Q3 2020 Wheaton Precious Metals Corp Earnings Call
Thank you for standing by welcome to precious metals 2020, <unk> third quarter results conference call.
All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If he would like to withdraw your question press the pound key sales.
I would like to remind everyone that this conference call is being recorded on Tuesday November 10 2020.
<unk> am Eastern time, I will now turn the conference over to Mr., Patrick Truman Senior Vice President of Investor Relations. Please go ahead.
Thank you operator, good morning, ladies and gentlemen, and thank you for participating in today's call I'm joined today by Randy Smallwood wouldn't precious metals, Chief Executive Officer, and President Gary Brown, Senior Vice President and Chief Financial Officer, and Haytham Hodaly Senior Vice President corporate development I'd like to bring to your attention that some of the commentary on todays 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 anticipated in such statements. In addition to our financial results cautionary note regarding forward looking statements. Please refer to the sector entitled description of the business risk factors in women's annual information form and the risks indentified under risks and uncertainties in managements discussion and analysis both.
Available on SEDAR, and Edgar Mittens form 40 F and wins form 6K, both available on Edgar These documents together with the Q1 2020 and DNA. The Q3 2020, M. DNA and the press release from last night set out the material assumptions and risk factors that could cause actual results to differ income.
Including among others fluctuation in the price of commodities the impacts on we were mining operations from the.
And precious metal purchases as a result of the epidemic, including the top in 19 pandemic risk related to mining operations from which we can purchase is precious metals. They continue the ability of wins counterparty to satisfy the obligations under precious metal purchase agreements and the impact of any material changes in fact law or jurisprudence on the CRT settlement.
It should be noted that all figures refer to on today's call are any less dollars unless otherwise noted in addition reference to weaken or weaken precious metals on this call include when precious metals core Pandora, it's wholly owned subsidiaries as applicable now I'd like to turn the 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 Wheaton third quarter results of Twentytwenty.
I hope everyone has been keeping healthy and safe since our last quarterly conference call at Wheaton, Our top priority remains the health and safety of our employees and the communities in which we operate.
Now with regard to our third quarter results I'm very pleased to announce the wheat and high quality portfolio of assets generated nearly $230 million in operating cash flow in the third quarter alone, resulting in a record of over 555 million for the first nine months of Twentytwenty.
And given Wheaton is unique dividend policy. This strong cash flow has resulted in a 20% increase in our dividend to be paid in the fourth quarter.
In addition, we recently announced the listing on the London stock exchange that we hope will provide another point of entry and make it easier for new internationally based shareholders to invest into weedon.
We continue to focus on delivering value to all of our stakeholders.
I will provide updates on weakness response, the COVID-19, after Gary discusses our third quarter results.
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 171400 gold equivalent ounces in the third quarter of 2020 comprised of 91800 ounces of gold 6 million ounces of silver and 5400 ounces of Palladium. This represents a 22% increase in production relative to the pro.
Prior quarter with the mines that were temporarily suspended due to COVID-19 in Q2, having returned to operation realm.
Relative to the third quarter of the prior year production decreased by 7% with gold production decreasing 11% due primarily to the expected mining of lower grade material, that's lobo, well silver and Palladium production was virtually unchanged gold equivalent sales volumes increased by two per se.
That relative to the third quarter of 29 team to 157500 ounces with sales volumes in the comparable quarter of the prior year, reflecting a buildup in ounces produced but not delivered it is interesting to note that our G.O. sales volume was 17% higher than not reported by any other.
Their streaming or royalty company in the quarter.
That's September Thirtyth, 2020 ounces produced but not delivered or P.B. and b. amounted to approximately 124000 gold equivalent payable ounces, representing approximately 2.2 months worth of payable production.
This compares to an average P.B.N.B. balance of approximately 140000 gold equivalent ounces over the preceding four quarters and it is possible that a build up of PB N D could occur in the future.
