Q2 2022 Wheaton Precious Metals Corp Earnings Call

Mhm. Mhm. Then.

Good morning ladies and gentlemen, thank you for standing by. Welcome to Wheaton Precious Metals 2022 Second Quarter Conference 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 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 of the webinar.

If you would like to withdraw your question, press star then the number 2. Thank you.

I would like to remind everyone that this conference call is being recorded on Friday, August 12, 2022 at 11 a.m. Eastern Time. I will now turn the conference over to Mr. Patrick Druin, Senior Vice President of Investor Relations and Sustainability. 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 Precious Metals President and Chief Executive Officer, Gary Brown, Senior Vice President and Chief Financial Officer, Hatham Holay, Senior Vice President, Corporate Development, and Wes Carson, Vice President, 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 presentation page of the Wheaton Precious 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 direct everyone to review slide two of the presentation which contains important cautionary notes regarding forward-looking statements I should note that all figures referred to on today's call are in US dollars unless otherwise noted In addition reference to Wheaton or Wheaton precious metals on this call includes Wheaton precious metals Corp And it's wholly owned subsidiaries is 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, everyone. Thank you for joining us today to discuss Wheaton's second quarter results of 2022.

I am pleased to say that our portfolio once again delivered solid revenue earnings and cash flow in the first half of 2022 as Gary will discuss later.

This solid performance reflects the resiliency of the streaming model to inflationary pressures currently being felt across the global economy and especially amongst the traditional miners.

In fact, our average cash cost per gold equivalent ounce actually decreased in the first half of 2022, relative to the first half of 2021.

While we continue to actively pursue a number of new opportunities in the second quarter, we also showed our willingness to strategically identify opportunities both inside and outside of our portfolio that create value for our shareholders.

To that end, in the quarter we announced the proposed termination of the Keno Hill stream for $135 million, which, when completed, will ultimately result in an absolute return on our Keno Hill investment of over 300%.

However, the termination of the stream combined with severe weather events at Stillwater and lower than expected throughput from Salobo have resulted in Wheaton having to lower its 2022 production guidance.

Wes will provide more information later in the call.

Despite this, given our strong balance sheet, liquidity available for investment, the production growth at our key producing assets, and our diverse development portfolio, we are on track to generate sustained long-term production and strong growth over the next four years.

Lastly, we once again demonstrated our leadership in sustainability and value creation for all stakeholders by publishing our third annual sustainability report and announcing a sustainability-linked element in connection to the renewal of our existing undrawn $2 billion revolving credit facility.

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.

Thank you Randy and good morning ladies and gentlemen. The company's precious metal interest produced 163,000 gold equivalent ounces or GEOS in the second quarter of 2022, comprised of 68,000 ounces of gold, 6.5 million ounces of silver, 3900 ounces of palladium and 136,000 pounds of cobalt. Relative to the second quarter of the prior year, this represented a decrease of 15% on a gold equivalent basis.

1,700 GEOs with the combined figure of 133,000 GEOs representing approximately 2.4 months of payable production.

This is approximately twenty four thousand geos lower than the average over the preceding four quarters

Revenue for the second quarter of 2022 amounted to $303 million, representing an 8% decrease relative to Q2 2021, due to a 5% decrease in the average realized gold equivalent price combined with the lower sales volumes. Of this revenue, 52% was attributable to gold sales, 43% silver, 2% palladium, and 3% cobalt.

Driven by the lower realized prices and sales volumes, gross margin for the second quarter of 2022 decreased 11% to $162 million. However, worthy of note is the 1% decrease in the average cash cost per GEO, highlighting the resiliency of our business model to the inflationary pressures being experienced across the mining industry.

G&A expenses amounted to $10 million in the second quarter of 2022, and donations and community investment expenses amounted to an additional $1 million, with the combined figure of $11 million being virtually unchanged from Q2 2021.

For 2022, the company continues to estimate that G&A expenses will amount to $41 to $42 million, while donations and community investments are estimated to amount to an additional $6 to $7 million.

Stock-based compensation amounted to $2 million in the second quarter of 2022, representing a decrease of $6 million relative to the comparable quarter of the prior year, primarily due to the differences in accrued costs associated with the PSUs.

Net earnings amounted to $149 million in the second quarter of 2022 compared to $166 million in Q2 2021. Basic adjusted earnings per share decreased 8% to 33 cents compared to 36 cents per share in the prior year.

