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09.11.2017 23:37:00
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Wheaton Precious Metals Announces Third Quarter Results for 2017 and Declares Fourth Quarterly Dividend of 2017
TSX: WPM
NYSE: WPM
VANCOUVER, Nov. 9, 2017/CNW/ - Wheaton Precious Metals™ Corp. ("Wheaton" or the "Company") is pleased to announce its results for the third quarter ended September 30, 2017. All figures are presented in United States dollars unless otherwise noted.
In the third quarter of 2017, Wheaton Precious Metals continued to generate strong cash flow and remains on track to meet 2017 production guidance.
Operational Overview
Q3 2017 | Q3 2016 | Change | |||||||||||||
Ounces produced | |||||||||||||||
Silver | 7,595 | 7,651 | (0.7)% | ||||||||||||
Gold | 95,897 | 113,008 | (15.1)% | ||||||||||||
Ounces sold | |||||||||||||||
Silver | 5,758 | 6,122 | (5.9)% | ||||||||||||
Gold | 82,548 | 85,063 | (3.0)% | ||||||||||||
Sales price per ounce | |||||||||||||||
Silver | $ | 16.87 | $ | 19.53 | (13.6)% | ||||||||||
Gold | $ | 1,283 | $ | 1,336 | (4.0)% | ||||||||||
Cash costs per ounce 1 | |||||||||||||||
Silver 1 | $ | 4.43 | $ | 4.51 | (1.8)% | ||||||||||
Gold 1 | $ | 396 | $ | 390 | 1.5 % | ||||||||||
Cash operating margin per ounce 1 | |||||||||||||||
Silver 1 | $ | 12.44 | $ | 15.02 | (17.2)% | ||||||||||
Gold 1 | $ | 887 | $ | 946 | (6.2)% | ||||||||||
Revenue | $ | 203,034 | $ | 233,204 | (12.9)% | ||||||||||
Net earnings | $ | 66,578 | $ | 82,986 | (19.8)% | ||||||||||
Per share | $ | 0.15 | $ | 0.19 | (21.1)% | ||||||||||
Operating cash flows | $ | 129,121 | $ | 161,577 | (20.1)% | ||||||||||
Per share 1 | $ | 0.29 | $ | 0.37 | (21.6)% | ||||||||||
Dividends paid | $ | 44,201 | $ | 22,049 | 100.5% | ||||||||||
Per share | $ | 0.10 | $ | 0.05 | 100.0% | ||||||||||
All amounts in thousands except gold ounces produced and sold, per ounce amounts and per share amounts. | |||||||||||||||
Third Quarter Highlights
- Attributable silver production for the three months ended September 30, 2017, decreased 1% relative to the comparable period in 2016, with lower production from San Dimas and Constancia being largely offset by increased production from Antamina and Peñasquito.
- Attributable gold production for the three months ended September 30, 2017, decreased 15% relative to the comparable period in 2016, with the decrease being in line with expectations and primarily due to lower attributable production from 777 and Minto.
- On a silver equivalent ounce2 ("SEO") basis and gold equivalent ounce2 ("GEO") basis:
- Attributable production in Q3 2017 was 14.9 million SEOs or 195,900 GEOs, compared with 15.3 million SEOs or 225,400 GEOs in Q3 2016, a decrease of 3% and 13%, respectively.
- Sales volume in Q3 2017 was 12.0 million SEOs or 158,400 GEOs, compared with 11.9 million SEOs or 175,000 GEOs in Q3 2016, an increase of 1% and a decrease of 9%, respectively.
- As at September 30, 2017, payable ounces attributable to the Company produced but not yet delivered³ amounted to 5.3 million payable silver ounces and 57,200 payable gold ounces, representing an increase of 1.1 million payable silver ounces and 8,200 payable gold ounces during the three month period ended September 30, 2017.
- Declared quarterly dividend of $0.09 per common share. This represents an increase of 50% relative to the comparable period in 2016.
- The Company is reiterating its production guidance for 2017.
"Wheaton Precious Metals continues to generate strong operating margins from its portfolio of low-cost assets and remains on track to meet full year production guidance," said Randy Smallwood, President and Chief Executive Officer of Wheaton Precious Metals. "We continue to work diligently not only to strengthen our current portfolio, the source of our sector leading cash flows and dividend yield, but also to pursue additional accretive opportunities."
Financial Review
Revenues
Revenue was $203 million in the third quarter of 2017, on sales volume of 5.8 million ounces of silver and 82,500 ounces of gold. This represents a 13% decrease from the $233 million of revenue generated in the third quarter of 2016 due primarily to (i) a 6% decrease in the number of silver ounces sold; (ii) a 3% decrease in the number of gold ounces sold; (iii) a 14% decrease in the average realized silver price ($16.87 in Q3 2017 compared with $19.53 in Q3 2016); and (iv) a 4% decrease in the average realized gold price ($1,283 in Q3 2017 compared with $1,336 in Q3 2016).
Costs and Expenses
Average cash costs¹ in the third quarter of 2017 were $4.43 per silver ounce sold and $396 per gold ounce sold, as compared with $4.51 per silver ounce and $390 per gold ounce during the comparable period of 2016. This resulted in a cash operating margin¹ of $12.44 per silver ounce sold and $887 per gold ounce sold, a reduction of 17% and 6% as compared with Q3 2016. The decrease in the cash operating margin was primarily due to a 14% decrease in the average realized silver price and a 4% decrease in the average realized gold price in Q3 2017 compared with Q3 2016.
Earnings and Operating Cash Flows
Net earnings and cash flow from operations in the third quarter of 2017 were $67 million ($0.15 per share) and $129 million ($0.29 per share¹), compared with $83 million ($0.19 per share) and $162 million ($0.37 per share¹) for the same period in 2016, both a decrease of 20%.
Balance Sheet
At September 30, 2017, the Company had approximately $70 million of cash on hand and $854 million outstanding under the Company's $2 billion revolving term loan (the "Revolving Facility").
Third Quarter Asset Highlights
During the third quarter of 2017, attributable production was 7.6 million ounces of silver and 95,900 ounces of gold, representing a decrease of 1% and 15%, respectively, compared with the third quarter of 2016.
Operational highlights for the quarter ended September 30, 2017, based upon counterparties' reporting, are as follows:
Salobo
In the third quarter of 2017, Salobo produced 73,000 ounces of attributable gold, an increase of approximately 7% relative to the third quarter of 2016. According to Vale S.A.'s ("Vale") third quarter of 2017 production report, production was positively impacted mainly due to higher feed grades and stronger plant performance in the third quarter. The Salobo plant operated above nameplate capacity on average in the third quarter of 2017.
Peñasquito
In the third quarter of 2017, Peñasquito produced 1.6 million ounces of attributable silver, an increase of approximately 10% relative to the third quarter of 2016 primarily due to higher metal recoveries and grades. According to Goldcorp Inc.'s ("Goldcorp") third quarter of 2017 MD&A, throughput at Peñasquito is expected to increase in the fourth quarter of 2017 as a result of improved mill efficiencies. Pre-stripping of the Chile Colorado pit is reportedly ahead of schedule and will contribute to mill feed starting in 2018.
According to Goldcorp, the Pyrite Leach Project ("PLP") at Peñasquito is 40% complete and expected to commence commissioning in the fourth quarter of 2018, three months ahead of schedule. The PLP is reportedly expected to recover approximately 40% of the gold and 48% of the silver currently reporting to the tailings, and is expected to add production of approximately 1 million ounces of gold and 44 million ounces of silver over the current life of the mine. As a reminder, Wheaton Precious Metals is entitled to 25% of the silver produced at Peñasquito for the life of mine, or 11 million of the additional 44 million silver ounces.
Antamina
In the third quarter of 2017, Antamina produced 1.7 million ounces of attributable silver, an increase of approximately 18% relative to the third quarter of 2016 primarily due to increased grades and throughput, partially offset by lower recovery.
