Q2 2020 Wheaton Precious Metals Corp Earnings Call
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
If you would like to ask your question. During this time some press Star then the number one on your telephone keypad.
If you like to withdraw your question Keith Thank you.
I would like to remind everyone thought this conference call is being recorded on Thursday August 13, 2020 at 11 am Eastern time.
I would now like to turn the conference over to Mr., Patrick True Senior Vice President of Investor Relations. Please go ahead.
Thank you operator, good morning, ladies and gentlemen, thank you for participating in today's call I'm joined today by Randy Smallwood, Wheaton precious metals, President and Chief Executive Officer, Gary Brown, Senior Vice President and Chief Financial Officer, and Haithum whole life Senior Vice President corporate development I'd like to bring your attention at some of the commentary on today's call may contain forward looking statements there can be no assurances that.
Forward looking statements will prove to be accurate as actual results and future events could differ materially from those anticipate in such statements. In addition to our financial results cautionary note regarding forward looking statements. Please refer to the section entitled description of the business risk factors and we see annual information form and the risks identified under risks and uncertainties in wins annual Mdna.
Both available on SEDAR oriented we this form 40 F and weight in the form 6K, both on file with the U.S. Securities Exchange Commission.
And in addition, weakens mdna within three months ended March 31st 2020 available on SEDAR and weakens form 6K filed May 720, 20 with your Securities Exchange Commission. These documents the other with the Q2 2020 M. DNA in the press released last night set out the material assumptions and risk factors that could cause actual results it ever including them.
Yeah, there's fluctuations or the price of commodity impact on we met or mining operations, which we purchase is precious metals as a result of an epidemic, including the Kobe 19 pandemic risks related to mining operations for much weedon purchases precious metals. They continued ability of weakness counterparties to satisfy their obligations under precious metal purchase agreements and the impact.
Any material change in fact, Lawler jurisprudence onto the theory settlement. It should be noted that all figures refer to on today's call or in U.S. dollars unless otherwise noted in addition reference to Wheaton or we can precious metals on this call include Wheaton precious metals Corp, and doors wholly owned subsidiaries as applicable now I'd like turn call over to Randy Smallwood, Our president and Chief Executive Officer.
Thank you Patrick and good morning, ladies and gentlemen, thank you for joining us today to discuss sweetened second quarter results of Twentytwenty.
Before I begin I would like to start off by saying that I hope everyone has been keeping healthy unsafe since our last quarterly conference call.
Had wheaton our top priority remains the health and safety of our employees, our partners employees and the communities in which we operate.
We continue to follow guidance from local health authorities on best practices to reduce the spread of cobot 19.
I will provide further details on weakens response to covert 19 impacts on our partner mining operations. After Gary discusses our second quarter results.
On that note I am pleased to report that Wheaton delivered solid results in the first half of 2020 generating over 500 million in revenue and nearly 330 million in operating cash flow.
Well production in the second quarter was impacted by temporary shutdowns of some operations sales volumes remain strong and resulted in a record 322000 gold equivalent ounces being sold in the first half of Twentytwenty.
So now I'd like to turn the call over to Gary Brown, Senior Vice President and Chief Financial Officer, who will provide more details on our results Gary.
Thank you Randy and good morning, ladies and gentlemen.
The company's precious metal interest produced 140100 gold equivalent ounces in the second quarter 2020 comprised of 88600 ounces of gold 3.7 million ounces of silver and 5800 ounces of palladium.
Relative to the second quarter. The prior year. This represented a decrease of 16% and gold equivalent production with gold and silver production decreasing by 12% in 24%, respectively. While palladium production was virtually unchanged.
The decrease in gold and silver production was primarily the result of the impact of Cobot 19 with operations at six mines being temporarily suspended for a portion of the second quarter and an increased level of absenteeism occurring at the low ball as a result of the pandemic.
Well production levels decrease during the quarter sales volumes were very strong being augmented with the delivery of ounces produced in prior periods, specifically the balances of gold and silver ounces produced but not delivered decreased by almost 31000 gold equivalent ounces during the quarter.