Operating cash flow for the second quarter of 2022 amounted to $206 million, or $0.46 per share, compared to $216 million, or $0.48 per share in the prior year, representing a 5% decrease on a per share basis.

Based on the company's dividend policy, the company's board has declared a dividend of $0.15 a share payable to shareholders of record on August 26, 2022.

Under the Dividend Reinvestment Plan, the Board has elected to offer shareholders the option of having their dividends reinvested in newly issued common shares from the company at a 1% discount to market.

During the second quarter of 2022, the company made dividend payments relative to the prior two quarters totaling $117 million, invested $15 million relative to Marmotto, and acquired $3 million of long-term equity investments. Overall, net cash inflows amounted to $72 million in Q2 2022, resulting in cash and cash equivalents at June 30 of $449 million.

Recently, the company added a sustainability-linked element to its revolving credit facility, underscoring the company's commitment to ESG initiatives. In addition, the term of the revolving facility was extended to July 18, 2027.

The capacity provided by the undrawn $2 billion revolving credit facility, combined with the strong forecast of 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.

Thanks, Gary. Good morning.

Overall production in the second quarter came in lower than anticipated with lower than expected performance from Salobo and Stillwater, partially offset by stronger than expected production from Constancia, Penasquito and Antimena. In the second quarter, Salobo produced 34,000 ounces of attributable gold, a decrease of approximately 39% relative to the second quarter of 2021 due to lower throughput and grades.

Mine Movement saw its continued improvement throughout the quarter, however, concentrate production was negatively impacted by process plan performance due to delays in the ramp-up after a planned maintenance shutdown and additional corrective maintenance.

Valet expects further maintenance work to continue in the second half of 2022, with a focus on improving the overall operational performance at both the mine and process plant, ultimately resulting in improved production through the remainder of the year. Valet also reported that fiscal completion at the Slope of Three mine expansion was 95% at the end of the second quarter. In addition, they began commissioning activities at the primary crushing and stockpile areas during the quarter.

In the second quarter, Stillwater mines produced 2200 ounces of attributable gold and 3900 ounces of attributable palladium, a decrease of approximately 27% for gold and 26% for palladium relative to the second quarter of 2021.

Regional floods impacted the stillwater operations on June 13, 2022, including damage to multiple bridges and the access road to the stillwater mine.

Access to the East Boulder Mine and the Columbus Metallurgical facilities remained intact and both facilities continued full operations during the flooding events. Operations at the Stillwater Mine, which accounts for 60% of the mine production from the Stillwater operations, resumed production on July 29, 2022 once safe access to the mine had been restored.

production at the Stillwater Mine is expected to return to normal levels by the fourth quarter.

During the quarter, the Boise Bay mine produced 136,000 pounds of attributable cobalt, a decrease of approximately 64% relative to the second quarter of 2021, primarily due to lower grades during the ongoing transitional period between the depletion of the Ovoid open pit and the ramp up to full production of the Boise Bay underground project.

The Boise's Bay underground mine extension, which includes development of two new underground mines, Reed Brook and Eastern Deeps, was 74% physically complete at the end of the second quarter. Reed Brook Underground continues our production for development during the quarter, and valet has indicated that Eastern Deeps is expected to start up in the second half of 2022.

Given the proposed sale of the Keno Hill PMPA, lower production from stillwater due to severe weather, as well as lower than expected production from Salobo, wheaten is lowering production guidance.

Ween's estimated attributable production in 2022 is now forecast to be 300,000 to 320,000 ounces of gold, 22.5 to 24 million ounces of silver, and 35,000 to 40,000 gold equivalent ounces of other metals.

resulting in production of approximately 640,000 to 680,000 gold equivalent ounces.

For the five-year period ending in 2026, the company now estimates that average production will amount to 820,000 gold equivalent ounces. And for the 10-year period ending in 2031, the company now estimates that average annual production will amount to 870,000 gold equivalent ounces.

That concludes the operations overview and with that I'll turn the call back to Randy.

Thank you, Wes, and thank you, Gary.

In summary, while not without its challenges, Wheaton recorded a solid quarter, distinguished by several key highlights.

We achieved strong quarterly revenue, earnings and cash flow, and declared a 15 cent quarterly dividend.

