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spk00: placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. or type your question in the Q&A box of the webinar. If you would like to withdraw your question, press start. Thank you. I would like to remind everyone that this conference call is being recorded on Friday, May 5th, 2023, at 11 a.m. Eastern Time. I will now turn it over to my colleague, Thank you, Operator.
spk04: 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, 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 Wheaton Precious Metals website. I'd like to bring your attention that some of the commentary in today's call may contain forward-looking statements, and I would direct everyone to review slide two of the presentation, which contains important cautionary notes regarding forward-looking statements. It should be noted that all figures referred to on today's call are new installers unless otherwise noted. Now I'd like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.
spk10: Thank you, Patrick, and good morning, everyone. Thank you for joining us today to discuss Wheaton's first quarter results of 2023. I am pleased to announce that our high-quality portfolio of long-life, low-cost assets delivered a solid performance to start the year. First quarter production came in ahead of company expectations, positioning us very well to achieve our previously announced annual guidance of 600,000 to 660,000 gold equivalent ounces. And as we continue to see positive developments at a number of our key assets, including Salobo and Constantia, we expect to see significant production growth through 2023, culminating in a strong second half of the year. Notably, implicit in our five-year annual average production guidance is an impressive organic growth profile of over 40%, with two-thirds of that growth coming from assets that are already in operation. While inflationary pressures are still impacting all sectors of the economy, Wheaton has maintained a cash operating margin per ounce of over 75%. highlighting the resiliency of the streaming model in an inflationary world. And we achieved a key milestone in this first quarter, as Wheaton's total stream cash flow to date has now exceeded 100% of its total upfront investments deployed since inception. This achievement highlights our disciplined and accretive approach to capital deployment, In particular, given that our portfolio still has over 30 years of mine life remaining based on reserves in addition to a healthy resource base. In this environment of high interest rates and increasing demand for metals, our corporate development team remains very busy as we continue to see a healthy appetite for streaming as a source of capital for the mining industry, and we are actively pursuing several new accretive opportunities. And lastly, Wheaton continues to maintain our leadership and sustainability with sector-leading scores, including a AA rating from MSCI and a genuine number one rating in precious metals by Sustainalytics. I would now like to turn the call over to Wes Carson, our Vice President of Operations, who will provide more details on our results.
spk02: Wes? Thanks, Randy. Good morning. Overall production in the first quarter came in higher than expected, with strong production from Slobo and Constantia partially offset by weaker-than-expected performance from Stillwater. In the first quarter, Slobo produced 43,700 ounces of attributable gold, virtually unchanged relative to the first quarter of 2022. Despite the strong quarter, Valet reported that production during the quarter was affected by reduced plant availability caused by additional planned and corrective maintenance. Additionally, the Slowboat 3 mine expansion project, which will increase the mill throughput by 50%, successfully began production at the end of 2022. The project is expected to ramp up to full capacity by the fourth quarter of 2024. During the quarter, Constantia produced 600,000 ounces of attributable silver and 6,900 ounces of attributable gold, an increase of approximately 21% and 9%, respectively, relative to the first quarter of 2022. The increase in both silver and gold production was due to higher grades resulting from additional ore production from the Papacancha satellite deposit. Full mining activities resumed in the Papacancha pit in February, and the period of high stripping from March to June is progressing well, with mining of higher grade ore now expected in the second quarter of 2023 ahead of schedule. During the quarter, Artemis Gold announced the approval of its BC Mines Act permit, the final step required to allow Artemis to commence major works construction activities at the Blackwater Mine, with the expectation of an initial gold pour in the second half of 2024. Additionally, during the quarter, Artemis announced that it has issued a purchase order to Finning Canada for primary and ancillary mining fleet required for the initial Phase 1 of operations. Equipment deliveries to sites are planned to commence late in the fourth quarter of 2023 and continue throughout the first half of 2024 in preparation for the pre-strip mining phase. Wheaton's estimated attributable production in 2023 is forecast to be 320,000 to 350,000 ounces of gold, 20 to 22 million ounces of silver, and 22,000 to 25,000 GEOs of other metals. resulting in production of approximately 600,000 to 660,000 GEOs. For the five-year period ending in 2027, the company estimates that average production will amount to 810,000 ounces, and for the 10-year period ending in 2032, the company estimates that average annual production will amount to 850,000 GEOs. This includes organic growth of over 40%, with total production from our current portfolio increasing to over 900,000 GEOs by 2027. That concludes the operations overview, and with that, I'll turn the call over to Gary. Thank you, Wes.