The resulting gold equivalent sales volume amounted to 156000 ounces in the quarter, representing an increase of 6% relative to the second quarter of 2019.
At June Thirtyth 2020, approximately 123000 gold equivalent payable ounces had been produced but not yet delivered to the company compared to an average balance of over 142000 gold equivalent ounces over the preceding fourth quarters.
With the lower levels of production during Q2, and the reduced levels of ounces produced but not delivered as at June Thirtyth, We do anticipate sales to be impacted during the third quarter of 2020 as the balance of ounces produced but not delivered returns to more normal levels.
Revenue for the second quarter of 2020 amounted to $248 million, representing a 31% increase relative to Q2 2019, primarily due to a 24% increase in the average realized gold equivalent price coupled with a 6% increase in sales volumes.
This revenue, 64% was attributable to gold sales, 32% was attributable silver and 4% was attributable to palladium.
Driven by the weighted average increase in commodity prices of 24% gross margin for the second quarter of 2020 increased by 85% to $124 million highlighting the leverage our business model provides to increases in precious metal prices.
Cash based DNA expenses amounted to $20 million in second quarter of 2020, representing an increase of $10 million from Q2 2019, with the increase being primarily related to higher crude costs associated with the performance share units or PS views and higher charitable donations with the company don't.
Operating $2 million relative to the previously announced 5 million dollar community support in response fun relative to the cobot 19 pandemic.
Interest cost for the second quarter of 2020 amounted to $3 million, resulting in an effective interest rate on outstanding debt of 1.97% as compared to $12 million of interest cost at an effective interest rate of 4.25% incurred in Q2 2019 with the average outstanding debt.
Balance decreasing by almost 40%.
Net earnings amounted to $106 million in second quarter of 2020 compared to a net loss of $125 million in Q2 2019, with the 2019 results, reflecting a 166 million dollar impairment charge on the Boise is big cobalt stream.
After negating the effect of the 2019 impairment and other items that are nonrecurring in nature adjusted net earnings in the second quarter of 2020 more than doubled to $97 million compared to adjusted net earnings of $42 million in Q2 2019.
Basic adjusted earnings per share increased 131% to 22 cents compared to nine cents per share in the prior year.
Operating cash flow for the second quarter of 2020 amounted to $152 million or 34 cents per share compared to $109 million or 25 cents per share in the prior year, representing a 38% increase on a per share basis.
Based on the company's dividend policy. The Companys Board has declared a dividend of 10 cents a share payable to shareholders of record on August 27 2020.
Under the dividend reinvestment plan. The board has elected to offer shareholders the option of having their dividends reinvested in newly issued common shares of the company at a 1% discount to market.
For 2020, the company continues to estimate the non stock based DNA expenses, which exclude expenses relating to the value of stock options and PS use will amount to $40 million to $43 million for 2020.
During the second quarter of 2020 of the company repaid $75 million on the revolving facility and made dividend payments totaling $83 million, which represented a dividend payments for two quarters with these cash outflows being partially offset by proceeds from the exercise of stock options in the amount of $11 million.
Yes.
Overall net cash increased by $5 million in Q2, 2020, resulting in cash and cash equivalents at June Thirtyth of $132 million. This combined with the one the $641 million outstanding under the revolving facility resulted in a net debt position as of June thirtyth.
$509 million.
The company's cash position strong forecast future operating cash flows combined with the available credit capacity under the revolving facility positions the company well the satisfies funding commitments sustain its dividend policy, while the same time, providing flexibility to consummate additional accretive precious metal purchase agreements that concludes the financials.
Amarin without I'd turn the call back over to Randy.
Thank you Gary.
The company is keeping up to date on developments surrounding covert 19 and has taken steps to protect the health and safety of our employees and the community as well as measures to minimize any risks or impacts to our business.
I will now provide a general update on our guidance corporate development activities and community initiatives.
With regard to guidance, we are providing a revised 2020 production forecast to reflect the previously announced temporary suspension at six of our mining partners operations due to government restrictions focused on reducing the spread of cobot 19.
