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spk00: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wheaton Precious Metals 2021 Second Quarter Results 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. If you would like to withdraw your question, please press star, then the number two. Thank you. I would like to remind everyone that this call is being recorded on Friday, November 5th, 2021 at 11 a.m. ET. I will now turn the conference over to Mr. Patrick Durin, Senior Vice President of Investor Relations. Please go ahead.
spk10: 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, Haytham Holey, Senior Vice President, Corporate Development, and Wes Carson, Vice President of Mining Operations. Please note that for those not currently on the webcast, the slide presentation accompanying this conference call is available in PDF format on the presentations page of the Wheat and Precious Metals website. I'd like to bring to your attention that some of the commentary on today's call may contain forward-looking statements, and I would direct everyone to review slide two of this presentation, which contains important cautionary notes regarding forward-looking statements. It should be noted that all figures referred to on today's call are in U.S. dollars unless otherwise noted. Now I'd like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.
spk09: Thank you, Patrick, and good morning, ladies and gentlemen. Thank you for joining us today to discuss Wheaton's third quarter results of 2021. I am pleased to announce that Wheaton's diversified, high-quality portfolio continues to deliver strong results. including record revenue, earnings, and cash flow for the first nine months of 2021. In the third quarter of 2021, we produced approximately 86,000 ounces of gold, 6.4 million ounces of silver, 5.1 thousand ounces of palladium, and 370,000 pounds of cobalt. From a financial perspective, Wheaton generated over $200 million of operating cash flow and $268 million of revenue in the third quarter. Given our strong underlying financials, Wheaton remains committed to returning capital to shareholders and declared a $0.15 dividend representing a 25% increase relative to the third quarter of 2020. We continued to execute on our growth strategy, signing a non-binding term sheet with Rio2 in connection with the Phoenix Gold project located in Chile, a transaction we expect to close in the coming weeks. And we are actively trying to put our strong balance sheet to work, looking at a number of precious metal streaming opportunities. Strong production in the first nine months of the year has allowed us to tighten the range of our production guidance. which is now 735,000 to 765,000 gold equivalent ounces, in line with the midpoint of our original guidance. Lastly, following ratings updates in this quarter, we are pleased to announce that Wheaton's demonstrated leadership in ESG continues to be met with sector-leading scores, including a AA rating from MSCI and a number one ranking in the precious metal space by Sustainalytics. I would now like to turn the call over to Gary Brown, our Senior Vice President and Chief Financial Officer, who will provide more details on our results. Gary.
spk12: Thank you, Randy, and good morning, ladies and gentlemen. The company's precious metal interests produced 184,900 gold equivalent ounces in the third quarter of 2021. Relative to the third quarter of the prior year, this represented a 2% increase in production, on a gold equivalent basis with increased attributable production relative to Penesquito, Constantia, and Sandimast being offset by lower production from Salobo and Sudbury. In contrast to the increased production, sales volumes were 9% lower due to the timing of shipments resulting in the balances of ounces produced but not delivered, or PBND, growing in the most recent quarter. As at September 30th, 2021, approximately 151,000 gold equivalent payable ounces were in PB&D, in addition to inventory amounting to 488,000 pounds of cobalt, or 4,800 gold equivalent ounces, with the combined figure of 156,000 gold equivalent ounces representing approximately two and a half months of payable production. This amount of PB&D and inventory is approximately 20,000 gold equivalent ounces higher than the average balance of 136,000 gold equivalent ounces over the preceding four quarters. Revenue for the third quarter of 2021 amounted to $269 million, representing a 12% decrease relative to Q3 2020, primarily due to the lower sales volumes, coupled with a 4% decrease in the average realized price. Of this revenue, 45% was attributable to gold, 49% to silver, 5% to palladium, and 1% to cobalt. Driven by the lower sales volumes and prices, gross margin for the third quarter of 2021 decreased 14% to $151 million. Cash-based G&A expenses amounted to $12 million in the third quarter of 2021, representing a decrease of $8 million from Q3 2020 primarily due to lower accrued costs associated with the performance share units, or PSUs. The company currently estimates that non-stock-based G&A expenses, which exclude expenses relating to the value of stock options and PSUs, will amount to $42 to $44 million for 2021. Net earnings amounted to $135 million in the third quarter, compared to $150 million in Q3 2020. with the 10% decrease being primarily the result of the build-up in PB&D. Basic adjusted earnings per share decreased 10% to $0.304 compared to $0.338 per share in the prior year. Operating cash flow for the third quarter of 2021 amounted to $201 million or $0.45 per share compared to $228 million or $0.51 per share in the prior year. representing a 12% decrease on a per share basis, with the decrease being once again the result of the buildup in PB&D. The company's board has declared a dividend of $0.15 a share payable to shareholders of record on November 22, 2021, and under the dividend reinvestment plan, the board has elected to offer shareholders the option of having their dividends reinvested in newly issued common shares of the company at a 1% discount to market. During the third quarter of 2021, the company made a dividend payments of $57 million, invested $5 million in long-term equity investments, and made a $1 million advanced Bonoro for the Cotabamba's project early deposit precious metal purchase agreements. Overall, net cash inflows amounted to $137 million in Q3 2021, resulting in cash and cash equivalents at September 30th of $372 million. The company's $2 billion revolving credit facility remains undrawn and fully available as at September 30th, 2021, giving the company almost $2.4 billion of immediate liquidity, which, when combined with the unaccessed $300 million ATM program, and strong forecast operating cash flows positions the company very well to satisfy its funding commitments and sustain its dividend policy, while at the same time having the flexibility to consummate additional accretive precious metal purchase agreements. That concludes the financial summary, and with that I turn the call to Wes Carson, VP of Mining Operations. Wes?