Revenue for the third quarter of 2020 amounted to a record setting $307 million, representing a 37% increase relative to Q3 2019, primarily due to a 35% increase in the average realized gold equivalent price of this revenue, 56% was attributed attributable to gold.
Sales, 40% to silver and 4% the palladium again, it is worth noting that our revenue in Q3, 2020 was 10% higher than any other streaming or royalty company.
Gross margin for the third quarter of 2020 increased 85% to $177 million highlighting the leverage our business model provides to increases in precious metal prices.
Cash based DNA expenses amounted to $20 million in the third quarter of 2020, representing an increase of $7 million from Q3 2019, with the increase being primarily related to higher crude costs associated with the performance share units or P.S. use and higher charitable donations with the company donating.
$1 million during Q3 2020 relative to the previously announced 5 million dollar community support and response been related to the COVID-19 pandemic entry.
Interest costs for the third quarter of 2020 amounted to $2 million, resulting in an effective interest rate and outstanding debt of 1.24% as compared to $11 million of interest costs on an effective interest rate of 4.02% incurred in Q3 2019 with the average outstanding debt.
Decreasing by over 45%.
Net earnings amounted to $150 million in the third quarter of 2020 compared to $76 million in Q3 2019.
Basic adjusted earnings per share increased 113% to 34 cents compared to 16 cents per share in the prior year.
Operating cash flow for the third quarter of 2020 amounted to $228 million or 51 cents per share compared to $142 million or 32 cents per share in the prior year, representing a 59% increase on a per share basis although.
Although this level of operating cash flow does not represent a record for the company. It was 7% higher than any other streaming for royalty company generated in the quarter.
Based on the company's dividend policy. The Companys Board has declared a dividend of 12 cents a share payable to shareholders of record on November 25th 2020.
This represents a 20% increase relative to the dividend paid in the prior quarter and highlights how shareholders participate directly and efficiently and any precious metal pricing Riley under our unique dividend policy.
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 that non stock based <unk> expenses, which exclude expenses relating to the value of stock options and yes, you will amount to $40 million to $43 million for 2020.
During the third quarter of 2020, the company repaid $153 million on the revolving facility disbursed $37 million in dividends and invested $11 million in long term investments with these cash outflows being partially offset by proceeds from the sale of various equity instruments totaling.
$49 million and the exercise of stock options in the amount of $3 million.
Overall net cash increased by $78 million in Q3, 2020, resulting in cash and cash equivalents number thirtyth of $210 million. This combined with the $488 million outstanding under the revolving facility resulted in a net debt position and.
That September thirtyth of only $278 million.
As such the company is well positioned to satisfy its funding commitments and sustain its dividend policy, while at the same time, having the flexibility to consummate additional accretive precious metal purchase agreements.
In summary, our high quality portfolio of streaming assets not only help wheat and set new records in Q3 2020, they generated the highest geos sales volume revenue and operating cash flow of any streaming or royalty company in the world leading to a 20% increase in the dividend and positioning.
The company extremely well to reap the benefits of any continuation of the rally in precious metal prices as well as to execute on its accretive growth strategy.
With that I will turn the call back over to Randy.
Thank you Gary.
The company continues to keep up to date on development surrounding COVID-19 and has taken steps to protect the health and safety of our employees and the community as well as measures to minimize any impacts to our business.
I will now provide a general update on our guidance corporate development activities and community initiatives.
We are pleased that all of our mining partner or partners operations that were temporarily suspended due to COVID-19 have resumed operations production in the third quarter rebounded strongly following the temporary suspensions in the prior quarter and the company is on track to meet the higher end of our guidance.
As a reminder, on a gold equivalent basis, we expect to produce between 655000 to 685000 gold equivalent ounces in Twentytwenty.
Wheaton has long term production forecast remains unchanged at 750000 gold equivalent ounces per year on average between 2020 and 2024.
On the corporate development front, we continue to remain very active subsequent to the quarter, we announced that we had finalized the previously announced precious metal stream with called this goal to purchase 6.5% of the gold production and 100% of the silver production from them. Our motto project located in Columbia.
