WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [2] Management’s Discussion and Analysis of Results of Operations and Financial Condition for the Year Ended
WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [2]
Management’s Discussion and Analysis of Results of Operations and Financial Condition for the Year Ended
December 31, 2019
This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with Wheaton Precious Metals
Corp.’s (“Wheaton” or the “Company”) consolidated financial statements for the year ended December 31, 2019 and
related notes thereto which have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Reference to Wheaton or the Company
includes the Company’s wholly-owned subsidiaries. This MD&A contains “forward-looking” statements that are subject
to risk factors set out in the cautionary note contained on page 57 of this MD&A as well as throughout this document.
All figures are presented in United States dollars unless otherwise noted. This MD&A has been prepared as of March
11, 2020.
Table of Contents
Operational Overview ...................................................................................................................................................... 4
Highlights ......................................................................................................................................................................... 5
Outlook ............................................................................................................................................................................ 6
Mineral Stream Interests .................................................................................................................................................. 7
Mineral Royalty Interest ................................................................................................................................................... 9
Long-Term Equity Investments ...................................................................................................................................... 10
Investment in Associate ................................................................................................................................................. 11
Convertible Notes Receivable ........................................................................................................................................ 12
Summarized Financial Results ...................................................................................................................................... 14
Summary of Ounces Produced ...................................................................................................................................... 15
Summary of Ounces Sold .............................................................................................................................................. 16
Quarterly Financial Review ............................................................................................................................................ 17
Results of Operations and Operational Review ............................................................................................................. 18
Liquidity and Capital Resources..................................................................................................................................... 28
Contractual Obligations and Contingencies ................................................................................................................... 31
Share Capital ................................................................................................................................................................. 34
Financial Instruments ..................................................................................................................................................... 35
Risks and Uncertainties ................................................................................................................................................. 35
Critical Accounting Estimates ........................................................................................................................................ 42
New Accounting Standards Effective in 2019 ................................................................................................................ 44
Non-IFRS Measures ...................................................................................................................................................... 45
Subsequent Events ........................................................................................................................................................ 49
Controls and Procedures ............................................................................................................................................... 49
Attributable Reserves and Resources ............................................................................................................................ 51
Cautionary Note Regarding Forward-Looking Statements ............................................................................................. 57
WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [3]
Overview
Wheaton Precious Metals Corp. is a precious metal streaming company which generates its revenue primarily from the
sale of precious metals (gold, silver and palladium). The Company is listed on the New York Stock Exchange (“NYSE”)
and the Toronto Stock Exchange (“TSX”) and trades under the symbol WPM.
The Company has entered into 23 long-term purchase agreements (three of which are early deposit agreements), with
17 different mining companies, for the purchase of precious metals and cobalt (“precious metal purchase agreements”
or "PMPA") relating to 20 mining assets which are currently operating, 9 which are at various stages of development
and 1 which has been placed in care and maintenance, located in 11 countries. Pursuant to the PMPAs, Wheaton
acquires metal production from the counterparties for an initial upfront payment plus an additional cash payment for
each ounce or pound delivered which is fixed by contract, generally at or below the prevailing market price.
Attributable metal production as referred to in this MD&A and financial statements is the metal production to which
Wheaton is entitled pursuant to the various PMPAs. During the year ended December 31, 2019, the per ounce price
paid by the Company for the metals acquired under the agreements averaged $5.02 for silver, $421 for gold and $273
for palladium. The primary drivers of the Company’s financial results are the volume of metal production at the various
mines to which the PMPAs relate and the price realized by Wheaton upon the sale of the metals received.
WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [4]
Operational Overview
Q4 2019 Q4 2018 Change 2019 2018 Change
Ounces produced
Gold 107,225 107,160 0.1 % 406,675 383,974 5.9 %
Silver 5,962 5,499 8.4 % 22,562 24,474 (7.8)%
Palladium 6,057 5,869 3.2 % 21,993 14,686 49.8 %
Gold equivalent 2 186,892 180,936 3.3 % 707,195 700,446 1.0 %
Silver equivalent 2 15,185 14,701 3.3 % 57,460 56,911 1.0 %
Ounces sold
Gold 89,223 102,813 (13.2)% 389,086 349,168 11.4 %
Silver 4,684 4,400 6.5 % 17,703 21,733 (18.5)%
Palladium 5,312 5,049 5.2 % 20,681 8,717 137.2 %
Gold equivalent 2 152,389 162,205 (6.1)% 628,447 625,701 0.4 %
Silver equivalent 2 12,382 13,179 (6.1)% 51,061 50,838 0.4 %
Change in PBND 3
Gold 13,291 (513) (13,804) (847) 15,464 16,311
Silver 408 169 (239) 1,362 (644) (2,006)
Palladium 709 611 (98) (411) 5,282 5,693
Per ounce metrics
Sales price
Gold $ 1,483 $ 1,229 20.7 % $ 1,391 $ 1,264 10.0 %
Silver $ 17.36 $ 14.66 18.4 % $ 16.29 $ 15.81 3.0 %
Palladium $ 1,804 $ 1,137 58.7 % $ 1,542 $ 1,060 45.5 %
Cash costs 4
Gold 4 $ 426 $ 409 4.2 % $ 421 $ 409 2.9 %
Silver 4 $ 5.13 $ 4.66 10.1 % $ 5.02 $ 4.67 7.5 %
Palladium 4 $ 321 $ 205 56.6 % $ 273 $ 190 43.7 %
Cash operating margin 5
Gold 5 $ 1,057 $ 820 28.9 % $ 970 $ 855 13.5 %
Silver 5 $ 12.23 $ 10.00 22.3 % $ 11.27 $ 11.14 1.2 %
Palladium 5 $ 1,483 $ 932 59.1 % $ 1,269 $ 870 45.8 %
Total revenue $ 223,222 $ 196,591 13.5 % $ 861,332 $ 794,012 8.5 %
Gold revenue $ 132,342 $ 126,343 4.7 % $ 541,045 $ 441,193 22.6 %
Silver revenue $ 81,296 $ 64,510 26.0 % $ 288,401 $ 343,579 (16.1)%
Palladium revenue $ 9,584 $ 5,738 67.0 % $ 31,886 $ 9,240 245.1 %
Net earnings $ 77,524 $ 6,828 1,035 % $ 86,138 $ 427,115 (79.8)%
Per share $ 0.17 $ 0.02 750.0 % $ 0.19 $ 0.96 (80.2)%
Adjusted net earnings 6 $ 77,953 $ 36,745 112.1 % $ 251,993 $ 213,782 17.9 %
Per share 6 $ 0.17 $ 0.08 110.5 % $ 0.56 $ 0.48 17.2 %
Operating cash flows $ 131,867 $ 108,461 21.6 % $ 501,620 $ 477,413 5.1 %
Per share 7 $ 0.29 $ 0.24 20.8 % $ 1.12 $ 1.08 3.7 %
Dividends paid ⁸ $ 40,252 $ 39,959 0.7 % $ 160,656 $ 159,619 0.6 %
Per share $ 0.09 $ 0.09 0.0 % $ 0.36 $ 0.36 0.0 %
1) All amounts in thousands except gold and palladium ounces produced and sold, per ounce amounts and per share amounts.
2) Please refer to the tables on the bottom of pages 18, 19, 21 and 22 for further information on the methodology of converting production and sales volumes to gold-equivalent
ounces ("GEOs") and silver-equivalent ounces ("SEOs").
3) Represents the increase (decrease) in payable ounces produced but not delivered (“PBND”) relative to the various mines that the Company derives precious metal from.
Payable ounces PBND will be recognized in future sales as they are delivered to the Company under the terms of their contracts. Payable ounces PBND to Wheaton is
expected to average approximately two to three months of annualized production for both gold and palladium and two months for silver but may vary from quarter to quarter
due to a number of factors, including mine ramp-up and the timing of shipments.1
4) Refer to discussion on non-IFRS measure (iii) on page 47 of this MD&A.
5) Refer to discussion on non-IFRS measure (iv) on page 48 of this MD&A.
6) Refer to discussion on non-IFRS measure (i) on page 46 of this MD&A.
