Wheaton Precious Metals Corp. Q1 2023 Earnings Call
During the quarter Constancia produced 600000 ounces of attributable silver and six 6900 ounces of attributable gold an increase of approximately 21% and 9% respectively relative to the first quarter of 2022.
The increase in both silver and gold production was due to higher grades resulting from additional ore production from the public conscious that late deposit.
Full mining activities resumed in the public entre pit in February and the period of high stripping from March to June is progressing well.
With mining of higher grade ore now expected in the second quarter of 2023 ahead of schedule.
During the quarter Artemis Gold announced the approval of its <unk> permit the final step required to allow Artemis to commence major works construction activities of the Blackwater mine.
With the expectation of an initial gold part in the second half of 2024. Additionally.
Additionally, during the quarter Artemis announced that it has issued a purchase order to fit in Canada for primary and ancillary mining fleet required for the initial fees one of operations equipment deliveries to safety are planned to commence late in the fourth quarter of 2023 and continued throughout the first half of 'twenty 'twenty four 'twenty 'twenty four and preparation for the pre strip mining phase.
We estimated attributable production in 2023 is forecast to be 320 to 350000 ounces of gold.
20 to 22 million ounces of silver and 22000 to 25000 Geos of other metals, resulting in production of approximately 600000 to 660000 Geos.
For the five year period, ending in 2027, the company estimates that average production will amount to 810000 ounces and for the 10 year period ending in 2032. The company estimates that average annual production will amount to 850000 geos.
This includes organic growth of over 40% with total production from our current portfolio increasing to over 900000 Geos by 2027.
That concludes the operations overview and with that I'll turn the call over to Gary.
Thank you Wes.
Im pleased to present, the financial highlights, resulting from our solid operational performance to kick off the year as described by West production in the first quarter amounted to 142000, Geos above company expectations and consistent with the fourth quarter of 2022 sales volumes amounted to over 117000.
<unk> a decrease from the first quarter of the prior year, primarily due to the cessation of production from Triple seven <unk> and Keno Hill in 2022, coupled with relative changes two ounces produced but not yet delivered or PBS.
Strong commodity prices, which remained near historical highs coupled with our steady production base resulted in revenue of $214 million and gross margin of $118 million.
Of this revenue, 56% was attributable to gold, 40% for silver, 2% to palladium and 2% to cobalt.
At March 31, 2023, approximately 124000 Geos were in <unk> and cobalt inventory representing approximately two four months of payable production, which is a level that is consistent with the preceding four quarters.
G&A expenses and donations amounted to $11 5 million for the first quarter, resulting in adjusted net earnings of $104 million. The company continues to anticipate that G&A and donation expenses will amount to 47% to $50 million for the year.
Despite the persistent inflationary environment and thanks to our low and predictable cost structure. We can continue to deliver robust cash operating margins in the first quarter, resulting in cash flow from operations of $135 million, which in turn resulted in a quarterly dividend of <unk> 15 per share consistent with the first.
Quarter of 2022.
In the quarter Wheaton dispersed its fourth and final installment of $32 million relative to the <unk> project, which continues to make advancements under the new ownership with <unk>.
It should be noted that subsequent to the quarter B two goals exercise the option to repurchase purchased at 33% of the stream under the Goose pimp up in exchange for a cash payment in the amount of $46 million, resulting in a gain on the partial disposal of the Tampa.
In the amount of $5 million, which will be reflected in our Q2 results.
Overall, net cash inflows amounted to $104 million, resulting in cash and cash equivalents at March 31 of $800 million.
This notable cash balance coupled with the fully undrawn $2 billion revolving credit facility and the strength of our forecasted operating cash flows positions the company exceptionally well to satisfy its funding commitments and provides us with the financial flexibility to acquire additional accretive mineral stream interests that conclude.
The financial summary, and with that I'll turn the call back over to Randy.
Thank you Gary.
In summary, weakens first quarter was distinguished by several key highlights we achieved solid three months revenue earnings and cash flow and declared a <unk> <unk> quarterly dividend.
First quarter production came in ahead of our expectations positioning us well to achieve our previously announced annual guidance of 600 to 660000 gold equivalent ounces.