We are excited to partner with called US in advancing this project and we are very encouraged by the continued strong exploration success.
We remain unwavering in our focus on delivering the highest quality portfolio precious metals production to our shareholders through our top tier asset base strong organic growth profile and acquisition of accretive growth opportunities such as more model.
At Wheaton our success is not only measured in terms of financial results and accretive acquisitions, but also in our ability to make a positive difference in that regard earlier in this year, we established a dedicated usfive million dollar funds to help address the impacts of.
COVID-19 more than doubling our budget for community support.
We have now deployed approximately $3 million of those dollars of our COVID-19 response been to support various programs globally.
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.
In Brazil in Mexico, and in Peru. The fund has helped to provide food security medical services and supplies, such as an ambulance and ventilators and economic opportunities for those in need specifically in Brazil. We have funded the production of face masks to help reduce the spread of COVID-19, while supporting local.
Female entrepreneurs.
We continue to work with our partners to identify additional programs that support their COVID-19 relief efforts.
Now more than ever we must come together to help support our communities and make a positive impact and we continue to urge our peers in the streaming space to follow our lead in this regard.
In summary, despite the temporary shutdowns of some operations. The first nine months of 2020 has resulted in record revenue and cash flow and the second increase to our dividend this year.
In summary that but we remain optimistic that we will 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 with our recent listing on the London stock Exchange, we are excited that a new audience now has the opportunity to invest in wheat.
And we believe our business model offers UK investors and new and appealing opportunity to gain exposure to precious metals through a streaming company of Wheaton scale.
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 all of our stakeholders and continued to be leaders in the streaming and royalty space. So with that I would like to open up the call for questions.
Operator.
Thank you, ladies and gentlemen, we will now conduct the question and answer session I'd like to ask a question. Please press Star then the number one on your telephone keypad if.
I would like to withdraw your question press the pound key there will be a brief pause while we compile documenting roster.
And your first question here comes from the line of Ralph Profiti from capital. Please go ahead. Your line is now open.
Hi, there Ralph everyone. Good morning, Thank you for taking my questions Randy.
Randy in your commentary in the Mdna you talked about.
Comfort with the higher end of guidance for 2020, where are you feeling most confident in terms of the operations I think its been well telegraphed at Penasquito strong quarter over quarter and Q4 is going to be there strong says that the primary source are you feeling greater comfort and some of the other operations and if so which ones.
Well the Penasquito is definitely seeing the best grades a and can continues to surprise to that side and on top of that newmont's doing great. Great work, there with respect to recoveries.
And throughput and so it's just a combination of Penasquito probably is the is the the strongest within within the group itself.
We are seeing strength in every asset I think I think where were the comfort is coming from is actually the fact that everyone rebounded from the suspension so rapidly.
Good strong production numbers and we had when we originally came up with the revised guidance, we had felt that.
The combination of the higher absenteeism end to end and the restart of the operations that were suspended was going to slow things down a bit but it. It really appears that our operators had had put a lot of ill put a lot of effort into making sure that when the restart happened it happened strong and relatively well so so yeah.
Yes, I think across the board. It was it was penasquito performing a bit on grades and recoveries and ER and then overall just all of the operations that the impact on on from the pandemic have they've just rebounded.
Stronger sense, all the way across the board.
Yes, good answer I appreciate that and.
As an industry, we've seen a lot of dividend increases right than its becoming sort of.
A little bit more competitive in terms of one upmanship and in the context of the London listing on the new source of capital. How are you feeling in particular about that 30% ratio right. It's been in place for a couple of years.
Could you go higher would you go higher.
Your thoughts on that would be appreciated.
We will go higher is just a matter of timing.
We we of course have very very strong cash flows and good strong organic growth in the portfolio and so we have a choice we fund our dividend, but the rest of it goes back into the ground now.
