Q4 2023 Wheaton Precious Metals Corp Earnings Call
[music].
Good morning, ladies and gentlemen, thank you for standing by welcome.
Precious metals 2023 fourth quarter and full year results conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time some progress Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star two thank you I would like to remind everyone that this conference call is being record.
On Friday March 15th 'twenty 'twenty four at 11 a M.
Eastern time.
I'd like to turn the conference over to Vice President of Investor Relations. Please go ahead.
Thank you operator, good morning, ladies and gentlemen, and thank you for participating in today's call I'm joined today by Randy Smallwood, Wheaton precious Metals', President and Chief Executive Officer, Gary Brown, Senior Vice President and Chief Financial Officer, Keith I'm hardly senior Vice President corporate development, Curt Bernardi, Senior Vice President legal and West Carson Vice President Mike.
Grace.
Please note that for those not currently on the webcast and slide presentation accompanying this conference call is available in PDF format on the presentations page of the Wheaton precious metals website.
Some of the commentary in today's call may contain forward looking statements that would direct everyone to review slide two of the presentation, which contains important cautionary notes regarding forward looking statement. It should be noted that all figures referred to on today's call are in U S dollars unless otherwise noted with that I would like to turn the call over to Randy Smallwood, Our president and Chief Executive Officer.
Thank you Emma and good morning, everyone. Thank you for joining us today to discuss <unk> fourth quarter and full year results of 2023.
Our strong quarterly performance was underscored by Salobo, which reached its highest production level in the last four years.
We were very excited to see Vale base metals successfully complete the throughput test for the first phase of the Salobo III expansion project in November <unk>.
A significant milestone that demonstrates increased reliability and continued operational excellence.
We look forward to further advances as that expansion project continues to ramp up through 2024.
In 2023, we also achieved a milestone in our growth strategy with the announcement of our record eight acquisitions totaling just over $1 billion in commitments.
Hey, Sam will discuss in further detail. These recent acquisitions, which include a silver stream on water.
Mineral Park project gold Palladium, and platinum streams, and Ivan host Plat Reef project, which is our first foray into Africa.
Gold and silver streams on <unk> project.
Our gold stream on DAU Radians Curdle project.
And lastly, a royalty on vista's Mt Todd project.
Making marking our first foray into Australia.
We are excited to welcome our new mining partners and look forward to supporting them as they advance these projects the largest being Ivan who is rapidly advancing plat reef project.
We are very pleased to have Ivanhoe as partners, who have had long standing relationships in South Africa and have done an immense amount of work to de risk one of the highest grade undeveloped precious metals assets in the world.
Each of these acquisitions further diversifies our portfolio in terms of geographic presence and strategic partnerships and once ramped up our forecast to contribute meaningful production and further strengthen weakens already prominent position as.
As the leader in the sector's growth landscape.
Our growth pipeline of development projects was also further de risked in the quarter as Adventist mining received multiple key permits for their career Pombo project.
And convey that a construction decision is expected within the year.
In addition, Rio two announced that they have received approval of their environmental impact assessment, allowing them to advance the fenix project through permitting financing and into construction activities in 2024.
Sure.
During this quarter. We are also proud to have been recognized as one of the world's 100, most sustainable corporations by corporate Knights and achievement reflective of our commitment to operate to operating responsibly.
All areas of our business and representing the quality of the mining partners that we work with to deliver society, it's much needed commodities.
To reinforce our confidence in the sustainability and the growth potential of Wheaton. We are pleased to announce the transition to a new progressive dividend policy. This new approach is marked by an increase to our 2024 annual dividend.
Under our new policy weakness payout ratio is expected to remain the highest within the entire precious metal space.
And with that I would like to turn the call over to West Carson, Our Vice President of operations, who will provide more details on our operating results.
Yes.
Thanks, Randy good morning.
Overall production in the fourth quarter came in higher than expected driven by strong outperformance at both Salobo and Constancia and a steady ramp up at <unk>, highlighting the strength of our diversified portfolio of long life low cost assets.
In the fourth quarter of 2023, Salobo produced 71800 ounces of attributable gold an increase of approximately 89% relative to the fourth quarter of 2022.
Driven by higher throughput and higher gold recoveries.
Global reached its highest quarterly production level since 2019 as the ramp up of slower three expansion continued to advance and overall improvements were realized at both the level one and two.
As mentioned by Randy in November Valley base metals reported the successful completion of the throughput test for the first phase of this level III project with the slower complex exceeding an average of 32 million tonnes per annum over a 90 day period.
Under the terms of the agreement the company paid flow of $370 million for the completion of the first phase of slower three expansion on December one 2023.
Salobo III is expected to achieve a sustained throughput capacity of 36 million tons per annum by the fourth quarter of 2024.
The remaining balance of the expansion payment is dependent on the timing of completion and will be triggered once value based models expand actual throughput above 35 million tonnes per annum for a period of 90 days.