spk03: I am pleased to present the financial highlights resulting from our solid operational performance to kick off the year. As described by Wes, production in the first quarter amounted to 142,000 GEOs, above company expectations and consistent with the fourth quarter of 2022. Sales volumes amounted to over 117,000 GEOs, a decrease from the first quarter of the prior year, primarily due to the cessation of production from 777, Yali Yaku, and Keno Hill in 2022, coupled with relative changes to ounces produced but not yet delivered, or PBND. Strong commodity prices, which remain near historical highs, coupled with our steady production base, resulted in revenue of $214 million and gross margin of $118 million. Of this revenue, 56% was attributable to gold, 40% to silver, 2% to palladium, and 2% to cobalt. As of March 31, 2023, approximately 124,000 GEOs were in PB&D and cobalt inventory, representing approximately 2.4 months of payable production, which is a level that is consistent with the preceding four quarters. G&A expenses and donations amounted to $11.5 million for the first quarter, resulting in adjusted net earnings of $104 million. The company continues to anticipate that G&A and donation expenses will amount to $47 to $50 million for the year. Despite the persistent inflationary environment, and thanks to our low and predictable cost structure, Wheaton continued to deliver robust cash operating margins in the first quarter, resulting in cash flow from operations of $135 million, which in turn resulted in a quarterly dividend of 15 cents per share, consistent with the first quarter of 2022. In the quarter, Wheaton dispersed its fourth and final installment of $32 million relative to the Goose project, which continues to make advancements under the new ownership of B2 Gold. It should be noted that subsequent to the quarter, B2 Gold exercised the option to repurchase 33% of the stream under the Goose PIMPA in exchange for a cash payment in the amount of $46 million, resulting in a gain on the partial disposal of the PIMPA in the amount of $5 million, which will be reflected in our Q2 results. Overall, net cash inflows amounted to $104 million, resulting in cash and cash equivalents at March 31st of $800 million. This notable cash balance, coupled with the fully undrawn $2 billion revolving credit facility and the strength of our forecasted operating cash flows, positions the company exceptionally well to satisfy its funding commitments and provides us with the financial flexibility to acquire additional accretive mineral stream interests. That concludes the financial summary, and with that, I turn the call back over to Randy.
spk10: Thank you, Gary. In summary, Wheaton's first quarter was distinguished by several key highlights. We achieved solid three-month revenue, earnings, and cash flow, and declared a 15-cent quarterly dividend. First quarter production came in ahead of our expectations, positioning us well in to achieve our previously announced annual guidance of $600,000 to $660,000 in Gold Global Announcements. Wheaton has now recouped 100% of its total upfront investments deployed since inception, highlighting our disciplined and accretive approach to capital deployment. We reiterated our forecast organic production growth profile of over 40% over the next five years, with approximately two-thirds of that growth coming from mines already in operation, therefore at lower risk of delivery. Our balance sheet remains one of the strongest in the industry, providing ample capacity to add accretive high-quality streams into our portfolio, and we continue to be very busy on that front. And lastly, we continue to demonstrate leadership and sustainability with sector-leading ESG ratings. So with that, I would like to open up the call for questions. Operator, please.
spk07: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star two. Your first question comes from Ralph Profiti with eight capital. Please go ahead.
spk13: And Sabina, now that the transaction's closed.
spk10: Sorry, Ralph, we missed the first part of that.
spk13: Sorry, Randy, can you hear me now?
spk10: Yes.