We don't make any further investments our debt should disappear by the first quarter of next year and we start building up a war chest to to put back into the ground, but if that were just gets too big we will be increasing the dividend the feedback and so as I like to say our first objective is to pay a good strong healthy dividend like we are right now but continue growing the company.
But if we don't see the right opportunities to put the money back into the ground and we return it to our shareholders and the dividend will grow so until it's I think it's a matter of time as our company grows as as the organic growth that we've got scheduled over the next.
Five to 10 years comes into fruition.
You know I can't see it's going to get tougher and tougher for us to invest all that cash flow back into the ground, which means that the dividend will grow but the real advantage of of our dividend mechanism is the fact that it is directly linked to our cash flows and of course, our cash flows are directly linked to commodity prices and so.
So the shareholders are actually reaping a benefit beyond the increase in share price.
With these higher precious metal prices that we see and so it's a it's a good strong system that.
Yes, we do average it over the previous four quarters. So it doesn't take much to understand that there's there's still upward pressure on this dividend even for the next quarter and the quarter after that as long as prices stay up where we are right now.
It's going to continue growing.
Growing it on a per share basis.
Great well said Randy Thank you.
Thank you Ralph.
Once again, ladies and gentlemen, if youd like to ask a question. Please press star followed by the number one on your telephone keypad.
Your next question comes from the line of Cosmos Chiu with.
PC. Please go ahead. Your line is now open.
Hi, Thanks, Randy Gary Haithum, and Patrick and thanks for taking my questions here.
Well, we just.
Thanks, Randy maybe my first question here is on.
The ounces produced but not yet delivered.
Clearly 2020 with an unusual year look over 19, but in the past in Q4, you know, they're what usually a big big drawdown in terms of inventory and then it will result in higher sales and production for Q4, but we in precious metals.
Maybe it's too early to tell at this point in time, but should we expect that once again in year 2020.
Hi, Cosmos its Gary.
You know, it's very difficult to predict.
You know we had I think expected that the PND balance would have been higher at the end of Q3 than it than it.
Ended up being.
So you know our partners were doing.
Doing a very good job of keeping.
Concentrate and dory.
Slowing.
And we.
We generally do anticipate that.
Yeah.
Mining companies.
In General, we'll we'll try to.
Minimize the amount of.
Unsold concentrated and dori that they have at year end.
And.
So you know.
We're not anticipating a significant build up in the in Q4, but.
But you know if you look over the past few years, you know there have been.
There have been surprises in that regard and so it's hard to to anticipate I would highlight that you know.
If there was a build up.
That you know that that translates into sales the next quarter. So it's not like a long term issue. It's a very short term issue, it's just very difficult to to.
To predict.
Of course.
Maybe switching gears, a little bit I was reading your end DNA and.
I guess as you mentioned Barrick at Pascua Lama in Q3, they elected not to exercise the option to cancel the screen the PMTA.
Could you remind us is there.
Their last sort of opportunity to cancel that and on that you know is this the outcome that you had expected and preferred.
Could you maybe comment on that.
Cosmos that you had that backwards. It was it was off that had the opportunity to cancel the street.
Okay. Yeah, yeah. So I think they would have cancelled a long time ago actually.
[laughter].
No the.
It was thus we have the opportunity so the way that the deal was structured was that up to a certain point we could.
As for the remainder of our money back.
And so that point was essentially the end of September.
And we're still believers in the project, we think that we did receive a substantial amount of compensation silver back from Barrick already so although we invested $625 million into the project originally where I think we're only about 255 million into it right now because of the compensation silver from the other mines in South America.
But that has ended and then for $255 million.
We feel that Pascua Lama this the that the 25% of the silver on past glaucoma, we think it's worth more than that we think its a.
We are still a believer in the project. It definitely has its challenges, but we we know that Barrick is working on it to try and.
And find the way around the challenges and work with the community and we we do think it's a project that will deliver strong sustainable benefits to both Chile, and Argentina at sometime in the future and to Barrick shareholders sometime in the future and.