In the fourth quarter of 2023, Constancia produced 840000 ounces of attributable silver and 22300 ounces of attributable gold an increase of approximately 28% and 112% relative to the fourth quarter of 2022.
Quarterly gold production combined with strong silver production are a result of significantly higher grades for mining of higher grade zones in the public ACH deposit and associated higher recoveries.
In the fourth quarter of 2023 patents keto produced 1 million ounces of attributable silver a decrease of approximately 41% relative to the fourth quarter of 2022, primarily due to lower throughput, resulting from the labor strike, which began.
On June seven 2023 and ended on October <unk>.
<unk> reports that operations have since safely wrapped up after the October 13th resolution was reached.
Newmont has indicated the Penske, though is expected to deliver higher co product production in 2024, due to higher silver lead and zinc content and the Chile, Colorado pit.
In the fourth quarter of 2023 onto Mena produced 1 million ounces of attributable silver a decrease of approximately 3% relative to the fourth quarter of 2022, resulting resulting from lower grades due to mine sequencing on.
On February 15th of 2024, Peru's National Environmental certification service for sustainable investments approved after a detailed evaluation process. The modification of the environmental impact study, which allows the extension of that to me is reserve mine life from 2028 to 2036.
Wins overall attributable reserves and resources saw solid growth across all mineral categories with the most noteworthy being 10% growth in our proven and probable reserves.
This was driven by a 12% increase in gold reserves, primarily due to new acquisitions in 2023 combined with the results of a pre feasibility study at copper World, which now incorporates goal for the first time.
Attributable measured and indicated mineral resources also saw good growth at 15% on a <unk> basis, and overall attributable inferred resources grew by 3%.
In 2024 gold equivalent ounce production is forecast to be consistent with the levels achieved in 2023.
As expected stronger production from <unk> and voices Bay is forecast to be offset by anticipated lower production from <unk> global.
The pension of operations at Minto and the halting of production at <unk>.
<unk> estimated attributable annual production is forecast to be 325000 to 370000 ounces of gold.
18, 5% to $20 5 million ounces of silver and 12000 to 15000 gold equivalent ounces of other metals.
Resulting in production of approximately 550000 to 620000 gold equivalent ounces using our updated 2024 commodity price assumptions.
Production is forecast to increase in <unk> as a result of uninterrupted operations in it voices Bay do you see the ongoing transition from the worldwide pit to the underground mines.
Production is forecast to decrease slightly at Salobo due to lower grades as per the mine plan, which are expected to be partially offset by increasing throughput as the salobo III expansion project continues toward completion.
Historically weakness provided five and 10 year averages for its long term guidance. However in 2024. The company has elected to introduce a five year target. In addition to an annual average for years six through 10 with a goal of providing increased granularity and further transparency of our expected growth trajectory.
As such we are forecasting growth of approximately 40% over the next five years to over 800000 gold equivalent ounces by 2028 and averaging over 850000 gold equivalent ounces per year from 2029 to 2033.
We believe this industry, leading five year growth profile to be significantly derisked with over 70% of the growth coming from assets that are either operating and construction and are permitted.
We expect growth from operating assets to come from Salobo, and Tina <unk> voices and Mary motto.
With expected growth from development projects, including Blackwater Platt reefs Goose mineral Park, Phoenix, <unk> and Thats the main zone.
That concludes the operations review and with that I will turn the call over to Gary.
Thank you Wes.
Gary: As just described production in the fourth quarter amounted to 174000, Geos, a 13% increase relative to the prior quarter and a 22% increase from the fourth quarter of the prior year, primarily due to the throughput expansion at Salobo, which achieved the highest quarterly production level since 2009.
Gary: <unk> <unk>.
Relative to the fourth quarter of 2022 gold production increased 64%, primarily due to outperformance at Salobo and Constancia, partially offset by a 21% decrease in silver production due primarily to the now resolved labor dispute of pellets Quito, the divestment of the <unk> pen.
And the closure the closure of the Minto mine and the temporary suspension of attributable production from al just drill.
Sales volumes amounted to 162000, Geos, a 36% increase relative to the third quarter of 2023, and an 18% increase relative to comparable period of the prior year with the year over year variance being primarily due to higher production levels being partially offset by relative.
<unk> in ounces produced but not yet delivered or PBS.
Strong commodity prices, coupled with our solid production base resulted in revenue of $313 million and gross margin of $177 million.
An increase over the comparable period of the prior year of 33% and 46% respectively.
Of this revenue, 74% was attributable to gold, 24% to silver, 1%, <unk> and 1% to cobalt.
As at December 31, 2023, approximately 134000 GE goes we're in PP&E and cobalt inventory, representing approximately two five months of payable production slightly lower than the preceding quarter and within our expected range of two to three months.