spk11: Thanks, Gary, and good morning. Overall production in the third quarter was consistent with expectations, with continued strong production from Penesquito, Antamina, and Constantia, offset by lower-than-expected performance from Slobo and Sudbury. In the third quarter, Slobo produced 55,200 ounces of attributable gold, a decrease of approximately 13% relative to the third quarter of 2020, with throughput being affected by the implementation of additional safety and maintenance protocols and grade decreasing in line with expectations. On October 22nd, Valley announced the resumption of copper concentrate production at Slobo. Production had been halted for 18 days due to a fire on one of their main conveyors. Other activities, including mine and maintenance operations, continued as usual during this period. Valley also reported that physical completion of the Slobo 3 mine expansion was 81% at the end of the third quarter and continues on track for startup in the second half of 2022. Valley Sudbury mines produced 500 ounces of attributable gold in the third quarter, a decrease of approximately 88% relative to 2020. This was primarily due to lower throughput as operations of the mine were suspended as a result of a labour dispute which lasted from June 1st through August 9th. Valley announced on August 3rd that a new five-year collective bargaining agreement had been ratified with mine workers. Also during the quarter, Constantia produced half a million ounces of attributable silver and 8,500 ounces of attributable gold, an increase of approximately 21% and 126% respectively relative to the third quarter of 2020. The increase in both silver and gold production was primarily due to higher grades resulting from the commencement of ore production from the public conscious satellite deposit and the increase in fixed recoveries of attributable gold from 55% to 70%. And finally, the Boise Bay Underground Mine Extension, which includes development of two new underground mines, Reedbrook and Eastern Deeps, was 70% physically complete at the end of the third quarter. Reedbrook produced its first ore in June, and Vale has indicated that Eastern Deeps is expected to start up in 2022. Moving to the next slide. Wheaton's estimated attributable production in 2021 is now forecast to be approximately 735,000 ounces to 765,000 gold equivalent ounces in line with previous guidance of 720,000 to 780,000 ounces and maintaining the midpoint at 750,000 ounces. However, given strong performance at Penasquito, Antemita and Boise's Bay, offset by lower than expected production at Salobo and Sudbury, Wheaton is adjusting the production mix by metal as per the table shown in the slide. Longer-term guidance remains unchanged at an average production of 810,000 ounces for the five-year period ending in 2025 and 830,000 ounces for the 10-year period ending in 2030. That concludes the operations overview, and with that, I'll turn the call back to Randy.
spk09: Thank you, Wes. In summary, Wheaton recorded a solid third quarter, distinguished by several key highlights. We achieved record nine-month revenue, earnings, and cash flow, and declared a 15-cent quarterly dividend. Our commitment to accretive growth was emphasized by the signing of a non-binding term sheet with Rio 2 for a new stream on the Phoenix Gold Project, a strong development project which we look forward to welcoming into our portfolio of high-quality assets. And our technical teams have been very active, visiting a number of potential new precious metal streaming opportunities as we strive to put our strong balance sheet to work. We narrowed our annual production guidance range to 735,000 to 765,000 gold equivalent ounces, in line with the midpoint of our original guidance. We were honored to once again be recognized by external rating agencies for our ESG performance with sector-leading scores. And lastly, we believe our portfolio continues to deliver ample opportunity for organic growth, the benefit of which we expect to see from assets such as Solobo Voices Bay, and Constantia. So with that, I would like to open up the call for questions. Operator?
spk00: Thank you, ladies and gentlemen. We'll 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, please press the pound key. There will be a brief pause while we compile the Q&A roster. Your first question comes from Tyler Linton from JP Morgan. Please go ahead.
