Yahoo Finance Wheaton Precious Metals Corp. (NYSE:WPM) Q1 2024 Earnings Call Transcript
Wheaton Precious Metals Corp. (NYSE:WPM) Q1 2024 Earnings Call Transcript May 10, 2024
Wheaton Precious Metals Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Wheaton Precious Metals' 2024 First Quarter Results Conference Call. [Operator Instructions] Thank you. I would like to remind everyone that this conference call is being recorded on Friday, May 10, 2024 at 11:00 AM Eastern Time. I will now turn the conference over to Emma Murray, Vice President of Investor Relations. Please go ahead.
Emma Murray: Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call. I'm joined today by Randy Smallwood, Wheaton Precious Metals' President and Chief Executive Officer; Gary Brown, Senior Vice President and Chief Financial Officer; Haytham Hodaly, Senior Vice President, Corporate Development; and Wes Carson, Vice President, Mining Operations. Please note that, for those not currently on the webcast, a slide presentation accompanying this conference call is available in PDF format on the Presentations page of the Wheaton Precious Metals' website. Some of the commentary on today’s call may contain forward-looking statements. And I would direct everyone to review Slide 2 of the presentation, which contains important cautionary notes.
It should be noted that all figures referred to on today’s call are in U.S. dollars unless otherwise noted. With that, I’d like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.
Randy Smallwood: Thank you, Emma, and good morning, everyone. Thank you for joining us today to discuss Wheaton's first quarter results of 2024. I’m pleased to announce that our portfolio of long-life, low-cost assets delivered a robust first quarter to start the year, generating approximately $220 million of operating cash flow and over $160 million in net earnings, underscoring the effectiveness of our business model in leveraging rising commodity prices while maintaining strong cash operating margins. And we were very excited to have closed the previously announced agreement with Orion Resource Partners for the Platreef and Kudz Ze Kayah streams, completing an upfront payment of $450 million in February of this year. After advancing this payment, Wheaton remains very liquid with $306 million in cash, a $2 billion undrawn revolving credit facility and ongoing strong operating cash flows, allowing the company to fund all outstanding commitments, as well as provide the flexibility to acquire additional accretive mineral stream interests.
Building on the momentum from a record 8 acquisitions in 2023, our corporate development team remains actively engaged in evaluating new opportunities, and we continue to see a healthy appetite for streaming as a source of capital for the mining industry. In addition, during the quarter, we were proud to have been recognized among Corporate Knights 100 most sustainable corporations in the world in 2024. As the architects of sustainable streaming, this accomplishment is reflective of our commitment to operating responsibly in all facets of our business. And with that, I would like to now turn the call over to Wes Carson, our Vice President of Operations, who will provide more details on our operating results. Wes?
Wes Carson: Thanks, Randy. Good morning. Overall production in the first quarter came in higher-than-expected driven by strong performances at Salobo, Constancia and Peñasquito. In the first quarter of 2024, Salobo produced 61,600 ounces of attributable gold, an increase of approximately 41% relative to the first quarter of 2023, driven primarily by higher throughput. Salobo's strong perform -- production in Q1 is attributable primarily to the continued ramp up of Salobo III expansion and sustained overall improvements at both Salobo I and II. In the first quarter of 2024, Constancia produced 640,000 ounces of attributable silver, and 13,900 ounces of attributable gold, an increase of approximately 16% and 101%, respectively, relative to the first quarter of 2023.
Strong quarterly silver and gold production continued in Q1 as a result of the significantly higher gold grades from the mining of the Pampacancha deposit and associated higher recoveries. In the first quarter of 2024, Peñasquito produced 2.6 million ounces of attributed silver an increase of approximately 27% relative to the first quarter of 2023, primarily due to higher grades. Production in the first quarter focused on mining in the Chile Colorado pit which contains higher silver, lead and zinc metal grades than the main Peñasquito [ph] pit. On April 30, 2024, Ivanhoe reported the construction activities for the Platreef Phase 1 concentrator are on schedule at almost 90% complete and on track for cold commissioning in the third quarter of 2024.
An updated independent feasibility study on an optimized development plan for the acceleration of Phase 2 is planned to be completed and published in the fourth quarter of 2024. As a result of the planned acceleration of Phase 2, Ivanhoe reports that the first feed and ramp-up of production for Phase 1 will be deferred until mid-2025. In addition, a preliminary economic assessment on a Phase 3 expansion is expected to be completed at the same time, increasing Platreef's processing capacity up to approximately 10 million tons per annum. The result of which is expected to rank Platreef as one of the world’s largest PGM, nickel, copper and gold producers. In 2024, GEO production is forecast to be consistent with levels achieved in 2023. As expected stronger attributable production from Peñasquito and Voisey's Bay is forecast to be offset by lower production from Salobo.