Gary: G&A expenses amounted to $9 2 million for the fourth quarter of 2023, and total G&A for the year amounted to $38 million slight.
Slightly below the low end of our original forecast due primarily to lower compensation costs.
For 2024, the company expects the G&A expenses will amount to 41% to $45 million with the anticipated increase from 2023 being attributable primarily to higher marketing and due diligence costs.
Adjusted net earnings in the quarter amounted to $165 million with the $61 million increase from the prior year due primarily to the higher gross margin.
Adjusted earnings per share amounted to 36 per share an increase of 59% over the comparable period of the prior year.
Revenue for 2023 amounted to $1 billion, representing a 5% decrease relative to 2022, due primarily to lower gold equivalent sales, partially offset by a 6% increase in the average realized gold equivalent price of this revenue 99%.
That was derived from precious metals with 65% attributable to gold, 32% to silver <unk>, 2% to palladium and 1% to cobalt.
Gross margin for 2023 increased 1% from the prior year to $573 million with adjusted net earnings increasing by 6% to $533 million.
Despite the persistent inflationary environment, we can continue to deliver robust cash operating margins in the fourth quarter, resulting in cash flow from operations of over $242 million.
An increase of over 40% relative to the fourth quarter of 2022.
During the quarter, we made total upfront cash payments of approximately $452 million relative to minerals stream interests, including $45 million relative to Blackwater and $370 million relative to the Salobo III expansion.
One with dividend payments totaling $67 million.
Overall net cash outflows amounted to $287 million in Q4, 2023, resulting in cash and cash equivalents at December 31 up $547 million.
This cash balance combined 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.
It is worth noting that subsequent to the quarter on February 27.
2020 for an additional $450 million was paid to Orion relative to the closing of the acquisition of the Platt reef and the <unk> streams.
As mentioned by Randy we have transitioned to a new progressive dividend policy marked by an increase in our first quarterly dividend of <unk> 2024. The board has declared a dividend of 15 five cents a share payable to shareholders of record on April 3rd 2024.
To date. The company has now returned more than $2 billion to investors through dividends, which notably represents more than 50% of the amount of equity ever raised by the company.
That concludes the financial summary, and with that I turn the call back over to Nathan.
Thank you Gary.
But development team was exceptionally busy in 2023 announcing a record eight precious metals transactions on a number of assets and over $1 billion in commitments, resulting in the addition of multiple top tier assets, adding strong accretive growth to our developer project pipeline.
I'll take this opportunity to focus on streams relating to three new assets that were acquired in November when we entered into an agreement with entities advised by Orion resource partners to purchase existing streams on the <unk> project along with the new stream that was created on the current off project for total cash consideration of $525 million.
The current upstream closed in December 2023, with a flurry if a good takahe streams closing on February 27th 2024.
How is the <unk> project is the world's largest undeveloped precious metals project and is currently projected to become one of the lowest cost producers of palladium platinum rhodium nickel copper and gold globally.
For the existing flaring extreme agreements, we will receive 62, 5% of the payable gold and five 5% of the payable palladium and platinum until certain delivery thresholds have been met at which point the percentage of payable metal will be reduced as set forth in the pre existing agreements attributable.
Attributable annual production is forecast to average over 21000 gold equivalent ounces for the first 10 years, almost doubling to over 37000 gold equivalent ounces for years 10 through 'twenty. We can expect to begin receiving ounces in early 2025.
On slide eight in addition to <unk>. The company also acquired a stream on BMC minerals <unk> project, a poly metallic feasibility study stage development project projected to be one of Canada's top producers of zinc and silver and a top 10 copper producer Wheaton is expected to receive payable gold and silver deliveries ranging from 5% to seven.
375% of produced metal for the life of mine with the stage presented just depending on the timing of deliveries.
The life of mine attributable production is expected to average 3900 ounces of gold and over 530000 ounces of silver per year.
Over to slide nine.
The third stream acquired is newly created gold stream with Dell Radiant on its current oil project in Northern Ireland.
<unk> received gold production of three 5% dropping to one 5% for the life of mine. After 125000 ounces of gold has been delivered.
Attributable production will equal 4400 ounces of gold per year for the first 10 years of production.
We are excited to be partnering with radian and supporting the build of the state of the art modern underground mine.
In addition to the streams acquired from Ryan in the fourth quarter, we acquired a silver stream on the mineral Park mine for $115 million, which was presented on our last conference call. In addition to 1% royalty on Vista Gold's Mt. Todd Gold project with $20 million.
While 2023 was a record year for corporate development activity, we continue to see strong appetite for streaming capital to the mining space and see opportunities to continue adding accretive acquisitions to our portfolio in 2024.
With that I'll hand, the call back over to Randy.
Thank you hate them.
In summary, 2023 was a very strong year for Wheaton distinguished by several key highlights with production of 620000 gold equivalent ounces, we achieved our annual guidance generating robust cash flows of over $750 million in distributing record dividends of over $270 million.
