $ 77,708 $ 20,734 $ 156,988

Total liabilities $ 421 $ 938 $ 1,198 $ 2,557


11. DISCONTINUED OPERATIONS

Effective February 25, 2004, the Company sold its subsidiary, Dial, for
cash proceeds of Cdn$325,000 to a group that included former directors
and shareholders of the Company.

The operations of Dial have been accounted for as a discontinued
operation and, for reporting purposes, the results of operations,
financial position and cash flows have been segregated from those of
continuing operations for the current and prior periods. The Company has
included in the results of discontinued operations the loss on the sale
of Dial and the earnings from discontinued operations from the
measurement date to the disposal date. At December 31 and August 31,
2004 the Company did not have any assets or liabilities pertaining to
discontinued operations.



Financial results of discontinued operation:

(in thousands) December 31 August 31 August 31 August 31
2004 2004 2003 2002
----------- --------- --------- ---------
Sales $ - $ 453 $ 763 $ 666
----------- --------- --------- ---------

Earnings (loss) - 62 76 (123)
Loss on disposal of
Dial (net of income
tax of $nil) - (158) - -
----------- --------- --------- ---------
(Loss) earnings from
discontinued
operations $ - $ (96) $ 76 $ (123)
----------- --------- --------- ---------
----------- --------- --------- ---------


Cash flows from discontinued operations for the year ended August 31,
2004 consist of proceeds from the sale of Dial in the amount of
Cdn$325,000 (approximately $247,000 US dollars) and advances from Dial
to the Company in the amount of $14,000 (2003 - $17,000).

12. DIFFERENCES IN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES BETWEEN
CANADA AND THE UNITED STATES

These financial statements are prepared in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). 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.

Recently released accounting standards

In November 2004, the FASB issued SFAS No. 151, Inventory Costs an
amendment of ARB No. 43, Chapter 4, which amends Chapter 4 of ARB No. 43
that deals with inventory pricing. The Statement clarifies the
accounting for abnormal amounts of idle facility expenses, freight,
handling costs, and spoilage. Under previous guidance, paragraph 5 of
ARB No. 43, chapter 4, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs might be considered to be
so abnormal, under certain circumstances, as to require treatment as
current period charges. This Statement eliminates the criterion of "so
abnormal" and requires that those items be recognized as current period
charges. Also, this Statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal
capacity of the production facilities. This Statement is effective for
inventory costs incurred during fiscal years beginning after June 15,
2005, although earlier application is permitted for fiscal years
beginning after the date of issuance of this Statement. Retroactive
application is not permitted. Management is analyzing the requirements
of this new Statement and believes that its adoption will not have any
significant impact on the Company's financial position, results of
operations or cash flows.

In December 2004, the FASB issued SFAS No. 153, Exchanges of
Non-monetary Assets an amendment of APB No. 29. This Statement amends
Opinion 29 to eliminate the exception for non-monetary exchanges of
similar productive assets and replaces it with a general exception for
exchanges of non-monetary assets that do not have commercial substance.
The Statement specifies that a non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. This Statement is effective
for non-monetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. Earlier application is permitted for non-monetary
asset exchanges occurring in fiscal periods beginning after the date
this Statement is issued. Retroactive application is not permitted.
Management is analyzing the requirements of this new Statement and
believes that its adoption will not have any significant impact on the
Company's financial position, results of operations or cash flows.

-30-

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