Wheaton Precious Metals Announces Second Quarter Results FOR 2017 and a 43% Increase IN Declared Dividend
FOR IMMEDIATE RELEASE TSX: WPM
August 10, 2017 NYSE: WPM
WHEATON PRECIOUS METALS ANNOUNCES SECOND QUARTER RESULTS
FOR 2017 AND A 43% INCREASE IN DECLARED DIVIDEND
Vancouver, British Columbia – Wheaton Precious Metals ™ Corp. (“ Wheaton Precious
Metals” or the “Company”) (TSX:WPM) (NYSE: WPM) is pleased to announce its results for
the second quarter ended June 30, 2017. All figures are presented in United States dollars
unless otherwise noted.
In the second quarter of 2017, Wheaton Precious Metals increased the percentage of cash
flow used for the dividend distribution calculation from 20% to 30% , resulting in an increase
to the quarterly dividend of over 40%.
SECOND QUARTER HIGHLIGHTS
Attributable production in Q2 2017 of 7.2 million ounces of silver and 78,100 ounces of
gold, compared with 7.6 million ounces of silver and 71,200 ounces of gold in Q2 2016,
with silver production having decreased 5% and gold production having increased 10%.
On a silver equivalent basis¹ and gold equivalent basis¹ attributable production in Q2
2017 was 12.9 million silver equivalent ounces ("SEOs") or 176,600 gold equivalent
ounces ("GEOs"), compared with 12.9 million SEOs or 1 72,600 GEOs in Q2 2016, with
SEO production being virtually unchanged and GEO production having increased 2%.1
Sales volume in Q2 2017 of 6.4 million ounces of silver and 72,000 ounces of gold,
compared with 7.1 million ounces of silver and 70,800 ounces o f gold in Q2 2016, with
silver sales volume having decreased 11% and gold sales volume having increased
2%.
On a silver equivalent basis¹ and gold equivalent basis¹, sales volume in Q2 2017 was
11.6 million SEOs or 159,200 GEOs, compared with 12.5 million SEOs or 165,900
GEOs in Q2 2016, a decrease of 7% and 4%, respectively.
As at June 30, 2017, payable ounces attributable to the Company produced but not yet
delivered⁴ amounted to 4.2 million payable silver ounces and 52,900 payable gold
ounces, representi ng an increase of 0.2 million payable silver ounces and 2,000
payable gold ounces during the three month period ended June 30, 2017.
Revenues of $200 million in Q2 2017 compared with $212 million in Q2 2016,
representing a decrease of 6%.
Average realized sale price per ounce sold in Q2 2017 of $17.09 per ounce of silver and
$1,263 per ounce of gold with the sale price of silver having decreased 1% while the
sale price of gold was virtually unchanged compared to Q2 2016.
Net earnings of $68 million ($0.15 per share) in Q2 2017 compared with $60 million
($0.14 per share) in Q2 2016, representing an increase of 12%.
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Operating cash flows of $125 million ($0.28 per share²) in Q2 2017 compared with $134
million ($0.31 per share²) in Q2 2016, representing a decrease of 7%.2
Cash operating margin² in Q2 2017 of $12.58 per silver ounce sold and $870 per gold
ounce sold, representing a reduction of 1% per silver ounce sold while the cash
operating margin² per ounce of gold sold was virtually unchanged as compared with Q2
2016.
Average cash costs² in Q2 2017 were $4.51 and $393 per ounce of silver and gold,
respectively.
Declared quarterly dividend of $0. 10 per common share, representing an increase of
43% relative to the previous quarterly dividend.
EVENTS SUBSEQUENT TO THE QUARTER
On August 10, 2017 , the Company announced that it has signed a non -binding term
sheet with Desert Star Resources Ltd. (“Desert Star”) to enter into an Early Deposit
Precious Metals Purchase Agreement for the Kutcho project located in British
Columbia.
“Wheaton Precious Metals continues to generate strong operating margins from its portfolio
of low-cost assets, resulting in close to $250 million in cash flow in the first half of 2017 ,”
said Randy Smallwood, President and Chief Executive Officer of Wheaton Precious Metals.