We enhance their financial flexibility which positions us well for future accretive growth.

And lastly, we once again showed our leadership in sustainability by implementing a sustainability-linked credit facility and by being recognized as one of the best 50 corporate citizens in Canada by corporate knights.

So with that, I would like to open up the call for questions. Operator.

Ladies and gentlemen, we will now conduct a question and answer session.

If you would like to ask a question, please press star then the number one on your telephone keypad.

If you would like to withdraw your question, press the star followed by the number 2.

There will be a brief pause while we compile the Q&A roster.

The first question comes from Trevor Turnbull of Scotiabank. Please go ahead.

Thanks, Randy. I just wondered if you could talk a little bit about the changes to the five and ten year guidance. I realize they're relatively small in the grand scheme of things and somewhat attributable to the adjustment on that termination of a Lexco stream and then the mine changes that came out recently here on Stillwater. I wondered if there was any other contributing factors that caused you to adjust those longer term outlooks.

Well, I'll let Wes provide additional detail but I'll start off by saying that the drop in production this year in Salobo also has a big impact when you average that over the five and ten year period. Keep in mind that 2022 is part of that five and ten year average, right? So there's no doubt that that had an impact in terms of production and then as you said the sale of Kino, the updated mine plan from...

still water. And I would say the other factor that's come in is that we've now started starting to see the shape of copper world Rosemont and the reduction, you know, expected production in the early years. Even though there's significant growth in terms of total ounces to be received from Rosemont, it's going to start at the copper world area. And so production is definitely less than what was in the original Rosemont plans. And that also has an impact in terms of dropping the monitoring forecast.

You know, across the spectrum, the West, anything to add? Yeah, the only other two minor ones were, there was a change in Torp Peru as well, and where that fits into the production profile and the new plan they came up with, and then Phoenix being pushed out as well, were the only two other minor ones. But overall, really, I mean, the main thing was the change to this year, and then the Keno Hill stream were the two major ones.

Okay, that's great color. I hadn't thought about the impact of this year's solobo numbers, but appreciate that and thank you.

Great.

Thank you, Trevor.

Thank you.

The next question comes from Adam Josephson of KeyBank. Please go ahead.

Randy and everyone else, good morning. Thanks for taking my questions. Wes, just one follow up on your answer to the last one. Can you quantify how much of the five and ten year reduction is based on this year's production specifically versus the other factors that you mentioned?

Yeah, it's about, probably about 30% of it would come in from this year. Oh, for the five years. Yeah, for the five years. And then on the 10 years, it's half of that. Half of that. So yeah. So yeah, it's about 30% of it would come in from this year.

Exactly. Got it. Okay. And then this year, it seems like of the 70,000 ounce reduction, Solobo seems like was about 50. I don't know if Randy is that.

in the right ballpark or is there something I'm missing there?

It's right in that ballpark. I was going to say, I mean, you know, we've obviously seen less production from still water with the flood events that they've had there, so that's going to have an impact. Voysees Bay is a little bit behind schedule in terms of going underground, so we're seeing a little bit less cobalt out of Voysees and such. I mean, the silver is still pretty well on track, but we've been impacted on the gold, both at still water and at Salobo, and then, you know, cobalt out of, and palladium and cobalt out of...

of course still water in Boise's Bay. It's about just over 40,000 is the number from Salobo and we are expecting things to improve in kind of Q3, Q4 here. Q2 was pretty rough.

And how much, thank you, so 40 of the 70 ish was saliva. How much is still water?

I mean out of the 70 between 40 let's call it about 15 to 20. Yeah, that's it. And related to the 5 and 10 year Randy or Wes, how much would you say still water is? Can you go into more details about the updated mine plan and the impact that that's having on your view of what the long-term production to you will be?

Stillwater is reasonably small in the long term. You're only talking probably a couple thousand ounces off of each of the five-year and 10-year. They are still planning on ramping up over the next few years, and it does... There's some impact when the blitz ramp up, but it isn't significant in the overall scheme. The one number on the 10-year guidance that is impacted is, of course, Rosemont shifting over to Copperworld. That actually has a reasonable...

impact for the first five years. Again, it's a good news story because those are all ounces that weren't even part of our original plan, and so we'll be seeing that production, and we're confident that ultimately the full Rosemont will get built and will be operated. But with the new guidance that we've seen in our discussions with with HUD-B, as they're moving that project forward, that actually has a pretty big impact on our 10-year guidance. Not so much on our five-year guidance because it only comes on near the end of that.

least they have a firm grasp of what the problems are and what they need to do to fix them compared to what's happened over the really since the pandemic started.