The impacted operations, where the Constancio Yauliyacu Sun Demoss, Los Filos, Penasquito and onto Amina mines, all of which have since resumed operations.
Revised gold and silver production forecast for 2020 now range.
From 365000 to 385000 ounces of gold.
21.5 million to 22.5 million ounces of silver.
And the forecast for Palladium production remained unchanged at 23000 to 24500 ounces of Palladium.
Despite disruptions to production in the first half of the year. Our revised guidance has only been reduced by 5% on a gold equivalent basis and now ranges from 655000 to 685000 gold equivalent ounces in Twentytwenty.
Wheaton long term production forecast remains unchanged at 750000 gold equivalent ounces per year on average between the years Twentytwenty and Twentytwenty for.
I will note that the revised 2020 in long term forecasts do assume that operations will continue throughout the remainder of this year without any major interruptions.
On the corporate development front, we remain active.
In the second quarter, we signed a non burnt nonbinding term sheet with coldest goldcorp to purchase 6.5% of the gold production and 100% of the silver production from them. Our motto project located in Colombia.
The strength and potential upside of this project was especially apparent during our onsite due diligence trip, which was conducted prior to travel restrictions being put in place and we look forward to finalizing this deal in the very near future and partnering with called us as they develop and grow more muscle.
As can be seen Wheaton continues to be very active on corporate development opportunities. Despite the travel limitations.
We may be locked down, but we're not locked out of growing our high quality high quality portfolio of assets and plan on putting some of our strong cash flows back into the ground.
At Wheaton our success is not only measured in terms of financial results and accretive acquisitions, but also in our ability to make a difference within our own communities.
In that regard during the quarter, we established a dedicated 5 million dollar fund to help address the impacts of cobot 19 more than doubling our normal budget for community support.
To date. The fund has helped to provide food security medical services and supplies and economic opportunities to those in need.
The majority of these funds are dedicated to the communities around our mining partners operations and not only help to alleviate the near term impacts of the pandemic.
But also leave positive sustainable benefits.
To date, we've funded over $2 million in various initiatives at the Salobo, San Dimas Constancio Sudbury Stillwater Triple seven voice East Bay, I'll, just throw zinc grooving Nevis Corvo and Stratoni mines we.
Continue to work with our partners to identify additional programs that support their cobot 19 relief efforts now more than ever we must come together to help support our communities and make a positive impact.
In summary, despite the temporary shutdowns of some operations. The first half from 2020 was a very strong start to the year with record gold equivalent ounces sold.
We recognize that covert 19 will have an impact on our production and sales volumes, but we believe the impacts will not be overly significant as indicated by our minor revision to guidance.
As already mentioned, we reduced our guidance for 2020 by only 5%, which should be put in context to the current market for precious metals, which year to date has seen gold and silver prices up by over 25% and 40% respectively.
Given the bullish precious metals markets.
The strength of our business model and our high quality portfolio of assets. We remain confident that we can continue to create sustainable value for our stakeholders.
Not only that but we remain optimistic that we'll be able to continue growing the company and add additional production from long life assets producing in the lowest half of their respective cost curves.
And while we are well positioned to grow our portfolio should there be any accretive opportunities. Our top priority is the health and safety of our employees and the communities in which we and our partners operate.
So with that I would like to open the call up for questions operator.
Thank you, ladies and gentlemen, we will now conduct the question and answer session.
If you would like to ask a question. Please press Star then the number one on your telephone keypad.
I'd like to withdraw your question press the pound Keith.
There will be a brief pause for a couple documenting roster.
Our first question comes from the line of Cosmos Chiu.
Your line is open.
Hello Cosmos.
Sorry, I was muted.
Hi, Thanks, Randy Gary Patrick and Haithum first off congratulations on a very solid Q2, all things considered and good to see that you have established $5 million CSR fund to ill get back to the community.
Maybe my first question is on.
Timing.
Some of the disruptions were in Q2.
