Wheaton Precious Metals Exceeds 2017 Production Guidance and Declares First Quarterly Dividend of 2018
FOR IMMEDIATE RELEASE TSX: WPM
March 21, 2018 NYSE: WPM
WHEATON PRECIOUS METALS EXCEEDS 2017 PRODUCTION GUIDANCE AND
DECLARES FIRST QUARTERLY DIVIDEND OF 2018
Vancouver, British Columbia – Wheaton Precious Metals™ Corp. (“Wheaton” or the “Company”)
is pleased to announce its results for the fourth quarter and year ended December 31, 2017. All
figures are presented in United States dollars unless otherwise noted.
In the fourth quarter of 2017, Wheaton generated over $165 million of operating cash flow,
resulting in over $535 million for the year. Wheaton’s strong cash flow generation was founded on
production of over 350 thousand ounces of gold and over 28 million ounces of silver, both in
excess of Company guidance. Finally, subsequent to the quarter, Wheaton announced the
proposed new San Dimas precious metal stream as part of the First Majestic Silver Corp.
arrangement transaction, which should result in a stronger, more sustainable operation at the San
Dimas mine.
Operational Overview
Q4 2017 Q4 2016 Chan ge 2017 2016 Chan ge
Ounces produced
Silver 7,211 7,589 (5.0)% 28,646 30,379 (5.7)%
Gold 96,474 111,664 (13.6)% 355,104 366,378 (3.1)%
Ounces sold
Silver 7,292 7,506 (2.9)% 24,644 28,322 (13.0)%
Gold 94,295 108,931 (13.4)% 337,205 330,009 2.2 %
Sales price per ounce
Silver $ 16.75 $ 16.95 (1.2)% $ 17.01 $ 16.96 0.3 %
Gold $ 1,277 $ 1,205 6.0 % $ 1,257 $ 1,246 0.9 %
Cash costs per ounce 1
Silver 1 $ 4.48 $ 4.59 (2.4)% $ 4.49 $ 4.42 1.6 %
Gold 1 $ 399 $ 389 2.6 % $ 395 $ 391 1.0 %
Cash operating margin
per ounce 1
Silver 1 $ 12.27 $ 12.36 (0.7)% $ 12.52 $ 12.54 (0.2)%
Gold 1 $ 878 $ 816 7.6 % $ 862 $ 855 0.8 %
Revenue $ 242,546 $ 258,491 (6.2)% $843,215 $ 891,557 (5.4)%
Net earnings $ (137,712) $ 10,865 n.a. $ 57,703 $ 195,137 (70.4)%
Per share $ (0.31) $ 0.02 n.a. $ 0.13 $ 0.45 (71.1)%
Adjusted net earnings 1 $ 82,323 $ 81,865 0.6 % $276,750 $ 266,137 4.0 %
Per share 1 $ 0.19 $ 0.19 0.3 % $ 0.63 $ 0.62 1.3 %
Operating cash flows $ 165,083 $ 174,702 (5.5)% $538,808 $ 584,301 (7.8)%
Per share 1 $ 0.37 $ 0.40 (7.5)% $ 1.22 $ 1.36 (10.3)%
Dividends declared 1 $ 39,815 $ 26,475 50.4 % $145,848 $ 90,612 61.0 %
Per share $ 0.09 $ 0.06 50.0 % $ 0.33 $ 0.21 57.1 %
All amounts in thousands except gold ounces produced and sold, per ounce amounts and per share amounts.
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Highlights
Attributable silver and gold production for the year ended December 31, 2017 exceeded
production guidance of 28 million ounces of silver and 340,000 ounces of gold.
The decrease in attributable silver production for the three months and year ended
December 31, 2017 was primarily due to lower production from the San Dimas mine
resulting from various operational issues coupled with the expiry of the Cozamin silver
purchase agreement.
The decrease in attributable gold production for the three months and year ended December
31, 2017, which was in line with expectations, was a result of a 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 Minto.
The Company achieved record gold sales volume during the year ended December 31,
2017.
During the three months and year ended December 31, 2017, the Company recognized an
impairment charge of $229 million. The impairment charge was in relation to the Pascua-Lama
project.
The Company paid out a record level of dividends in 2017.
Declared quarterly dividend of $0.09 per common share relative to the three months ended
December 31, 2017. This represents an increase of 29% relative to the comparable period in
2016.
Subsequent to the Quarter
In conjunction with the proposed acquisition by First Majestic Silver Corp. (“First Majestic”) of
Primero Mining Corp. (“Primero”), Wheaton has agreed to terminate the existing San Dimas
silver purchase agreement and enter into a new precious metals purchase agreement relating
to the San Dimas mine with First Majestic.