Well, I'll let Wes add a bit more color and detail. I will say that we have just got down for our first site visit in a number of years, and I can't underscore how much more important it is to be physically on site versus virtual mine tours in terms of getting a feel for how things are operating and getting a sense of confidence in terms of their ability. So I will let Wes provide a bit of color, but I will tell you that one of the reasons that we invest in the most profitable mines in the world is that there is a very strong incentive on the valet side to get it fixed too.

And I know that there's been a lot of management changes down there to try and resolve these issues. That being said, you know, we can't forget the impact of the pandemic and trying to manage the pandemic. And Brazil was one of the tougher hit countries on the planet in terms of how COVID did impact operations. And so the measures, a lot of the measures to try and limit the impact at the site itself also had an impact on productivity and working our way forward. So,

Wes, you want to add more color? Sure, yeah. So I was down on site with a technical team in the early part of June , so really quite recently set up well to really give us more confidence in the rest of this year and the ramp up of Salobo 3. We were down there for four days in total, got a good review of the entire site. We have a great relationship with Valet as being our largest partner, and they're always incredibly transparent with us in walking through exactly what the challenges are. And as Randy said, there have been quite a few changes at the site.

get things going by the end of the year here. It's going to take some time to wrap it up though and actually get it up to full capacity. And I think the mine is in great shape to be able to feed all three lines into next year. It's important to remember that when phase one, when the mine first started, it took about 24 months to reach full capacity on that first line. The second line took about 18 months to get to full capacity. Obviously, as they continue down this path, it should improve. So we're hoping that we should see full capacity easily by the end of 2023, 2024.

of the tie-ins or anything that you need to do with that. It's actually a completely separate line.

I appreciate that from both of you. Wes, just to clarify one thing on the impact of Solobo on your long-term guidance, aside from your lower production expectation for this year, have your longer-term Solobo production expectations changed based on the problems they've had, or are those the same as they were before, and the only impact on 5- and 10-year is the 40-ish thousand lower ounces this year?

Yeah, it's just the production this year that we've lowered. We're still very confident in the long-term guidance that they have and then that we provided previously.

I appreciate it. And Randy, just one last one on jurisdictional issues, specifically in South America. How, if at all, has your outlook changed in terms of...

your willingness or reluctance to invest in

many of those countries for perhaps obvious reasons.

Yeah, it's, political risk is a challenge. And getting it right is, you know, a country like Chile, which has for decades has been one of the best investing jurisdictions in the world, is all of a sudden proving very challenging with a number of permits being rejected of late with the new government down there. And, you know, I know that ultimately it's going to have an impact on foreign investment into the mining industry down there. And I can tell you that, you know, all you have to do is look at.

their state miner, Cadelco, and the lack of capital that it has in terms of building and advancing its own projects, that's going to have a real negative impact on Chile.

What you try and do is find assets that are strong enough to withstand any changes in taxation because we see it everywhere in the world. Even here in Canada, we see increases in taxation all the time and so on. Again, I reiterate the importance of looking for first and second quartile assets and focusing on assets that deliver high profitability to all the stakeholders, including the recipient governments for taxes and the recipient communities for income and stuff. We've got to make sure that we focus on these because...

They're the ones that have the best capacity to withstand these pressures, albeit increasing taxation or increasing royalties or bigger challenges in terms of permitting and the extra costs associated with that. You know, it just sort of reinforces the importance of making sure that we focus on assets that have the capacity to manage that and still deliver their essential products to society.

Just one last one. In terms of the discount rate that you would apply to a country like Chile, can you give us any rough sense of how that might have changed based on what's happened over the past year or so? Yeah. It's a little bit higher than it was. It is very fluid. We do have a team that assesses political risk and so it's a very fluid number. The number I'd tell you today would be different tomorrow.

and I can tell you that Chilean political risk has added to our risk profile, and we're not willing to pay as much for Chilean opportunities as we were a year ago, two years ago.

Thanks so much Randy.

Thank you, Adam.

Thank you. The next question comes from Ralph Profitti of 8th Capital. Please go ahead.