Could you you kind of touched on it but could you remind us in terms of the impact on production and sales in Q3, and maybe Gary could you remind us when do you have record production when would you record sales for example of a concentrated as being produced that Salobo you know the difference in terms of timing between.
Production at the mine and when would you record production and then thereafter scenes.
Yes so.
The.
All all six of the.
Operations that were temporarily suspended in Q2 are back up and running now and so.
We don't anticipate a significant.
Flow through of.
Of any type of production issues.
In in Q3 or Q4, but we do anticipate that there so when when do we record production we record production when a final product is produced by our partners. So in the.
Whether it be in the form of concentrate or in the form of doorway.
And so.
That's the production recognition point.
And then on the sales side of things.
Generally what will happen is we recognize sales when that final product gets sold by our.
Partners.
And and we get the delivery of the silver or gold credits or payment. If if we've taken ownership of the precious metal content contained in concentrate.
As I.
Outlined.
Earlier.
When we look at sort of our average balance of produced but not delivered we we think a more normal level is sort of in the 140 to 145000 gold equivalent ounces.
We're at 123000 ounces at the end of June so.
Certainly would expect that.
Those will build up over the next.
Likely over Q3.
So you've got.
20000 ounce kind of build up of produced but not delivered ounces. So we should see production returned to more normal levels in Q3, but sales will probably be light.
In the neighborhood of that 20000 ounce gold equivalent ounce.
Range, Yes, I think causal if I can just add I think that produced but not yet delivered is really the best measure of.
But we typically have about two and a half months worth of production tied up in that and every asset different whether it produces dori or concentrate there's always different timelines between.
Production and sales, but on average we seem to carry about two and half months of produced but not yet delivered right now we're at about two months and so.
Worth of production tied up in that which that'll that should normalize during the third quarter and get back.
Of course, assuming everyone is able to maintain.
Good operations through the rest of the year.
Yes, crusher, maybe switching gears, a little bit Randy you kind of touched on does in terms of.
Deal pipeline.
As you said is still remains robust.
But I guess my question is it all now gold is about 2000 bucks an ounce or it was.
Silver is that almost 27 once again.
Are you finding it harder to price you know these deals.
In a sense that will have producers asking.
For all these deals to be priced at spot prices are you willing to pay the spot prices.
According to sort of bullish environment.
A bit of a hindrance in terms of.
Cost of meeting some of these deals.
There's no doubt it is going to make things a little bit more expensive, but we're still very bullish in terms of precious metal prices. We do think theres a lot of upside in precious metals, especially in context for the rest of the world.
And where you know where precious metal sit as store a value against such as.
A challenging backdrop.
But there's no doubt it's going to increased costs. The one thing I wouldn't say is that.
Relatively rapid moves up like this we tend to reference more and and I know a lot of our potential partners tend to reference more some of the long term numbers, which which have gone up a bit but nowhere near as much as the short term spot prices and so we continue to push our way forward.
It's it's kind of.
No.
There is no bad answer here, because we don't consummate because of high prices will I can tell you that we are making very good profits off over existing portfolio and so.
No.
One of the other is still very positive for our company with production profiles in the organic growth that we already have in our portfolio you have higher prices.
You know generate a frothy market and we've always said there is time to buy and times not to buy the challenge is recognizing those times not to buy into sit back and reap for harvest the benefits of our existing portfolio and so we're quite happy with these higher prices.
As we have such a strong portfolio and we've already got such good organic growth.
Over the next four five years and some great optionality in some some assets that even look more attractive at these prices and.
And even incentivize our partners to continue advancing those so.
So I think either way is a good solution. If we if we can't afford the new deals that just means that we're going to be generating substantive cash flows and.
That this appears pretty fast.
Yes for sure and Randy could you maybe ill comment on the potential size of these deals.
We saw Callidus gold was a bit smaller 100 million dollar ish, you've been quota and a meta in terms of saying that upwards to a billion dollar over 1 billion dollar.
Could you comment on the potential size on some of these deals.
Yet, we still we still see assets.
Opportunities there.
Now there.
There.
