Q4 2021 Wheaton Precious Metals Corp Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome to Wheaton precious metals 2021 fourth quarter and yearend results conference call note that 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 or type your question in the Q&A box off the webinar and if you would like to withdraw your phone question. Please press Star then number two thank you.
Like to remind everyone that this conference call is being recorded on Friday March 11, 2022 at 11, a M. Eastern time, and I would like to turn the conference over to Mr. Patrick Toy Senior Vice President of sustainability and Investor Relations. Please go ahead Sir.
Thank you operator, good morning, ladies and gentlemen, and thank you for participating in today's call I'm joined today by Randy Smallwood Wheaton presence.
It's metals, President and Chief Executive Officer, Gary Brown, Senior Vice President and Chief Financial Officer, Haytham, <unk> Senior Vice President corporate development and West Carson Vice President of mining operations. Please note that for those not currently on the webcast. The slide presentation accompanying this conference call is available in PDF format on the presentations page of the week.
Metals website.
I'd like to bring to your attention that some of the commentary in today's call may contain forward looking statements and I would like to direct everyone to review slide two of the presentation, which contains important cautionary notice regarding forward looking statements. It should be noted that all figures referred to on today's call are in U S dollars unless otherwise noted in addition reference to Wheaton or Wheaton precious metals.
On this call include Wheaton precious metals Corp, and or its 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 <unk> fourth quarter and year end results of 2021.
2021 was another record year for Wheaton, driven by a strong quarter to close out the year in the fourth quarter of 2021, we produced over 186000 gold equivalent ounces, giving us a total of 753000 gold equivalent ounces for all of 2021. This was slightly above the mid <unk>.
<unk> of our previously announced guidance.
From a financial perspective, we had another solid quarter, resulting in record annual revenue cash flow and earnings as Gary will discuss shortly.
This solid performance reflects the underlying strength of our diversified high quality portfolio and has resulted in a 23% increase to the quarterly dividend relative to the fourth quarter of 2020.
In the fourth quarter, we continued to execute on our growth strategy announcing three new streams on two assets located right here in Canada, Artemis Gold Blackwater project and generation Mining's Marathon project.
And we Werent as the corporate development momentum continued into 2022, we have already have announced two additional streams since the beginning of the year one on that Ventas mining's corrupt Hamba project and the other in Sabina Golden Silvers Goose project.
Including these projects Wheaton has added eight new streams in the past 15 months, which have brought immediate production as well as medium and longer term growth to our already best in class portfolio of assets.
With the addition of these new streams, coupled coupled with recent exploration success at some of our existing mines Wheaton overall proven and probable mineral reserves grew by 13% on a gold equivalent basis, driven by a 20% increase in gold reserves alone.
We are excited about how this expanded base will translate into production growth over the next five to 10 years, specifically, we now forecast annual production to average 910000 ounces of gold equivalent production over the next 10 years with some of those years getting very close to 1 million gold equivalent ounces in the year.
Lastly, following ratings ratings update late last year. We are pleased to announce that Wheaton has demonstrated leadership in ESG continues to be met with sector, leading scores, including a double a rating from MSCI and a true number one rating in <unk>.
This metals by sustained political.
I would now like to turn the call over to Gary Brown, Our 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 interests produced 186400 gold equivalent ounces in the fourth quarter of 2021 comprised of 88300 ounces of gold six 4 million ounces of silver 4700 ounces of Palladium and three <unk>.
Third 81000 pounds of cobalt relative to the fourth quarter of the prior year. This represented a decrease of 2% in gold equivalent production with lower production at Salobo, resulting from lower grades coupled with an 18 day suspension of operations due to a conveyor belt buyer being partially offset by improved production at <unk>.
<unk> mines.
On a gold equivalent basis sales volumes were 2% higher relative to Q4 2020 as a result of relative changes two ounces produced but not delivered.
At December 31, 2021, approximately 157000 gold equivalent payable ounces were in PP&E. In addition to inventory amounting to 657000 pounds of cobalt or 6500 gold equivalent ounces with the combined figure of 164000 gold equivalent ounces representing.
Currently two seven months of payable production.
This level of PP&E and inventory is approximately 22000 gold equivalent ounces higher than the average balance of approximately 142000 gold equivalent ounces over the preceding four quarters. The increase in <unk> is primarily attributable to salobo and constancia with the increase in cobalt.