“We are confident in our ability to continue to grow the Company by adding new high-quality
streams to our portfolio, and we will remain disciplined and only do tran sactions that are
accretive to our shareholders. As a result of our sector-leading cash flow as well as ample
access to capital to finance acquisitions through our revolving credit facility, we have taken
the step today to increase the amount of capital we return to our shareholders with a
significant increase to our dividend.”
Financial Review
Revenues
Revenue was $200 million in the second quarter of 2017, on sales volume of 6.4 million
ounces of silver and 72,000 ounces of gold. This represents a 6% decrease from the
$212 million of revenue generated in the second quarter of 2016 due primarily to an
11% decrease in the number of silver ounces sold, partially offset by a 2% increase in
the number of gold ounces sold.
Costs and Expenses
Average cash costs² in the second quarter of 2017 were $4.51 per silver ounce sold
and $393 per gold ounce sold, as compared with $4.46 per silver ounce and $401 per
gold ounce during the comparable period of 2016. This resulted in a cash operating
margin² of $12.58 per silver ounce sold and $870 per gold ounce sold, a decrease of
1% per silver ounce sold while the cash operating margin² per ounce of gold sold was
virtually unchanged as compared with Q2 2016. The decrease in the cash operating
margin was pr imarily due to a 1% decrease in the average realized silver price in Q2
2017 compared with Q2 2016.
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Earnings and Operating Cash Flows
Net earnings and cash flow from operations in the second quarter of 2017 were $68
million ($0.15 per share) and $125 million ($0.28 per share²), compared with $60 million
($0.14 per share) and $134 million ($0.31 per share²) for the same period in 2016, an
increase of 12% and a decrease of 7%, respectively.
Balance Sheet
At June 30, 2017, the Company had approximately $77 million of cash on hand and
$953 million outstanding under the Company's $2 billion revolving term loan (the
"Revolving Facility").
Second Quarter Asset Highlights
During the second quarter of 2017, attributable production was 7.2 million ounces of silver
and 78,100 ounces of gold, respectively, representing a decrease of 5% and an increase of
10%, as compared with the second quarter of 2016.
Operational highlights for the quarter ended June 30, 2017, based upon counterparties’
reporting, are as follows:
Salobo
In the second quarter of 2017, Salobo produced 57,500 ounces of attributable gold, an
increase of approximately 61% relative to the second quarter of 2016. This growth was
primarily due to the acquisition of an additional 25% of attributable gold from the Salobo
mine in the third quarter of 2016. According to Vale S.A.’s (“Vale”) second quarter of
2017 production report, production was positively impacted ma inly due to higher feed
grades and stronger plant performance in the second quarter.
Peñasquito
In the second quarter of 2017, Peñasquito produced 1.5 million ounces of attributable
silver, an increase of approximately 71% relative to the second quarter of 2016.
According to Goldcorp Inc.’s (“Goldcorp”) second quarter of 2017 MD&A, higher
production at Peñasquito was primarily due to higher grade ore as a result of mine
sequencing in Phases 5 and 6, and higher mill throughput as the second quarter of
2016 included a prolonged period of planned and unplanned maintenance.
According to Goldcorp, the Pyrite Leach Project (“PLP”) achieved construction progress
of 14% and engineering progress of 94% by the end of the second quarter of 2017.
Major procurement activities are nearing completion, material and equipment is arriving
on site and major works contractors have mobilized to site. Earthwork activities are now
complete, concrete works are underway, and mechanical works installation has
commenced and is ramping up. Construction of the PLP is expected to be completed by
the end of 2018. The Carbon Pre -flotation Project ("CPP") is a lso being constructed ,
which will allow Peñasquito to process ore that was previously considered uneconomic,
including significant amounts already in stockpiles. CPP earthworks are substantially
complete and the concrete works are underway. The mechanical works contractor is
mobilizing and will ramp up in the third quarter of 2017.
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Antamina
In the second quarter of 2017, Antamina produced 1.9 million ounces of attributable
silver, an increase of approximately 11% relative to the second quarter of 2016 . The
increase was primarily the result of higher grade ore being processed in the quarter,
partially offset by lower silver recovery.
San Dimas
In the second quarter of 2017, San Dimas produced 1.0 million ounces of attributable
silver, a decrease of app roximately 39% relative to the second quarter of 2016.