San Dimas
In the third quarter of 2017, San Dimas produced 1.0 million ounces of attributable silver, a decrease of approximately 17% relative to the third quarter of 2016 primarily due to a decrease in throughput, which was partially offset by better grades. According to Primero Mining Corp.'s ("Primero") news release dated September 21, 2017, the expected ramp-up in production at San Dimas following a work stoppage in the second quarter of 2017 was significantly delayed due to persistent issues with underground equipment reliability, which has impacted development rates and underground stoping activities. As a result of these issues, Primero reduced the upper end of its 2017 silver production guidance range from 4.5-5.5 million ounces to 4.5-5.0 million ounces. As a reminder, Wheaton's full year 2017 guidance is based on attributable production from San Dimas of 4.0 million ounces of silver.
Wheaton continues to work closely with Primero as they work through their strategic review process. As per Primero's announcement on March 24, 2017, Wheaton provided significant support for the strategic review process by providing a guarantee to the lenders under Primero's existing revolving credit facility, which resulted in an extension of the maturity date by six months to November 23, 2017. The intent of this guarantee is to provide Primero with time to complete its strategic review process, which was first announced on February 27, 2017. Wheaton has been encouraged by Primero's ability through this process to reduce general and administrative costs and divest of non-core operations. Also, as noted in Primero's second quarter of 2017 MD&A, Primero has received a number of proposals from interested parties regarding a potential acquisition of the San Dimas operation. The process is ongoing but there can be no certainty that these discussions will result in a resolution acceptable to all stakeholders, including the Company.4
Sudbury
In the third quarter of 2017, Vale's Sudbury mines produced 8,400 ounces of attributable gold, a decrease of approximately 22% relative to the third quarter of2016 primarily due to lower throughput. According to Vale's third quarter of 2017 production report, the decrease in production was primarily due to the full operation of two furnaces in Q3 2016, while in Q3 2017 Sudbury transitioned to a single furnace operation. According to Vale, the transition has gone very well with the newly designed furnace already exceeding its nameplate capacity. Vale further reports that while nickel production was down in the quarter, with the transition to the new single furnace flowsheet, Sudbury achieved record quarterly copper concentrate production.
Constancia
In the third quarter of 2017, Constancia produced 0.6 million ounces of attributable silver and 2,500 ounces of attributable gold, a decrease of approximately 18% and 33%, respectively, relative to the third quarter of 2016. The decrease in production was primarily the result of the processing of lower grade ore as expected in Hudbay Mineral Inc.'s ("Hudbay") mine plan as well as lower recovery, partially offset by record high throughput.
Other Gold
In the third quarter of 2017, total Other Gold attributable production was 12,000 ounces, a decrease of approximately 60% relative to the third quarter of 2016. The decrease was relatively in line with expectations and primarily due to the anticipated reduction of the Company's share of the gold production at the 777 mine from 100% to 50% effective January 1, 2017, coupled with reduced production at the Minto mine due to mine sequencing changes to support the mine life extension as previously announced by Capstone Mining Corp. ("Capstone").
Subsequent to the quarter, in October 2017, the Company agreed to amend the Minto precious metal purchase agreement in order to incentivize Capstone to extend the mine life of Minto. The primary modification is to increase the production payment per ounce of gold delivered to Wheaton Precious Metals over the current fixed price in periods where the market price of copper is lower than $2.50 per pound. In consideration for this contract amendment and certain other agreements made between the Company and Capstone, the Company received shares of Capstone with a value of $8 million.
Other Silver
In the third quarter of 2017, total Other Silver attributable production was 2.6 million ounces, a decrease of approximately 5% relative to the third quarter of 2016. The decrease was driven primarily by the cessation of production from Cozamin as the Cozamin silver purchase agreement with Capstone expired on April 4, 2017, as well as lower grades at Yauliyacu. Lower attributable production from Cozamin and Yauliyacu was partially offset by stronger production from Zinkgruvan.
Produced But Not Yet Delivered3
As at September 30, 2017, payable ounces attributable to the Company produced but not yet delivered³ amounted to 5.3 million payable silver ounces and 57,200 payable gold ounces, representing an increase of 1.1 million payable silver ounces and 8,200 payable gold ounces during the three month period ended September 30, 2017. Payable silver ounces produced but not yet delivered increased primarily as a result of increases related to the Peñasquito, Zinkgruvan, Yauliyacu, and Antamina silver interests. Payable gold ounces produced but not yet delivered increased primarily as a result of increases related to the Sudbury and Salobo gold interests. Payable ounces produced but not yet delivered to the Wheaton Precious Metals group of companies are expected to average approximately two months of annualized production but may vary from quarter to quarter due to a number of mining operation factors including mine ramp-up and timing of shipments.
Detailed mine-by-mine production and sales figures can be found in the Appendix to this press release and in Wheaton Precious Metals' consolidated MD&A in the 'Results of Operations and Operational Review' section.
Events Subsequent to the Quarter
Kutcho
Pending completion of the Kutcho Early Deposit Agreement, the Company has entered into a non-binding term sheet with Desert Star Resources Ltd. to provide assistance in the form of an up to Cdn$20 million subordinated secured convertible debt loan at an interest rate of 10% per annum over a 7-year term (the "Desert Star Loan"). There can be no assurance that the Desert Star Loan will be completed on the terms set out in the non-binding term sheet or at all.
Dividend
Fourth Quarterly Dividend
The fourth quarterly cash dividend of US$0.09 will be paid to holders of record of Wheaton Precious Metals common shares as of the close of business on November 27, 2017, and will be distributed on or about December 7, 2017.
Under the Company's dividend policy, the quarterly dividend per common share will be equal to 30% of the average cash generated by operating activities in the previous four quarters divided by the Company's then outstanding common shares, all rounded to the nearest cent.
The declaration, timing, amount and payment of future dividends remain at the discretion of the Board of Directors. This dividend qualifies as an 'eligible dividend' for Canadian income tax purposes.
Dividend Reinvestment Plan
The Company has previously implemented a Dividend Reinvestment Plan ("DRIP"). Participation in the DRIP is optional. For the purposes of this fourth quarterly dividend, the Company has elected to issue common shares under the DRIP through treasury at a 3% discount to the Average Market Price, as defined in the DRIP. However, the Company may, from time to time, in its discretion, change or eliminate the discount applicable to Treasury Acquisitions, as defined in the DRIP, or direct that such common shares be purchased in Market Acquisitions, as defined in the DRIP, at the prevailing market price, any of which would be publicly announced.
The DRIP and enrollment forms are available for download on the Company's website at www.wheatonpm.com, accessible by quick links directly from the home page, and can also be found in the 'investors' section, under the 'dividends' tab.
Registered shareholders may also enroll in the DRIP online through the plan agent's self-service web portal at: https://www.canstockta.com/en/InvestorServices/Investor_Information/Issuer_List/IssuerDetail.jsp?companyCode=1501.
Beneficial shareholders should contact their financial intermediary to arrange enrollment. All shareholders considering enrollment in the DRIP should carefully review the terms of the DRIP and consult with their advisors as to the implications of enrollment in the DRIP.
This press release is not an offer to sell or a solicitation of an offer of securities. A registration statement relating to the DRIP has been filed with the U.S. Securities and Exchange Commission and may be obtained under the Company's profile on the U.S. Securities and Exchange Commission's website at http://www.sec.gov. A written copy of the prospectus included in the registration statement may be obtained by contacting the Corporate Secretary of the Company at 1021 West Hastings Street, Suite 3500, Vancouver, British Columbia, Canada V6E 0C3.
Outlook
Wheaton Precious Metals' estimated attributable silver and gold production in 2017 is forecast to be 28 million silver ounces and 340,000 gold ounces. Estimated average annual attributable silver and gold production over the next five years (including 2017) is anticipated to be approximately 29 million silver ounces and 340,000 gold ounces per year. As a reminder, Wheaton Precious Metals does not include any production in its guidance from streams on development assets, such as Barrick's Pascua-Lama project or Hudbay's Rosemont project.
From a liquidity perspective, the $70 million of cash and cash equivalents as at September 30, 2017 combined with the liquidity provided by the available credit under the $2 billion Revolving Facility and ongoing operating cash flows positions the Company well to fund all outstanding commitments and known contingencies as well as providing flexibility to acquire additional accretive precious metal stream interests.