Inventory being attributable to the commencement of the Boise is bay cobalt stream in 2021.
Revenue for the fourth quarter of 2021 amounted to $278 million.
Representing a 3% decrease relative to Q4 2020, primarily due to a 5% decrease in the average realized gold equivalent price, partially offset by higher sales volumes.
Of this revenue, 51% was attributable to gold sales, 43% silver, 3% palladium and 3% cobalt drill.
Driven by the decrease in commodity prices gross margin for the fourth quarter of 2021 decreased 7% to $151 million relative to comparable quarter of the prior year cash based G&A expenses amounted to $16 million in the fourth quarter of 2021, representing an increase of $8 million from Q4.
'twenty, primarily due to higher accrued costs associated with performance share units or psus reflective of the company's strong share price performance.
During the quarter the sustained increase in the price of cobalt resulted in an impairment reversal of $157 million related to the Boise as vapor pressure.
Boyd's Bay cobalt.
St.
Including the impairment reversal net earnings amounted to $292 million in the fourth quarter of 2021 compared to $157 million in Q4, 2020 neutralizing for the impairment reversal together with a number of other minor items adjusted net earnings amounted to 132 million.
Compared to $149 million in Q4, 2020, with the decrease being attributable to lower commodity prices.
Basic adjusted earnings per share decreased 12% to 29 cents compared to 33 per share in the prior year.
Operating cash flow for the fourth quarter of 2021 amounted to $195 million or <unk> 43 per share compared to $208 million or <unk> 46 per share in the prior year, representing a 6% decrease on a per share basis.
Based on the company's dividend policy. The company's board has declared a dividend of <unk> 15, a share payable to shareholders of record on March 24 2022.
With the 15%.
15th dividend level setting the floor for 2022.
Under the dividend reinvestment plan or drip 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.
During the fourth quarter of 2021, the company disbursed $68 million in dividends $57 million in cash and $11 million under the drip program to date. The company has now returned more than $1 5 billion to investors through dividends, representing almost 50% of the total equity ever raised.
The company.
Additionally, the company invested $300 million relative to the Blackwater gold Pampa and as I'd be mined and processed more than 4 million tonnes of ore from the pump Concha deposit by December 31, 2021, we made an additional upfront payment of $4 million for the Constancia Pippa.
These cash outflows were partially offset by proceeds from the sale of long term equity investments in the amount of $18 million.
Overall net cash outflows amounted to $146 million in Q4, 2021, resulting in cash and cash equivalents as at December 31 of $226 million.
For the year ended December 31, 2021 production amounted to 753000 gold equivalent ounces exceeding the midpoint of the company's original guidance <unk>.
Revenue for 2021 amounted to $1 2 billion, representing a 10% increase relative to 2020 and a record for the company.
Of this revenue, 47% was attributable to gold, 48% silver, 4% Palladium and 1% cobalt on a gold equivalent basis average realized commodity prices rose by 10% in 2021, leading to an increase in gross margin of 13%.
G&A expenses in 2021 amounted to $61 million, representing a decrease of $5 million from 2020 with the decrease being primarily the result of differences in accrued costs associated with the psus non stock based G&A expenses, which exclude the costs associated with the value of stock options.
The restricted share units and performance share units amounted to $42 million coming in at the lower end of company guidance.
For 2022, the company estimates that non stock based G&A expenses will amount to 47% to $49 million with the increase from 2021 being primarily.
<unk> two <unk>.
Increased insurance costs combined with increase in increases in travel related costs as the restrictions arising from COVID-19 are eliminated.
Basic adjusted earnings per share increased 17% to $1 32 in 2021 compared to $1 12 in 2020 cash flow from operations for 2021 amounted to $845 million a record for the company and an increase of 10% as compared to 2020.
Due to the higher commodity prices.
This translated into operating cash flow per share of $1 88.
<unk> to $8 71 in 2020.
During 2021, the company eliminated outstanding debt by repaying $195 million under the revolving credit facility, we disbursed $218 million in dividend payments.
$130 million was received from the disposal of long term investments and $520 million in upfront payments were made relative to <unk> fueling future growth the capacity provided by the Undrawn $2 billion revolving credit facility combined with the strong forecast operating cash flows positions the company.
Very well 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 that concludes the financial summary with that.