spk07: Good morning, Randy and team. Thanks for taking my question. Good morning. Maybe just, you know, starting, you know, with Solobo, I guess, you know, sort of your production, you know, I guess from 2020 and then 2021 was just impacted by sort of COVID and the mine maintenance issues. I mean, do you think is 2022 shaping up to be a more normal year or could be, you know, the first part of the year still change? be a little weak, you know, as some of these issues carry over? Just kind of any color there would be helpful.
spk09: Well, I'll let Wes add in a bit, but what I would say is 2022, of course, Solobo 3 will be starting up towards the end of 2022. And so, you know, I do expect that to be, you know, a next phase of growth coming into production at Solobo. So I do expect, you know, good strength there. In terms of the normal course operating issues, you know, all the intentions, well, I'll let Wes actually comment.
spk11: Sure yeah I'd say that I mean the issues that they were having earlier in the year this year were really kind of solved by August of this year and we saw that the mine production get back up to really normal levels and unfortunately kind of September and fire in October that there were some issues sort of want more on the plant side but really with those solved now we see things kind of coming back online in the fourth quarter here and really no issues going into 2022 and I think really a push to get things back on online and then back on track.
spk07: Okay, that's helpful. And then just kind of on deals, I mean, are you seeing, I guess, with sort of the recent inflationary pressures, and I guess especially within the pressures for precious metal deals, are those pressures kind of making some projects less viable or people just sort of, you know, sort of take a fresh look at them? I'm just kind of interested in, you know, sort of if you're seeing anything on that front.
spk09: Well, I mean, to be honest, I think the – The inflationary pressures probably are best represented in the mining industry by the commodity prices that we're seeing out there. And so that's driving a lot of investment into the space. And so I would actually say that a lot of the opportunities we're looking at are coming into fruition because of the higher commodity prices. Now, that's ultimately going to wind up catching its way back into the cost of the consumables and the infrastructure and such. And there's no doubt, and even on the labor side, we are seeing cost pressure around the industry itself. But I would say in the current state of the industry right now, the higher commodity prices have actually opened up a bit of an opportunity set here in terms of people looking for funding for new projects. And I would highlight, especially on the green metal side, the amount of copper opportunities and nickel opportunities that we're seeing where we where we are looking at funding the precious metals to help build these green metal focused operations, getting the precious metals byproducts off these things. We're just seeing a lot of interest in that space. And so a big number of projects. I don't know, Haitham, you want to add anything?
spk03: No, I think you hit the nail right on the head there, Randy. It's basically higher commodity prices are driving a lot of the opportunities because you're seeing a lot of these development stage opportunities look for funding. And so the majority of the opportunities we're seeing right now are, call it, you know, sub $300 million streaming operations where we're taking precious metals out of a non-precious metals company.
spk07: Okay. So it seems that it's more sort of base metals with precious metal streams as opposed to sort of pure precious metal projects. Yeah, that's correct.
spk09: Definitely.
spk07: All right. That's it for me. Thanks so much. Thanks, Tyler.
spk00: Your next question comes from Ralph Profitti from Ape Capital. Please go ahead.
spk08: Good morning. Thanks for taking my questions, Randy. Randy, firstly on Sand to Mass, I'm seeing sales come in slightly below production, and I'm just wondering how much of that is First Majestic's strategy of holding back you know, some silver production or some silver sales into Q4 as sort of this, you know, speculative strategy. Are they telling you that's sort of something that's one-off? And, you know, is Wheaton okay with that strategy? Or would you sort of go so far as to, you know, maybe create some offsetting hedging transactions that nullify that timing risk?
spk09: Well, you know, I think it's a pretty small amount, and so we would never – we're not a fan of doing any hedging around the quarter and to sort of take that risk on. When we've seen what's happening, and Keith's done this in times past, and sometimes it works and sometimes it doesn't, we're strong believers in sort of working the market, the current market, and not trying to shape it. And so not a strong supporter of doing that, but at the same time, First Majestic has the freedom to do that if they want. You know, I think when we look at First Majestic and their track record at Santa Mass, it's a record of continuous improvement. Ever since they've taken over the asset, it continues to deliver. And so I think when it comes to Santa Mass, we're more excited about the potential to fill in that mill. It's now got capacity of close to 3,000 tons per day, and they're not operating at that level yet. And so we are seeing a lot of investment in that space. Yeah, and so we haven't seen any serious impact on that front in terms of holding back, but we'll stay on top of that.
spk08: Okay, thanks, Randy. And I want to ask a follow-up on a topical theme of global minimum tax, and just wondering if internally you've run sort of worst-case scenarios on what that could mean to potential valuation and such, just for frame of reference. You know, I sort of get to a 7%, 8% impact on a worst-case scenario of 15% effective today. I'm just wondering, is that sort of realistic or am I out to lunch?
spk09: Gary, take that one.