Wheaton has now recouped, 100% of its total upfront investments deployed since inception, highlighting our disciplined and accretive approach to capital deployment.
We reiterated our forecast organic production growth profile of over 40%.
Over the next five years with approximately two thirds of that growth coming from mines already in operation Therefore at lower risk of delivery.
Our balance sheet remains one of the strongest in the industry, providing ample capacity to add accretive high quality streams into our portfolio and we continue to be very busy on that front.
And lastly, we continued to demonstrate leadership and sustainability with sector, leading ESG ratings.
So with that I would like to open up the call for questions operator. Please.
Thank you, ladies and gentlemen, we will now conduct a question and answer session.
Like to ask a question. Please press Star then the number one on your telephone keypad, if you will.
To withdraw your question press Star two.
Your first question comes from.
<unk> eight.
Capital.
Please go ahead.
And Sabrina.
I don't know elections closed.
Sorry, Ralph we missed the first part of that.
Sorry, Randy can you hear me now.
Yes.
Yep.
Ralph I'll just yet.
My apologies can you hear me now yes.
Yes, we can.
Sorry about that thanks operator.
Randy B two Golden Sabine has now closed just wondering if you've had conversations with the new management team and whether or not youre comfortable with the original guidance of when first production is first quarter 2025, I believe and is that factored into your guidance.
We haven't made any adjustments based on <unk>.
<unk> operating it I do have confidence in <unk> and <unk>, they've got a very strong track record of non <unk> and the <unk> team for a very long time had a lot of them have a lot of respect for what they're.
They are doing.
<unk>.
The one advantage that theyre going to have is of course is much stronger balance sheet than Sabina had originally the negative to that is we were always hoping to be able to to add a bit more financing.
Through growing the stream of it but clearly <unk> has the capacity to deliver this project from a capital perspective and so.
I think that what we're going to see is an even better project out of <unk> gold.
Or sort of out of the <unk> project with Btu gold.
Good yes, I see.
Some of that Optionality come in.
Yes definitely.
Also worth noting it is in the five and 10 year guidance and in the 5% your guidance is reflective of the buyback as well.
Okay. Good good and just factoring in taking us a little bit of a step back from from the buyback on that stream.
Does the team that we can make a risk factor adjustment for stream negotiations when when they do have the buyback option in place in <unk>.
Sort of quantify.
Some of the.
Some of the decisions that you make on discount rates. When that's factored in is this sort of two separate pieces of analysis or one that you're sort of co mingle into looking at how you risk adjust for the buyback optionality.
Well I mean, the way we structure the buybacks is that we get a reasonable rate of return.
Ignite is that a lot of these that these partners that we're working with right now are.
Our.
Single asset development companies, and we don't want to get in the way of them actually being acquired so so it is something that we're seeing a lot more of is the need for it.
And what we're looking for is just a reasonable rate of return on that on that part of the risk capital that we're putting up.
We are long term investors into these projects.
And so so we do want to make sure that we maintain a reasonable.
Return for our shareholders at the bare minimum with respect to any of the capital that we're putting up and so I think the structure works well I don't know Haytham you want to add anything to that yes. Thanks Rajiv.
What we've also done when we start to these things as we limit our buyback to a one third buyback and we want the street to be perceived as a quality type of financing that doesn't deter.
M&A transactions and I think that was very well proven here with.
Yes.
And it's effectively over two thirds of the remainder of our stream and then some of the private equity stuff didn't remain which shows you that.
We're very the way we structure things, where we're very capable of putting in place something that actually appeals even to a potential acquirer, while these developments take opportunities.
So we're excited about partnering with cloud.
Got you thanks, very much very helpful.
Thanks Ralph.
Your next question comes from Jackie Bohlen risky.
With BMO capital markets.
Please go ahead.
Hi, Thanks very much my question is.
Hi.
The World project.
I know you guys said before about restructuring that stream financing and I was just wondering.
If you could give us any update on that if there's been any progress in discussions with with the operator.
There Hasnt Jackie.
They are still working on finalizing their plans on a go forward basis and so so I think we just have to be patient and wait for them to come up with a firmer framework on the on how copper world is going to compare relative to the original rosemont structure.
Yes.