spk01: Now I can, yep.
spk13: My apologies, can you hear me now? Yes, we can. Sorry about that. Thanks, operator. Randy, B2Gold and Sabina is now closed. Just wondering if you've had conversations with the new management team and whether or not you're comfortable with the original guidance of when first production is, first quarter 2025, I believe. And is that factored into your guidance? Yes.
spk10: We haven't made any adjustments based on B2 operating it. I do have confidence in Clive and B2. They've got a very strong track record. I've known Clive and the B2 team for a very long time, have a lot of respect for what they're doing. The one advantage that they're going to have is, of course, a much stronger balance sheet than Sabina had originally. The negative to that is that we were always hoping to be able to add a bit more financing through growing the stream a bit. But clearly, B2 has the capacity to deliver this project from a capital perspective. And so I think that what we're going to see is an even better project out of B2 Gold or sort of out of the Goose project with B2 Gold.
spk13: Good, yeah, I'm excited to see some of that optionality come in.
spk02: Yes, definitely. Wes, you want to add something? Yeah, also worth noting, it is in the 5- and 10-year guidance, and the 5- and 10-year guidance is reflective of the buyback as well.
spk13: Okay, good, good. And just factoring in, taking a little bit of a step back from the buyback on that stream, does the team at Wheaton make a risk factor adjustment for stream negotiations when they do have the buyback option in place, and Can you sort of quantify some of the decisions that you make on discount rates when that's factored in? Is this sort of two separate pieces of analysis or one that you sort of co-mingle into looking at how you risk adjust for the buyback optionality?
spk10: Well, I mean, the way we structure the buybacks is that we get a reasonable rate of return. We recognize that a lot of these partners that we're working with right now are single asset development companies, and we don't want to get in the way of them eventually being acquired. So it is something that we're seeing a lot more of is the need for it. And what we're looking for is just a reasonable rate of return on that part of the risk capital that we're putting up.
spk00: You know, we are long-term investors, into these projects and so we do want to make sure that we maintain a reasonable return for our shareholders at the bare minimum.
spk10: with respect to any of the capital that we're putting up. And so, you know, I think the structure works well. I don't know, Haytham, you want to add anything to that?
spk09: Yeah, thanks, Randy. Ralph, what we've also done when we structure these things is we limit our buyback to a one-third buyback, and we want the stream to be perceived as a quality type of financing that doesn't deter M&A transactions. And I think that was very well proven here with the sustenance, effectively, of our two-thirds of the remainder of our stream, and then some of the private equity stuff didn't remain, which shows you that, you know, we're very, the way we structure things, we're very capable of putting in place something that actually appeals even to a potential acquirer of one of these development stage opportunities.
spk10: So we're excited about partnering with Clive.
spk13: Yeah, gotcha. Thanks very much. Very helpful. Thanks, Ralph.
spk07: Your next question comes from Jackie Prevalosky. with BMO Capital Markets. Please go ahead.
spk12: Thanks very much. My question is on HUD-based Carpal World project. I know you guys have talked before about restructuring that stream financing, and I was just wondering if you could give us any update on that, if there's been any progress in discussions with the operator. Thanks.
spk10: There hasn't, Jackie. They're still working on finalizing their plans on a go-forward basis, and so I think we just have to be patient and wait for them to come up with a firmer framework on how Copper World is going to compare relative to the original Rosemont structure. HUD-Bay is a longtime partner of ours, and we've done a lot of work with them in the past, and Peter and the team very well, and so we look forward to to sitting down with them at that stage. It's not at that stage in terms of us being able to fine-tune how that stream will come into play.
spk12: Thank you very much.
spk01: Thanks, Jackie. Operator?
spk07: Your next question comes from Merton Prachter with Veritas. Please go ahead.
spk11: Thank you. I have two questions. My first question is why Antamina production was weak and why Salovo? We see a very different sales than the production. I mean, production was similar than last year, but sales were like 20% lower. That's my first question.