These all require especially stuff of that size. It all requires a good.
The right, where it is a fermentation period in terms of.
It projects.
To that over the line and so we continue to work on that front.
I will say that the strength in commodity prices may have reduced some of the demand on that side, we have seen this.
Across the board.
On the base metal side, and so, but we still see opportunities, where we think streaming is the best source of capital.
At a very competitive source of capital for these projects as they go forward and so we'll continue working on them and there are opportunities up in that scale.
For sure and one last question if I may taking a step back here you know clearly silver prices have outperformed.
It will all commodities in Q2 and.
As always good to hear what you have to say about you know silver Randy.
How do you look at it now.
Clearly the gold silver ratio has contra contractive from 110 to one to closer to 73 to one nowadays.
Are you still very bullish on silver you more bullish on silver than say others and.
This change how you're running your business.
Well, the fact that silver becomes a bigger portion of our revenues and.
Which is which isn't a bad thing we have about 30, 35% of our current revenues coming from silver, but actually at today's prices that might even be up as much as 40.
The I've always said.
Been pretty clear on this that silver always lags gold, but then it outperforms and I think we're just starting to see the start of that outperformance. If you go back and look at every upward every bull market in precious metals prices gold always lose first and then silver silver lags silver lags silver lags and then silver moves and when silver mine.
Moves that has incredible volatility and.
And.
Of course, good volatility on an upward market as always is always a real positive and so so I think we're just seeing the start of that the fundamentals have long been strongly in favor of silver just because of.
Even extra fundamentals over over gold.
Does represent a precious metal in the store value, but it's got some good industrial applications, especially in today's world and so we are strong believers in silver.
And and quite happy to see it strengthening as it as it has.
Great. Thanks, again, Randy and team those all the questions I have.
Thank you Cosmos.
Our next question is from Ralph Profiti with eight capital your line is open.
Good morning, everyone.
Thanks for taking my questions Yeah.
Randy I have to specifically on the call. This transaction. Please firstly.
To get a sense of where you see.
The attractiveness of the upside here should we be thinking about this as a sort of a scalable.
Or is it.
Juice here on the exploration side it looks to be a pretty compelling are just based on the PE I'm trying to get a sense of how it gets better.
Yes ill.
Plus a few words in here, but then I'm going to ask Haithum too to share his thoughts.
This is the kind of asset that just it's a strong system. It's got a long history of of our technical gold production and then.
The whole system is sort of been taken over there's a there's an upper zone that currently in production. So we said we will see a bit of production once the deal closes and I believe that reference stages as of July onest. So, we'll get a bit of a benefit in the third quarter here.
And but the deep.
The deep resources and some of the deeper drilling as just showing some incredible potential and very very similar to some other.
Systems that we've seen down in Colombia.
Ecuador area that the Wheaton has invested into in the past we've seen some really good benefits as you you dive down into the structurally controlled systems and you see.
See everything coalescence, one nice strong ore body so.
Some of the deeper drilling looks very promising I don't know Haithum, if you want to add anything to that.
Yes, I think you've hit the nail right and they had Derek.
We do this is a very scalable operation for starters as Randy said, there's the upper zone.
And my motto.
Upper zone is small it will provide immediate production as of July 1st and probably.
You want even noticed when you can continue to my motto deep so on a combined basis, if you're looking at its mostly goals, we looked like things that as gold or silver it'll generate over a million silver equivalent ounces call. It then you can back then it is what looks like on both.
When within the next two to three years, so on an annual basis. So what we've seen on the decrease is some incredible exploration upside.
Just continues to trend not just a depth, but also the extensions to the existing were body and we do feel that if the company is looking to continue to grow through other avenues theres definitely potential for this for the stream can be scaled higher there's an incredible amount of margin there, especially at current commodity prices. We thought it was a lot of margin a much lower prices. So we're ecstatic.
These levels.
Yeah.
And maybe as a follow up because.
It is more of a structural question.
It appears as though these attributable step downs.
In terms of the the exposure there both in gold and silver.
Happened within the P.A. I just wondering firstly is that is that deliberate structure part of the deal.