I turn the call over to hate them.
Thanks, Gary and thank you all for joining us today by now you've all noticed that we had a busy fourth quarter last year announcing three stream acquisitions to add to the two streaming transactions announced earlier in the year. We subsequently announced an additional two deals in the first quarter of this year, our pressing forward as we continue to pursue opportunities, which can further enhance our medium term growth profile.
We've had a lot of investors and analysts ask us why Wheaton was successful in all of these transactions and where where our competitors throughout this process. It's a very good question and what I can say about the opportunities that we've recently consummated is that although they were all competitive process. We've been building relationships with many of these counterparties long before they decided to launch a process we've listened to their concern.
And tried to understand what it is they want and need and we've come up with structures and proposals to create a win win transaction.
Wheaton has also built a strong reputation in the industry over the past 18 years of treating streams as partnerships, bringing value to our counterparties. After we cut them to check for the upfront payments, we do what we can to help them advance their project, providing technical help when they need it and community support to help reinforce the social license and flexibility throughout the whole process.
Furthermore, we pride ourselves on undertaking a very thorough due diligence process and being highly selective as to what we add to our portfolio. There is value for a potential mining partner to point to there projects that haven't been reviewed by an independent third party, but theres, even more value when they can see it has been vetted by the Wheaton technical team.
Given our track record of treating our partners fairly fairly I truly believe that when bids are close we come out on top as a preferred partner and that has been demonstrated by our unparalleled success over the past 15 months.
I'll now take a few minutes and go through a high level overview of some of these transactions I'll start with an overview on the Blackwater project.
We were successful in acquiring a life of mine silver stream from Artemis and makes existing life of mine gold stream from new gold both on the open pit Blackwater project in British Columbia and.
In total the two streams will cost US 441 million U S with the payment to new gold, having already been made and the payment to Artemis to occur in four equal installments during construction.
Going gold production payment will be 35% and the ongoing silver production payment will start at 18%.
A large amount of exploration in great control drilling on the project has recently significantly derisked the reserves and resources.
Fixed silver recovery will also protect our investments and the large stream area of interest provides significant exploration potential construction is expected to start shortly with first production projected for 2024.
I'll turn it over to the next slide on generation Mining's Marathon project also located in Canada. This time, Ontario.
With this transaction our stream on this open pit begins at 100% of the life of mine gold and 22% of the life of mine platinum until certain thresholds are achieved after which the streams dropped by one third weeden will pay a total of 240 million Canadian of which Canadian 40 million will go in as an early deposit in two equal installments. In addition, we will make a starting production.
Payment of 18% for each ounce delivered assuming the timeline is maintained we would expect to begin receiving ounces in the second half of 2024.
This project is one of the highest we've seen for this size of a project and we feel there is strong potential for throughput increases and exploration success. So we're very excited to see this project built.
Turning to the next slide on Adventist mining sphere pump a project located in Ecuador. This is our first foray into Ecuador, and I can tell you that Ecuador is quickly becoming one of the better places to operate in Latin America.
Again this was an opportunity we identified back in 2018 and liked it so much that we took in early equity investment into the company as <unk>.
<unk>, which is a poly metallic asset weakness entered in a life of mine agreement for 50% of the gold and 75% of payable silver for a total of $175 5 million of which five will go to support the communities before production even begins.
Once again, we will make an 18% production payment to start and expect this project to begin production as early as 2024.
Based on everything Adventist management has accomplished in such a short period of time and given how they beefed up their team to develop this project and given also there's strong in country relationships were quite optimistic on the outlook for this project.
And turning to the next slide our most recent stream acquisition is from Sabina gold and silver on the <unk> project at back River located Nineveh, Canada Wheaton has entered into a $4 one 5% gold stream on the gold that we produced from the Ghost project dropping down after certain milestones are met for this interest we know advanced $125 million through out construct.
<unk> in four equal installments.
Based on the current profile and the work that's been done to date to advance. The project. We believe we could begin getting ounces under our stream as early as 2025 I'll also highlight that earlier this week the company announced that it will now start with a 4000 tonne a day mill rather than a staged ramp up from 3004 thousand tonnes and also highlighted that optimized equipment selection and detail engineering has resulted in a.
Slightly lower cost for us expansion, which will further improve the IRR of the project. This project is a high margin long life asset that falls into the lowest cost quartile and still possesses strong exploration upside with the deposits still open at depth.