Good morning, thanks for taking my questions, Randy.

Yeah. Randy, if we can stay on the theme of Chile.

Are you involved in?

sort of a mitigation plan at Phoenix with the partner Rio2. Just given your growing ESG competence and how that's become a focus for the company and would you be open to part of their strategy, which is to seek alternative financing and whether that be through a renegotiated stream or other capital investment means.

Well, we are definitely in touch with them. I will let Haitham provide a bit of color here but obviously it is an asset that we like. We think it is an asset that has got good optionality and good growth potential but ultimately it has got to get up and running in the first place. So there is no doubt that we are in discussions with Rio2 on that one. Haitham, I don't know if you want to add some color? You bet. Thanks for the question, Ralph. Just in terms of Phoenix specifically, we are in discussions with them. We are trying to figure out...

what type of capital is required over the next little while and trying to figure out ways to work with them to try and fill those capital needs. Generally speaking, any time one of our partners runs in any challenges, we're always there. We're always trying to determine how to best help them, what the right path for them would be in this situation in a politically motivated decision down in Chile. You've gotta tread slowly here and try to figure out how you can withstand this regime here, at least for the next couple of years.

Yeah, fair enough. Appreciate that.

You know Gary, can I ask you a question on the sustainability link facility and

you know whether or not Gary this opens you up to exposure on third-party ESG scores, right? And does, you know, the potential rate that on drawn amounts, you know, sort of go beyond emissions targets and the parity goals and whether or not you run the risk of sort of environmental stewardship on things may be somewhat not in your total control.

Well there's three elements KPIs underlying the sustainability linked component of our revolver and the maximum change in the drawn pricing associated with achieving or not achieving those targets is five basis points plus or minus five basis points.

You know, one of those targets is relative to our, ties into our partners commitments to greenhouse gas emission reductions. And so, you know, you take the five basis points divided by three, you're down to, you know, 1.6 basis points. And, you know, that being said, we do.

you know there's more a better chance of us reducing our costs of borrowing in this regards. Patrick? Yeah, where I'll just add you know the only KPI that ties us to an external rating agency is one based on our S&P rating. The added disclosure that we had in our last sustainability report that came out in which we were actually

quantifying our scope three investment GHG emissions and whatnot, as well as a number of other targets that we have put in place in that report. We strongly believe that that score will be going much, much higher. So, it isn't overly concerning to us because again of the work we're doing in the added disclosure that we've already put into place that should be reflected in the next round of scoring by S&P.

And Ralph, I'd just add one more thing. You know, we can't hide behind our partners. You know, there's a lot of companies in this space that have done that for years, but we are responsible for the investments that we make and for the partners we have. And obviously, we don't control them, but we have to do everything and we have to take ownership in terms of the fact that they are our partners on a go-forward basis. And so we do everything we can to try and help them be better. And I think that's one of the things that really differentiates streaming is that

that focus on the relationship. Well said, appreciate the answers. Thank you.

focus on the relationship. Got it. Well said, appreciate the answers. Thank you. Thanks, Ralph.

Thank you. The next question comes from Charlie Rothers of Barron Bank. Please go ahead.

morning and congratulations on your results and thank you very much for taking my questions.

Good evening.

Yes.

Good evening everyone. It's only 4.30. Can you please, you highlighted in your presentation the available capital that you have. In the current pricing environment, could you put a little bit of commentary on how you're thinking about deals on the screen and whether or not you're finding them...

more available to you at the moment? I'll let Haifam answer that one.

Sure, thanks for the question, Charlie. We're continuing to see a number of smaller streaming opportunities, most of them falling into the sub $300 million range. And they're primarily development stage opportunities, not unlike what you've seen over the last couple of years. My team is currently working through a number of due diligence processes and to put things in perspective, we're usually looking at about 10 to 12 opportunities at any given point in time and hopefully we can narrow it down to one or two high quality assets that meet our requirements over the next 12 months to 12 as well.

Now keep in mind that we do have strong organic growth, especially given the success we've had on entering into these streaming transactions over the last 24 months. So we will be able to put some cash towards that, but we will continue to look for ways to deploy our cash, but it has to be accretively over the next little while.