spk12: Yeah. You know, I think, well, it's very difficult to estimate what the impact would be given all the uncertainties that arise that surround the industry. potential implementation of the global minimum tax, but if the legislation was to be enacted such that it applies in 2023, if our contracts would not qualify for the additional deduction for tangible assets, and if our lost carry-forward position that is available in Canada to offset Canadian income for tax purposes, then I would say that you're in the right ballpark with your estimate. But I would highlight that this global minimum tax is going to have very broad global application. And I can make a pretty sound case for that additional cost being passed on to consumers at the end of the day, which is going to drive inflationary pressures up, which bodes well for precious metal prices.
spk09: Yeah, I'd just highlight the number of ifs that Gary mentioned in that. There's a lot of ifs that have to be satisfied, and the lack of clarity in terms of what's coming. So we definitely remain on the watch and observing it, but, yeah, there's a lot of ifs.
spk08: Yeah, those are all good points, guys. Thanks very much.
spk09: Thanks, Ralph.
spk00: Your next question comes from Cosmos Chiu from CIBC. Please go ahead.
spk06: Hi. Thanks, Randy and team, and happy Friday. Maybe my first question is on Boise's Bay. Could you remind me, I guess, in the MD&A you mentioned there's 488,000 pounds held in inventory by Wheaton, and then also 638,000 pounds produced but not sold. What's the difference here? The inventory... pounds. Are you holding it for a higher cobalt price? Is that how that works? Could you remind me how sales work again at Boise State?
spk12: Well, I'll start and maybe Wes might have some additional color. We recognize production prior to the the cobalt rounds actually being delivered to our warehouse. So you do have a differentiation between produced but not delivered and actual inventory. Then I would also just say that cobalt selling activity is very seasonal, and what you'll uh, tend to see is that, uh, the fall of every calendar year is what is referred to as the mating season where, uh, cobalt buyers, uh, you know, look to enter into longer term committed, uh, uh, supply arrangements. Uh, and, um, and so, you know, we, uh, we've been quite active this fall in that type of activity. So, you know, you would see generally, I think, moving forward, a buildup of inventory leading into the third quarter of every calendar year.
spk11: Yeah, I think that the one other thing to add is, I mean, the difference between that inventory and the PB&D is really that we record inventory starting at the processing plant at Boises Bay. And then there's a lag between there and it goes through the Long Harbour facility and then over to Rotterdam. So and then we actually record the inventory once we get into the warehouse in Rotterdam. So there is that lag in there, which is the difference between those two numbers.
spk09: Cosmos, this is a new commodity for us, and it's an industrial commodity, albeit in higher and higher demand. And to be honest, holding it into this fourth quarter has proven profitable for us just by looking at cobalt prices. So it's actually worked out well. But it does have unique characteristics in terms of how you fill those needs. There is a seasonality to the demand. and we basically held it in our warehouses to take advantage of that demand, that increase in demand. For sure.
spk06: Thanks, Ryan. Maybe a follow-up here, to be honest with you, looking a few years back when you first did the Voices Bay deal, it was met with a bit of skepticism at that point in time, but in hindsight, it's looking pretty smart. If I do a quick Google search, cobalt prices have have done pretty well of late, as you mentioned, I believe a $58,000 per ton. Um, you know, I guess my first question is twofold, maybe first off, uh, Randy, you know, any comments on a cobalt price and, you know, should we, and as you talked about, there's a lot of seasonality, like what we priced is what cobalt price should we be using? And then, uh, secondly, um, I think you kind of mentioned it earlier as well, but, uh, A lot of interest these days in these green metals in terms of anything that's related to EVs and things like that. Any appetite in terms of adding to that exposure? Because I think earlier during the conference call, Gary mentioned that cobalt is only 1% of revenue. Any kind of desire, appetite to increase that? Maybe even, say, lithium?