I'll now pass the presentation over to West Carson for the operations overview.
Thanks, Nathan and good morning.
Overall production in the fourth quarter remained on budget and with strong production from pennants keto constancia in sand demand offset by lower than expected performance from Salobo and Sudbury.
In the fourth quarter Salobo produced 48200 ounces of attributable gold a decrease of approximately 23% relative to the fourth quarter of 2020 due to lower throughput grade and recovery.
On October 22nd Valley announced the resumption of copper concentrate production at Salobo that was halted for 18 days due to a fire on one of their main conveyors other activities, including minded maintenance operations continued as usual during this period, but concentrate production was interrupted.
If anything this issue really highlights the importance of investing in low cost high quality mines, such as logo at the speed with which this can bear was repaired shows how important this asset is to valley.
On January 6th heavy rainfall in the region of the Salobo III expansion cards, a land site that damaged part of the conveyor belt and blocked access to the project site a full assessment of the impact is ongoing and expected to be completed early in the second quarter of 2022.
That being said Valley also reported that physical completion of the Salobo III expansion was 85% at the end of the fourth quarter and continues to be on track for startup in the second half of 2022.
During the quarter Constancia produced 600000 ounces of attributable silver and 9900 ounces of attributable gold an increase of approximately 21% and 151% respectively relative to the fourth quarter of 2020.
The increase in both silver and gold production was due to higher grades, resulting from the commencement of ore production from the public conscious satellite deposit and increase in fixed recoveries on attributable gold from 55% to 70%.
The voices Bay Underground mine extension, which includes development of two new underground mines, Rebroke and Easter Deeps was 67% physically complete at the end of the fourth quarter.
<unk> produced its first ore in the second quarter of 2021 and Valley has indicated the eastern Dps is expected to start up in the second half of 2022.
Wheaton overall attributable reserves and resources saw good growth across all mineral categories, but the most noteworthy is by far our proven and probable mineral reserves on a <unk> basis total attributable proven and probable mineral reserves for all metals increased by 13%.
This was driven by a 20% increase in total attributable gold proven and probable mineral reserves, primarily due to the recently added <unk> and increases at Salobo.
Attributable measured and indicated mineral resources.
Exclusive of reserves also saw good growth at 9% on a <unk> basis, and overall attributable inferred resources grew by 3%.
We estimated attributable gold production.
Gold production in 2022 is forecast to be 350000 to 380000 ounces of gold 23 to 25 million ounces of silver and 44000 to 48000 Geos of other metals, resulting in production of approximately $700000 to 760000 Geos.
For the five year period, ending in 2026, the company estimates that average production will amount to 850000, Geos and for the 10 year period ending in 2031. The company estimates that average annual production will amount to 910000 geos.
That concludes the operations overview and with that I'll turn the call back to Randy.
Thank you Wes Haytham and Gary.
In summary, Wheaton recorded a solid fourth quarter, which resulted in a record full year of 2021 distinguished by several key highlights.
We achieved record 12 months revenue earnings and cash flow driven by production of 750750, 3000 gold equivalent ounces, which was once again slightly above the midpoint of our guidance.
In 2021, our commitment to accretive growth was emphasized by the completion and welcoming of five new streaming partnerships into our portfolio of high quality assets, which contributed to the significant increase to our reserves and resource base.
We showed the continuous growth in our dividend through the throughout the year with total dividends paid in 2021, increasing by over 35% from 2020.
Following recent ESG ratings updates we were honored to once again be recognized by external rating agencies for our performance in this area with sector leading scores.
And lastly, we believe our portfolio continues to deliver ample opportunity for organic growth the benefit of which we expect to see from assets such as the global voices Bay and Constancia.
So operator with that I would like to open up the call for questions. Please.
Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star followed by one of your Touchtone phone.
If you would like to withdraw your question simply press Star followed by two.
There will be a brief pause while we compile the Q&A roster.
And your first question will be from Tyler Langton Jpmorgan. Please go ahead.
Good morning, Randy and team Thanks for taking my question.
Just to start with slow, but obviously there is some impact recently from the fire in the land side could you just talk.
Talk a little bit that sort of what you think production could look like this year and then with the phase III expansion, what it looks like over the next several years.