Our pipeline of development projects was further derisked by construction advancements in the receipt of various key permits by our partners supporting our impressive organic growth profile of over 40% in the next five years.
We continued to grow our asset base welcoming seven new assets into our portfolio.
Adding further diversification by commodity operator region and development stage.
Our balance sheet remains one of the strongest in the industry, providing ample capacity to add accretive high quality streams into our portfolio.
We announced a new progressive dividend policy.
And lastly, we continue to demonstrate leadership and sustainability with sector, leading ESG ratings and external recognition.
So with that I would like to open up the call for questions operator.
Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you'd like to ask a question. Please press the star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star two.
One moment, please while we compile the Q&A roster.
Your first question comes from Richard Hatch.
Kevin Berryman Berg. Please go ahead.
Thanks, very much good morning, Randy and team thanks for the presentation and congrats on a good set of numbers.
Thank you.
Any questions.
The first one.
Just on <unk>.
I think the.
The market struggled a bit to get clarity on.
Gary: All in favor.
Jason Yes.
Wonder whether you can perhaps give us a little bit more color incomes.
The estimates that the market should be <unk>.
And reading into this conference <unk> IV ranked guidance given the slight base such as a core asset.
The second one is just on.
And.
Obviously, they've come out and said that they want to sell some assets and I was just wondering if you might be able to talk a little bit about weather.
You're seeing a bit of interesting business development opportunities there.
You can be part of our funding structure.
And companies that are looking to try and do some deals with some non core assets and get some strange listen some interesting assets in some jurisdictions and then the last one is just finally enough what I had from an investor today just talking about.
About the EV.
Alicia.
So like what's.
When you look at extreme that you would have done.
This is actually giving you and then.
Fast forward.
510 years, whatever it might be.
Talk about the additional value.
In that IRR as the use of combined like for example, <unk>.
Exploration upside or whatever that maybe just a quick question I'm just curious to get your diesel thanks.
Sure Richard.
Hopefully I'll remember all three questions are we will remember all three questions I'll start off with Salobo.
Salobo is just finishing off last year they are phase four of the.
Of that pit design and kicking into phase five and as expected.
These these pits are always designed around the higher grade core and so they're always chasing down and whenever you're starting a new phase you chase up to the perimeter, which is little bit lower grades in <unk>.
And so that's what we're looking at is through the course of this year, we're going to see the bulk of it is just going to be the startup of mining in phase five as they work their way down the phase five is expected to last probably about four or five years.
And so what we're going to see us gradually increasing grades again as they work towards the core of the deposit in phase five.
But I'll make a prediction five years out from now when they shift towards the phase <unk>, we'll probably see a bit of a takeover and great again now.
The reason that the third phase of the expansion was.
Was that sort of.
Timed to come on this third phase of global was sort of coincide with this hidden lower grade and so we will see an offset it's not as hard as it would have been because we are ramping up this third phase and so we do expect.
That that there'll be running the operation that has full capacity by the end of this year. The objective is to satisfy the the next phase of the expansion test before the end of this year I'm, hoping it happens earlier than expected. They showed really good progress last year.
I do think that valley has taken a little bit of a conservative approach in terms of scheduling that towards the end of this year, but fingers crossed that they can actually get there a little bit earlier, but we will see improved grades over the next.
Four or five years as phase five works its way back down into the core of the ore of the ore body and but this is going to be something that's a natural cycle with respect to the open pit I don't know west you've got anything to add to that yes, probably the only other thing I would add is just that they do have it and then optimize stockpiling strategy there where they are building up lower grade stockpiles as they mine ore out of the.
And we will see that variability over the next several years in grade, but as Randy said as you get deeper down into the pit in phase five and phase six you will see that grade start to come back up and really we're really excited to see that higher throughput coming through and we're really just seem the beginning of it as that ramps up over the next year here, we will see the actual.
All production come up with that throughput.
I think your second question Richard was.
Newmont I don't know Haytham, you raising the avnet happy to happy to take that question Richard and Thank you for the question. Yes, Newmont, obviously has indicated that almost half of their portfolio is considered non.
Non world class or non tier one and they've indicated that they would look to sell probably seven of those assets. We have been in discussions now with newmont, but with other parties to see if there is interest out there to that.
The way that streaming could actually help fund some of the status now keep in mind. There is only one or two of those assets that we would consider.
Interesting from a Wheaton perspective, given the long mine lives and the resources and reserves that are in place. Many of the others are very very short mine lives and wouldn't really be amenable to a good stream.
And the other aspect is operating costs and margins, we do focus on first and second quartile assets and so a lot of times when we see.
Opportunities like this these assets one of the reasons. They are for sale is because they are not very high margin assets the cost of climbed up and so it is something that.
But we're not willing to stretch as far for in terms of doing that but it's definitely going to be some activity on that front.