spk09: Well, you know, a lot of questions are cosmos, but I'll do my best. So, you know, first off, you know, the Voices Bay Cobalt was a very unique opportunity for us, and it's why we strayed. We are a precious metals-focused company, first and foremost. But Voices Bay is operated by Valet, a very important partner of ours. And when we had a look at that site, the Voices Bay operation, the Long Harbour Processing Facility, it produces the cleanest, greenest, most environmentally sound, most socially responsible cobalt in the world. The hydromet facilities at Long Harbor, which process this, and it's a dedicated facility that only processes Boise's Bay, so it's not being contaminated with anything, any cobalt or any production from anywhere else. This is unique within the cobalt world, and we think that this deserves special recognition. And so it's one of the reasons that we stepped into the contract in the first place. Now, in terms of the market, I really think the cobalt market is just getting started. The demand, you don't have to look too far to have a look at some of the demand figures that are being estimated, especially with respect to electric vehicles. Cosmos, you know me well enough. I've been driving electric for 10 years now, and I'll never go back. They're just better, period. on so many aspects. And so we know the world's shifting that direction. The demand figures are astounding in terms of the amount of cobalt that's going to be needed over the next while. And so the only way that that gets satisfied is commodity price. And we are very bullish on cobalt prices. So, you know, we do look at unique opportunities. We look at every opportunity out there. We like to understand what's happening in the world around us. And so we never, ever ignore any opportunity that comes through. We've successfully avoided any oil and gas investments. It's not something that we're interested in. We just don't think it's the right direction to go. And we haven't gone after what I would call base metals. However, specialty metals like cobalt do sometimes warrant some special review. I do reiterate, we are focused on precious metals. That is what we think we're good at, and that's what we want to deliver to our shareholders' portfolios. And I think we've got a great track record on that front, but we will look at every other opportunity out there. And the green metals, again, and I mentioned it in one of the earlier questions, A lot of the projects that we're looking at funding are green metals projects, and we're in there buying the precious metals byproduct from these copper mines and these zinc mines and nickel mines. And so there's definitely a real push in that direction, and I think we're well positioned to not only take advantage of it with our existing portfolio, but to continue to put our balance sheet back to work on this and grow in that space.
spk06: Great. Maybe switching gears a little bit and turning to Solobo. You know, good to hear that Solobo 3 is still on track to come in the second half of 2022. But I noticed in the MD&A that, you know, progress was a bit slow during the quarter. It was 77% complete at the end of Q2, 81% complete at the end of Q3. Um, I would imagine that's in part due to, you know, COVID-19 measures in part due to maybe even the conveyor fire at, uh, for the conveyor belt, uh, during the quarter. Uh, I guess my question again is twofold. Um, you know, number one, uh, is that, is that, is my understanding correct? And, you know, number two, should we expect, um, better progress, maybe Q4 and, and certainly into, uh, And, you know, since I have Wes here, maybe you can talk to what are some of the key sort of critical components, critical paths that they still need to achieve to get to that second half 2022 target? Wes? Sure.
spk11: I would say that, I mean... A perceived kind of slowdown in progress there. I mean, it's just kind of the nature of these projects as you get close to the end. That progress will appear to slow down a little bit just because there's sort of more difficult components of it that they're starting to tie in. Really no impact from the conveyor fire. It's actually a totally separate line from Solobo 3. So that's one of the advantages of actually getting Solobo 3 up and running here is that because that conveyor fire happened, they actually lost the first two lines. But once Solobo 3 is up and running, they will be able to run that line completely separately. So overall here, I mean, they did delay the overall last quarter, they delayed from H1 to H2 next year. So we did see that kind of push back. That really is the impact, I think, from COVID that we've seen over the last kind of 18 months here. But overall, certainly well on track to move things in. I mean, they've got a lot of the mechanical tie-ins are done. A lot of the tie-ins to existing infrastructure are done already. So a lot of it now is really just kind of getting things kind of finished off with the last kind of, I mean, all your piping and cables and all that stuff that really is kind of the final tie-ins. So we get a great update every month on their progress there, and it is moving along extremely well.
spk12: And Cosmos, I would just highlight that... that valet really bounced back very quickly from that conveyor fire.
spk11: Yeah, it was a lot faster than they were even expecting. So, I mean, to do it in 18 days was really quite impressive.
spk06: Great. Thanks again. Those are all the questions I have. Happy Friday. Thanks. Thanks, Carlos.
spk00: Ladies and gentlemen, as a reminder, if you have a question, please press star, then the number one on your telephone keypad. The next question comes from John Emosis from John Emosis Independent Research. Please go ahead.
spk05: Hey, this is John. Good morning. When Tesla reported earnings, they said something about changing their standard vehicle to a lithium iron phosphate composition. I guess that means no nickel or cobalt. despite performance questions. And I apologize, I didn't take enough chemistry or physics classes a very long time ago. And I don't understand all these battery sciences. But it would seem like there's a little risk to the battery metals where the lithium looks like it's going to happen and they're going to need to copper wires whatever the battery composition is. Should we expect more cobalt or stuff in that direction first? And just conceptually, I know your name is Precious Metals, but aluminum is very green, and 60% of it comes from coal. So the supply could very well go down, but the plastic bottles going away and the PVC siding is going away in construction. And aluminum is better than steel in vehicles. The EVs are all aluminum. So I think aluminum is just fabulous. Iron ore depletes on three different axes. There's lower output of coal and copper and nickel by the big base metals companies. And it doesn't look like China is going to produce more as much as they used to. Do we think that there's a possibility that you could consider other materials that are depleting very rapidly or have supply risks? Yeah, the gold funds sort of go out of business as potential customers of ours. So we look at cash flow, and we think any cash flow is precious, not just precious metals. Excuse me, I ask as many questions as Cosmos, I'm sorry.