I know, it's slow way to kind of produce more for you in this or the trivial production was in sort of the $2 70 to $2 80 range is it something where you think with the phase III expansion can kind of get back to those levels.
Thanks, Tom West here, So I would say the last two years. So we have definitely been difficult for salobo with Covid and with the fire last year certainly.
So we are seeing certainly improvements moving into 2022 here there is better production, there and certainly with Salobo III coming online in the latter part of the year here that production will ramp up now that being said I mean, the great guys come off a little bit in the coming years. So we will see things getting back closer to the levels, we've seen in the past, but but not really.
Exceeding kind of that 270 to 80 that youre seeing there. So it is more of a kind of maintaining as the grades come off a little bit, but certainly production going up significantly with Salobo III coming online.
Great. That's helpful. And then just second question just asked.
Done a lot of deals recently I mean is your pipeline still.
Feel pretty sort of active and then you can just kind of give any commentary in terms of size of deals.
Type of deals, whether it's primary precious metal or our byproducts.
Any color around that area would be great yes.
Yes, you bet. Thanks for the question Tyler its haytham here.
We're still seeing a lot of new precious metal streaming opportunities. The majority is still I think as I said before falling into the $100 million to $300 million range, and then primarily development stage opportunities with precious metals as a byproduct and that's obviously where streaming works best as you've seen from last few deals. The streams will continue to help our medium term growth profile and that's that's just.
The stage in the cycle that we're in right now most of the base metal companies are cashed up and so theyre not looking for financing from that perspective, but development stage opportunities are definitely out there. So we're trying to find the best ones as we move forward.
We're also seeing streaming to fund expansions and for M&A opportunities, but we do think this will increase as time goes on.
But we have yet to consummate.
A material one from an expansion or sorry from a M&A perspective.
As share prices rise, there's going to be a point where companies will begin to use our strong paper for consolidation and we're not seeing much in the day these days and ways of balance sheet repair and that's expected given the strong commodity price environment.
Optimistic that we can continue to deploy our cash and add quality streams in the current environment Accretively, probably not one month like we've been doing for the last five months, but.
Definitely and I keep trying to get some high quality centers, but it's not for us. It really is quality. Our focus is is not on quantity, it's getting the portfolio getting the streams high quality asset to our portfolio that is already a high quality portfolio.
Okay. That's perfect. Thanks, Kevin that's it for me.
Thanks Tyler.
Next question will be from Johnson muscles at John Tumazos very independent research. Please go ahead.
Thank you and congratulations on everything.
Thank you Jonathan Bryan Randy I noticed that.
As best I can study your assets.
And doesn't have a single asset in any of the 52 countries refuse to condemn the Ukraine invasion last week at the U N.
Well.
Youre the only royalty streaming company among the large ones that can say that as best I can determine.
Can you just talk a little bit about that.
History of the company and how you've managed to stick to North and South America.
Spots in Europe .
Yes.
I know, it's not a perfect measure political risk, we still have passed score on Rosemont.
Navidad and things get hung up.
Ed.
Can you just talk about how you pick countries and how you stay out of certain cotton Thats plays.
Yes, sure and John you, you've known the company long enough to remember the silver Wheaton days, we did start off as a silver focused company and being silver focused that led us to the Americas, Mexico, and Peru, particularly.
Dominant in the silver space and so when it came to looking for silver projects. It just gave us an Americas bias right off the bat.
And to be honest, we've maintained that to a very large extent it's.
It's been a while since we've added anything outside of the Americas. Most of the projects. We are looking at are in North and South America and even currently we still we've reviewed projects and in Africa and in Asia, and we do have a few streams in Europe and good stable jurisdictions, but it is something that's important to us.
John you know this business as well as any in the sense that these are life of mine investments, we are making life of mine investments into these assets and so we're not here for the three to four to five years to sort of flip it into some other owner, we own our decisions and we own them for life of mine and so political risk is something that's incredibly important to us and we have to.
Make sure that we capture that it's not something that can be truly measured are estimated and you listed off a couple of examples.
Pasqua and Rosemont projects that should be built and I am confident will be built.
But.
Yes, sometimes.
I am a strong believer that common sense will prevail, sometimes it just takes a while and I truly believe that that's the situation with both of those and a few other assets in our portfolio as they are good quality assets and when you compare the the impacts to all stakeholders. They would provide net positives to to society as a whole in terms of those projects going forward, especially.