Richard I think the third question was related to IRR.
And what kind of an IRR or we look at it one of the huge benefits of this.
<unk> business model is the fact that we have commodity price pure commodity price exposure or costs are defined in the contracts and so.
A lot of it comes down to what happens to commodity prices over that.
That period, I think you suggested about four or five year period.
We deliver the bulk of that right back to our shareholders in terms of cash.
Cash flows and profits.
And so that's the real key difference in the streaming model versus the traditional mining model were.
We're higher prices quite often mean lower grades get processed and costs go up because of that we don't we don't suffer from that our cost actually are defined by our contracts and our and we still delivered very very strong margins all the way back up when we see those higher prices and so I don't know Gary you've got some that we've got a pretty good too.
Record on the IR side, Yes, we do Richard.
We just still.
The required returns associated with the opportunities that we're looking at.
Based upon the risks inherent in the in that opportunity relative to the risks inherent in our existing portfolio and so we look at how well defined the resources.
What the counterparty credit risk looks like what the political risk looks like whether we are dealing with the first quartile, etc. Second quartile and we're really only focused on.
Assets that operate in the lowest half of their respective cost curves and then we look at.
Whether we're taking development stage risk score whether it's currently operating asset and then we look at the.
The ESG track record.
Or what we expect to be the commitment of the counterparty to ESG.
The high level of ESG practices, and we come up with.
An appropriate discount rate.
Associated with that.
When we also do what we call a post mortem every year, where we look at every deal that we've ever done and then we compare how it performed to how we expected it to perform and when you when you look at that.
Put just over $10 billion into streams.
Gary: We have already recovered all of that money.
We have.
Average mine life of <unk>.
Rune and probable reserve life of roughly.
25 years when you include resources.
Which our assets have shown a high propensity to deliver on that mine life more than doubles.
So.
When you when you look at the returns that we've generated.
On the over $10 billion.
We estimate that it being just over 17% so.
That's over a.
At 20 year history, we're celebrating our 20 <unk> anniversary so.
Think.
We feel we've been pretty good stewards of capital.
That's incredibly helpful Gary and thanks.
Yes.
Please.
Normally when you would do a deal if we would say see what tomorrow the IRR.
It probably would calculate would be high single digits low double digit sorry, Ross I really dies.
A good 50% upside of potentially.
Potentially.
Which commodity price upside to life of mine upside is that a good way to think about it.
Yes, I mean it comes out every project is unique right because each project has varying risks if youre going into small countries, there where you're the only asset running you assign a higher risk to it and you take that risk when youre going into it and viewing.
You make sure you're structured to protect yourself. So you don't have those kind of problems.
If you.
The exploration risk the metallurgical risk all of those factors come into ESG risk all of those factors come into what kind of return that we need to satisfy.
US investing into the project.
And as Gary highlighted there.
<unk> got a pretty good track record of making sure that we deliver on those on those returns.
Very helpful I'll get out of the way thanks for your time Thanks Richard.
Ladies and gentlemen, as a reminder, should you have a question. Please press star one.
Your next question comes from Tanya <unk> from Scotiabank. Please go ahead.
Good morning, everyone. Thank you for taking my questions. Then thank you operator for getting my name right.
Yes.
Yes, Rob Andy.
Two other call. So this is a good luck.
Yes.
I have actually four questions if I could I'm just going to go through them one by one.
First one maybe just on the global minimum tax.
From your interpretation because my understanding is that it.
Implemented or when implemented.
Canadian government implemented would be retroactive back to January 2024.
I just wanted to understand your view.
You're seeing it is retroactive going back or are you seeing it just being implemented.
The Canadian government implemented.
We expect it to be retroactive danya.
So we should think of it that maybe you don't pay it in Q1.
<unk> implemented in Q2 that you would have it.
Obviously take through the income statement and going forward. Thank you Q2 onwards retroactive.
Would that be a fair way of thinking about it yes.
Yes, I don't think theres much of a chance of the GMT being enacted by the time that we release, our Q1 results. So we'll be very transparent as to what that.
<unk>.
Accrued liability would be expected to be by by disclosing it in our MD&A, but we likely will take two quarters of GMT.
Reflect two quarters of it in our second quarter results.
Just keep that in mind.
Assuming that the Canadian government inaccurate.
Yes, no no no. Okay. That's helpful. Thank you very much for that.
Second question has to do with.
Dividends, So you know.
I'm, just and maybe this is for Randy.
Randy just on the dividend policy, you know you've gone to electro aggressive dividend can you just.
My true.
Why.
Is it maybe because your peers have progressive dividend.
Is it made.
It's being reviewed once a year and so like your peers every year, we sort of habit.
A slight increase and just remind me of a minimum cash balance on your balance sheet that you need to run your business. So that I can think about what else how I modeled this dividend going forward.
Sure well so as a refresher the previous dividend was it had as a reference a minimum of 30% of our of our cash flows.