spk09: Well, let me start with the cobalt. You know, thrifting of cobalt in batteries has long been, you know, it's normal. It's one of the highest cost components of batteries out there. And so... We're not surprised. Again, I'm a geologist, which does involve a bit of chemistry, but I'm not the chemist. But I'm going to tell you that the main purpose of cobalt in batteries is to stop them from burning up. And every time we see people push towards trying to reduce the amount of cobalt in batteries, You start running into overheat issues and and I do know that there's a lot of engineering in every battery application to try and control the heat, especially during recharge. And one of the ways that batteries are effective is to be able to recharge them rapidly that's that's how they work their way into the workforce as a replacement for internal combustion so you know. Although we expect continued thrifting, I think the increase in demand is substantially, we're talking magnitudes higher than the impacts of thrifting on a per unit basis that we're going to see in cobalt. And to be honest, I think the drive towards thrifting is going to continue because the only way we see that gap between supply and demand being met is with higher cobalt prices. And so I definitely would expect that. On the aluminum side, I agree with you. There's no doubt that aluminum is much more the metal of the future. Aluminum is generally a bulk product that's produced on its own. It's not a byproduct. Our niche, I think where we're the best at, is acquiring non-core byproducts from primary base metal producers. It's one of the reasons we haven't stepped into the iron ore space also, is it's just not something that works for us in terms of... trying to unlock hidden value within some of these things. So I don't see us stepping into the aluminum space, but I agree with you. Aluminum definitely should be considered a green metal. One of the challenges, of course, is the amount of energy that aluminum requires in terms of processing and such, but the world's getting better at that slowly, but definitely getting better at that. So it's definitely not an area that we're focused on.
spk05: So Franco or Cisco can have those wins? Yes, they can. I'm kidding, Randy.
spk09: Yes, they can, John. So yeah, as I said, focused on precious metals. Happy to look at other opportunities when we see unique ones that stand out, like the Boise Bay Cobalt Stream, then we'll step into that. But our real focus still is on the precious metals side. We do think that there's in the face of all these strong commodity prices, those are ultimately going to deliver inflation. And I think in the face of what I see as an inflation wall hitting us, there's no better time to be in precious metals. And I think that gold and silver are going to play in a very important role in terms of preserving value through the coming years here.
spk05: Thank you. I apologize for being a little goofy with my questions.
spk09: Thanks, John.
spk00: Your next question comes from Adam Josephson from KBank. Please go ahead.
spk04: Randy and everyone, good morning. Thank you for taking my questions.
spk09: Yep. Thanks, Adam.
spk04: Yep. Randy, just along somewhat similar lines to Cosmos and John on this precious metals versus other I mean, you've limited yourselves to streams as opposed to royalties and really precious metals as opposed to anything else aside from cobalt. And I know precious metals is your area of expertise. I know precious metals multiples are higher than others. But why do you think you're not unnecessarily limiting yourselves by not looking at some of these other markets, not looking at royalties? I mean, there's a lot of competition in the precious metal streaming industry, and I presume that's why some of your peers are looking elsewhere. So why are you not kind of thinking along similar lines that, hey, maybe we really ought to expand our horizons here?
spk09: Well, Adam, first off, we haven't limited ourselves to streams. I think the strength of the streaming model itself is what's limited to streams. Companies don't do new royalties. They'll trade around existing royalties, and we always look at existing royalties. But streams are just better, and even the existing, the traditional royalty companies recognize that, and that's why everything new that they've done is stream-focused. And so it's not that we've limited ourselves to streams. It's just that That's the opportunity set that we've seen out there. And so the other side to that is, you know, I'm a strong believer that we should, you know, instead of forcing a diversity, a diverse portfolio and a blend of materials, if you want exposure to iron ore, I can give you a long list of iron ore royalty companies that give you the same risk profile as a streaming company but are focused on iron ore. If you want exposure to oil and gas, I can give you a long list of oil and gas royalty and streaming companies, actually mainly royalty companies, that will give you that exposure. For me to, for us at Wheaton to actually start putting together a blend of those commodities is to force every single one of our shareholders to get exposure to that. And I really do think that, and perhaps there's some comfort in that from shareholders that want someone to sort of manage that diversity, but But I actually think that if I look down our shareholder list, there's quite a different appetite for what that diversity is. And I think it's actually much better in the hands of our investors and our shareholders to decide what kind of diversity they want exposure to. And so that's really the core focus. Now, with respect to the competition, we've had no problem finding precious metal streams. We've done... The scale is a bit smaller right now than it has been. It is a cyclical market. We will see times when big opportunities come in, but even though the scale is smaller right now, the quantity is dramatically higher. And so I can tell you that our legal team has never been busier in terms of the number of contracts, the number of deals that we're working on. We're not seeing a shortage of opportunities in the precious metal space. What we are seeing a shortage of is the number of high-quality precious metal streaming opportunities, but there's not an overall shortage. I think our balance sheet sort of might imply that. The fact that we're strongly positive and have no debt says that maybe we're not putting the money to work as fast as it's coming in. Trust me, we're striving to do that. I'm a strong believer that when it comes to the diversity, I think that's better left in our shareholders' hands versus us coming up with some magic mix that will sometimes shine well for you, as it has recently for some of our peers, but at the same time, it actually dramatically lowers your exposure whenever you see a strong move within the precious metal space. We're comfortable staying in this focus and have a way. Haytham, I should link you to add something.