Some of the ones that will be delivering copper into today's world seeing where copper is right now and so we patiently wait for for those partners to work their way through their permitting challenges and get those projects, we established and deliver positives back to society.
When it comes to looking at countries. It is something that's very very important to us and we are blessed with with <unk>.
Great portfolio of assets that that that will provide good strong exposure, especially in times like this when.
Everyone should have some some precious metals, everyone should have some gold in their portfolio and our whole objective is to make sure that Wheaton is the preferred choice when it comes to exposing yourself to precious metals in your portfolio.
Alright. Thank you if I can ask another.
Of course impressive that you've completed so many transactions and of course.
The company's invite you to invest when they need the money to build the mine before its production.
Have you been able as your team been able to visit the sites.
Yeah.
So COVID-19 restrictions starting to ease.
And with inflation being rampant.
How are you.
Relying on are not relying on tech studies.
Q piece I have a hard time, keeping up with inflation just like all of us.
John I'm going to let Haytham start off the answer there Joe I'll start with the first asked the first part of the question.
Just with regards to <unk> et cetera, John .
When Covid first started there was the travel restrictions that for about the first six months.
Two maybe six to nine months, we werent able to really travel so.
So we did still do a very detailed desktop review and I have to say, we also actually hired in country consultants for the opportunities that we were looking at to actually confirm what we actually concluded from our desktop reviews. So we made sure that it is still past are.
Our hurdles internal technical hurdles, but I also have to say that a couple of transactions that we contemplated right as COVID-19 started we'd already visited a year before towards the tail end of the year. So we weren't really disadvantaged about a year and a half ago. We decided we were fairly comfortable traveling so we did travel to a lot of the sites some of that sometimes that involved thats coming back.
And quarantining in our basements for two weeks, which.
It wasn't a lot of fun, but we did what we had to do in and since the quarantine for two weeks just stopped and we resumed operations as usual.
And the second part of that John .
First off and then Theres Haytham underscored we own our decisions and we don't we don't we never rely on other <unk> and other reports, we use them for guidance RBC and we test projects relative to that but our technical team takes these projects apart and rebuild them.
And it's because we we report directly to our shareholders and when we come out with a production number we stand by that we own that decision, we're not going to point the finger to anyone else and so.
It's something that's very very important in terms of understanding these projects not only from a risk.
But also from an opportunity sets in again highlight going back to the whole partnership aspect of our streaming agreement, where we are if we see opportunities to help our partners be stronger we put that effort in we try and find those opportunities and shape that and so.
And the other area you mentioned in terms of relying inflation on capital cost estimates again reinforcing that that.
First quartile second quartile assets, where they have healthy margins. So if you do have to deal with a bit of a capital cost overrun, which which is probably going to be more of the cases inflation rears. Its ugly head here over the next few I think it is going to be around for a while.
You want to make sure that you have projects that do have those margins are still drive the incentive to invest and then you also want to make sure that these projects have capacity and I can tell you that a number of the projects that we've recently invested into we'd love to do larger streams on them.
So those companies they know that they've got wheaton in their back pocket to help them if they need that in terms of going forward. So.
Again, the capacity that we see in these projects because of their high operating margins. If there is if there is a need for a bit of extra capital during that construction period.
We hope to be the first place the first dore that those companies knock on to to try and satisfy that need for extra capital. So so I think we're perfectly positioned to help our partners be successful and that's the whole objective I would just add one other thing John It's Gary here.
From a contractual perspective, we.
We always include completion tests in completion guarantees, which.
Which.
Give us.
A lot of protection for any any type of delay that might.
Raj.
Thank you very much.
Thanks, John .
Once again as a reminder, ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone.
And your next question will be from Adam Josephson at Keybanc. Please go ahead.
Randy Gary Haytham. Good morning, Thanks for taking my questions I appreciate it.
Hey, Tim you mentioned, you talked about base metal producers not being in any great need of capital at the moment like precious metals producers for that matter, but.
Have you also and maybe this is for Randy or whomever have you changed your thinking at all in terms of the attractiveness of base metals.
<unk> precious metals, just given everything that's going on you obviously reversed year your impairment.
Because of what's happening with cobalt prices.
As Youre thinking evolved at all along those lines, obviously you want to be.