Webcast and Conference Call Details
A conference call and webcast will be held Friday, November 10, 2017, starting at 11:00 am (Eastern Time) to discuss these results. To participate in the live call, please use one of the following methods:
Dial toll free from Canada or the US: | 888-231-8191 |
Dial from outside Canada or the US: | 647-427-7450 |
Pass code: | 94521962 |
Live audio webcast: |
Participants should dial in five to ten minutes before the call.
The conference call will be recorded and available until November 17, 2017 at 11:59 pm (Eastern Time). The webcast will be available for one year. You can listen to an archive of the call by one of the following methods:
Dial toll free from Canada or the US | 855-859-2056 |
Dial from outside Canada or the US: | 416-849-0833 |
Pass code: | 94521962 |
Archived audio webcast: |
This earnings release should be read in conjunction with Wheaton Precious Metals' MD&A and Financial Statements, which are available on the Company's website at www.wheatonpm.com and have been posted on SEDAR at www.sedar.com.
Mr. Neil Burns, Vice President, Technical Services for Wheaton Precious Metals, is a "qualified person" as such term is defined under National Instrument 43-101, and has reviewed and approved the technical information including information on mineral reserves and mineral resources disclosed in this news release.
Wheaton Precious Metals believes that there are no significant differences between its corporate governance practices and those required to be followed by United States domestic issuers under the NYSE listing standards. This confirmation is located on the Wheaton Precious Metals website at http://www.wheatonpm.com/Company/corporate-governance/default.aspxhttp://www.silverwheaton.com/company/corporate-governance/default.aspx.
End Notes
_______________________________
1 Please refer to non-IFRS measures at the end of this press release. 2 Silver equivalent ounces (SEOs) and gold equivalent ounces (GEOs), which are provided to assist the reader, are calculated by converting gold (in the case of SEOs) or silver (in the case of GEOs) using the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. The silver / gold ratio is the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. 3 Payable silver and gold ounces produced but not yet delivered are based on management estimates, and may be updated in future periods as additional information is received. 4 Please refer to Wheaton Precious Metals Q3 2017 Management's Discussion and Analysis ("MD&A") for a more detailed description of the status and risks associated with the San Dimas Silver Interest. Please also see "Cautionary Note Regarding Forward Looking Statements" in the Company's MD&A for material risks, assumptions, and important disclosure associated with San Dimas and Primero.
Condensed Interim Consolidated Statements of Earnings
Three Months Ended | Nine Months Ended | ||||||||||
(US dollars and shares in thousands, except per share amounts - unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||
Sales | $ | 203,034 | $ | 233,204 | $ | 600,669 | $ | 633,066 | |||
Cost of sales | |||||||||||
Cost of sales, excluding depletion | $ | 58,234 | $ | 60,776 | $ | 173,506 | $ | 177,620 | |||
Depletion | 61,852 | 73,919 | 185,567 | 220,336 | |||||||
Total cost of sales | $ | 120,086 | $ | 134,695 | $ | 359,073 | $ | 397,956 | |||
Gross margin | $ | 82,948 | $ | 98,509 | $ | 241,596 | $ | 235,110 | |||
Expenses | |||||||||||
General and administrative 1 | $ | 8,793 | $ | 9,513 | $ | 25,760 | $ | 30,316 | |||
Interest expense | 6,360 | 6,007 | 19,214 | 17,529 | |||||||
Other income | (93) | (19) | (2,266) | (105) | |||||||
Other expense | 1,410 | 1,377 | 3,917 | 3,632 | |||||||
Foreign exchange loss | 163 | 22 | 248 | 611 | |||||||
$ | 16,633 | $ | 16,900 | $ | 46,873 | $ | 51,983 | ||||
Earnings before income taxes | $ | 66,315 | $ | 81,609 | $ | 194,723 | $ | 183,127 | |||
Income tax recovery | 263 | 1,377 | 691 | 1,144 | |||||||
Net earnings | $ | 66,578 | $ | 82,986 | $ | 195,414 | $ | 184,271 | |||
Basic earnings per share | $ | 0.15 | $ | 0.19 | $ | 0.44 | $ | 0.43 | |||
Diluted earnings per share | $ | 0.15 | $ | 0.19 | $ | 0.44 | $ | 0.43 | |||
Weighted average number of shares outstanding | |||||||||||
Basic | 442,094 | 440,635 | 441,790 | 426,737 | |||||||
Diluted | 442,476 | 441,917 | 442,263 | 427,094 | |||||||
1) Equity settled stock based compensation (a non-cash item) | $ | 1,279 | $ | 1,220 | $ | 3,748 | $ | 3,822 | |||
Condensed Interim Consolidated Balance Sheets
As at | As at | |||||
(US dollars in thousands - unaudited) | 2017 | 2016 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 69,910 | $ | 124,295 | ||
Accounts receivable | 5,895 | 2,316 | ||||
Other | 2,678 | 1,481 | ||||
Total current assets | $ | 78,483 | $ | 128,092 | ||
Non-current assets | ||||||
Silver and gold interests | $ | 5,728,770 | $ | 5,919,272 | ||
Early deposit - silver and gold interests | 20,709 | 20,064 | ||||
Royalty interest | 9,107 | 9,107 | ||||
Long-term investments | 86,265 | 64,621 | ||||
Other | 12,352 | 12,163 | ||||
Total non-current assets | $ | 5,857,203 | $ | 6,025,227 | ||
Total assets | $ | 5,935,686 | $ | 6,153,319 | ||
Liabilities | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | $ | 13,522 | $ | 18,829 | ||
Current portion of performance share units | - | 228 | ||||
Total current liabilities | $ | 13,522 | $ | 19,057 | ||
Non-current liabilities | ||||||
Bank debt | $ | 854,000 | $ | 1,193,000 | ||
Deferred income taxes | 61 | 262 | ||||
Performance share units | 798 | 1,012 | ||||
Total non-current liabilities | $ | 854,859 | $ | 1,194,274 | ||
Total liabilities | $ | 868,381 | $ | 1,213,331 | ||
Shareholders' equity | ||||||
Issued capital | $ | 3,464,856 | $ | 3,445,914 | ||
Reserves | 74,295 | 55,301 | ||||
Retained earnings | 1,528,154 | 1,438,773 | ||||
Total shareholders' equity | $ | 5,067,305 | $ | 4,939,988 | ||
Total liabilities and shareholders' equity | $ | 5,935,686 | $ | 6,153,319 | ||
Condensed Interim Consolidated Statements of Cash Flows
Three Months Ended | Nine Months Ended | ||||||||||||
(US dollars in thousands - unaudited) | 2017 | 2016 | 2017 | 2016 | |||||||||
Operating activities | |||||||||||||
Net earnings | $ | 66,578 | $ | 82,986 | $ | 195,414 | $ | 184,271 | |||||
Adjustments for | |||||||||||||
Depreciation and depletion | 62,096 | 74,149 | 186,298 | 221,032 | |||||||||
Amortization of credit facility origination fees: | |||||||||||||
Interest expense | 167 | 190 | 551 | 596 | |||||||||