spk03: Thanks, Randy. And Adam, I think you implied that we don't look at royalties. We do look at royalties. So there's two different types of royalties. There's royalties that already exist, which we definitely look at, but what we find is that there's so much competition in smaller companies trying to get scale to drive a revaluation that it becomes ridiculous and it makes way more sense for us to focus on streams at that point. Now, we never look to actually specifically create a royalty over a stream because the counterparty always realizes that a stream is much more attractive because if they structure it properly, they can receive a similar upfront value and get a production payment when the ounce of gold, silver, platinum plate, and whatever happens to be is produced and delivered. So the stream structure is also more attractive because outside of Canada, it actually allows the mining company, which is best capable of managing its taxes, to do so in the host country that it's in. So there are royalties, there are existing royalties, and there are new royalties. We just find that it always makes more sense to look at new streams instead.
spk04: I appreciate that, Haytham. On the topic of Solobo and Valet, obviously they're a terrific partner, but obviously the recent disruptions at Solobo just highlight precisely how much exposure you have to that asset and to that counterparty. Are you inclined to try to diversify yourself along those lines just to limit company risk and perhaps trade at a higher multiple given your lower concentration along those lines?
spk09: Well, if your biggest asset is your best asset, that's not a bad thing. Like Slobo is by far, you know, in terms of operating margins such it's a good strong asset on so many fronts. And so there's no doubt it is also our biggest asset. That's the whole effort in terms of diversifying. It is going out and looking for new opportunities. And so Hatham and his team are constantly looking to lower that percentage of Solobol by continuing to add growth. We're not going to cut back on Solobol just because the asset is very healthy, very strong. Slobo 3 is coming on stream next year. Slobo 4 has been talked about by Vale. We think it's inevitable that Slobo 4 will come along. All you have to do is look at the way Slobo 3 was laid out. It just begs for the fourth line to be added. We're confident it's going to happen eventually. And so, you know, we're quite comfortable having Solobo as a core asset in our franchise. Wes, you want sugar?
spk11: It's also worth highlighting just that the strength and diversity of our portfolio is the reason that even with Solobo having these challenges this year, we're still well on track. So, I mean, all of our other assets have performed extremely well this year, and that concentration has not hurt us. So, and we've seen really a great performance from some of the other assets in Penasquito and Antamina, Constancia, Boise's Bay. They've all done extremely well this year. So, and I think that diversity really shines through.
spk09: But I assure you, we're doing everything we can to try and minimize global by adding further assets.
spk04: Sure. I appreciate that. And one last one, just on silver. Silver prices have been, have gone nowhere of late, as have gold prices. And I'm just wondering, If you think there'll be a time in the foreseeable future, Randy, at which silver prices will move independently of gold prices, given you've pointed out the different supply-demand fundamentals in those two markets, or is there no reason to expect them to diverge at any point in the foreseeable future in your mind?
spk09: Well, they should. In my eyes, silver should catch up. It still is trading on a relative basis to gold below where it should be. And then when you look at the fundamentals, and I've said it before, and I'll say it again here, the fundamentals behind silver are even stronger than that of gold. And so we should see that. Again, the focus around the world... and listening to everything coming out of COP26 in Glasgow, Scotland right now, is about being more efficient. And the one aspect that silver, one attribute that silver delivers is the highest efficiency in terms of moving energy around circuit boards, around solar panels, around electricity. Energy moves through silver better than any other metal, even better than copper. Silver has stronger antibacterial tendencies or qualities than even copper. And so the demand is only going to get stronger for silver on the industrial application side. And then as a store of value against inflation, silver also does play a role in that space. And so the fundamentals are there. And yeah, I would expect History has long shown that silver always outperforms in a strong market. I do think that we're still coming off a bit of a pandemic bump in terms of precious metal prices, but boy, all you have to do is look at a 25- or 30-year graph to understand that we are in a long uptrend in precious metals, and no doubt right alongside money supply. I don't see that trend ending anytime soon. So, you know, silver will get its time in the sun.