7) Refer to discussion on non-IFRS measure (ii) on page 47 of this MD&A.
8) Dividends declared in the referenced calendar quarter, relative to the financial results of the prior quarter.
1 Statements made in this section contain forward-looking information with respect to forecast ounces produced but not yet delivered
and readers are cautioned that actual outcomes may vary. Please see “Cautionary Note Regarding Forward-Looking Statements”
for material risks, assumptions and important disclosure associated with this information.
WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [5]
Highlights
Operations
• Relative to the comparable three-month period of the prior year:
o Wheaton generated $132 million in operating cash flow in the fourth quarter of 2019, representing a 22%
increase relative to the comparable quarter of the prior year and leading to a reduction in net debt of $91
million.
o the increase in attributable silver production was primarily due to higher grades at Peñasquito.
o the increase in attributable palladium production was a result of higher throughput at Stillwater.
o the increase in adjusted net earnings was primarily due to higher margins resulting from increased
realized prices for gold, silver and palladium sales of 21%, 19% and 59%, respectively.
• Relative to the comparable twelve-month period of the prior year:
o Wheaton generated $502 million in operating cash flow during 2019, representing a 5% increase relative
to the comparable period of the prior year and leading to a reduction in net debt of $418 million.
o the increase in attributable gold production, which represented a record for the Company, was primarily
due to the commencement of the San Dimas gold stream effective May 10, 2018, and the Stillwater
precious metals stream effective July 1, 2018, as well as higher production at Sudbury, partially offset by
decreased production at Minto which was placed into care and maintenance from October 2018 to
October 2019.
o the increase in attributable palladium production was a result of the acquisition of the Stillwater palladium
stream effective July 1, 2018.
o the decrease in attributable silver production was primarily due to the termination of the San Dimas silver
purchase agreement effective May 10, 2018.
o the decrease in net earnings during the year was a result of a non-cash impairment charge in the amount
of $166 million relative to the Company’s Voisey’s Bay PMPA, while during the prior year the Company
terminated the previously owned San Dimas silver purchase agreement, resulting in a gain on disposal of
$246 million.
o the increase in adjusted net earnings was primarily due to higher margins resulting from increased
realized prices for gold, silver and palladium sales of 10%, 3% and 45%, respectively.
• During the fourth quarter ended December 31, 2019, the Company declared dividends in the amount of $40
million. On March 11, 2020, the Board of Directors declared a dividend in the amount of $0.10 per common
share representing an increase of 11% relative to the comparable period in 2019.
WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [6]
Outlook1
Wheaton’s estimated attributable production in 2020 is forecast to be between 685,000 and 725,000 gold equivalent
ounces2 comprised of 390,000 to 410,000 gold ounces, 22.0 to 23.5 million silver ounces, and 23,000 to 24,500
palladium ounces. For the five-year period ending in 2024, the Company estimates that average annual gold equivalent
production will amount to 750,000 ounces 2. As a reminder, Wheaton does not include any production from Barrick’s
Pascua-Lama project or Hudbay’s Rosemont project in its estimated average five-year production guidance.
From a liquidity perspective, the $104 million of cash and cash equivalents as at December 31, 2019 combined with
the liquidity provided by the available credit under the $2 billion revolving term loan (“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 mineral stream interests.
1 Statements made in this section contain forward-looking information with respect to forecast production, funding outstanding
commitments and continuing to acquire accretive mineral stream interests and readers are cautioned that actual outcomes may
vary. Please see “Cautionary Note Regarding Forward-Looking Statements” for material risks, assumptions and important
disclosure associated with this information.
2 Commodity price assumptions for the forecasts of gold equivalent production for 2020 and the five-year average to 2024, are
$1,500 / ounce gold, $18 / ounce silver, $2,000 / ounce palladium, and $16 / pound of cobalt.
WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [7]
Mineral Stream Interests1
The following table summarizes the mineral stream interests currently owned by the Company:
Mineral Stream
Interests
Mine
Owner ¹ Location¹
Attributable
Production
Per Ounce
Production
Payment 2,3
Total Upfront
Payment ³
Cash Flow
Generated to
Date ³
Ounces
Received to
Date ³
Q4-2019
PBND 3, 4 Term ¹
Date of
Original
Contract
Gold
Salobo Vale BRA 75% $404 $ 3,059,360 $ 1,011,604 1,155,018 64,144 LOM 28-Feb-13
Sudbury ⁵ Vale CAN 70% $400 623,572 171,080 196,487 18,761 20 years 28-Feb-13
Constancia Hudbay PER 50% ⁶ $400 135,000 58,078 66,335 607 LOM 8-Aug-12
San Dimas FM MEX variable ⁷ $600 220,000 49,300 66,629 3,403 LOM 10-May-18
Stillwater ⁸ Sibanye USA 100% variable 237,880 19,770 17,944 5,080 LOM 16-Jul-18
Other 439,442 453,082 469,605 6,631
Minto PERE CAN 100% ⁹ variable LOM 20-Nov-08
Rosemont Hudbay USA 100% $450 LOM 10-Feb-10
777 ¹⁰ Hudbay CAN 50% $416 LOM 8-Aug-12
$ 4,715,254 $ 1,762,914 1,972,018 98,626
Silver
Peñasquito Newmont MEX 25% $4.91 $ 485,000 $ 880,276 52,358 1,734 LOM 24-Jul-07
Antamina Glencore PER 33.75% ¹¹ variable 900,000 322,431 24,631 1,195 LOM 3-Nov-15
Constancia Hudbay PER 100% $5.90 294,900 105,461 10,093 88 LOM 8-Aug-12
Other 1,103,708 1,216,371 85,972 1,529
Los Filos Equinox¹² MEX 100% $4.39 25 years 15-Oct-04
Zinkgruvan Lundin SWE 100% $4.39 LOM 8-Dec-04
Yauliyacu Glencore PER 100% ¹³ $8.89 LOM 23-Mar-06
Stratoni Eldorado GRC 100% $9.31 LOM 23-Apr-07
Neves-Corvo Lundin PRT 100% $4.30 50 years 5-Jun-07
Aljustrel Almina PRT 100% ¹⁴ variable 50 years 5-Jun-07
Keno Hill Alexco CAN 25% variable LOM 2-Oct-08
Minto PERE CAN 100% $4.22 LOM 20-Nov-08
Pascua-Lama Barrick CHL/ARG 25% $3.90 LOM 8-Sep-09
Rosemont Hudbay USA 100% $3.90 LOM 10-Feb-10
777 ¹⁰ Hudbay CAN 100% $6.14 LOM 8-Aug-12
Navidad PAAS ARG 12.5% $4.00 LOM n/a ¹⁵
$ 2,783,608 $ 2,524,539 173,054 4,546
Palladium
Stillwater ⁸ Sibanye USA 4.5% ¹⁶ variable $ 262,120 $ 33,815 29,398 4,872 LOM 16-Jul-18
Cobalt
Voisey's Bay Vale CAN 42.4% ¹⁷ variable $ 390,000 $ - - - LOM 11-Jun-18
Total $ 8,150,982 $ 4,321,268
1) Abbreviations as follows: FM = First Majestic Silver Corp; PERE = Pembridge Resources plc; PAAS = Pan American Silver Corp; BRA = Brazil; CAN = Canada; CHL =
Chile, PER = Peru; MEX = Mexico; USA = United States; SWE = Sweden; GRC = Greece; PRT = Portugal; ARG = Argentina; and LOM = Life of Mine.
2) The per ounce production payment is either a fixed price per ounce purchased, subject to an annual inflationary adjustment with the exception of Sudbury and Loma de La
Plata, or a percentage of the spot price of the applicable metal for each ounce of the applicable metal delivered. Please refer to the section entitled “Contractual Obligations
and Contingencies – Mineral Stream Interests” on page 31 of this MD&A for more information.
3) All figures in thousands except gold and palladium ounces received to date, gold and palladium ounces produced but not yet delivered (“PBND”) and per ounce amounts.
The total upfront consideration excludes closing costs and capitalized interest, where applicable. Please refer to the section entitled “Other Contractual Obligations and
Contingencies” on page 32 of this MD&A for details of when the remaining upfront consideration to be paid becomes due.