And our the mutually independent of each other meaning that a gold production outperforms. The silver production you can have different timing of when that step down occurs.
So so to answer that question I guess I'll say, yes on the latter when they are obviously independent of each other.
First question. This step downs are we factor a lot of exploration upside and we look and see where the extension of the upside or we factored that into our valuation, obviously, because they're so far out and they get a higher discount rate associated with it.
We're not paying a huge amount for them, but we do feel that it's fair to our partners aggressively paying something for them and Thats why you see those dropdowns happening after that.
Understood understood. Okay. Thanks for that clearly appreciate it thank you.
Thanks, Rob Thanks, Ralph.
Our next question is from Richard Hatch with Berenberg. Your line is open.
Yes, thanks, very much at fee cooling back congratulations on a very strong numbers Im just first one on the dividend appreciate you not shut up and but just can you perhaps talk.
A little bit about you full price on the chance to shareholders.
As we look how.
The next couple of needs and will be gold gold silver prices technical but.
Okay.
Generally get free cash flow just how you how you balance I knew I don't mind around.
Additional investment and that.
Leveraging.
Sure.
So so.
Let's start with the dividend and we do have a bit of a unique dividends structure, where are we we have a reference point reference as a percentage of our cash flows and that is averaged over the previous four quarters.
But right now our reference is 30% of cash flows that is our target we held our basement and we established that essentially every at the start of every year by looking at.
30% of our cash flows what percentage of we returned to shareholders through the through the dividend.
And so for this year, we established a basement hard basement of 10 cents per share.
Through the through the calendar year of 2020, now I'd say, it's a basement because if we see stronger commodity prices or increases in production, obviously, our cash flow will increase and if that drives.
The return of 30% back higher than 10 cents than we will pay that higher numbers. So there is a natural correlation or national connection to our cash flows again averaged over the previous four quarters. So so this recent uptick in commodity prices won't have an immediate effect on the dividend, but it will definitely start putting upward pressure on.
How our dividend as calculated and.
And I would I would estimate by the fourth quarter Slash first quarter of next year, we're going to see at an increase in how that dividend is is estimated that 30% as I said is just a reference target that we use and and it really comes down to the fact that we still see.
Good opportunities to continue growing our company with accretive acquisitions and in my eyes.
Our objective is always to try and continue growing in expanding the company with accretive and I'd put accretive in bold with quotation marks around acquisitions, making sure that they are accretive to us whenever we make acquisitions, we always tested as to does it make more sense for us to make this acquisition versus buying our own stock back or.
Or.
Or other other uses of capital and it has to be the most attractive use of capital for us and so we continue to push that forward.
So our first preference of course is too is to make new acquisitions, if we can't make acquisitions than we just strengthen our balance sheet with that cash flow, whether we're on the debt side of the equation as we currently are.
The one thing that makes our company a bit unique is the use of debt.
We're very comfortable because of the strength of our business model in the quality of our assets with.
With debt as a very cheap and short term source of capital that dipping goes away.
We're not we're not big fans of the issuing shares.
Out of the fact that we havent actually exercise any of our ATM over the last quarter and a half.
There to help us grow the company has not there to just strengthened the balance sheet. Our cash flow is strong enough to do that so so priority is is obviously the Bakken dividend first.
Investing back into the ground with what's left and.
And ultimately building up the balance sheet and if we if we wind up with excess cash flow or a strong balance sheet than we look at increasing that dividend rate to 40% or 50%, which is the longer term view.
Okay.
I don't know that I could add anything to that I think that articulate our philosophy.
A very well you know, we don't view debt as a permanent tranche of our capital structure, but we will use it in order to consummate deals.
Given the strength of our assets and given the strength of the.
Operating cash flow that we generate and we will you know where we can create the most value for our shareholders is by consummating use a these accretive deals. So we certainly would look to repay debt, which are based upon current commodity prices is repaid by Q.
One of next year.
And and then build up a award chest to to pursue these.
Opportunities that we're seeing.
Come to fruition here so.