Amortization of credit facility origination fees - undrawn facilities | 201 | 177 | 541 | 498 | |||||||||
Interest expense | 6,194 | 5,817 | 18,664 | 16,933 | |||||||||
Equity settled stock based compensation | 1,279 | 1,220 | 3,748 | 3,822 | |||||||||
Performance share units | (38) | 565 | (496) | 744 | |||||||||
Deferred income tax (recovery) expense | (279) | (1,404) | (985) | (1,170) | |||||||||
Investment income recognized in net earnings | (93) | (19) | (256) | (105) | |||||||||
Other | (434) | (308) | (1,507) | (220) | |||||||||
Change in non-cash working capital | (234) | 3,397 | (9,162) | (401) | |||||||||
Cash generated from operations before interest paid and received | $ | 135,437 | $ | 166,770 | $ | 392,810 | $ | 426,000 | |||||
Interest paid - expensed | (6,394) | (5,204) | (19,296) | (16,478) | |||||||||
Interest received | 78 | 11 | 211 | 76 | |||||||||
Cash generated from operating activities | $ | 129,121 | $ | 161,577 | $ | 373,725 | $ | 409,598 | |||||
Financing activities | |||||||||||||
Bank debt repaid | $ | (99,000) | $ | (141,000) | $ | (339,000) | $ | (901,000) | |||||
Bank debt drawn | - | 780,000 | - | 780,000 | |||||||||
Credit facility origination fees | (6) | - | (1,311) | (1,300) | |||||||||
Shares issued | - | - | - | 632,547 | |||||||||
Share issue costs | - | (162) | - | (25,996) | |||||||||
Repurchase of share capital | - | - | - | (33,126) | |||||||||
Share purchase options exercised | - | 20,284 | 1,002 | 20,883 | |||||||||
Dividends paid | (36,663) | (19,310) | (88,771) | (56,050) | |||||||||
Cash (used for) generated from financing activities | $ | (135,669) | $ | 639,812 | $ | (428,080) | $ | 415,958 | |||||
Investing activities | |||||||||||||
Silver and gold interests | $ | - | $ | (800,013) | $ | - | $ | (800,297) | |||||
Interest paid - capitalized to silver interests | - | - | - | (615) | |||||||||
Early deposit - silver and gold interests | (5) | - | (899) | (2,042) | |||||||||
Proceeds on disposal of silver interest 1 | - | - | 1,022 | - | |||||||||
Dividend income received | 15 | 8 | 45 | 28 | |||||||||
Other | (116) | (115) | (202) | (222) | |||||||||
Cash used for investing activities | $ | (106) | $ | (800,120) | $ | (34) | $ | (803,148) | |||||
Effect of exchange rate changes on cash and cash equivalents | $ | (11) | $ | (214) | $ | 4 | $ | (160) | |||||
(Decrease) increase in cash and cash equivalents | $ | (6,665) | $ | 1,055 | $ | (54,385) | $ | 22,248 | |||||
Cash and cash equivalents, beginning of period | 76,575 | 124,490 | 124,295 | 103,297 | |||||||||
Cash and cash equivalents, end of period | $ | 69,910 | $ | 125,545 | $ | 69,910 | $ | 125,545 | |||||
1) | During the three months ended March 31, 2017, the Company received an additional $1 million settlement related to the November 4, 2014 bankruptcy of Mercator Minerals Ltd. ("Mercator") with whom Wheaton Precious Metals had a silver purchase agreement relative to Mercator's Mineral Park mine in the United States. |
Summary of Ounces Produced
Q3 2017 | Q2 2017 | Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | |||
Silver ounces produced 2 | ||||||||||
San Dimas | 1,043 | 973 | 623 | 1,429 | 1,264 | 1,596 | 923 | 2,317 | ||
Peñasquito | 1,641 | 1,483 | 1,339 | 1,328 | 1,487 | 867 | 1,352 | 1,766 | ||
Antamina | 1,735 | 1,888 | 1,464 | 1,599 | 1,469 | 1,707 | 2,021 | 2,403 | ||
Constancia | 618 | 546 | 540 | 723 | 749 | 778 | 509 | 637 | ||
Other | ||||||||||
Los Filos | 43 | 42 | 32 | 33 | 44 | 56 | 40 | 45 | ||
Zinkgruvan | 710 | 493 | 538 | 557 | 449 | 495 | 659 | 729 | ||
Yauliyacu | 588 | 607 | 562 | 379 | 721 | 686 | 657 | 749 | ||
Stratoni | 137 | 171 | 166 | 187 | 206 | 222 | 136 | 178 | ||
Minto | 43 | 42 | 56 | 100 | 153 | 60 | 43 | 53 | ||
Neves-Corvo 3 | 341 | 316 | 330 | 312 | 279 | 331 | 319 | 269 | ||
Cozamin 4 | - | 17 | 397 | 265 | 239 | 253 | 277 | 400 | ||
Lagunas Norte | 243 | 218 | 210 | 234 | 215 | 233 | 273 | 291 | ||
Pierina | 107 | 114 | 137 | 117 | 50 | 31 | 35 | 54 | ||
Veladero | 201 | 144 | 158 | 174 | 160 | 193 | 182 | 281 | ||
777 | 145 | 138 | 96 | 152 | 166 | 99 | 106 | 112 | ||
Total Other | 2,558 | 2,302 | 2,682 | 2,510 | 2,682 | 2,659 | 2,727 | 3,161 | ||
Total silver ounces produced | 7,595 | 7,192 | 6,648 | 7,589 | 7,651 | 7,607 | 7,532 | 10,284 | ||
Gold ounces produced ² | ||||||||||
Sudbury 5 | 8,401 | 7,468 | 9,182 | 8,901 | 10,779 | 15,054 | 7,895 | 13,678 | ||
Salobo | 72,980 | 57,514 | 53,193 | 71,328 | 68,168 | 35,627 | 38,474 | 39,395 | ||
Constancia | 2,498 | 2,332 | 2,431 | 3,151 | 3,737 | 4,622 | 3,435 | 4,617 | ||
Other | ||||||||||
Minto | 6,904 | 6,063 | 9,734 | 10,906 | 20,184 | 6,985 | 3,779 | 5,237 | ||
777 | 5,114 | 6,259 | 4,422 | 10,919 | 10,140 | 8,900 | 8,274 | 9,439 | ||
Total Other | 12,018 | 12,322 | 14,156 | 21,825 | 30,324 | 15,885 | 12,053 | 14,676 | ||
Total gold ounces produced | 95,897 | 79,636 | 78,962 | 105,205 | 113,008 | 71,188 | 61,857 | 72,366 | ||
SEOs produced 6 | 14,874 | 13,009 | 12,176 | 15,067 | 15,343 | 12,947 | 12,453 | 15,699 | ||
GEOs produced 6 | 195,944 | 178,100 | 173,949 | 211,970 | 225,393 | 172,566 | 156,513 | 209,783 | ||
Silver / Gold Ratio 7 | 75.9 | 73.0 | 70.0 | 71.1 | 68.1 | 75.0 | 79.6 | 74.8 | ||
1) | All figures in thousands except gold ounces produced. |
2) | Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions. Production figures are based on information provided by the operators of the mining operations to which the silver or gold interests relate or management estimates in those situations where other information is not available. Certain production figures may be updated in future periods as additional information is received. |
3) | As per Lundin Mining Corporation's ("Lundin") MD&A for the three months ended September 30, 2017, the Mining Industry Workers Union organized a strike at the Neves-Corvo mine from October 3-7, 2017. Lundin states that they have been advised that the union intends to undertake another strike during a five-day period commencing November 6, 2017 and it may repeat this action a third time in the month of December, resulting in their decision to revise production guidance downward to reflect anticipated lost production from the labour actions. Lundin has engaged in dialogue with the unions, who are looking for changes to work schedules and other factors that have also been demanded of other industries as part of a nation-wide union initiative. These labour issues at Neves-Corvo have not impacted Wheaton Precious Metals' production guidance for 2017. |
4) | The Cozamin precious metal purchase agreement expired on April 4, 2017. |