<unk> averaged over the previous.
Four quarters.
The challenge that we have.
That we've had with that is that it is one that had a climbing basement and so we've been actually holding it relatively constant and to be honest. We're paying currently somewhere around I think it's 37% of our cash flows and so when we looked at our growth profile coming forward, we realized that with that.
With the current framework, we actually wouldn't be raising the dividend, even though we're going to see some growth.
Of course current commodity prices would accelerate that but I wouldn't assume that growth for a couple of years and we just felt that having having been flat for a couple of years. It was time to add some some growth we've had substantive growth in our dividend.
Peer peer group, leading growth in our dividend over the last five six years, but it has actually been held flat for a couple of years and we just felt it was time to give it give.
Give it a bump.
So the commitment towards the progressive scale I mean, what we're committing to is that there will be an increase on an annual basis on a go forward. The scale of that increase is going to be up to up to us and up to our board and it is going to be subjective to what kind of a cash balance or we're looking at right now.
In terms of a minimum cash balance. This is a this is a very G&A light company, we don't have.
Much much needs as a total of 40 employees and the whole company and so our G&A and as Gerry detailed in his.
Numbers, our G&A numbers are very very small and so and we've got healthy access to very very attractively priced debt if required.
But that's all going to only be touched if we with the strong cash flows and with the with the production growth. We've got over the next few years.
That's only going to be.
We're only going be using that revolver, if we're seeing access to larger scale world class.
Streaming opportunities, which we're always hopeful for but currently what we've been looking at this stuff, that's $500 million or less which which.
It's something that's easily handle that we can handle that with our current expected cash flows and so so I don't see any any risks on that side at all the commitment as it's.
It's been flat for close to two years now since we've seen a bump up on that and were and because of that 30% number being well below what we're actually paying in the 37% range. We just that.
Looking forward, we didn't see that actually impacting our dividend on a go forward basis and so we just felt it was time to deliver brings some of that growth forward and start giving it even even adding more back to what we already delivered to our shareholders. We're already by far the biggest in the entire precious metal space in terms of the percentage of revenue back to back to shareholders.
So we want to make sure that we continue showing that growth that we have shown for the last.
Four five years.
And the minimum cash that you think about on the balance sheet.
I don't think.
Gary: We don't really.
Look at their being a minimum cash balance required on our balance sheet. We've got this five year $2 billion.
Revolving credit facility, which is fully drawn should we we need to access that.
Fund.
Some of the opportunity sets that.
We will hopefully be bringing in.
<unk>.
When we look at the.
Current commitments that we have outstanding we don't even see ourselves even with this new dividend policy, we don't see ourselves even accessing the $2 billion revolving credit facility to <unk>.
Those over the next three years.
Ill.
We've shown a strong track record of just adding to that dividend.
And so when you keep on talking about the reference to minimum balance I mean, we're not going to drop the dividend. So.
We've got a strong enough balance sheet with all the tools that we have at hand, and all the growth we have.
That's not something that's that's a concern to us.
Okay, well I'll continue with Gary Dan on my next question.
Just wanted to review Gary with you just the payments just want make sure I have all of the payment.
We are going to be paying this year you did mention obviously the full $150 million that went out that 27 I think it was like you mentioned.
Jim can you just remind me all of the other ones that are coming at the mall captured.
Yeah, and I would.
<unk>.
I would point you to our.
Are the table that we have of our commitments on.
Page 39 of our MD&A.
Gary: So you've got the Salobo payment.
But we.
Is contingent upon.
And valet, achieving the 35 million tonne per annum throughput test.
Which we think.
<unk>.
Should satisfy this year, so that's a $163 million.
We expect to.
Start making payments relative to Ken greenhouse.
So we've got about $19 million relative to them.
<unk>.
Got.
<unk> got about $15 million that.
We hope to be making to generation mining relative to the marathon.
Gary: Project.
My motto is expected to move forward with.
The.
Development of the.
The deeper zone and so we've got $80 million there, we've got the $115 million for the mineral Park stream.
We paid the $450 million relative to plat reef and because the chaos.
Phoenix Gold, we would hope they move forward with the construction decision later this year, so that's $25 million.
$17 million that.
We.
We'll pay relative to the Mt Todd.
Royalty.
And that's pretty much everything that we expect this year. There is that there is a possibility that.
Correct Pombo might move forward a bit we've got that scheduled in that in next year, but with the success they've had on permitting.
And they are considering going into a construction decision we might see that move forward Thats, a great news story and that would be a 162 mill.
Unlikely, we pay all of that but we might be paying a bit of that here in this year.
If they May go ahead, and make a construction decision, which they are seriously looking at.
And open for that.
Sure.
Good ones that definitely in the model and then I just wanted to ask just on that guidance. Some depreciation we're getting with Q2 that may be G&A that you usually provide for US and then also an understanding of the quarterly guidance should I be thinking 48, 52 first half second half.