Yeah, I would add that any companies that have existing operations have done relatively well in terms of commodity prices and therefore cash flow, internal cash flows, and not a lot of need for outside capital for the ones that have existing operations. And so it just continues to focus our development set onto development companies, single asset development companies that are building mines and helping fund that.

and there's definitely a healthy demand for that. Understood. Thank you so much. I might have missed this, or could you please remind me. Your assumptions going forward in terms of commodity prices, are they materially different to the ones that you used for this year? I'm sort of thinking of the Kogol sell-off at the moment and your $33 per pound assumption. It's a 22.

Sorry, is that, do you mean like with respect to gold equivalent ounces in the production forecast or? Yes, I do. We kept them identical to make sure it was an apples to apples comparison. So the conversion into gold equivalent ounces for the forecast is exactly the same as it was at the start of this year.

But to be clear, when we look at new opportunities, we evaluate them in terms of the current spot price.

Yeah, again, it's a very fluid number. I've been in this business for well over 30 years now and I still can't tell you what the price of gold is going to be tomorrow. So it's very fluid. It's always a function. Whenever we're looking at new opportunities, it's always a function of the spot price of the day. That's what drives valuation.

Okay, understood. Sorry, to be clear, the price used for this year, the same for the five and ten year geo calculation.

Correct, yes. Yeah, we set those numbers once a year just so that they stay consistent. So that they're set kind of when we put out our original guidance and we keep them the same through the year.

Thank you very much.

Thanks, Charlie.

Thank you. The next question comes from Lawson Winder of Bank of America Securities. Please go ahead.

Good morning, gentlemen, thank you for today's update and thank you for the color you've provided so far on the update and the long term guidance that's been very helpful. I was hoping regarding Stillwater that you guys perhaps would have a little bit more color around yesterday's update from SSW than we do, in particular around gold. So when you guys originally did that screen, the expectation was for around 14,000 ounces per year of gold. Once it hit its run rate, is that

Do you have a sense of how materially that's changed? Yeah, overall it hasn't changed significantly. It does ramp up as the Blitz project comes on, but over the next year or two is really where the main impact is as the project has been slowed down slightly. It's not a significant impact on gold particularly.

It's really over the next couple of years. The Blitz project and the other improvements are just taking longer to implement and no doubt further complicated by the flood events that they've had there this year.

Thanks for that, Collar. On cobalt, in the other metals category, was there any change to the longer-term outlook for cobalt?

There was a slight drop in the longer-term outlook on Cobalt just really because of Boise's Bay and some of the challenges there with the project and kind of getting those undergrounds up and running. So primarily 2023 dropped down a little bit so that affected the other metals for the five and ten year.

Okay, that's super helpful. Thank you, Hae-seung. Then I'm just trying to true up my model for Copperworld Rosemont. In your prior guidance, what year were you assuming for a startup of Rosemont? Now in your current guidance, what year are you assuming for a startup for Copperworld? Now in your current guidance, what year are you assuming for a startup of Rosemont? Now in your current guidance, what year are you assuming for a startup of Rosemont?

We've got a very minor amount of production from Copperworld at the end of the five-year guidance, so we expect it's going to be in that range. You know, they're still firming up things on the HUD-Bayside, and so we still await more clarity. This is just a best guess on our part in terms of that is four-plus years out before we see any production, but it's a very, very small amount. Where we see it coming on is, you know, really years, you know, six, I guess six to ten. Let me move forward.

is Copperworld. If they have some success on the permitting side, this could also, on the federal side, in terms of the Rosemont portion of the project, you know, that it would immediately bring about a change in that mining plan to bring on that additional production out of Rosemont. So, you know, it's a very fluid plan. Hudbay is firming things up as we speak, but we just saw enough of a change in the indication here in terms of early production out of Rosemont that it warranted pulling it out of the 10-year guidance. It's a similar place to where it was.

a much better capitalized operator coming in. I'd be curious to get your thoughts on whether it was even close in terms of the potential return on having that asset actually ramp up and produce at its full capability versus the return you realized from selling it.

Well, you know, again, I think it needed the, you know, it's kind of one of these things where you have to balance holding the stream on it and determining whether the investment would have gone into the project the way it was or to back out. We just felt that the project itself, we've been supporters of that project for well over 10 years now, I think close to 14 years when we did the original deal, and it just hasn't been able to deliver. And it's a challenging jurisdiction. We know that that Hecla has got, you know, better capabilities. They've got...

and we just felt it was time to wash our hands of it and let HECLA give it a go.