5) | Comprised of the Coleman, Copper Cliff, Garson, Stobie, Creighton and Totten gold interests. The Stobie gold interest was placed into care and maintenance as of May 2017. |
6) | Silver equivalent ounces (SEOs) and gold equivalent ounces (GEOs), which are provided to assist the reader, are calculated by converting gold (in the case of SEOs) or silver (in the case of GEOs) using the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. |
7) | The silver / gold ratio is the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. |
Summary of Ounces Sold
Q3 2017 | Q2 2017 | Q1 2017 | Q4 2016 | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | ||||
Silver ounces sold | |||||||||||
San Dimas | 962 | 845 | 796 | 1,571 | 1,065 | 1,426 | 1,345 | 2,097 | |||
Peñasquito | 1,109 | 1,639 | 860 | 1,270 | 1,078 | 886 | 949 | 2,086 | |||
Antamina | 1,537 | 1,453 | 1,170 | 1,488 | 1,598 | 2,202 | 1,879 | 1,340 | |||
Constancia | 491 | 559 | 383 | 702 | 536 | 520 | 666 | 511 | |||
Other | |||||||||||
Los Filos | 43 | 42 | 32 | 33 | 44 | 55 | 39 | 45 | |||
Zinkgruvan | 305 | 398 | 296 | 592 | 340 | 369 | 812 | 507 | |||
Yauliyacu | 364 | 423 | 403 | 671 | 342 | 578 | 603 | 987 | |||
Stratoni | 84 | 123 | 195 | 165 | 203 | 129 | 148 | 39 | |||
Campo Morado 2 | - | - | - | - | - | - | 4 | 9 | |||
Minto | 43 | 39 | 37 | 102 | 96 | 26 | 53 | 13 | |||
Cozamin 3 | 23 | 125 | 232 | 196 | 207 | 219 | 300 | 317 | |||
Neves-Corvo | 117 | 114 | 153 | 147 | 88 | 158 | 142 | 153 | |||
Lagunas Norte | 242 | 204 | 217 | 227 | 237 | 224 | 299 | 252 | |||
Pierina | 102 | 136 | 150 | 84 | 32 | 27 | 46 | 36 | |||
Veladero | 201 | 144 | 159 | 174 | 160 | 193 | 182 | 281 | |||
777 | 135 | 125 | 142 | 84 | 96 | 130 | 85 | 78 | |||
Total Other | 1,659 | 1,873 | 2,016 | 2,475 | 1,845 | 2,108 | 2,713 | 2,717 | |||
Total silver ounces sold | 5,758 | 6,369 | 5,225 | 7,506 | 6,122 | 7,142 | 7,552 | 8,751 | |||
Gold ounces sold | |||||||||||
Sudbury 4 | 3,237 | 5,822 | 6,887 | 10,183 | 12,294 | 11,351 | 9,007 | 6,256 | |||
Salobo | 67,198 | 50,478 | 63,007 | 73,646 | 50,043 | 45,396 | 35,366 | 44,491 | |||
Constancia | 2,206 | 2,356 | 2,315 | 3,343 | 3,396 | 3,610 | 4,933 | 4,473 | |||
Other | |||||||||||
Minto | 4,603 | 6,988 | 9,902 | 15,445 | 11,110 | 19 | 8,815 | 3,317 | |||
777 | 5,304 | 6,321 | 6,286 | 6,314 | 8,220 | 10,381 | 7,137 | 6,362 | |||
Total Other | 9,907 | 13,309 | 16,188 | 21,759 | 19,330 | 10,400 | 15,952 | 9,679 | |||
Total gold ounces sold | 82,548 | 71,965 | 88,397 | 108,931 | 85,063 | 70,757 | 65,258 | 64,899 | |||
SEOs sold 5 | 12,024 | 11,625 | 11,412 | 15,249 | 11,913 | 12,451 | 12,745 | 13,607 | |||
GEOs sold 5 | 158,401 | 159,161 | 163,032 | 214,529 | 175,008 | 165,945 | 160,180 | 181,838 | |||
Cumulative payable silver ounces PBND 6 | 5,257 | 4,152 | 3,967 | 3,224 | 3,783 | 2,999 | 3,230 | 3,872 | |||
Cumulative payable gold ounces PBND 6 | 57,205 | 48,997 | 45,669 | 59,536 | 68,148 | 44,780 | 49,679 | 56,867 | |||
Silver / Gold Ratio 7 | 75.9 | 73.0 | 70.0 | 71.1 | 68.1 | 75.0 | 79.6 | 74.8 | |||
1) | All figures in thousands except gold ounces sold. | |
2) | The Campo Morado silver interest was disposed of on December 31, 2014. | |
3) | The Cozamin precious metal purchase agreement expired on April 4, 2017. | |
4) | Comprised of the Coleman, Copper Cliff, Garson, Stobie, Creighton and Totten gold interests.The Stobie gold interest was placed into care and maintenance as of May 2017. | |
5) | Silver equivalent ounces (SEOs) and gold equivalent ounces (GEOs), which are provided to assist the reader, are calculated by converting gold (in the case of SEOs) or silver (in the case of GEOs) using the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. | |
6) | Payable silver and gold ounces produced but not yet delivered ("PBND") are based on management estimates.These figures may be updated in future periods as additional information is received. | |
7) | The silver / gold ratio is the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. | |
Results of Operations
The Company currently has eight reportable operating segments: the silver produced by the San Dimas, Peñasquito and Antamina mines, the gold produced by the Sudbury and Salobo mines, the silver and gold produced by the Constancia mine and the Other mines, and corporate operations.
Three Months Ended September 30, 2017 | |||||||||||||||||
Ounces Produced² | Ounces Sold | Average | Average | Average | Sales | Net | Cash Flow | Total | |||||||||
Silver | |||||||||||||||||
San Dimas | 1,043 | 962 | $ | 16.84 | $ | 4.32 | $ | 1.46 | $ | 16,205 | $ | 10,640 | $ | 12,049 | $ | 136,763 | |
Peñasquito | 1,641 | 1,109 | 16.67 | 4.13 | 2.88 | 18,491 | 10,715 | 13,911 | 407,679 | ||||||||
Antamina | 1,735 | 1,537 | 17.01 | 3.34 | 9.81 | 26,147 | 5,938 | 21,017 | 774,993 | ||||||||
Constancia | 618 | 491 | 17.16 | 5.90 | 7.36 | 8,429 | 1,915 | 5,531 | 265,420 | ||||||||
Other 4 | 2,558 | 1,659 | 16.79 | 5.28 | 3.77 | 27,854 | 12,836 | 19,109 | 759,840 | ||||||||
7,595 | 5,758 | $ | 16.87 | $ | 4.43 | $ | 5.13 | $ | 97,126 | $ | 42,044 | $ | 71,617 | $ | 2,344,695 | ||
Gold | |||||||||||||||||
Sudbury 5 | 8,401 | 3,237 | $ | 1,281 | $ | 400 | $ | 769 | $ | 4,147 | $ | 362 | $ | 2,852 | $ | 389,266 | |
Salobo | 72,980 | 67,198 | 1,280 | 400 | 381 | 86,030 | 33,561 | 59,150 | 2,836,029 | ||||||||
Constancia | 2,498 | 2,206 | 1,301 | 400 | 409 | 2,869 | 1,083 | 1,986 | 122,856 | ||||||||
Other 6 | 12,018 | 9,907 | 1,298 | 368 | 335 | 12,862 | 5,898 | 8,823 | 35,924 | ||||||||
95,897 | 82,548 | $ | 1,283 | $ | 396 | $ | 391 | $ | 105,908 | $ | 40,904 | $ | 72,811 | $ | 3,384,075 | ||
Operating results | $ | 203,034 | $ | 82,948 | $ | 144,428 | $ | 5,728,770 | |||||||||
Corporate costs | |||||||||||||||||
General and administrative | $ | (8,793) | $ | (6,693) | |||||||||||||
Interest expense | (6,360) | (6,394) | |||||||||||||||
Other | (1,480) | (2,220) | |||||||||||||||
Income tax recovery | 263 | - | |||||||||||||||
Total corporate costs | $ | (16,370) | $ | (15,307) | $ | 206,916 | |||||||||||
$ | 66,578 | $ | 129,121 | $ | 5,935,686 | ||||||||||||
1) | All figures in thousands except gold ounces produced and sold and per ounce amounts. |
2) | Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions. Production figures are based on information provided by the operators of the mining operations to which the silver or gold interests relate or management estimates in those situations where other information is not available. Certain production figures may be updated in future periods as additional information is received. |
3) | Refer to discussion on non-IFRS measure (ii) at the end of this press release. |