We.
One thing we don't want to do is is have a whole bunch of idle cash sitting on our balance sheet that we don't have a reasonable expectation of being able to reinvest in the ground as Randy puts it and so we will keep our finger to the pulse of that 30%.
That 30% payout moving forward, although given the opportunity set we have in front of us I.
I don't think we'd anticipate that changing anytime in.
The immediate future.
Okay. That's it kind of detail. Thank you very much in my second question.
More broadly.
Okay.
Yes, so last slide towards that we've seen that.
Precious metal sites.
If you will comparing the number it creates.
Transaction.
Hey.
In the current sort of opportunities that lie flat seats.
Previous cycles, we've seen in.
Are you seeing lower same same number did you guys.
Equaled supply that.
Yes, I'll I'll toss comment here, and then get Haithum too to add some color.
Yes.
There's no doubt that when commodity prices are low that's the best time, that's typically when when.
Our company as a source of capital for the mining industry, that's what our businesses and and so when commodity prices are low it's typically when when the demand for capital and sources of capital outside of.
Other areas is highest and so that generally does create the the best opportunities for us and as we see stronger commodity prices generally.
There's not as much demand, but it's it's it is.
It is.
Look at that.
That still streaming itself I mean, one of the big advantage is that a stream does on any type of a project is a dramatically improves the internal rate of return of those projects and so as I'd like to say a stream is a way to take a good mine and make it a great mine.
From a from a shareholders from an operating company shareholders perspective, the return on capital has dramatically improved if a stream is used as part of the financing and so so I think there's always a market for streaming.
Obviously, there is better markets and lesser markets, but.
Theres always going to be a demand for streaming so haithum I don't know if you want to talk about current versus past.
Sure I mean, obviously the higher commodity prices.
Change to the actual streaming candidates are right now as an example, we've been spending a lot of time looking at new opportunities that fall into the sub 400, or 500 million dollar category stream perspective, primarily development stage opportunities that fit into early deposits structure as well as like expansion straight streaming opportunities.
When base metal prices are strong we typically have.
Two things happening one you have less space metal companies looking to stream because they're generating strong cash additional prices are weak you typically have stronger interest from the baseball pretty should now that we've got precious metals prices up.
You are seeing two things one because first of all those prices are up so much more than base metal prices, they're looking at at precious metals streaming as a way to improve their overall balance sheet. But also you are seeing primarily precious metals company is also looking at ways given that fact that their margins are 50 or 60%, which.
Very very strong margins is currently in the current environment. We've also seen some royalty packages come come out and but there's nothing that makes sense from a weekly prospective there in large part because of their size and because they come with a significant amount of non precious metal revenues, which were not really interested at this point in time, yes. There are some also some larger opportunities that we've been.
Fostering I'd say for as long as a decade, we've we continue to do this.
Stream business as relationship driven so we build relationships. We go to sites. We may go to sites, one two or three times over the last decade in certain assets to the point where.
Makes sense foreign finally for that midstream and for us to stream and that's that gives us a significant advantage knowing what's happened in the past it definitely helps you predict what's happening in the future. So from our perspective every single environment is actually conducive to streaming just depends on streaming at that point in time, hopefully that answers your question.
Yes, that's very helpful. Thanks.
[music].
Thank you Richard.
Our next question is from Trevor Turnbull Scotiabank Your line is open.
Yeah, Randy I, just had a really kind of nuance question on on the dividend.
It was good to hear that there's potential for that that formula to actually work its way higher in the future.
I guess, what I was curious is if any of these larger deals that have been in the pipeline do come to fruition.
There any chance that you would ever modify the dividend policy.
In light of having a big deal kind of in front of view that you needed cash for.
No no.
Now, we've been pretty clear on that front and.
You know that 30% of cash flow is.
We don't we don't really see with.
With our business model the strength of the business model and the quality assets that we have I find it very unlikely that we would never have to.
But.
No.
We tend to the dividend to try and fund our opportunities. We just have such strong cash flows that strong capacity on on so many fronts.