Outlook
Wheaton’s estimated attributable production in 2018 is forecast to be 22.5 million ounces of
silver and 355,000 ounces of gold.
Wheaton’s estimated average annual attributable production over the next five years
(including 2018) is anticipated to be approx imately 25 million ounces of silver and 370,000
ounces of gold.
“Wheaton’s high quality portfolio of low-cost, long-life assets once again exceeded production
guidance for both gold and silver, resulting in sector-leading operating cash flow of over $535
million in 2017. With 30% of our cash flows being distributed in dividends, we now provide the
highest yield of all the precious metal streamers,” said Randy Smallwood, President and Chief
Executive Officer of Wheaton Precious Metals. “We also took significant steps to further
strengthen our portfolio, including restructuring the stream at San Dimas, and we look forward to
welcoming First Majestic as a new partner. Finally, in addition to the substantial organic optionality
embedded in our current portfolio, we see a solid pipeline of new opportunities for additional
accretive growth.”
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Financial Review
Revenues
Revenue was $243 million in the fourth quarter of 2017, on sales volume of 7.3 million ounces
of silver and 94,300 ounces of gold. This represents a 6% decrease from the $258 million of
revenue generated in the fourth quarter of 2016 due primarily to (i) a 13% decrease in the
number of gold ounces sold; (ii) a 3% decrease in the number of silver ounces sold; and (iii)
a 1% decrease in the average realized silver price ($16.75 in Q4 2017 compared with $16.95
in Q4 2016); partially offset by (iv) a 6% increase in the average realized gold price ($1,277
in Q4 2017 compared with $1,205 in Q4 2016).
Revenue was $843 million in the year ended December 31, 2017, on sales volume of 24.6
million ounces of silver and 337,200 ounces of gold. This represents a 5% decrease from the
$892 million of revenue generated in 2016 due primarily to (i) a 13% decrease in the number
of silver ounces sold; partially offset by (ii) a 2% increase in the number of gold ounces sold;
and (iii) a 1% increase in the average realized gold price ($1,257 in 2017 compared with
$1,246 in 2016).
Costs and Expenses
Average cash costs¹ in the fourth quarter of 2017 were $4.48 per silver ounce sold and $399
per gold ounce sold, as compared with $4.59 per silver ounce and $389 per gold ounce during
the comparable period of 2016. This resulted in a cash operating margin¹ of $12.27 per silver
ounce sold and $878 per gold ounce sold, a decrease of 1% per silver ounce sold and an
increase of 8% per ounce of gold sold as compared with Q4 2016. The increase in the gold
cash operating margin was primarily due to a 6% increase in the average realized gold price
in Q4 2017 compared with Q4 2016 while the decrease in the silver cash operating margin
was primarily due to a 1% decrease in the av erage realized silver price during the same
period.
Average cash costs¹ during the year ended De cember 31, 2017 were $4.49 per silver ounce
sold and $395 per gold ounce sold, as compared with $4.42 per silver ounce sold and $391
per gold ounce sold during the comparable period of 2016. This resulted in a cash operating
margin¹ of $12.52 per silver ounce sold and $862 per gold ounce sold, an increase of 1% per
gold ounce sold while the cash operating margin¹ per ounce of silver sold was virtually
unchanged as compared with 2016.
Earnings and Operating Cash Flows
Adjusted net earnings¹ and cash flow from operations in the fourth quarter of 2017 were $82
million ($0.19 per share) and $165 million ($0.37 per share¹), compared with adjusted net
earnings¹ of $82 million ($0.19 per share) and cash flow from operations of $175 million ($0.40
per share¹) for the same period in 2016, an increase of 1% and a decrease of 6%, respectively.
Adjusted net earnings¹ and cash flow from operations for the year ended December 31, 2017
were $277 million ($0.63 per share) and $539 million ($1.22 per share¹), compared with
adjusted net earnings¹ of $266 million ($0.62 per share) and cash flow from operations of
$584 million ($1.36 per share¹) for the same period in 2016, an increase of 4% and a decrease
of 8%, respectively.
Balance Sheet
At December 31, 2017, the Company had approximately $99 million of cash on hand and
$770 million outstanding under the Company's $2 billion revolving term loan (the "Revolving
Facility"). On February 27, 2018, the term of the Revolving Facility was extended so that it
now matures on February 27, 2023.
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Asset Impairment
At the end of each reporting period, the Company assesses each precious metal purchase
agreement (“PMPA”) to determine whether any i ndication of impairment exists. If such an
indication exists, the recoverable amount of the precious metal purchase agreement is
estimated in order to determine the extent of the impairment (if any).