And we're going to be patient and wait for that so it was our choice to do that and we chose.
Not to take the refund and to stay invested into possible.
And that passed well on a number that's not included in your 750000 Alices state you're projecting in terms of Geo ounces right, yes, definitely not no I. That's that are 50000 ounces for the next five years, including 2020, I think it's important to highlight that.
If we're going to maintain that and if you look at our 2020 production that means that the next four years will average about 770000 gold equivalent ounces. There is no passport Lama in there there is no rosemont in there there was no navidad in there.
It's it's only projects that are on schedule and in fact, I would I would say we've taken a pretty conservative approach on salobo in that forecast also so those.
We're we're waiting for the updated mining plan from ballet expected sometime next year. So we think theres definitely some upside in that 770000 over the next four years.
Well sure maybe.
Maybe ill quickly on Constancio as as you mentioned the Pampacancha was delayed in 2020 as a result, you were able to receive additional about 8000 ounces in the year.
No.
Seems like they're on track.
For start up early 2021.
I think it's going to happen, but could you remind us if.
If there's further delays is there any kind of other soda Allison is that you'll receive in compensational was the 8000 ounces pretty much it.
The the the we did give them make an extension because of a they've had pandemic.
Impacts down in Peru, with respect to government agencies in terms of giving approval on a go forward basis, and so we did give us some extension through to the end of June.
Next year at that point, we get to sort of refresh and look at.
Look at the the stream itself, whether we decide to adjust the stream or go forward ill.
Hudbay has been doing a great job in this thing moving it forward and we're a supportive partner of theirs. So we will work with them to make sure that it comes due to a satisfactory arrangement, but I'm I'm very confident that they'll have it up and running before the end of June.
Great. Thanks, a lot once again those are all the questions I have thanks for answering my questions. Thank.
Thank you Cosmos.
Your next question comes from the line of John Tumazos from John Tumazos, Gary Independent Research. Please go ahead. Your line is now open.
Thank you for taking my question.
I know this is John I know some of the mine operating companies.
I have a lot more operating risk of freeze their dividend many times.
Percentages.
[music].
Could you tell us a little bit more about the philosophy and the 20% dividend hike.
Financially strong enough to raise the dividend a little more.
Are you going slow and gradual because.
Great is it too quickly or cut it too quickly.
Are you just putting a priority on repaying your debt and accumulating money for the Rosemont to serve its alone.
And your other investments.
I would actually say its a.
It's the were still confident that we have some new opportunities will be able to bring into the portfolio were very active on the corporate development front John Weve.
We've got lots of law.
Lots in fact, I would I would almost argue that were as busy as we've ever been on that front and so we're hopeful that we can actually add a few new assets to the portfolio over the next few months.
The.
So it's basically building up that capital, but but you know I have no doubt we will eventually grow into a yield more yield focused company that dividend as a percentage overall will grow.
I think it's important to sorta again highlight the fact that.
Yes, 30% was was scheduled as per our formula. So it was predictable I think everyone or sorry, the 20% increase that we've just had.
The schedule the you could sit and look at it and you know that we average it on a cash flows over the previous four quarters.
I'm pretty confident that <unk> of course, depending on how precious metal prices do over the next three months or the remainder of this quarter.
There's going to be upward pressure the next.
Quarter two for the for the next round of dividends, we establish a basement or a floor price every year that we won't drop below for the course of the year and then we use 30% as a reference now I can tell you that if we if we don't put money back into the ground. Then then the dividend will grow.
But as of right now, we still have a bit of net debt that will disappear in the first quarter will probably build up a little bit of a war chest. If we don't put it back in the ground and then.
And then we won't let it get to be too big of a war chest, because we're not really believers in money we'd.
We'd rather have it in ounces in the ground and cash in the bank and so so thats the point that we'll turn it around and put it back into a dividend if we if the what just gets too big.
Surely we as outsiders can't see the.
Evaluation project flow that you have.
But do you think is the likelihood is that Theres, a 500 million.