spk04: Thanks a lot, Randy. Thank you, Adam.
spk00: Your next question comes from Richard Hatt from Barron. Please go ahead.
spk01: Yeah, thanks very much. Morning, everyone, and thanks for the time. Just first just to say congrats on keeping sort of disciplined capital allocation and not sort of pushing off there. And multiple deals and strong shareholder value. So well done for keeping your powder dry and waiting for the right deal. Just a couple of points or questions. The first one, Gary, I wonder if you might be able to give us a hand just to think about how that PD&D unwinds. particularly from a Salobo standpoint into Q4 and maybe into Q1. And then just kind of still on Salobo, what's the kind of recent and latest mood music in terms of that large sort of payment that you've got to pay to Vale in terms of the throughput and obviously the decision on whether to put high grades through? would be um would be appreciated if you've got any color on that and then just a point of clarification on the um on the minimum tax question gary is it kind of a mid to sort of high single digit percentage point tax rate that you're thinking of or just for clarity thanks uh yeah okay so uh the pbnd um clear out uh you know we generally see
spk12: Our partners look to flush out, you know, concentrate and dore leading into the year-end, calendar year-end. So, you know, we generally would expect that PB&D would be reduced as of December 31st. We... We've seen volatility in that in the past, so it's very difficult to estimate with any type of certainty, but suffice it to say that we would expect that PB&D would decrease leading into December 31st. The second question was the payment relative to Slobo 3, I think. With the push out of the ramping up to the second half of next year of that line, that new line, we would expect that Valet would satisfy the completion test that gives rise to the payment in 2023 now. You know, we estimate that the payment we will make relative to that will be in the range of $550 to $650 million, and that payment would be made in 2023.
spk01: And then I wasn't sure what the question... On the tax, yeah, I mean, just the... You got asked a question earlier about the global minimum tax and... the number of 7% was bandied around, but I just wanted to clarify, is that your assumed tax rate?
spk12: Yeah, we're assuming, yeah, from a tax rate perspective, we're assuming a 15% global minimum tax rate.
spk09: But in terms of the impact, and I think that was the question that he asked,
spk12: Well, I think what we... There's so many ifs. This question that had been asked by Ralph was, you know, that he had estimated the impact to be 7% to 8%, and I confirm that that, with all of the uncertainty associated with the calculation, you know, again, you know, when will it be implemented requiring legislation to be passed? which we all know can be a very challenging and time-consuming process. Whether we qualify for the additional deduction on the tangible assets side of things, which would dramatically mute the impact of this on our business, and whether we can utilize the lost carry forward position that we have in Canada that's otherwise available to offset Canadian income. That estimate that was put out there is in the ballpark of what we would expect with a 15% GMT.
spk01: Thanks for your help, Chip. Thanks, Richard.
spk00: Your next question comes from Paneen Sinj from IA Capital. Please go ahead.
spk02: Hi, good morning. Yesterday on the HUD-BAIT call, they were talking about the opportunity to reprocess their tailings in flimp on. I thought that was interesting. Just wondering if your 777 contract would cover any metals recovered from that in the future.
spk11: Yeah, it is. Those are included in the current contract. So we have had some initial discussions with HUD-BAE on that, but there would be kind of further discussions required depending on how they decide to progress that.
spk02: Okay, that's interesting. And is that usually something that you build into your other contracts too? So if another operator went down that route, you would also benefit in the future?
spk09: Yeah, Praneen, the contracts are all life of mine, and so this is all product that's contained within the area of interest that we signed the contract on, and so, yeah, it gets captured into it. We don't talk about tailings much because there's not a lot of exploration upside in tailings, but there's no doubt that, you know, as demand increases and sales For that matter, I know one of the driving forces behind the tailings at Flin Flon is in terms of environmental treatment and cleaning them up even further. I think that's something that the industry is going to get better at in terms of making sure that we extract as much value out of this product as we can. With higher prices and the costs and challenges of building new facilities, it's only going to make it more attractive. So yes, that does come in a life of mine contract.
spk02: It's good from ESG perspective and benefits your shareholders as well.
spk09: So good to see.
spk02: Thanks.
spk09: Yes. And thank you, everyone, for dining in today. That was a good, healthy question and answer period. In 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 having low and predictable costs, which when coupled with leverage to increasing commodity prices result in some of the highest margins in the entire precious metal space. Secondly, by offering our shareholders exposure to some of the highest quality mines in the world through our diversified portfolio of long life, low cost assets. Thirdly, by 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.
spk00: Thank you. This concludes your conference call for today. Thank you for participating. Please disconnect your lines.
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