Hi.
Longtime partner of ours, and we've done a lot of work with them in the past and.
Peter and the team very well and so we look forward to sitting down with them at that stage. It's just it's not it's not at that stage in terms of us being able to fine tune how that.
How that stream will come into play.
Alright, Thank you very much.
Thanks Jackie.
Operator.
Your next question comes from Martin <unk>.
With Baird.
Please go ahead.
Thank you.
I have two questions. My first question is.
Why enter Mena production was weak.
Why sell logo, we see a very different.
Very different the sales than the production.
Production with similar than last year, but sales were like 20% lower.
That's my first question sure.
Sure sure West or do you want to take that thanks.
Thanks for the question Martin So <unk> really is just a function of where they are mining in the pit so theres different grades and the various different areas of the pit and we did see a higher grade coming out in the latter end of last year and really they are just into a lower grade area of the pit and in this year. So that's really what we're seeing as they move around within the pit.
The different areas of the ore body are going to have.
Different amounts of production to them so not unexpected basically with what we would expect to see from from now on and on.
On Salobo really that is a lag between the production and the sales. So we get a copper concentrate from Salobo is what's produced there and there is a lag between what produced on the mine site and then what we see in sales so and that's what's reflected in our produced but not delivered and I will say that typically amongst all of our assets.
In the first quarter, we tend to wind up building up a bit of an inventory and I think that just comes from the fact that a lot of our partners will sort of squeezed the pipeline to try and get a bit more.
Sales in before year end, and then than that than the.
<unk> sort of.
Our production flow fills up again in the first quarter.
So it wasn't a surprise to us in terms of seeing seeing a bit more inventory buildup over the course of the first quarter and I would say that typically in the fourth quarter as we tend to see that drop as companies.
<unk> sales so.
Second question.
Could you could you comment about the global tax impact I mean.
You mentioned that.
Going to come.
Into play very soon.
So what is the company view on this.
It's Gary Brown here.
<unk>.
It's hard to give you.
Detailed response, given that we don't have any legislation.
To refer to at this point.
All we can say is that based upon the.
The the comments made by the government of Canada.
We do they do seem to be committed to implementing a GMT 15%.
Global minimum tax rate.
Okay.
That seems to be applicable to 2024 and onwards.
Again Theres no legislation at this point.
So there's a lot of work that would need to be done in order to implement that by June one of next year, but we're assuming that that's going to happen.
The vast majority 90 plus percent of our income is generated outside of Canada. So.
We expect that.
But it would have about a.
A 10% impact to our NAV.
NAV.
Calculations.
Once implemented that being said I think the market.
Is well aware of this.
This new tax.
<unk> has already reflected that in our valuation.
But in terms of 2024.
If it goes ahead, you expect to pay how much in taxes that you.
At 10% or 15% or well.
If you assume that.
90% of our income is generated outside of <unk>.
Canada.
And is subject to a zero percent tax.
Multiply that by 15% to estimate what we would pay in 2024.
The challenge is is that without the legislation we're not sure.
We don't have clarity in terms of what deductible, what what are what goes against that tax we're not there's not a framework within which we can painted against right now and so so if you're going to.
It's really tough to sort of firm numbers on that I think.
What we have seen and it's been talked about quite a bit is that.
The overall estimated impact to our net asset value should be somewhere around 8% to 10%.
And until we get further clarity and tell them that I think everyone gets further clarity on what's actually coming in into play we're not quite sure what we'll be able to how we'll be able to.
Work with that.
With that legislation.
Great. Thank you very much thanks.
Thanks Martin.
Our next question. Please your next question comes from Richard Hatch with.
With Bahrenburg. Please go ahead.
Yes.
And Randy and team Thanks Hello.
The colon.
To be clear and Gary.
Questions remind me.
<unk>.
First one is.
Just on <unk>.
Page 24 of the MD&A.
Contractual obligations and contingencies.
I was just wondering if you might be able to just help us out a little bit just in terms of.
Just thinking about next quarter, what are the ones that we should start to like put into our models just to make sure we have.
Brian on the cash flow that's the first one.
Yes, I mean, I don't know that we can get that granular.
So I think we've tried to outline what we are and this is a conservative picture the contractual obligation.