Great, that's clear and very well understood. Thanks very much, Randy, and thank you.

Yep, thanks, Bob.

Thank you.

The next question comes from Brian McArthur of Raymond Jeans.

This question comes from Brian McArthur of Raymond James. Please go ahead.

Good morning. I'd like to go back to the global outlook a different way. I see you haven't changed your expected payment.

next year but you sort of give guidance to 550 to 650 to get the 36 million tons.

I guess my first question is, do you still expect to make the payment next year? Second question, I guess, do you think the ramp up slower so you'll pay to the lower end of that just because of the new outlook for the Lobo or three, does it just, is it keeping this goes through how it scales up again, the trade off over the 90 days, what you have to hit versus what you have to pay, what the scaling of your payment looks like?

Well, Brian , a great question because it's clear that Vale has some work to do. The expansion payment is measured based on total performance of the site, not just line three, and I think that's important to remember. And as we have seen and as we're reporting here right now, line one and line two aren't performing to SPAC. And so they've got a lot of work to do in order to get to the full payment. And as you know, and I think just what everyone knows, it is a matrix.

that is based on time and throughput levels, total throughput levels, not line 3 throughput levels, but total throughput levels.

And so, you know, I'm hopeful. I would love nothing better than to make that full payment, because that means they're up and running all the way across the board on lines one, two, and three. However, there's a bit of work for Vale to do on this front, and you're right, I think that's probably pretty conservative. You know, given that they're, you know, as I said, line one took two years to get up to full level, line two took 18 months. Because it's a 90-day completion test, it means you've got to add on a quarter when you start your test.

them but you know they're still striving for that. I don't know if you want anything to add? That is slightly higher than 90% on that one. They actually have to hit 35 million to hit that. Right. Sorry, 35 million to show the 36 million capacity.

And, and sorry, just on that, if it's 35 of the 36 that had triggered that matrix, and I guess it's the same all the way up. Let's say they only got to, you know, next year, if they got the 32, they could actually elect if they ran it and they got that you just pay them at 32. But is there a scenario where they're better now to wait and try and get it up to 12.

you know, 38 and go like two years out and therefore you don't pay for even two years from now or something? It's a one-time trigger. They're the ones that elect when they want to initiate the test.

And then we wait, you know, over the next 90-day period, we wait and see what the results are, and at the end of that, we pay them based on their performance over the 90 days. So, it's a one-time trigger. They've only got one chance to exercise this.

And so, you know, one of the other possible scenarios is they wait. We know there's been discussion about SLO before. There's been no commitments on Vale's side.

One of the other scenarios they could have is to wait and complete syllable four and get it to the point. Now that's easily quite a number of years out, but with the increased throughput capacity, it would bump up numbers. And so it's their option to choose whenever they want to exercise it. Our best guess is still that they somehow satisfy it sometime next year. It's probably got a bit of conservatism to it. I would think that there's a real...

risk of it getting pushed into 2024. As I said, I'd love to make this payment because that means that they've resolved these issues and we're back to Solobo being the best asset in our portfolio again.

Great, thanks very much for the caller, Randy.

Thank you, Brian .

Thank you. The next question comes from Adam Josephson of KeyBank. Please go ahead.

Adam, welcome back. Thanks everyone. Thanks Randy. I didn't ask you enough questions earlier, obviously. Haifam, would you mind indulge me on where you're seeing

most of your opportunities, is it from precious metals mines, is it base metals mines, and any shift you've seen of late along those lines?

Yeah, the majority of the opportunities we're seeing have been precious metals from base metal mines. There are some development projects out there that are more precious metals focused, but have very, very strong margins that are considering precious metal streams as well. But there's also opportunities if we wanted to consider taking precious metal streams and a tiny bit of base if it helps a bit. Right at this point in time, everything we're looking at is precious metals focused.

You know, I hear you there. I think Randy in months or years past you've, I think, expressed a view that that silver prices back to a question earlier about your commodity price outlook.

Appreciate it. No one knows where these prices are going, but that that you thought that perhaps silver and gold prices could decouple just given all of the construction of the stock stocks, then you might find longer Data

Presume secular opportunities for silver and obviously we have not seen that happen.

Have you changed your thinking at all along those lines? Do you still expect silver to decouple from gold at some point? Any thoughts on that would be great.