It's one of the reasons, we put the ATM in place earlier as it's basically another tool in the or another arrow in the quiver in terms of being able to source capital if required.
We just we've got so much capacity when we look out there that I don't see I mean, I see the dividend the staying at that level or ultimately climbing and as I've said.
Many times I don't have a problem envisioning our dividend ultimately climbing to 50, 60% of cash flows as as we continue to grow.
No I'd like to see the company up over 1 million gold equivalent ounces before we start getting into those kind of dividend rate, but but I, just think that theres, a point, where especially depending on what precious metal prices are doing where it's going to be very tough for us to put the all that cash back into the ground. So the next place next best place.
But to go into the dividend.
Okay sounds good thanks Randy.
Thanks driver.
Our next question is from Jackie previous file asking with BMO capital markets. Your line is open.
Hi, good morning, and thanks for taking my question I just wanted to ask if you had any updates I know that the deal that you guys signed with call. This goes back in June.
It's contingent I guess on finishing.
Site visits are due diligence and I was wondering if you'd had any opportunity.
Yes.
Worse or what the what that timing is if anything's changed I know I know travel restrictions are still pretty difficult, but is is that still.
So still difficult for you guys did you right now or is it getting better.
Well just to clarify we have already been to that site. We got the site visit in just ahead of all the the travel restrictions and so so we have been down to site and have satisfied all those requirements on the call. This more motto project.
Ill, let haithum take the rest of that question because he's the one that manages that entire aspect of it.
Sure. Thanks, Randy Good morning, Jackie Yes from as Randy said, we visited that site in mid December right before Christmas. So we managed to get there we spend a few days on site and managed to get all the tended to do business out of the way. We also in order to get us comfortable.
Engage certain consultants in certain areas and we walked away very very comfortable from that transaction or our entire technical due diligence was completed in the asset passed with flying colors.
In terms of.
The transaction closing really were just finalizing some legal legal digital this which everything seems to be going well hopefully as Randy mentioned earlier in his presentation has to be happening version.
Thanks, very much on clarification and another question just on Salobo III the.
Released yesterday, you noted the balance still still expecting to complete expansion at some level in the first half of 2022 and there's just wondering if you guys had a view on on whether that's on track or not it seems like instance, pretty aggressive.
All right Mhm target at this point is that it's doable in your view.
Yes, there is the guidance that we've had back from a from from valid slope as they've had obviously had to go through some restrictions with respect to contractors on site, but they've they've they've been sort of identified the critical path that's required to sort of achieved that target and they still feel that they're on track to achieve that target.
There's no doubt that there has been some some effort. So some of the work that has been pushed back but it's not part of the critical path and they feel that they can catch up and still maintain that target. So so they're hopeful it turn on the switches in 2022.
It is a 90 day completion test before we'd have to fund anything so at the early as we'd be funding towards the end to 2022.
Or early 2023 as it drops year over year, you know, there's going to be a real strong drive on their side too.
Try and satisfy that completion test before the end of 2022 it has.
A big.
A big impact on the actual expansion payment that we're making to them. So.
So I feel that valley is going to try and do everything they can to get it done in 2022 and satisfy the completion test within that within that calendar year.
So far the guidance we've had as it is on track.
Sounds great. That's it for me thanks, Thanks Randy.
Well, thank you Jackie and thank you everyone for dialing in today in closing, we believe Wheaton is well positioned to continue delivering value to our shareholders for a number of different reasons.
Firstly by having low unpredictable costs that result in some of the highest margins in the entire precious metal space and strong operating cash flows.
Secondly, through our steady organic growth profile and proven track record of accretive quality acquisitions.
Thirdly by offering our shareholders exposure to some of the highest quality mines in the world through our portfolio of long life low cost assets.
And lastly by being a leader amongst precious metal streamers in sustainability through initiatives, such as the CSR fund and supporting our partners and the communities in which we live and operate.
I do look forward to speaking with you all again very soon stay healthy stay safe and thank you.
This concludes today's conference call. Thank you for participating and please disconnect your lines.
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