4) | Comprised of the operating Los Filos, Zinkgruvan, Yauliyacu, Stratoni, Minto, Cozamin, Neves-Corvo, Lagunas Norte, Pierina, Veladero and 777 silver interests as well as the non-operating Keno Hill, Aljustrel, Loma de La Plata, Pascua-Lama and Rosemont silver interests. The Cozamin precious metal purchase agreement expired on April 4, 2017. |
5) | Comprised of the operating Coleman, Copper Cliff, Garson, Creighton and Totten gold interests, the non-operating Victor gold interest and the Stobie gold interest which was placed into care and maintenance during the second quarter of 2017. |
6) | Comprised of the operating Minto and 777 gold interests in addition to the non-operating Rosemont gold interest. |
On a silver equivalent and gold equivalent basis, results for the Company for the three months ended September 30, 2017 were as follows:
Three Months Ended September 30, 2017 | ||||||||
Silver / Gold | Ounces | Ounces | Average | Average | Cash | Average | Gross Margin | |
Silver equivalent basis | 75.9 | 14,874 | 12,024 | $ 16.89 | $ 4.84 | $ 12.05 | $ 5.14 | $ 6.91 |
Gold equivalent basis | 75.9 | 195,944 | 158,401 | $ 1,282 | $ 368 | $ 914 | $ 390 | $ 524 |
1) | The silver / gold ratio is the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. |
2) | Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions. Production figures are based on information provided by the operators of the mining operations to which the silver or gold interests relate or management estimates in those situations where other information is not available. Certain production figures may be updated in future periods as additional information is received. |
3) | Silver ounces produced and sold in thousands. |
4) | Refer to discussion on non-IFRS measure (ii) at the end of this press release. |
5) | Refer to discussion on non-IFRS measure (iii) at the end of this press release |
Three Months Ended September 30, 2016 | |||||||||||||||||
Ounces Produced² | Ounces Sold | Average | Average | Average | Sales | Net | Cash Flow | Total | |||||||||
Silver | |||||||||||||||||
San Dimas | 1,264 | 1,065 | $ | 19.75 | $ | 4.28 | $ | 1.11 | $ | 21,037 | $ | 15,300 | $ | 16,478 | $ | 142,312 | |
Peñasquito | 1,487 | 1,078 | 19.73 | 4.09 | 3.05 | 21,276 | 13,574 | 16,866 | 421,955 | ||||||||
Antamina | 1,469 | 1,598 | 19.67 | 3.84 | 9.94 | 31,437 | 9,424 | 25,305 | 830,594 | ||||||||
Constancia | 749 | 536 | 19.38 | 5.90 | 7.41 | 10,379 | 3,250 | 7,219 | 281,170 | ||||||||
Other 4 | 2,682 | 1,845 | 19.20 | 5.08 | 4.90 | 35,444 | 17,028 | 28,037 | 799,465 | ||||||||
7,651 | 6,122 | $ | 19.53 | $ | 4.51 | $ | 5.45 | $ | 119,573 | $ | 58,576 | $ | 93,905 | $ | 2,475,496 | ||
Gold | |||||||||||||||||
Sudbury 5 | 10,779 | 12,294 | $ | 1,332 | $ | 400 | $ | 787 | $ | 16,382 | $ | 1,787 | $ | 11,463 | $ | 480,550 | |
Salobo | 68,168 | 50,043 | 1,339 | 400 | 382 | 67,008 | 27,875 | 46,991 | 2,932,959 | ||||||||
Constancia | 3,737 | 3,396 | 1,338 | 400 | 409 | 4,544 | 1,795 | 3,186 | 127,038 | ||||||||
Other 6 | 30,324 | 19,330 | 1,329 | 354 | 537 | 25,697 | 8,476 | 19,016 | 62,586 | ||||||||
113,008 | 85,063 | $ | 1,336 | $ | 390 | $ | 477 | $ | 113,631 | $ | 39,933 | $ | 80,656 | $ | 3,603,133 | ||
Operating results | $ | 233,204 | $ | 98,509 | $ | 174,561 | $ | 6,078,629 | |||||||||
Corporate costs | |||||||||||||||||
General and administrative | $ | (9,513) | $ | (6,881) | |||||||||||||
Interest expense | (6,007) | (5,204) | |||||||||||||||
Other | (1,380) | (899) | |||||||||||||||
Income tax recovery | 1,377 | - | |||||||||||||||
Total corporate costs | $ | (15,523) | $ | (12,984) | $ | 247,403 | |||||||||||
$ | 82,986 | $ | 161,577 | $ | 6,326,032 | ||||||||||||
1) | All figures in thousands except gold ounces produced and sold and per ounce amounts. |
2) | Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions. Production figures are based on information provided by the operators of the mining operations to which the silver or gold interests relate or management estimates in those situations where other information is not available. Certain production figures may be updated in future periods as additional information is received. |
3) | Refer to discussion on non-IFRS measure (ii) at the end of this press release. |
4) | Comprised of the operating Los Filos, Zinkgruvan, Yauliyacu, Stratoni, Minto, Cozamin, Neves-Corvo, Lagunas Norte, Pierina, Veladero and 777 silver interests as well as the non-operating Keno Hill, Aljustrel, Loma de La Plata, Pascua-Lama and Rosemont silver interests. The Cozamin precious metal purchase agreement expired on April 4, 2017. |
5) | Comprised of the operating Coleman, Copper Cliff, Garson, Creighton and Totten gold interests, the non-operating Victor gold interest and the Stobie gold interest which was placed into care and maintenance during the second quarter of 2017. |
6) | Comprised of the operating Minto and 777 gold interests in addition to the non-operating Rosemont gold interest. |
On a silver equivalent and gold equivalent basis, results for the Company for the three months ended September 30, 2016 were as follows:
Three Months Ended September 30, 2016 | ||||||||
Silver / Gold | Ounces | Ounces | Average | Average | Cash Operating Margin | Average | Gross Margin | |
Silver equivalent basis | 68.1 | 15,343 | 11,913 | $ 19.57 | $ 5.10 | $ 14.47 | $ 6.20 | $ 8.27 |
Gold equivalent basis | 68.1 | 225,393 | 175,008 | $ 1,333 | $ 347 | $ 986 | $ 422 | $ 564 |
1) | The silver / gold ratio is the ratio of the average price of silver to the average price of gold per the London Bullion Metal Exchange during the period. | |
2) | Ounces produced represent the quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions. Production figures are based on information provided by the operators of the mining operations to which the silver or gold interests relate or management estimates in those situations where other information is not available. Certain production figures may be updated in future periods as additional information is received. | |
3) | Silver ounces produced and sold in thousands. | |
4) | Refer to discussion on non-IFRS measure (ii) at the end of this press release. | |
5) | Refer to discussion on non-IFRS measure (iii) at the end of this press release. | |
Non-IFRS Measures
Wheaton Precious Metals has included, throughout this document, certain non-IFRS performance measures, including (i) operating cash flow per share (basic and diluted); (ii) average cash costs of silver and gold on a per ounce basis and; (iii) cash operating margin.