According to Primero Mining Corp.’s (“Primero”) second quarter of 2017 MD&A,
production during the quarter was impacted by a strike related to the renegotiation of the
Collective Bargaining Agreement, with a phased restart of operations commencing on
April 22, 2017. Primero further reports that mill throughput was affected by a 13 -day
suspension of milling activities in mid -June following the failure of an anchor block
affixed to one of eight cables sup porting the tailing suspension bridge; however, mining
operation continued uninterrupted during this time, and all ore was stockpiled at the mill
site. Full plant operations reportedly resumed on June 24, 2017, and the ore stockpile
was fully processed by the mill in July.
According to Primero, despite seeing initial improvements in relations with unionized
workers following the resolution of the San Dimas strike in the second quarter, the
situation degraded in July 2017 with the negotiation of the 2016 annual workers’ bonus
(‘‘PTU Bonus’’), and as a result, the site experienced a significant work slowdown in
July. While the PTU Bonus negotiation was reportedly resolved on July 29, 2017,
Primero believes that labour disruptions may continue to adversely affect the profitability
of the San Dimas mine. Primero is maintaining its previously disclosed production
guidance but believes that production will track toward the lower end of the range.
Primero also notes that despite significant investment at San Dimas, exploration effort s
have not identified large replacement veins for the depleting Roberta and Robertita
veins, and that without new large veins coming into production or changes to the
operating environment, mining rates above 1,800 tonnes per day may not be possible.
Primero has indicated that it believes that at lower production rates, it is unable to carry
on a sustainable operation at San Dimas while complying with its obligations , including
under the Silver Purchase Agreement . Primero has indicated that it believes tha t the
San Dimas mine life will become significantly shorter as a result of Primero’s inability to
invest in exploration and development , unless revisions to the Silver Purchase
Agreement are made . The Company is prepared to consider reasonable alternatives
towards a sustainable solution, but there can be no assurance that an acceptable
solution will be achieved.
As previously announced, Primero has initiated a strategic review process. 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.
Sudbury
In the second quarter of 2017, Vale’s Sudbury mines produced 7,000 ounces of
attributable gold, a decrease of approximately 53% relative to the second quarter of
2016. According to Vale’s second quarter of 2017 p roduction report, production was
impacted due to the scheduled rebuild and expansion in capacity of Furnace #2 and the
three-week scheduled maintenance in June for all surface operations. The scheduled
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maintenance in all surface operations happens every 18 months. Vale notes that
Furnace #2 was off -line for the entire second quarter and will resume operation in the
third quarter, during which the Sudbury smelter complex will transition to the new single
furnace flowsheet and will commence operating as a sin gle furnace operation in the
fourth quarter. Finally, as Vale announced in March 2017, the Stobie mine was placed
on care and maintenance at the end of May.
Constancia
In the second quarter of 2017, Constancia produced 0.5 million ounces of attributable
silver and 2,300 ounces of attributable gold, a decrease of approximately 30% and 50%
for silver and gold production, respectively, relative to the second 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.
Other Gold
In the second quarter of 2017, total Other Gold attributable production was 11,200
ounces, a decrease of approximately 29% relative to the second quarter of 2016. The
decrease was driven prim arily by lower attributable production at 777 and lower
production at the Minto mine, which was impacted by sequencing changes to support a
mine life extension.
Other Silver
In the second quarter of 2017, total Other Silver attributable production was 2.3 million
ounces, a decrease of approximately 13% relative to the second quarter of 2016. The
decrease was driven primarily due to lower production from Cozamin as the Cozamin
silver purchase agreement expired on April 4, 2017.
Development Update – Rosemont
As per Hudbay’s June 7, 2017 news release, the U.S. Forest Service has issued the
Final Record of Decision for Hudbay's Rosemont Project. The other key federal permit
outstanding is the Section 404 Water Permit from the U.S. Army Corps of Engineers. As
per the precious metals streaming agreement, Wheaton Precious Metals International
Ltd. will provide a payment of a $230 million deposit upon achievement of certain
milestones in exchange for an amount equal to 100% of the life of mine silver and gold
production from Rosemont3.