spk02: Sure, sure. Wester, do you want to take that? Yeah, thanks for the question, Martin. So Antamina really is just a function of where they're mining in the pit. So there's different grades in the various different areas of the pit, and we did see a higher grade coming out in the latter end of last year, and really they're just into a lower grade area of the pit in this year. So that's really what we're seeing. As they move around within the pit, the different areas of the ore body are going to have different amounts of production to them. So not unexpected, basically what we would expect to see from that one. And on Salobo, really, that is a lag between the production and the sales. So we get a copper concentrate from Salobo is what's produced there, and there is a lag between what's produced on the mine site and then what we see in sales. So that's what's reflected in our produced but not delivered production.
spk10: And I will say that typically amongst all of our assets, in the first quarter, we tend to wind up building up a bit of an inventory.
spk00: And I think that just comes from the fact that a lot of our partners will sort of squeeze the pipeline to try and get more sales in before year end. And then that whole sort of production flow fills up again in the first quarter. It wasn't a surprise to us in terms of seeing a bit more inventory build up over the course of the first quarter.
spk10: And I would say that typically in the fourth quarters, we tend to see that drop as companies push up sales. Second question?
spk11: Yep. Could you comment about the global tax impact? I mean, you mentioned that that's going to come into play very soon. So what is the company view on this?
spk03: It's Gary Brown here. You know, it's hard to give you a detailed response, given that we don't have any legislation to refer to at this point. All we can say is that, you know, based upon the comments made by the government of Canada, that they do seem to be committed to implementing a GMT, a 15% GMT, global minimum tax rate that seems to be applicable to 2024 and onwards. Again, you know, there's no legislation at this point. So, you know, there's a lot of work that would need to be done in order to implement that by January 1 of next year. But we're assuming that that's going to happen. And the vast majority, 90 plus percent of our income is generated outside of Canada. So, you know, we expect that it would have about a 10 percent impact to our NAV calculations once implemented. That being said, you know, I think the market is well aware of this trend. this new tax and has already reflected that in our valuation.
spk11: But in terms of 2024, if it goes ahead, you expect to pay how much in taxes that year? Like 10% or 15%? Well, you know, if you...
spk03: Assume that 90% of our income is generated outside of Canada and is subject to a 0% tax. Multiply that by 15% to estimate what we would pay in 2024.
spk10: The challenge is that without the legislation, we're not sure you know, we don't have clarity in terms of what's deductible, what goes against that tax. There's not a framework yet in which we can paint it against right now. And so if you're going to, you know, it's really tough to sort of put firm numbers on that. I think, you know, what we have seen, and it's been talked about quite a bit, is that the overall estimated impact to our net asset value should be somewhere around 8% to 10%. And, you know, And, you know, until we get further clarity and until I think everyone gets further clarity on what's actually coming into play, we're not quite sure what we'll be able to, how we'll be able to, you know, work with that legislation.
spk00: Great. Thank you. Thanks, Martin. Next question, please. Your next question comes from . Go ahead. Yeah, morning. Randy and team, thanks a lot for the call and well done on a good call. Gary, we've got... My questions are mainly... sort of aim towards you.
spk06: First one is just on page 24 of the MD&A, you've got your contractual obligations and contingencies. I just wonder if you might be able to just help us out a little bit just in terms of Just thinking about next quarter, what are the ones that we should start to put into our models just to make sure that we're right on the cash flow? That's the first one.
spk03: Yeah, I mean, I don't know that we can get that granular. So, you know, I think we've tried to outline what we are. And this is a conservative picture, the contractual obligation model. schedule that we've put out showing $700 million being paid between March 31st and December 31st. That's assuming all of the projects. And the biggest one of that is Salobo. And that may slip into 2024. But we're assuming that Valet achieves the full completion test of the Lobo 3 in that $552 million number. So I'm not prepared to break down what we expect to be dispersed next quarter at this point.
spk04: Richard, we can... We can speak offline as well and kind of walk through our best expectations.