Your 1 billion dollar large project on the horizon in the next year or two.
Hey comes on the line here I'm going to let him answer that when he is he leads our corporate development the pretty girls your romancing.
[laughter].
Good morning, John how are you.
Just to give you a bit of an idea John we as Randy mentioned early we've been incredibly unpleasantly busy I guess, we've got lots of new opportunities were looking at the majority of the phone to the sub 500 million category and those are primarily development stage opportunities that fit into our early deposit structure as well as expansion opportunities, but we are seeing.
Phil some large billion dollar deals out there is at least a couple out there that they take time to come to fruition, but no. There. There. There's also been some royalty packages, which really don't make sense from a weighted perspective, mostly because they come with a significant amount of non precious metals, but yes, there is John as Randy.
I mentioned earlier I don't think Weve been this busy in a long time, where I've been saying that for probably the last three quarters and it doesn't leave keeps going.
How much capacity does that project.
To go to sites and.
Rigorously evaluate in the coated world as long as it was can you look at it can you physically do due diligence on one project to weaker one project to monitor how tough is it sure I should great question.
Nemec has not really affected our ability to advance streaming due diligence and consummate transactions were constantly looking at and evaluating new opportunities and we completed four site visits in the last month alone.
Some two of those were with external consultants and two of those were with our team specifically.
And one of the reasons I'm actually doing this by a cell phone rather than in the office as I mentioned that two week quarantine periods as I just got back from one of those sales as myself. So we're still very very active we've probably got at least another.
Three site visits in the next month and a half scheduled loan and they may be using Wheaton employees using consultants, we can rely on but we are definitely still very very active.
John every every jurisdiction is different in terms of how we manage that and so it all comes down to minimizing the risk and the and being competent in terms of what were investing into or what we're looking at and so so there is a balancing act with respect to every asset that we look at.
Thank you.
Thank you John.
Your next question comes from the line of Jackie can sellouts Kim from BMO capital markets. Please go ahead. Your line is now open.
Sure. Thanks, Thanks, very much and good morning, everyone.
Yes, just a follow up on John's question.
He's asking about the pipeline of deals you're seeing can you maybe give us an indication are these deals of meaningful size are you talking about deals that would be sort of 300 500 million in an upfront payment or does that change to deals that are smaller is there any color you can give in terms of that that distinction.
Hey, Tim I'll hand, it over to you again, yes.
Hey, Jack.
Yes, Jack is there is a whole range of deals say they range anywhere from one to 200 million all the way up to 702 billion. So there's there's quite a few the majority of them are I would say between the 300 and.
$400 million range, or 200, 400 million Thats, probably a better rate so were definitely still looking at a lot of opportunities out there.
Thanks, very much and just switching gears to tear and DNA you talked about voyages B you are scheduled to start receiving cobalt from that line I guess in a couple of months now it's hard to believe 2021 is almost here in the Mdna you you talked about that.
The pace of implementation.
Underground project is being slowed because of Cobiz does that affect the deliveries of cobalt that you are expecting is there any potential for delays to that thanks.
Not.
The beauty of the mine is essentially is transitioning from open pit to underground, but they still have.
Several years of open pit reserves in front of them and and it was always going to be a gradual transition.
If anything they did suspend operations in 2020 and a year that I think we're all going to be very happy to see behind us.
They did suspend production up at voices Bay during 2020, with which in fact pushed some of the stuff that would've been mined in 2020 into our streaming period starts in 2021. So there's a slight advantage we've had probably a bit more open pit reserves that will that will keep the mill full and.
Processing and so we don't expect any change in the production profile, it's just that.
They will be sourcing from the open pit as they as they get the underground up it was always planned as being a very trend.
Phase to transition.
Over a number of years and they've always got the backup of some of the open pit mining material available to keep make sure that the mill Stateful.
Okay Thats really helpful. Thanks, very much that's all my questions. Thanks. Thank.
Thank you Jackie.
Okay.