Much of precious metals company, but might you be a little more flexible in terms of the percentage precious metals than was the case before and just any thoughts you have along those lines.
Sure thing Adam.
That's a good question because it does come up and as we've seen cobalt on its way to becoming a precious metal.
There's definitely.
Bears bears interest in terms of how we've done on that front.
But it really comes down to what we're offering to our shareholders. Our focus is to be a precious metals company and if you want iron ore exposure I can point you to a company and that allows you as a shareholder to vary your interest levels in iron ore I'm not going to force an exposure to iron ore to you. If you want oil and gas I can point you in whichever direction, you want Theres a number of <unk>.
He is out there that provide good pure oil and gas exposure.
Yes.
I really think that shareholders should have the opportunity to define their own diversity in terms of when it comes to that the exposure. So so our mandate are our focus here is to be the best precious metals company that we can be in and deliver that precious metals exposure now that being said, we study everything well.
I will say, we don't study oil and gas, we don't even bother looking at oil and gas, but we do study everything we look at the iron ore stuff, we look at cobalt, mainly mainly because we like to know what our peers are doing in this space and understanding that and I'm not going to say that we won't shy away from the occasional deal and that as is exemplified by the voice These bay deal with <unk>.
But the reason we did that transaction was because vale approached us looking for support for that mine. They are an existing partner.
We studied the cobalt market the more we liked it as as an asset and that asset, especially in the cobalt world produces the greenest.
Most socially responsible most environmentally sound cobalt in the world.
Dedicated smelting facility at Port Henry Henry that just.
That just delivers top tier product to two.
To society and so it just had some special aspects to it that made it very unique and it was an existing partner, where we were we were looking to provide that support.
Not out hunting that stuff, but if opportunities are portfolios come along where theres a bit of base metals exposure were also not shy of that but we're not looking for it and so my prediction is we will constantly stay over 95% precious metals exposure and depending what cobalt does it may even climbed to 100% again.
Maybe Adam I'll, just add one thing to that.
Opportunities come in.
We recognized in the market recognizes there were precious metal streaming company now for sudden some reason there was an opportunity that came in that said listen you have to do the precious metals and a tiny bit of base metals, we wouldn't let that disadvantage our bid and the opportunity to adequate high quality precious metals portfolio. If we like the asset we would maintain that that small base.
Metal component in our in our portfolio. If we didn't feel comfortable we'd find a partner and theres lots of partners out there looking for us to partner with them on the streaming opportunities.
And just a follow up I saw uranium opportunity came your way that's not something that you would be it sounds like all that interested in muscle as part of some other.
Opportunity as well.
That's safe to say, yes, yes.
Okay.
And Haytham in terms of you mentioned the IRR on a couple of projects in going over the four acquisitions since December .
You frame for us how.
How you thought about the IRR on those deals relative to the roughly 5% discount rate that's typically apply to your future cash flows.
Sure and the way we look at these transactions as we start at a specific discount rate and we incorporate.
Increases in that to that discount rate, depending on what type of risk we have what type of security we can get guarantees.
It is in the development stage, who the partner is how long to production. So so we reflect that a lot I think when we try to get something thats at least if we can consistent with what our weighted average cost of capital is and if you look at our return over the last call. It 18 years I think Gary would probably tell you it's probably.
Somewhere in the 18% range. So obviously that commodity prices have something to do with that but we're never going to jump into something that we don't feel is going to generate that solid return for us.
Without a movement in the commodity price. So we do take a deep dive into the exploration upside into the potential for expansions and throughput projects efficiencies improvements in recoveries. So all of that is weighed into our analysis. So if you suddenly see as coming in with a 5%.
IRR on a transaction, which I think one of the transactions. We did had that level I can tell you. We think it's a lot higher than that that's just what's public.
Adam we target typically.
Hi.
Straight line commodity price going out we target high high single digit on existing operations and low double digit on on development projects, but just to reinforce what what Nathan said, we value. These assets based on what we uncover based on what we build based on what we see we don't rely.
Obviously used as a reference in the checkpoint.
The company's own guidance in the company's own qualified person reports are independent QP reports, but.
But we do build it ourselves and that's key because.
If we see opportunities on the grade side, if we think they have been a bit conservative on interpretation or or very agra fee or stuff like that.
Again going back to an earlier comment we own our decisions and so anytime you see.