spk03: That being said, I think, Richard, it's important to highlight we have no concerns with respect to paying those. We ended the quarter with $800 million of cash on hand and and we've got the $2 billion revolving credit facility there as well. So we're extraordinarily well positioned to make those disbursements as and when they come due.
spk06: Sure. No, not worried about the balance sheet. It was just getting the model tight. And then on Nevis, Corvo, last couple of quarters, sales volumes have really lagged production. I appreciate it's one of the smaller streams, Have you got any colour on what's going on there and when we should think about when that kind of elastic bands back into the sales?
spk02: Yeah, we did see that Nevis Corvo this quarter actually came in quite a bit ahead of our expectations on that. So it is starting to come back. I think some of it certainly is the ramp up of that zinc expansion project and where they've gotten to there. But overall, we've seen the performance improving at Nevis Corvo over the last several quarters.
spk06: Yeah, but if you look at the, say, for example, Q4, you got 369,000 ounces. Q1, you got 352. The sales were 80 and 171. So kind of the question is when do we start to see some of those production volumes translate into sales?
spk00: Yeah. One of the things you have to remember Remember on navishes that silver in the zinc concentrate is not available. So there is always going to be a fairly significant gap between sales and demand. and production on Nevis Carvo. So it's not a direct comparison. So you won't be able to see that full amount come in. But that being said, There is a lag on the copper and the lead concentrate. And as that production starts to ramp up, then we should see the sales dragging behind. It's usually about a three-month lag. on that.
spk10: Payabilities on silver and zinc concentrates are very low, and there's quite a bit of the silver here that is contained in zinc concentrates, and so I think there's a bigger discrepancy between that. We typically have recovery rates in our reserve and resource. Yeah, so there should be some, you know, happy to provide a bit more detail on that, but I think the challenge is that a lot of the silver out of Nevis Corvo comes out in zinc concentrates.
spk06: Okay, yeah, understood. All right, cool. And then on the depletion number, that was quite a bit lower quarter on quarter. Is there any, I guess you got a couple of streams sort of all the way, but is there anything there that we should be thinking about as we look sort of further out in terms of depletion numbers?
spk03: You know, I think the main driver for the lower depletion this quarter was the lower sales volume, which in turn was due to the cessation of flows from three mines that we're no longer receiving deliveries from. We do go through a process in Q1 of every year of updating our depletion rates for any changes that we observe in the reserve and resources of the assets that we have interest in. That didn't change our overall depletion rate by more than 1%. So it's a very nominal impact on that. on our depletion rates going forward. I guess the other factor would be that some of the mines that we disposed of last year were higher depletion rate mines than the ones that we're currently receiving deliveries from. But overall, it's less than a 1% adjustment to depletion rates.
spk06: Okay. All right. Thanks, Gary. And the last one is just on, again, it's a bit of a weird one, but in the cash flow statement, acquisition of long-term investments, $8 million out the door, it sits in other common shares held. Are you able to disclose what that was?
spk03: That was the Integra investment. Okay. Cool. Thank you very much.
spk01: Great. Operator, one more question, please.
spk07: Your next question comes from Tanya Jakoskonik with Scotiabank.
spk00: Please go ahead. Great. Good morning, everyone. Thank you so much for taking my questions. If I could just start. just the 2023 guidance I just want to make sure I have how your year progresses so I'm thinking you mentioned that you're going to have have a stronger second half. I'm just wondering if I look at it holistically. Does a 45 first half versus 55 second half seem reasonable with quarter over quarter improvements. That sounds about right. I mean, what we see over the course of this year is just continued improvement.
spk10: I mean, both at Constantia and Salobo, as Line 3 ramps up and as they continue to improve Line 1 and Line 2 at Salobo and try and get production up to former levels, we see continued improvement there. And we've just finished another site visit down to Salobo and we're happy with the progress that is being made at the site. And so what I can tell you is the production for the first quarter was at the very top end of our guidance right now. So So if we keep on this trend, we would be at the 660,000 gold equivalent ounce level. We were right at that top end of our guidance range. And so that's kind of probably the best way to set it up in terms of how we see it. Every quarter, in fact, if I sit and look at it, I think that every quarter for the next five years should probably be better than the last one. There might be a few blips in there, but we are going to see continued improvement all the way across the portfolio, Tanya.