4) Payable gold, silver and palladium ounces PBND are based on management estimates. These figures may be updated in future periods as additional information is received.
5) Comprised of the operating Coleman, Copper Cliff, Garson, Creighton and Totten gold interests as well as the non-operating Stobie and Victor gold interests. As of
December 31, 2019, the Company has received approximately $171 million of operating cash flows relative to the Sudbury PMPA. Should the market value of gold delivered
to Wheaton through the 20 year term of the contract, net of the per ounce cash payment, be lower than the initial $670 million refundable deposit, the Company will be
entitled to a refund of the difference at the conclusion of the term.
6) Gold recoveries will be set at 55% for the Constancia deposit and 70% for the Pampacancha deposit until 265,000 ounces of gold have been delivered to the Company.
Should Hudbay fail to achieve a minimum level of throughput at the Pampacancha deposit during 2018, 2019 and 2020, Wheaton will be entitled to an additional 8,020
ounces of gold in each of 2019, 2020 and 2021, of which 8,020 ounces of gold was received during 2019.
7) Under the terms of the San Dimas PMPA, the Company is entitled to an amount equal to 25% of the payable gold production plus an additional amount of gold equal to 25%
of the payable silver production converted to gold at a fixed gold to silver exchange ratio of 70:1 from the San Dimas mine. If the average gold to silver price ratio decreases
to less than 50:1 or increases to more than 90:1 for a period of 6 months or more, then the "70" shall be revised to "50" or "90", as the case may be, until such time as the
average gold to silver price ratio is between 50:1 to 90:1 for a period of 6 months or more in which event the "70" shall be reinstated.
8) Comprised of the Stillwater and East Boulder gold and palladium interests.
9) The Company is entitled to acquire 100% of the first 30,000 ounces of gold produced per annum and 50% thereafter.
10) As of December 31, 2019, the Company has received approximately $292 million of operating cash flows relative to the 777 PMPA. Should the market value of gold and
silver delivered to Wheaton through the initial 40 year term of the contract, net of the per ounce cash payment, be lower than the initial $455 million upfront consideration, the
Company will be entitled to a refund of the difference at the conclusion of the 40 year term.
11) Once Wheaton has received 140 million ounces of silver under the Antamina PMPA, the Company’s attributable silver production to be purchased will be reduced to 22.5%.
12) On March 10, 2020, Leagold Mining Corporation (“Leagold”) and Equinox Gold Corp. (“Equinox”) completed their previously announced plan of arrangement pursuant to
which Equinox has acquired all of the issued and outstanding shares of Leagold.
13) Glencore will deliver a per annum amount to Wheaton equal to the first 1.5 million ounces of payable silver produced at Yauliyacu and 50% of any excess.
14) Wheaton only has the rights to silver contained in concentrate containing less than 15% copper at the Aljustrel mine.
15) Wheaton and PAAS have not yet finalized the definitive terms of the agreement.
16) Once the Company has received 375,000 ounces of palladium under the Stillwater agreement, the Company’s attributable palladium production to be purchased will be
reduced to 2.25%, and once the Company has received 550,000 ounces of palladium under the agreement, the Company’s attributable palladium production to be
purchased will be reduced to 1.00%.
17) Once the Company has received 31 million pounds of cobalt under the Voisey’s Bay agreement, the Company’s attributable cobalt production to be purchased will be
reduced to 21.2%.
1 Statements made in this section contain forward-looking information including the timing and amount of estimated future production
and readers are cautioned that actual outcomes may vary. Please see “Cautionary Note Regarding Forward-Looking Statements” for
material risks, assumptions and important disclosure associated with this information.
WHEATON PRECIOUS METALS 2019 ANNUAL REPORT [8]
Updates Relative to the Mineral Stream Interests
Salobo – Mill Throughput Expansion
The Salobo mine currently has a mill throughput capacity of 24 million tonnes per annum (“Mtpa”). As per Vale S.A.’s
(“Vale”) third quarter 2018 report, in October 2018 Vale’s Board of Directors approved the investment in the Salobo III
mine expansion (the “Salobo Expansion”). The Salobo Expansion is proposed to include a third concentrator line and
will use Salobo’s existing infrastructure. Vale anticipates that the Salobo Expansion, which is scheduled to start up in
the first half of 2022, will result in an increase of throughput capacity from 24 Mtpa to 36 Mtpa once fully ramped up.