Something that might look a little bit lower it'd be cognizant that there might be some exploration success coming or perhaps there is a great upside.
Opportunities that we've uncovered and our own due diligence because we haven't changed the way we value these assets ever since we started the company. It's the same approach.
I appreciate it and just one clarification on if you think about the last four deals compared to the preceding several that you did did you view the IRR is.
Much differently in terms of the last four versus your more historical deals.
No. It's our approach has been exactly the same.
Thanks very much.
Thank you Adam.
Next question will be from lowered Ashburn Edison. Please go ahead.
Good morning, and thank you very much indeed for taking my questions Charlie from Edison in London.
I Wonder if I could ask probably a question for Gary I think.
You, obviously made some fairly substantial investments in the fourth quarter, which would be in line with.
The announcements you made about the various streams viewed board.
I'm guessing you haven't paid all of the consideration for all of them, but I just wonder if you could outline how much you paid for work streams. So at least so far in the fourth quarter and how you see the balance of that panning out over the course of the next year or may be further I mean granted thats all covered by cash flow I understand that but I just.
What's been paid for and what's what's outstanding still.
Yes. So in Q4, we made two payment.
Payments.
<unk>.
What I would consider upfront payments relative to the.
The first was the $300 million that was paid to new gold relative to the Blackwater gold stream.
So thats been paid and as Haytham outlined there's a silver stream that we've done with Artemis that.
We will make a $141 million worth of upfront payments relative to as they move forward with construction, but and then there was a $4 million payment made high bay relative to Constancia for them.
Mining.
More ore than we had anticipated from from the <unk> pit.
$304 million in Q4.
At the end of December .
<unk> had.
About $1 $9 billion of.
Commitments outstanding the biggest of which relates to the.
Salobo III expansion and.
We only make that payment, which.
We estimate it will be in the neighborhood of $550 million to $650 million.
And we make it once they satisfy a completion test, which we expect.
They will satisfy in 2023.
And then the other pain.
Payments.
Roughly one $3 billion worth of additional payments will be made over the next five years really.
We without us doing a.
Another transaction, we don't see ourselves.
Actually.
Being.
Needing to draw upon the credit facility to satisfy those payments. So we would expect to be.
Satisfying those payments with the operating cash flow.
But Charlie Trust me, we are trying to dive into that revolver always but only for the right projects.
I understand quite well I have you can I can I ask another question, so slightly a housekeeping question for which I apologize but.
I mean, correct me if I'm wrong.
It looked like that was slightly more restatements of past production.
Annual results announcement of this time than I'm used to I used to celebrate being restated quite often but it looked like there were a few more.
Just wondered if there was any particular reason for that I would put it down internally to <unk>, but maybe my observation is wrong, but I just wondered if that was it.
If there was anything about Youll counterparties bookkeeping that was that was peculiar about last year.
Charlie you have got us scratching our heads here right now so.
We're going to have.
Perhaps take this offline and go back because theres nothing unusual in terms of <unk>.
These statements yes.
Yes, I mean, Charlie after remember that production.
As always an estimate and we get as we get.
More information on what was actually produced in the quarter. We go back and make modifications that being said I don't I'm.
I'm not aware of any significant.
Modifications to past production, but like like Randy said, we'd be happy to follow up offline on that.
No understood. Thank you and they certainly weren't significant in any way at all it was just tweaking my numbers a bit.
I was speaking more normal it was more feeling anything else looking.
Congratulations thank you really appreciate it.
Thank you Charlie and thank you everyone for dialing in today in closing, we believe Wheaton is well positioned to continue delivering value to all of our stakeholders for a number of different reasons, firstly by having low and predictable costs, which when coupled with leverage to increase in commodity prices result in some of the highest margins in the entire precious metal space.
Secondly by offering our shareholders exposure to some of the highest quality mines in the world through our diversified portfolio of long life low cost assets.
Thirdly by offering our growth profile unmatched by the senior streaming and royalty companies.
Fourthly by being the preferred partner for precious metal streaming by delivering more value to our partners than just the upfront payment.
<unk> by returning value to shareholders through our unique cash flow linked dividend policy and lastly by being a leader in sustainability and by supporting our partners and the communities in which we live and we operate.
Sure.
I do look forward to speaking with you all again soon until then please stay healthy and stay safe. Thank you.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines have a good weekend.