i. | Operating cash flow per share (basic and diluted) is calculated by dividing cash generated by operating activities by the weighted average number of shares outstanding (basic and diluted). The Company presents operating cash flow per share as management and certain investors use this information to evaluate the Company's performance in comparison to other companies in the precious metal mining industry who present results on a similar basis. |
The following table provides a reconciliation of operating cash flow per share (basic and diluted). |
Three Months Ended | |||||||
(in thousands, except for per share amounts) | 2017 | 2016 | |||||
Cash generated by operating activities | $ | 129,121 | $ | 161,577 | |||
Divided by: | |||||||
Basic weighted average number of shares outstanding | 442,094 | 440,635 | |||||
Diluted weighted average number of shares outstanding | 442,476 | 441,917 | |||||
Equals: | |||||||
Operating cash flow per share - basic | $ | 0.29 | $ | 0.37 | |||
Operating cash flow per share - diluted | $ | 0.29 | $ | 0.37 | |||
ii. | Average cash cost of silver and gold on a per ounce basis is calculated by dividing the total cost of sales, less depletion, by the ounces sold. In the precious metal mining industry, this is a common performance measure but does not have any standardized meaning. In addition to conventional measures prepared in accordance with IFRS, management and certain investors use this information to evaluate the Company's performance and ability to generate cash flow. |
The following table provides a reconciliation of average cash cost of silver and gold on a per ounce basis. |
Three Months Ended | |||||||
(in thousands, except for gold ounces sold and per ounce amounts) | 2017 | 2016 | |||||
Cost of sales | $ | 120,086 | $ | 134,695 | |||
Less: depletion | (61,852) | (73,919) | |||||
Cash cost of sales | $ | 58,234 | $ | 60,776 | |||
Cash cost of sales is comprised of: | |||||||
Total cash cost of silver sold | $ | 25,529 | $ | 27,637 | |||
Total cash cost of gold sold | 32,705 | 33,139 | |||||
Total cash cost of sales | $ | 58,234 | $ | 60,776 | |||
Divided by: | |||||||
Total silver ounces sold | 5,758 | 6,122 | |||||
Total gold ounces sold | 82,548 | 85,063 | |||||
Equals: | |||||||
Average cash cost of silver (per ounce) | $ | 4.43 | $ | 4.51 | |||
Average cash cost of gold (per ounce) | $ | 396 | $ | 390 | |||
iii. | Cash operating margin is calculated by subtracting the average cash cost of silver and gold on a per ounce basis from the average realized selling price of silver and gold on a per ounce basis. The Company presents cash operating margin as management and certain investors use this information to evaluate the Company's performance in comparison to other companies in the precious metal mining industry who present results on a similar basis as well as to evaluate the Company's ability to generate cash flow. |
The following table provides a reconciliation of cash operating margin. | |
Three Months Ended | |||||||||
(in thousands, except for gold ounces sold and per ounce amounts) | 2017 | 2016 | |||||||
Total sales: | |||||||||
Silver | $ | 97,126 | $ | 119,573 | |||||
Gold | $ | 105,908 | $ | 113,631 | |||||
Divided by: | |||||||||
Total silver ounces sold | 5,758 | 6,122 | |||||||
Total gold ounces sold | 82,548 | 85,063 | |||||||
Equals: | |||||||||
Average realized price of silver (per ounce) | $ | 16.87 | $ | 19.53 | |||||
Average realized price of gold (per ounce) | $ | 1,283 | $ | 1,336 | |||||
Less: | |||||||||
Average cash cost of silver 1 (per ounce) | $ | (4.43) | $ | (4.51) | |||||
Average cash cost of gold 1 (per ounce) | $ | (396) | $ | (390) | |||||
Equals: | |||||||||
Cash operating margin per silver ounce sold | $ | 12.44 | $ | 15.02 | |||||
As a percentage of realized price of silver | 74% | 77% | |||||||
Cash operating margin per gold ounce sold | $ | 887 | $ | 946 | |||||
As a percentage of realized price of gold | 69% | 71% | |||||||
1) Please refer to non-IFRS measure (ii), above. |
These non-IFRS measures do not have any standardized meaning prescribed by IFRS, and other companies may calculate these measures differently. The presentation of these non-IFRS measures is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For more detailed information, please refer to Wheaton Precious Metals' MD&A available on the Company's website at www.wheatonpm.com and posted on SEDAR at www.sedar.com.
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
The information contained herein contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements with respect to:
- statements with respect to the proposed entering into, and advance, by the Company of up to Cdn$20 million subordinated secured convertible debenture term debt loan to Desert Star;
- statements with respect to the successful negotiation and entering into of a definitive documentation by the Company with Desert Star, payment by the Company of US$65 million to Desert Star and the satisfaction of each party's obligations in accordance with the Kutcho Early Deposit Agreement;
- the receipt by the Company of silver and gold production in respect of the Kutcho project;
- future payments by the Company in accordance with precious metal purchase agreements, including any acceleration of payments, estimated throughput and exploration potential;
- projected increases to Wheaton Precious Metals' production and cash flow profile;
- the expansion and exploration potential at the Salobo and San Dimas mines;
- projected changes to Wheaton Precious Metals' production mix;
- anticipated increases in total throughput;
- the effect of the SAT legal claim on Primero's business, financial condition, results of operations and cash flows for 2010-2014 and 2015-2019;
- the impact on Primero of the unionized employee strike at the San Dimas mine which concluded in April 2017 and any other labour disruptions;
- the ability of Primero to continue as a going concern;
- the ability of Primero to determine that it is uneconomic to continue mining operations at the San Dimas mine;
- the ability of Primero to achieve expected production levels;
- the Guarantee of the Primero Facility;
- possible amendments to the San Dimas silver purchase agreement as a result of any strategic process or discussions with Primero;
- the estimated future production;
- the future price of commodities;
- the estimation of mineral reserves and mineral resources;
- the realization of mineral reserve estimates;
- the timing and amount of estimated future production (including 2017 and average attributable annual production over the next five years);
- the costs of future production;
- reserve determination;
- estimated reserve conversion rates and produced but not yet delivered ounces;
- any statements as to future dividends, the ability to fund outstanding commitments and the ability to continue to acquire accretive precious metal stream interests;
- confidence in the Company's business structure;
- the Company's position relating to any dispute with the CRA and the Company's intention to defend reassessments issued by the CRA; the impact of potential taxes, penalties and interest payable to the CRA; possible audits for taxation years subsequent to 2015; estimates as to amounts that may be reassessed by the CRA in respect of taxation years subsequent to 2010; amounts that may be payable in respect of penalties and interest; the Company's intention to file future tax returns in a manner consistent with previous filings; that the CRA will continue to accept the Company posting security for amounts sought by the CRA under notices of reassessment for the 2005-2010 taxation years or will accept posting security for any other amounts that may be sought by the CRA under other notices of reassessment; the length of time it would take to resolve any dispute with the CRA or an objection to a reassessment; and assessments of the impact and resolution of various tax matters, including outstanding audits, proceedings with the CRA and proceedings before the courts; and
- assessments of the impact and resolution of various legal and tax matters, including but not limited to outstanding class action litigation.
Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "projects", "intends", "anticipates" or "does not anticipate", or "believes", "potential", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Wheaton Precious Metals to be materially different from those expressed or implied by such forward-looking statements, including but not limited to:
- specific risks relating to the entering into and advancing of amounts under the subordinated secured convertible debenture term debt loan;
- Desert Star not being able to make payments under the subordinated secured convertible debenture term debt loan;
- any specific risks relating to the completion of documentation and diligence for the Kutcho Early Deposit Agreement;
- the satisfaction of each party's obligations in accordance with the terms of the Kutcho Early Deposit Agreement;
- risks related to the satisfaction of each party's obligations in accordance with the terms of the precious metal purchase agreements, including any acceleration of payments, estimated throughput and exploration potential;
- fluctuations in the price of commodities;
- risks related to the mining operations from which Wheaton Precious Metals purchases silver or gold (the "Mining Operations") including risks related to fluctuations in the price of the primary commodities mined at such operations, actual results of mining and exploration activities, environmental, economic and political risks of the jurisdictions in which the Mining Operations are located, and changes in project parameters as plans continue to be refined;
- the absence of control over Mining Operations and having to rely on the accuracy of the public disclosure and other information Wheaton Precious Metals receives from the owners and operators of the Mining Operations as the basis for its analyses, forecasts and assessments relating to its own business;
- Primero is not able to defend the validity of the 2012 APA, is unable to pay taxes in Mexico based on realized silver prices or the SAT proceedings or actions otherwise have an adverse impact on the business, financial condition or results of operation of Primero;
- Primero not being able to profitably operate the San Dimas mine due to the impact of the strike or other labour disruptions;
- Primero not being able to continue as a going concern;
- Primero determining that it is uneconomic to continue mining operations at the San Dimas mine and ceasing such mining operations;
- Primero not being able to achieve expected production levels;
- Primero not being able to secure additional funding, resume San Dimas mine operations to normal operating capacity, reduce cash outflows or have a successful outcome to a strategic review process;
- Primero failing to make required payments or otherwise defaulting under its credit facility and the Company having to meet its guarantee obligations under the Guarantee;
- amendments to the San Dimas silver purchase agreement have a material adverse effect on the Company's business, financial condition, results of operation or cash flows;