spk08: Okay, and so just for 2023, just that we have Salobo ramping up, that's right, Constance here, getting into the higher grades, so that should be better second half. What about Boise Bay and Penesquito? Are you seeing any improvement in Q2, or should I kind of put them all into Q3, Q4?
spk02: Not a significant improvement at either Penesquito or Boise's Bay in the second half. They'll be fairly, the big kind of step up at Boise's Bay is really in Q4 and into next year once they get into the undergrounds there. And Penesquito is fairly static across the year.
spk10: Yep. Boise's Bay is going to be, you know, they're still pulling from open pit material to supply and the underground is substantially higher grade cobalt for us. And so So once that underground does phase in, we should see a pretty rapid uptick in terms of production from Boise's Bay.
spk08: Very helpful. Thank you.
spk00: Uh-oh. Tanya, I don't know. We can't hear you anymore.
spk01: Operator, do you know if Tanya is still on the line with questions?
spk00: Tanya, please press. Thank you. Your line is open. Hello. Hello. Hello. Yep. Okay, I'm back. I didn't know if you wanted to hear me or didn't want to hear me. Anyways, here. It depends on the question. Yes. Okay. Well, it is about transactions. That's why I thought. I thought maybe you didn't want to hear me. So maybe if I hate them, I should just ask, you know, I'm always interested in, you know, with volatility and pricing and both goals and other matters. What does the deal environment look like? Has it changed from, you know, last quarter? I know we had talked about the 150. to $350 million in terms of financing of development projects. I'm just wondering if that still the case or are you seeing anything different? Including the structure of the deals.
spk09: Yeah, good morning, Tanya. Thank you for the question. Yeah, we're still seeing opportunities to fall in the $150 to $350 million range. Still, to be honest with you, a very healthy number of opportunities in our pipeline. And the majority are developing stage, but we are starting to see some operating assets as well. So that's a positive. The focus for us is always on precious metals, gold, silver, platinum, palladium. So that's the areas that we're looking at at this point in time. And we're actually quite optimistic about the outlook for the remainder of this year. So we're hoping to show you some things as time goes on.
spk08: And when you mentioned operating assets, how do you define that? That's the companies that need to fix balance sheets on their operating assets?
spk09: No, I'm talking specifically about assets that are actually operating and if streams could contribute immediately to Wheaton's bottom line.
spk08: Okay. I was just thinking of it from the operator, why they would need you. Was it just to fix balance sheets on their side?
spk10: We don't see a lot of stressed balance sheets. What we do see, though, is a need for funding capital, right? So it's growth. Typically, either expansions, the stuff we're looking at is either expansions or funding another acquisition into an operating company in the And even with today's equity market, the way it stands for a lot of these smaller companies, even though they've got operations, the capital from the streaming agreement is still very, very attractive. So we are seeing stuff along that line.
spk08: Yeah, it's good to see. Okay, thank you so much. And thank you for taking my question.
spk10: It wasn't our side. You just disappeared on us.
spk08: No, I think someone did our too. Get her off. Yeah.
spk10: Thank you.
spk08: Yes.
spk10: Thank you, Tanya, and thank you and thanks everyone for dialing in today. 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 offering our shareholders exposure to our diversified portfolio of long-life, low-cost assets that we believe has one of the best organic growth profiles in the mining industry. Secondly, by having low and predictable costs which are resilient to inflationary pressures, resulting in some of the highest margins in the entire precious metal space, which has allowed us to consistently return value to shareholders through our dividend policy.
spk00: 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. So with that, I'd like to finish off by saying that after 20 years at this company, since we've created it, I personally have never been more excited about our future prospects. We've believe that now is a great time to own more Wheaton. I do look forward to speaking with all of you again soon. Thank you. This concludes this conference call for today. Thank you.
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