The suspension of operations at Minto and the temporary halting of production at Aljustrel. Attributable production is forecast increase at Peñasquito as a result of uninterrupted operations and at Voisey's Bay due to the ongoing transition from the Ovoid pit to the underground mines. Attributable production is forecast to decrease slightly at Salobo due to lower grades as per the mine plan, which are expected to be partially offset by increasing throughput as the Salobo III expansion continues toward completion. Wheaton's estimated attributable production in 2024 continues to be forecast at 325,000 and 370,000 ounces of gold, 18.5 million to 20.5 million ounces of silver and 12,000 to 15,000 GEOs of other metals, resulting in production of approximately 550,000 to 620,000 GEOs unchanged from previous guidance.
Production is forecast increase in industry leading rate of approximately 40% to over 800,000 GEOs by 2028, primarily due to the growth from operating assets including Salobo, Antamina, Peñasquito, Voisey's Bay and Marmato. The development projects which are in construction and are permitted including Blackwater, Platreef, Goose, Mineral Park, Fenix, Curipamba and Santo Domingo and pre-development projects, including marathon and copper world for which production is anticipated towards the latter end of the 5-year forecast period. From 2023 -- for 2029 to 2033, attributable production is forecast average over 850,000 ounces in the 5-year period, also unchanged from previous guidance. That concludes the operations overview and with that, I'll turn the call over to Carrie.
Gary Brown: Thank you, Wes. As described by Wes, production in the first quarter amounted to 160,000 GEOs, a 19% increase relative to the comparable period of the prior year. Most notably, gold production increased 28%, primarily due to Salobo and Constancia. Sales volumes amounted to 143,000 GEOs, a 31% increase relative to the comparable period of the prior year, primarily due to higher production levels, coupled with relative changes in ounces produced but not yet delivered, or PBND. This increased sales volume coupled with a 6% increase in commodity prices resulted in revenue rising by 38% to $297 million of this revenue 64% was attributable to gold 32% to silver, and 2% to each of palladium and cobalt. As at March 31, 2024, approximately 120,000 GEOs were in PBND, representing approximately 2.3 months of payable production, which is consistent with our expected range of 2 to 3 months.
G&A expenses amounted to $10.5 million for the first quarter, and the company continues to anticipate the G&A will total $41 million to $45 million for the year with these figures excluding share-based compensation as well as donations and community investments. Adjusted net earnings amounted to $164 million, with a $59 million increase from the prior year due primarily to the higher gross margin coupled with lower stock-based compensation. Despite the persistent inflationary environment, and thanks to our [indiscernible] predictable cost structure, we can continue to deliver robust cash operating margins in the first quarter, resulting in cash flow from operations of over $290 million, an increase of 62% from the prior year, driven primarily by higher sales volumes.
We have declared a quarterly dividend of $0.155 per share, a 3% increase from the prior year. During the quarter, Wheaton made total upfront cash payments of $462 million, $450 million of which was relative to the Platreef and Kudz Ze Kayah streams with the balance relating to the DeLamar and Mt Todd royalties. When coupled with cash generated from operating activities, our overall net cash outflows amounted to $240 million in the first quarter of 2024, resulting in cash and cash equivalents as at March 31 of $306 million. Additionally, subsequent to the quarter the company disposed of its investment in Hecla Mining for gross proceeds of $177 million. This cash balance combined with the fully undrawn $2 billion revolving credit facility, and the strength of our forecasted operating cash flows, positions the company exceptionally well to satisfy its funding commitments and provides us with the financial flexibility to acquire additional accretive mineral stream interests.
Lastly, I did want to provide an update on global minimum tax. As previously disclosed, the company does expect its income generated outside of Canada to be subject to a 15% global minimum tax or GMT. While we continue to anticipate that the tax will be retroactive to January 1, 2024, Canada has not yet enacted the legislation and as such, the company has recorded no current tax expense associated with GMT in the quarter. For reference in the first quarter, the wholly owned foreign subsidiaries, which reside in jurisdictions where the GMT is expected to apply had net earnings of $165 million with 15% of such amount amounting to $25 million. We will recognize the tax expense associated with the GMT in our consolidated financial statements in the appropriate period relative to when the legislation is enacted.
As such, assuming that the legislation is enacted and its current proposed form, we will record multiple quarters worth of GMT in the quarter that such enactment occurs. That concludes the financial summary and with that I will turn the call back over to Randy.
Randy Smallwood: Thank you, Gary. In summary, Q1 was a very strong start to the year for Wheaton, distinguished by several key highlights. We achieved robust 3-month revenue earnings and cash flow and declared a $0.155 quarterly dividend aligned with our new progressive dividend policy. Our pipeline of development projects was further derisked by construction advancements and the receipt of various key permits by our partners supporting our impressive organic growth profile of over 40% by 2028. We continue to maintain low and predictable costs which, when coupled with our leverage to increase in commodity prices, result in some of the highest margins in the entire precious metal space. Our balance sheet also remains strong, providing ample capacity to add accretive high-quality streams into our portfolio.
And lastly, we take pride in 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 would like to open up the call for questions. Operator?.
Operator: [Operator Instructions] Your first question is from Ralph Profiti from Eight Capital. Please ask your question.
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