Minto – Ownership Change
The Minto mine, which was placed into care and maintenance as of October 2018, was sold by Capstone Mining Corp.
to Pembridge Resources plc (“Pembridge”) effective June 3, 2019. According to Pembridge’s news release dated
October 16, 2019, milling operations at Minto recommenced on October 10, 2019. Pembridge states that the mill will
operate on a 2-weeks-on, 2-weeks-off schedule until sufficient development has been achieved underground to enable
a higher monthly processing capacity.
In conjunction with the resumption of mining activity at Minto, the Company has amended the Minto PMPA such that the
cash payment per ounce of gold delivered will be 75% of the spot price of gold for each ounce of gold delivered under
the Minto PMPA. This amended pricing will end on the earlier of (i) 14 months after the first delivery is due; or (ii) once
11,000 ounces of gold have been delivered to the Company.
Peñasquito – Illegal Blockade
On September 15, 2019, Newmont Mining Corporation (“Newmont”) announced that the dialogue sponsored by the
government of Mexico to resolve issues with a trucking contractor and the San Juan de Cedros community (one of
Peñasquito’s 25 neighboring communities) had been suspended and that an illegal blockade had resumed. On
October 22, 2019, Newmont announced that they were starting up production at Peñasquito following the lifting of the
illegal blockade on October 8.
On December 13, 2019, Newmont announced that the Peñasquito mine and the San Juan de Cedros community had
mutually agreed to an infrastructure solution securing sustainable water availability for the community’s domestic and
agricultural uses. Newmont states that the 30-year water agreement, which was developed and signed under the
auspices of the Dialogue Table sponsored by Mexico’s Federal Department of the Interior and representatives of the
state government of Zacatecas, represents a significant milestone and an important step in the ongoing negotiations
between the parties.
Constancia – Pampacancha Update
As per Hudbay Minerals Inc.’s (“Hudbay”) news release dated February 18, 2020, Hudbay secured the surface rights
for the Pampacancha deposit and expects to begin mining ore from the satellite deposit in late 2020.
Rosemont – Updates
As per Hudbay’s MD&A for the year ended December 31, 2019, in July 2019, the U.S. District Court for the District of
Arizona (“Court”) issued a ruling in two of the lawsuits challenging the U.S. Forest Service’s issuance of the Final
Record of Decision (“FROD”) for the Rosemont project in Arizona. Hudbay notes that the Court ruled to vacate and
remand the FROD thereby delaying the expected start of construction of Rosemont. Hudbay further reported that in
December of 2019, Hudbay and the U.S. Department of Justice each filed a notice of appeal in respect of the Court’s
decision to the U.S. Ninth Circuit Court of Appeals. Hudbay reports that on February 10, 2020, the Court issued a
ruling in the third lawsuit challenging the U.S. Forest Service's issuance of the FROD for the Rosemont mine. In this
lawsuit, the plaintiffs challenged the Biological Opinion that was issued by the U.S. Fish and Wildlife Service and relied
on by the U.S. Forest Service as part of the permitting process. The Court ruled to remand certain aspects of the U.S.
Fish and Wildlife Service's analysis and findings related to the Biological Opinion back to the agencies for further
review. Hudbay has indicated that it believes remanding these issues is unnecessary as the federal agencies’
research and studies concluded that the potential impacts to endangered species would comply with the regulations.
Hudbay has also indicated that it is reviewing the decision and will continue following the direction of the government
agencies through the permitting process.
As per Hudbay’s annual financial statements for the year ended December 31, 2019, in April 2019, Hudbay entered
into an agreement with United Copper & Moly LLC (“UCM”) to purchase UCM’s remaining 7.95% interest in the
Rosemont project and to terminate all of UCM’s remaining earn-in and offtake rights. This acquisition provides Hudbay
with 100% ownership of the Rosemont project.