Yes, I guess I mean from a G&A perspective, what we've got is 41.
$45 million over the course of the.
Course of the year.
Spread out evenly across that.
Gary: In terms of production.
There's no doubt that <unk> is a key influence and they expect to be running that it's a 90 day completion test to take to get that second phase and thats going to be their current schedule has that being satisfied during the fourth quarter, but but theyre going to have to start that in the third quarter to go forward and that will be running at a minimum of 35 million tonnes per annum.
Keep in mind, the asset has a capacity of 36 million tons per annum. So I would probably lean it a little bit towards youre, probably not too far off the $48 50, 248% first half 52% second half.
It might even be a $47 53, there is definitely going to be a little bit of a bias towards the tail end of the.
The year, mainly because we global is ramping up through the course of the year.
And the other the other area, we're going to see gains over the course of the year as voice. These bay on the cobalt side.
Every quarter, there is going to be a higher percentage of underground feed satisfying and that stuff.
That stuff is much higher grade than what were currently currently using from the open pit.
Yes, no I appreciate that and then my final question, maybe for Haytham is again coming back to the transaction activity or the M&A activity out there I'm just kind of curious whether now.
Switching back to focusing on production over development.
Are you happy to take your Max I'm just wondering.
Again size wise.
Development of what production, how do you see that in your portfolio.
Sure.
I think youre right for the last few years. It has been focused on development. What we've seen is a little bit of focus on balance sheet strengthening by some of the potential diversified and other producers out there. So I think it's probably a 50 50 mix I'd say right now 50% is probably still looking at development stage opportunities and the other 50%.
Looking at.
Balance sheet strength, and I don't want to say balance sheet repair, but people are trying to shore up their balance sheets to be able to to add into increase acquire et cetera. In this environment and thats an area that they are coming to us looking for guidance on.
I would say that the majority of the opportunities. We're looking at are still sub 300, but as always there is a couple that are greater than 500 that takes some time to foster and hopefully we can get those across the line also add Tanya one thing you've got 17 years as an analyst I don't think anybody ever got my name right on a conference call CRD upon on me there.
Got it.
Brian.
Thank you.
Okay.
I'll give it to somebody else.
Could go on for a long time here or otherwise.
Yes.
Always happy to talk to you Daniel.
Your next question comes from Brian Macarthur from Raymond James. Please go ahead.
Good morning, and thank you for taking my question can.
Can I go back to the GMT.
When you talk about how youre going to book it first quarter low second quarter higher but can you go through on a cash basis, when youll actually make payments because you also talk about theres some credits about G&A financing et cetera.
Can you just walk through how you think that will evolve over the next few years. When do you think you'll actually have to start making cash payments related to the TMT.
Yes.
For the amounts accrued in 2024, we won't actually disperse those until 2026.
And.
I think what we've been guiding people to us.
Take our non Canadian income and you apply a 15%.
Tax rate to that so we don't.
There won't be much like additional deductions.
We will incur.
Income so it does reflect the.
The depletion of the upfront payment.
So if I roll forward, then if I'm paying my 2024 on a cash basis and 26.
Going that way that Youre 25 will be paid.
2007, so we're always like on a 18 months lag or does it get true it up and eventually you start paying on a run rate I'm trying to figure out whether it's accurately.
First payment on a lag basis or are you actually get full credit shelter some of that cash upfront.
Yes at this point I think we are operating on the basis that it will be.
There is.
On the on that kind of two year deferral.
Basis, or a year and a half deferral basis.
Ryan given that it's a what.
What I would call a sweep tax I think it needs to operate like that in a sense to.
Allow any other taxes that have been.
Paid to be deducted off of what that works out and just looking at the mechanics of it.
But until until we see legislation, it's really tough to be firm on that but but that sounds like it makes sense in terms of them having to wait for the subsequent year. So you get the 18 month lag before you actually calculate it because because it's going to look at whatever.
As I said, it's like a sweet tax.
Oh great.
That's very helpful to think about it that way and the other thing is in the MD&A you talk about how it works in Luxembourg.
Yes.
Barbados was there anything that changes going forward.
Hardware came in Luxembourg.
Okay.
No I think we've.
Outlined all of the.
Potentially applicable jurisdictions.
Sure.
Great. Thank you very much sorry to go from tax, but just trying to get clear on a cash basis was very helpful.
Yes.
Thanks, Brian.
That's the only question Brian contacts.
Thanks.
We wanted to be more taxes.
No.
Thanks.
Thanks, Brian.
Your next question comes from John Tumazos from John Tumazos Independent. Please go ahead.
Congratulations on the page 39 table.
Playing out the next $2 billion to invest in such good projects.
And the good projects you invested in.
<unk> 2023.
Thanks, Josh I could shine the shoes of your corporate development guys, maybe they deserve an extra bonus.