Schedule that we put out showing $700 million being paid.
Between March 30, <unk> and.
In December 31, that's assuming all of the projects and the biggest one of that is salobo and.
<unk>.
That.
Sure.
May may slip into two.
<unk> 2024.
But we're assuming that ballet achieves.
The full completion.
First the Lobo III.
And that $552 million number but.
So.
I am not prepared to break down what we expect to be disbursed next quarter at this point.
Great Alright.
Okay.
We can speak offline as well and kind of walk through our best expectations that being said I think Richard.
Important to highlight.
We have no concerns with respect to paying those we ended the quarter with $800 million of cash on hand.
And we've got the $2 billion revolving credit facility, there as well so we're extraordinarily well positioned to make those disbursements as and when they come due.
Sure.
I'm not worried about the balance sheet or it was just getting a little tight.
Just and then on <unk>.
<unk>.
Last couple of quarters.
<unk> sales volumes have really lagged.
I appreciate it it's one of the smallest streams.
Have you got any color on what's going on there and when we should think about when that kind of.
Elastic bands back into the Shadows.
Yes, we did see that leverage corvo this quarter actually came in quite a bit ahead of our expectations on that so it is starting to come back I think.
But certainly as the ramp up of that zinc expansion project and where they've gone through there, but overall, we've seen the performance improving at <unk> over the last several quarters.
Yes.
Say for example.
For.
369000 ounces <unk> Eagle Ford shale.
Sales were 171 sei.
The question is.
When do we start to see some of that is fully production volumes translate into sales.
Yes, one of the things you have to remember on NAV issues that the zinc.
So the silver and the zinc concentrate is not payable. So there is always going to be a fairly significant gap between sales and.
And.
Production on damaged cargo. So it's not a direct comparison, so you won't be able to see that full amount come in but that being said there is a lag on the copper and the lead concentrate so and as that production starts to ramp up then we should see the sales training behind it's usually about a three months lag on that.
<unk> on silver and zinc concentrates are very low and there is quite a bit of a silver here that is contained zinc concentrates and so I think there's a bigger discrepancy between.
Between that.
We typically have recovery rates in our reserve and resource.
Yes sure.
Be some some some.
Yes, happy to provide a bit more detail on that but.
The challenges is that a lot of the Silverado <unk> corporate comes on in zinc concentrate.
Okay understood alright.
And then on the depletion numbers that was.
Quite a bit lower.
Is there any I guess, you've got a couple of strange sort of way, but is there anything that Sam.
And he noted that we should be thinking about as Phoenix will further out just in terms of patient numbers.
I think the main driver for the lower depletion in this quarter was the lower sales volume, which in turn was due to the cessation.
Cessation of flows from three mines.
We're no longer.
Longer receiving <unk>.
Deliveries from.
So.
We did we do go through a process in Q1 of every year of updating our depletion rates for any changes that we observe in the reserve and resources of the assets that we have interest in that.
Didn't change our overall depletion rate by more than 1%.
So it's a very nominal impact on.
Our depletion rates going forward, so I think.
The other factor would be that some of the the mindset.
We disposed of last year were higher depletion rate mines than then.
The ones that.
But we're currently receiving deliveries from but overall, it's less than a 1% adjustment to depletion rates.
Okay, Alright, Thanks, Scott and then last one is just on again.
Again.
Wade.
In the cash flow statement and acquisition of long term investments and $8 million out the door.
However in Q.
Common shares held are you able to displace.
Okay.
That was the integra.
Investment.
Okay. Okay.
Thank you very much.
Great operator, one more question please.
Your next question comes from Kenya Jacob.
Scotiabank.
Please go ahead.
Good morning, everyone. Thank you so much for taking my questions I have two.
If I could just start on just the 2020 guidance I just wanted to make sure I have.
How your process.
So I'm thinking you've mentioned that you're going to have a stronger second half I'm just wondering if I look at it holistically.
Does that 45 first half versus 55 second half seem reasonable.
Over quarter improvements.
That sounds about right I mean, what we what we see over the course of this year is just continued improvement.
Both the Constancia and Salobo.
<unk> III ramps up and as they continue to improve line, one and line two at Salobo and trend.