Produced But Not Yet Delivered 4
As at June 30, 2017, payable ounces attributable to the Company produced but not yet
delivered⁴ amounted to 4.2 million payable silver ounces and 52,900 payable gold
ounces, representing an increase of 0.2 million payable silver ounces and 2,000
payable gold ounces during the three month period ended June 30, 2017. Payable silver
ounces produced but not yet delivered increased primarily as a result of increases
related to the Antamina, San Dimas, and Yauliyacu silver interests, partially offset by a
decrease related to the Peñasquito silver interest. Payable gold ounces produced but
not yet delivered increased primarily as a result of an increase related to the Salobo
interest, offset partially by a decrease related to the Minto gold interest. 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.
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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
Wheaton Precious Metals has announced that it has signed a non -binding term sheet
with Desert Star to enter into an Early Deposit Precious Metals Purchase Agreement
(the “Kutcho Early Deposit Agreement”) for the Kutcho project located in British
Columbia (the “Kutcho Project”). Under the terms of the proposed Kutcho Early Deposit
Agreement, the Company will be entitled to purchase 100% of the silver and gold
production from the Kutcho Project until 51,000 ounces of gold and 5.6 million ounces
of silver have been delivered, at which point the stream will decrease to 66.67% of
silver and gold production for the life of mine. Based on the Prefeasibility Study
Technical Report on the Kutcho Project, British Columbia dated Ju ly 31, 2017, and
current spot commodity prices , the proposed stream would represent less than 10% of
the revenue generated by the project.
Under the proposed Kutcho Early Deposit Agreement, the Company will pay a total
cash consideration of $65 million (s ubject to certain customary conditions including the
acquisition of the Kutcho Project by Desert Star) plus an ongoing production payment of
20% of the spot silver and gold price. Of the $65 million total upfront amount, $7 million
will be advanced to Dese rt Star on an early deposit basis, which will be used for
purposes of funding a definitive feasibility study, environmental study and impact
assessment, and other related documents (collectively, the “Feasibility
Documentation”). Following receipt of the F easibility Documentation and receipt of
permits and construction commencing, the Company may then advance the remaining
deposit or elect to terminate the Kutcho Early Deposit Agreement. If the Company
elects to terminate, the Company will be entitled to a return of the portion of the $7
million paid less $1 million payable upon certain triggering events occurring. The
Company will be required to make an additional payment to Desert Star, of up to $20
million if processing throughput is increased to 4,500 tp d or more within five years of
attaining commercial production.
Wheaton Precious Metals has also agreed to participate in up to 14% of a Desert Star
equity financing to a maximum of Cdn$4 million, where the funds are to be used for the
acquisition of the Kutcho Project. The entering into of the Kutcho Early Deposit
Agreement is subject to the completion of the acquisition of the Kutcho Project by
Desert Star, the negotiation and completion of definitive documentation and certain
other typical conditions and approvals. There can be no assurance that the Kutcho
Early Deposit Agreement will be completed on the terms set out in the non-binding term
sheet or at all.
Dividend
Third Quarterly Dividend
The third quarterly cash dividend of US$0.10 will be paid to holders of record of
Wheaton Precious Metals common shares as of the close of business on August 25,
2017, and will be distributed on or about September 8, 2017.
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Under the Company’s dividend policy, the quarterly dividend per common share will be
equal to 30% , up from 20% in p revious quarters, of t he 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 third quarterly dividend,
the Company has elected to issue common shares under the DRIP through treasury at
a 3% d iscount 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/Issue
rDetail.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 th e DRIP has been filed with the U.S. Securities and
Exchange Commission and may be obtained under the Co mpany’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 from Barrick’s
Pascua-Lama project or Hudbay’s Rosemont project in its guidance.
From a liquidity perspective, the $77 million of cash and cash equivalents as at June 30,
2017 combined with the liquidity provided by the available credit under the $2 billion
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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, August 11, 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: 50693115
Live audio webcast: www.wheatonpm.com
Participants should dial in five to ten minutes before the call.
The conference call will be recorded and available until August 18 , 201 7 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: 50693115
Archived audio webcast: www.wheatonpm.com
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 , T echnical 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.aspx.