Well I will tell you that its an entire team effort here, it's not haytham doesn't get all the credit.
Like how do you think John.
So Randy while I was sitting in the new discoveries seminar.
Last Wednesday.
Okay.
And a year ago.
Maybe half of the discoveries I thought werent discoveries or not documented yet.
Yes.
And.
Maybe one big discovery as Anglogold.
Silica Northwest Vegas, which already has an origin have the royalty on.
The skull Cisco has the royalty on it.
And in the context of.
Sort of not a great stream of new discoveries.
Your accomplishments in locking up all these deals is even more superhuman.
If you can.
Staying this pace of deal generation.
You are getting bigger and generating so much cash.
Do you think you'd simply let cash.
Accumulate on the balance sheet or increase the dividend or buyback shares.
By royalties or other royalty companies.
What will you do if you can't sustain the deal generation pace I don't think youre going to lower your quality standards.
And Thats John.
Excellent point in <unk>.
And I strongly agree with you one of the challenges this isn't a number that's out there, but what we have run into over the last few years as we're putting out a lot less <unk> indications of value and so for an asset to actually make it to the <unk> level.
For us it <unk> it.
It has to show clear standards in terms of operating margins and responsible.
Neil suitable risks all the way across the board in terms of getting to that stage and I can tell you that for the last four years, it's less and less and less we're not seeing as many good quality projects out there.
I'm careful for the industry in the sense that there's just not a lot of risk capital. This is not a lot of exploration and that means there's just not a lot of good new discoveries that we see coming down the pipe, it's getting to be a tighter and tighter market I think in that space.
The.
The the number of the.
The success that we had last year, we more acquisitions than ever before.
Sure.
Just really do hand that to the team in terms of the work that we did.
Pushing that forward.
A lot of those transactions were with people or companies that we've worked with in the past.
And that really does come down to.
Working on being a partner of choice, it's something that we really strive to be.
And so.
I don't know Haytham, you want to add any more on the opportunity set and then I'll come back in and talk about where the cash is going sure. Thanks, Randy I think good questions. John I think I will say what you are seeing now John in terms of a lack of quality is something we actually saw a few years ago. So about half a dozen years ago, we had a definite focus to try and find the best develop.
<unk> stage opportunities that we could actually get involved in and as you saw over the last five years.
We've got like 14, or 15 development stage opportunities right now that we're actually involved in and there is three or four of them coming into production here in the next 12 to 24 months. So we did have a timeline, where we looked at and said okay. Let's work on our near term growth is working our medium term growth, let's have some optionality in our longer term growth and we've accomplished that so we do think.
There's still opportunities out there they are far and few between you are right, but randy's comment is exactly right building the relationships and getting that repeat business and.
That's going to be the key going forward is to be a partner of choice.
With respect to the cash on hand.
It's been a pretty consistent message, if we can't put it back into the ground effectively.
It goes back to shareholders.
I don't see us ever.
Gary: If we ever bump up over $1 billion of cash on hand that to me is a pretty lazy balance sheet.
And Thats the point that if you ever see a cash balance kicking up at those kind of levels will start ramping up that dividend and sarpedon, even more of that back to our shareholders. We already were.
We already lead the entire precious metal space on that front in terms of how much what percentage, we give back to our shareholders, but we can add that up further.
And my hope is and what we're always trying to do is manage our existing portfolio and grow it and continue to add quality assets.
And that's what we'll keep doing but we're going to do it for.
Accretive prices.
Gary: We're not we're not going to previously.
I mean, it's for us it's a.
It is important that we are strong stewards of our shareholders' capital and so if we can't put it to work effectively it will go back to shareholders. Our first choice is always going to be to grow the dividend I think it's the best way its a commitment on a longer term basis to go out and so so I just think that thats always going to be our first.
Our preferred choice.
Thank you and congratulations once again.
Thanks, John.
And thank you everybody go ahead.
I was just going to turn back the call over to yourself, ladies and gentlemen. This concludes the Q&A portion of today's conference call I will now turn the call back.
Mr. Randy Smallwood for closing remarks.
Thank you everyone for your time today.
As we.
To celebrate our 20th anniversary here in 2024.
I'm incredibly grateful for the partnerships that we have forged over the years and the strong support of our shareholders.
Together, we have provided the industry with an innovative solution to project finance that truly unlocked value for all stakeholders.
<unk> high quality portfolio of assets sector, leading growth profile and commitment to sustainability provides our shareholders with a solid outlook for the future and it's one of the best vehicles for investing into the gold and precious metals space.
So as we celebrate our 20th year.
Sincerely thankful for all of our stakeholders for their part in our success and wheat and success and I do look forward to a golden future ahead.
So we look forward to speaking to you all of you again soon thank you.
This concludes your conference call for today. Thank you for participating you may now disconnect your lines. Thank you.
Okay.
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Okay.