- differences in the interpretation or application of tax laws and regulations or accounting policies and rules; and Wheaton Precious Metals' interpretation of, or compliance with, tax laws and regulations or accounting policies and rules, is found to be incorrect or the tax impact to the Company's business operations is materially different than currently contemplated;
- any challenge by the CRA of the Company's tax filings is successful and the potential negative impact to the Company's previous and future tax filings;
- the Company's business or ability to enter into precious metal purchase agreements is materially impacted as a result of any CRA reassessment;
- any reassessment of the Company's tax filings and the continuation or timing of any such process is outside the Company's control;
- any requirement to pay reassessed tax, and the amount of any tax, interest and penalties that may be payable changing due to currency fluctuations;
- the Company is not assessed taxes on its foreign subsidiary's income on the same basis that the Company pays taxes on its Canadian income, if taxable in Canada;
- interest and penalties associated with a CRA reassessment having an adverse impact on the Company's financial position;
- litigation risk associated with a challenge to the Company's tax filings;
- credit and liquidity risks;
- hedging risk;
- competition in the mining industry;
- risks related to Wheaton Precious Metals' acquisition strategy;
- risks related to the market price of the common shares of Wheaton Precious Metals;
- equity price risks related to Wheaton Precious Metals' holding of long‑term investments in other exploration and mining companies;
- ·risks related to the declaration, timing and payment of dividends;
- the ability of Wheaton Precious Metals and the Mining Operations to retain key management employees or procure the services of skilled and experienced personnel;
- litigation risk associated with outstanding legal matters;
- risks related to claims and legal proceedings against Wheaton Precious Metals or the Mining Operations;
- risks relating to unknown defects and impairments;
- risks relating to security over underlying assets;
- risks related to ensuring the security and safety of information systems, including cyber security risks;
- risks related to the adequacy of internal control over financial reporting;
- risks related to governmental regulations;
- risks related to international operations of Wheaton Precious Metals and the Mining Operations;
- risks relating to exploration, development and operations at the Mining Operations;
- risks related to the ability of the companies with which the Company has precious metal purchase agreements to perform their obligations under those precious metal purchase agreements in the event of a material adverse effect on the results of operations, financial condition, cash flows or business of such companies;
- risks related to environmental regulationsand climate change;
- the ability of Wheaton Precious Metals and the Mining Operations to obtain and maintain necessary licenses, permits, approvals and rulings;
- the ability of Wheaton Precious Metals and the Mining Operations to comply with applicable laws, regulations and permitting requirements;
- lack of suitable infrastructure and employees to support the Mining Operations;
- uncertainty in the accuracy of mineral reserve and mineral resource estimates;
- inability to replace and expand mineral reserves;
- risks relating to production estimates from Mining Operations, including anticipated timing of the commencement of production by certain Mining Operations;
- uncertainties related to title and indigenous rights with respect to the mineral properties of the Mining Operations;
- fluctuation in the commodity prices other than silver or gold;
- the ability of Wheaton Precious Metals and the Mining Operations to obtain adequate financing;
- the ability of Mining Operations to complete permitting, construction, development and expansion;
- challenges related to global financial conditions;
- risks relating to future sales or the issuance of equity securities; and
- other risks discussed in the section entitled "Description of the Business – Risk Factors" in Wheaton Precious Metals' Annual Information Form available on SEDAR at www.sedar.com, and in Wheaton Precious Metals' Form 40-F filed March 31, 2017 and Form 6-K filed March 21, 2017 both on file with the U.S. Securities and Exchange Commission in Washington, D.C. (the "Disclosure").
Forward-looking statements are based on assumptions management currently believes to be reasonable, including but not limited to:
- the completion of documentation and receipt of all necessary approvals in respect of the subordinated secured convertible debenture term debt loan with Desert Star;
- that Desert Star will make all required payments and not be in default under the subordinated secured convertible debenture term debt loan;
- the completion of documentation and diligence in respect of the Kutcho Early Deposit Agreement;
- the payment of US$65 million to Desert Star and the satisfaction of each party's obligations in accordance with the terms of the Kutcho Early Deposit Agreement;
- the satisfaction of each party's obligations in accordance with the precious metal purchase agreements;
- no material adverse change in the market price of commodities;
- that the Mining Operations will continue to operate and the mining projects will be completed in accordance with public statements and achieve their stated production estimates;
- the continuing ability to fund or obtain funding for outstanding commitments;
- that the impact on Primero of the unionized employee strike or other labour disruptions at the San Dimas mine will not be significant;
- that Primero is able to continue as a going concern;
- that Primero will not determine that it is uneconomic to continue mining operations at the San Dimas mine;
- that Primero is able to achieve expected production levels;
- that Primero will make all required payments and not be in default under the Primero Facility;
- that any amendments to the San Dimas silver purchase agreement will not have a material adverse effect on the Company's business, financial condition, results of operation or cash flows;
- Wheaton Precious Metals' ability to source and obtain accretive precious metal stream interests;
- expectations regarding the resolution of legal and tax matters, including the ongoing class action litigationand CRA auditinvolving the Company;
- Wheaton Precious Metals will be successful in challenging any reassessment by the CRA;
- Wheaton Precious Metals has properly considered the application of Canadian tax law to its structure and operations;
- Wheaton Precious Metals will continue to be permitted to post security for amounts sought by the CRA under notices of reassessment;
- Wheaton Precious Metals has filed its tax returns and paid applicable taxes in compliance with Canadian tax law;
- Wheaton Precious Metals will not change its business as a result of any CRA reassessment;
- Wheaton Precious Metals' ability to enter into new precious metal purchase agreements will not be impacted by any CRA reassessment;
- expectations and assumptions concerning prevailing tax laws and the potential amount that could be reassessed as additional tax, penalties and interest by the CRA;
- any foreign subsidiary income, if taxable in Canada, would be subject to the same or similar tax calculations as Wheaton Precious Metals' Canadian income, including the Company's position, in respect of precious metal purchase agreements with upfront payments paid in the form of a deposit, that the estimates of income subject to tax is based on the cost of precious metal acquired under such precious metal purchase agreements being equal to the market value of such precious metal.
- the estimate of the recoverable amount for any precious metal purchase agreement with an indicator of impairment; and
- such other assumptions and factors as set out in the Disclosure.
Although Wheaton Precious Metals has attempted to identify important factors that could cause actual results, level of activity, performance or achievements to differ materially from those contained in forward-looking statements, there may be other factors that cause results, level of activity, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate and even if events or results described in the forward-looking statements are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, Wheaton Precious Metals. Accordingly, readers should not place undue reliance on forward-looking statements and are cautioned that actual outcomes may vary. The forward-looking statements included herein are for the purpose of providing investors with information to assist them in understanding Wheaton Precious Metals' expected financial and operational performance and may not be appropriate for other purposes. Any forward looking statement speaks only as of the date on which it is made. Wheaton Precious Metals does not undertake to update any forward-looking statements that are included or incorporated by reference herein, except in accordance with applicable securities laws.
Cautionary Language Regarding Reserves And Resources
For further information on Mineral Reserves and Mineral Resources and on Wheaton Precious Metals more generally, readers should refer to Wheaton Precious Metals' Annual Information Form for the year ended December 31, 2016 and other continuous disclosure documents filed by Wheaton Precious Metals since January 1, 2017, available on SEDAR at www.sedar.com. Wheaton Precious Metals' Mineral Reserves and Mineral Resources are subject to the qualifications and notes set forth therein. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
Cautionary Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Resources: The information contained herein has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws. The terms "mineral reserve", "proven mineral reserve" and "probable mineral reserve" are Canadian mining terms defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") – CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the "CIM Standards"). These definitions differ from the definitions in Industry Guide 7 ("SEC Industry Guide 7") under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"). Under U.S. standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Also, under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource" are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. "Inferred mineral resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade without reference to unit measures. Accordingly, information contained herein that describes Wheaton Precious Metals' mineral deposits may not be comparable to similar information made public by U.S. companies subject to reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder. United States investors are urged to consider closely the disclosure in Wheaton Precious Metals' Form 40-F, a copy of which may be obtained from Wheaton Precious Metals or from http://www.sec.gov/edgar.shtml.
In accordance with the Company's MD&A and financial statements, reference to the Company includes the Company's wholly owned subsidiaries.
SOURCE Wheaton Precious Metals Corp.
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