Your next question comes from the line of Charles Gibson from Edison. Please go ahead. Your line is now open.
Hi, good morning, if I make congratulations on an excellent quarter, Randy I'm I Wonder if you Charles or not so I wonder if I could ask just about my mouth. So quickly I see and congratulations again on closing that deal I saw and it was great. This is the first of July.
There is no sign of that having contributes it didnt.
Okay, and I, just wonder what that means in terms of the accounting if you like I spend just wanted a question for Gary going going forward. When it comes to the fourth quarter results, you're going to have two quarters. I'm also in the fourth quarter or is are you going to restate. The third quarter were just how are you going to treat that.
Yeah. Good question.
Carlos.
You know, there's still some conditions that need to be satisfied here in order to.
Cross the barrel head with silver so to speak.
And.
And so assuming that those conditions are satisfied in Q4, we would.
Report the production.
From July.
Yes.
In Q4, we.
And any sales that would result would would be attributed to to Q4 as well.
Okay that makes perfect sense. Thank you can I was just a follow up question, which has nothing to do with that of course, but I just not just for last couple of quarters Min.
Been contributing to production, but not sales and I just wonder if you could give us an idea of when you think men say, Mike start contributing to sales.
Yeah.
We would expect that though that production will be converted.
Converted to sales.
In Q4.
Yes. It was a recent start up and they're moving materials and new operators that are in there and so we're we're working our way through that process, but we'll have it all.
Cleaned up by the by the fourth quarter.
Excellent alright look forward to that thank you very much indeed, that's everything from me congratulations again.
Thanks Charles.
One more call. Please operator.
Certainly your next question comes from the line of Brian Macarthur from Raymond James. Please go ahead. Your line is now open.
Hi, Good morning, Dennis you mentioned in the emptiness just delaying plant can you just go through how you see that sort of evolving with the feed the mill and then how that looks in your five year versus what it looked before.
Well, it's I mean, originally it was scheduled out a to be coming in and it is a gradual gain so it's not like they're turning on the switch or something that they are just increasing the number of working faces in both Blitz and and in the east Boulder operation. So that's what's going on at both sites, but this is sort of the more headline project.
But.
One of the challenges and we've actually seen as a UBS.
Surprises actually doesn't get talked about a bit more in the industry, but the biggest impact in terms of the new measures that we have to sort of minimize risk on pandemic seems to be the underground operations and the time it takes to safely move everyone to the face to get the work done and at the end of the shift back away from the phase product.
I'd in underground mines as has definitely been impacted by by the pandemic response and by the efforts to minimize risk and and I think thats whats catching.
Still water as a whole is that they're seeing higher absenteeism rates like a lot of mines.
But there are also because they are entirely underground also dealing with.
Extra or lower productivity on a per man ship basis, because of the extra efforts that are required to minimize risk and we don't it's not just stillwater problem. It is we've seen it in all of our underground operations that seems to be an impact it's having a.
No impact on productivity and so so all of that sort of spills over into challenges on the Blitz because.
The Blitz being an expansion project and.
Their efforts are to first first priority is to maintain current levels of production and the expansion is sort of.
Is what's required after that and so there are new guidance came out to believe it's two years now before they expect to be up to that full level.
Of course, the original they had already had delayed.
Delayed that expected completion date.
But the original date would have been in 2021 was when they were first expecting it to be up and running and so.
The full levels. So it will be a gradual increase overtime. They continue to work on that and then the night I'm hopeful that the industry does find ways to address these productivity issues that we're seeing because it's a broader industry impact as a result of this pandemic and.
And.
We have to have to find some way to get to work around that.
At the same time minimizing risk of course.
Great. Thanks, very much Randy.
Thank you thank you Brian 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. The result in some of the highest margins in the entire precious metal space and sector, leading 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 and 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 soon stay healthy stay safe. Thank you.
And ladies and gentlemen. This concludes this conference call for today. Thank you for participating please.
Connect your line.
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Yes.
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