Get production up to former levels.
We see continued improvement there.
And we've just finished another site visit down to Salobo and we're happy with the progress that is being made at the site and so and so.
What I can tell you is the production for the first quarter was at the very top end of our guidance right now. So so if we keep on this trend we would be at the 660000 gold equivalent an ounce level, we were right at that top end of our guidance range and so that's probably the best way to set it up in terms of how we see it every quarter.
In fact, if I sit and look at it I think that every quarter for the next five years should probably be better than the last one.
There might be a few blips in there but.
But we are going to see continued improvement all the way across the portfolio Tanya.
Okay, and so just for 2023, just that we have salobo ramping up that's right constancia getting into the higher grades so that should be better second half what about <unk> and <unk> are you seeing any improvement in Q2, I should I put them all into Q3 Q4.
Not a significant improvement at either pennant skewed or boise's Bay in the second half there'll be fairly big kind of step up in voice. These days is really in Q4 and into next year once they get into the underground there and Penske is fairly static across the year.
Yes.
I'm going to say, it's going to be.
Sure.
Theres still pulling for open pit material to supply in the underground is substantially higher grade cobalt for us and so so once that undergone does phase in.
Yeah.
A pretty rapid uptick in terms of production from voice has been.
Very helpful. Thank you and then.
Oh.
Danny I don't know, we cant hear you anymore.
Operator.
Still on the line for questions.
Can you please press.
Thank you your line is open.
Oh.
Alright.
Yep, Okay I'm back I didn't know if you wanted to hear me didn't want to hear me.
Anyways.
It depends on the question.
Okay, well it is about transaction, that's why I thought maybe you didn't want to hear me.
So maybe if I hate them.
Just ask.
I'm always interested in.
The volatility in pricing.
In both gold and other metals.
Does the deal environment look like Hasnt changed from last quarter, I know, we had talked about the $150 million to $350 million.
<unk> level in terms of financing.
I'll, let Matt projects I'm, just wondering if that's still the case or are you seeing anything different out there, including the structure of the deal.
Yes, good morning.
Thanks for the question, Yes, we're still seeing assets opportunities that fall into $150 million to $350 million range still to be honest with you a very healthy number of opportunities in our pipeline and the majority of our development stage, but we are starting to see some operating assets as well.
That's a positive focus for us is always on precious metals gold silver platinum palladium. So thats the areas that we're looking at at this point in time, and we're actually quite optimistic about the outlook for the remainder of this year. So we are hoping to show you some things as time goes on.
And when you mentioned operating assets, how do you define that.
Companies that need to fix balance sheets on their operating assets.
I'm talking specifically about assets that are actually operating.
Streams could contribute immediately to weakened bottom line.
Okay I was just thinking of it from the operator, why they would need you would that just affects balance sheets on their side.
And we don't see a lot of stress the balance sheet until we do see though is a need for funding capital right.
It's growth.
Typically either expansions of stuff. We're looking at is either expenses or funding another acquisition into an operating company and its.
Even in today's equity market the way it stands for a lot of these smaller companies.
Even though they've got operations.
Streaming capital capital from our streaming agreement is still very very attractive. So we are seeing stuff along that line.
It's good to see okay. Thank you so much and thank you for taking my question.
Well it wasn't our side here.
Thanks.
To get it off.
Yes.
I've got a few.
Yes, Tanya and thank you for thank you and thanks, everyone.
For dialing in today.
Closing, we believe Wheaton is very well positioned to continue delivering value to all of our stakeholders for a number of different reasons, firstly by offering our shareholders exposure to our diversified portfolio of long life low cost assets that we believe has one of the best organic growth profiles in the mining industry.
Secondly, by having low and predictable costs, which are resilient to inflationary pressures, resulting in some of the highest margins in the entire precious metal space, which has allowed us to consistently return value to shareholders through our 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.
With that I'd like to finish off by saying that after nearly 20 years at this company since we created it.
Personally I have never been more excited about our future prospects. We believe that now is a great time to own more wheaton.
I do look forward to speaking with all of you again soon thank you.
This concludes this conference call for today. Thank you for participating please disconnect your lines.
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Okay.
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