Well, the fundamentals haven't changed. Silver acts as a precious metal, so it provides a store of value and a measure of value as gold does.

but silver does so much more. Silver also, you know, high efficiency electronics, which in today's world incredibly important, more and more important all the time. Silver conducts electricity better than any other noble metal. And so if you want to maximize your battery length, you want to maximize your efficiency, your processing power, your solar power generation on solar panels, you have to use silver. Silver's got antibacterial qualities beyond any other noble metal.

we have as efficiently as we can. And so that hasn't changed. And for that, I think silver is going, silver's got the same attributes as a precious metal, obviously not as anywhere near as widely accepted as gold, but it has the same attributes. There are large measures of society that treat it as a precious metal as a store of value, but it also has an increasing demand on the industrial side that is becoming more and more important to society.

I think all the metrics just line up too perfectly to ignore it.

I appreciate that. Just one last one, Eriny, in terms of the guidance you give, obviously you guys give current year, five-year, ten-year average. Some peers that give five-year and current year, you have some peers that give just the current year and nothing more. And I think Dave said, look, we only have so much visibility into the future, and so we just don't necessarily think giving ten-year average guidance is appropriate given…

What visibility we have or don't have and so just given all these projects that you've had moving around delayed, et cetera. Have you given any consideration to perhaps just giving, I don't know, current year and 3 year or current year and 5 year as opposed to going out as far as you do given whatever visibility you have.

Adam, you know, I think there's a point in time, like data that's measured in a point of time is important, but I think vectors are also important. And I think by giving us, by us giving 10-year guidance, what we're highlighting is that it's a continuous uptrend, that we've got strength for the next 10 years going forward. And so, you know, I think it's the vector that we're talking about. And that vector hasn't been, hasn't changed. At this point, Accessibility is outside, but we still have to looked at ways of creating Metro-anya to make it work better for people.

What we're looking at now is we've seen a drop in terms of the overall, but the vector, the slope of that vector, the slope of that growth hasn't changed from where it was a year ago or six months ago when we came up with our previous guidance. And that's a key attribute of our portfolio that I think is important to make sure the investing public understands. I know our shareholders understand it. I mean, it's one of the attributes that we have, good, long, 10-year growth in our portfolio. We've got assets, you know.

I think it's close to 40 years of proven and probable and measured and indicated, proven and probable reserves and measured and indicated resources and another I think it's 19 years of inferred resources.

after that. There's not another portfolio out there that has that. And so I think it's important to capture that in terms of our own production forecast. We are confident that we'll be out there. Obviously, it's going to change. I'm hoping, I know it'll change because we're going to make acquisitions over the next 10 years. And so there's no doubt that it's going to change. But I think what is important is to show that our 10-year average guidance is higher than our 5-year guidance. And that hasn't changed. That vector is still as strong as it's ever been.

And that's the important aspect of making sure that we provide that 10-year guidance. I think if you go through the precious metals industry as a whole, a lot of people don't provide 10-year guidance because the vector is pointing in the wrong way. And they've got holes that they need to fill by making either acquisitions or by spending aggressively on organic growth. And that's one of the reasons why it's not embraced.

but in our portfolio we do not see that. You know, I have to reinforce again, one of the advantages of the streaming business model is that we provide precious metal investors access to long life base metal operations.

by investing and purchasing off the non-core by-product precious metals. And so it's a very unique portfolio that we have within the precious metal space to have such long life, long reserve life, long resource life and deliver that back. And so we're comfortable with that 10-year guidance. We think it's an important thing to make sure that the investors know about out there.

Thanks so much, Ray. I really appreciate all your answers to my questions.

Thanks Adam, and thank you everyone for dialing in today. In closing, we believe that we are very 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, the increase in commodity prices, results in some of the highest margins in the entire precious metal space.

Secondly, by offering our shareholders exposure to our diversified portfolio of long-life, low-cost assets and the strong organic growth embedded within it.

Thirdly, by returning value to shareholders through our unique cash flow linked dividend policy.

and lastly by being a leader amongst precious metal streamers in sustainability and by supporting our partners and the communities in which we live and operate.

I do look forward to speaking with you all again soon. Until then, please stay healthy and stay safe. Thank you.

This concludes this conference call for today. Thank you for participating. Please disconnect your lines.