As per Barrick Gold Corp.’s (“Barrick”) fourth quarter of 2017 MD&A, in January 2018, Barrick
received a revised resolution from Chile’s environmental regulator (the Superintendencia del
Medio Ambiente, or “SMA”) in connection with the previously disclosed SMA regulatory
sanctions requiring the closure of existing infrastructure on the Chilean side of the Pascua-
Lama project. Barrick has indicated that the resolution does not affect Barrick’s ongoing
evaluation of an underground, block-caving operation at Pascua-Lama, which would require
additional permitting and regulatory approvals in both Argentina and Chile, unconnected to
the recent SMA decision. In light of the order to close surface facilities in Chile, and current
plans to evaluate an underground mine, Barrick has reclassified Pascua-Lama’s Proven and
Probable Mineral Reserves of approximately 14 million ounces of gold, which are based on
an open pit mine plan, as Measured and Indicated Resources. As a result, Wheaton has also
reclassified 151.7 million ounces of silver Proven and Probable Mineral Reserves associated
with Pascua-Lama as Measured and Indicated Mineral Resources.
As this resolution affects Barrick’s ability to advance the Pascua-Lama project as an open pit
mine and coupled with the resulting reclassification of open-pit reserves to resources, the
Company has determined there to be an indicator of impairment of this asset in the fourth
quarter of 2017.
The Pascua-Lama PMPA had a carrying value at December 31, 2017 of $485 million.
Management has estimated that the recoverable amount at December 31, 2017 under the
Pascua-Lama PMPA was $256 million, representing its fair value less cost of disposal and
resulting in an impairment charge of $229 million.
If the requirements of the completion test have not been satisfied by the completion test
deadline of June 30, 2020, the Company may, within 90 days of such date, elect to terminate
the Pascua Lama silver purchase agreement in which case the Company will be entitled to a
return of a portion of the original upfront cash payment of $625 million, reduced by the cash
flows received relative to the Lagunas Norte, Veladero, and Pierina mines. As at December
31, 2017, the Company has received approximately 19.1 million ounces related to silver
production from these mines, generating cumulative operating cash flows of approximately
$364 million.
Fourth Quarter Asset Highlights
During the fourth quarter of 2017, attributable production was 7.2 million ounces of silver and
96,500 ounces of gold, representing a decrease of 5% and 14%, respectively, compared with the
fourth quarter of 2016.
Operational highlights for the quarter ended December 31, 2017, based upon counterparties’
reporting, are as follows:
Salobo
In the fourth quarter of 2017, Salobo produced 76,200 ounces of attributable gold, a decrease
of approximately 2% relative to the fourth quarter of 2016 as lower grades and recovery were
partially offset by increased throughput.
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According to Vale S.A.’s (“Vale”) fourth quarter of 2017 production report, production was
positively impacted mainly due to stronger plant performance which resulted in record
quarterly production of copper concentrate. The Salobo plant operated above nameplate
capacity on average for a second consecutive quarter in the fourth quarter of 2017.
Peñasquito
In the fourth quarter of 2017, Peñasquito produced 1.6 million ounces of attributable silver, an
increase of approximately 18% relative to the fourth quarter of 2016 due to higher silver
grades, recoveries and tonnage. According to Goldcorp Inc.’s (“Goldcorp”) fourth quarter of
2017 MD&A, increased throughput at Peñasquito was driven by the implementation of a new
management operating system and better ore delivery to the primary crusher.
According to Goldcorp, the Pyrite Leach Project ("PLP") at Peñasquito was 62% complete as
of December 31, 2017, 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 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 fourth quarter of 2017, Antamina produced 1.5 million ounces of attributable silver, a
decrease of approximately 8% relative to the fourth quarter of 2016 primarily due to lower
grades and throughput, partially offset by higher recovery.
San Dimas
In the fourth quarter of 2017, San Dimas produced 1.3 million ounces of attributable silver, a
decrease of approximately 7% relative to the fourth quarter of 2016 primarily due to a decrease
in throughput, which was partially offset by better grades.
As announced on January 12, 2018, Wheaton has agreed to terminate the existing San Dimas
silver purchase agreement (the “Primero SPA”) with Primero and enter into a new precious
metals purchase agreement with First Majestic relating to the San Dimas mine (the "San
Dimas PMPA"), in conjunction with the proposed acquisition by First Majestic of Primero
pursuant to a plan of arrangement transaction (the “Arrangement”). Under the San Dimas
PMPA: 25% of gold production plus an additio nal amount of gold equal to 25% of silver
production converted to gold at a fixed gold to silver exchange ratio of 70:1 from the San
Dimas mine; for each ounce of gold delivered, Wheaton will pay to First Majestic a production
payment equal to the lesser of US$600/oz, subject to a 1% annual inflationary adjustment,
and the prevailing market price; and First Majestic will provide a corporate guarantee and
security to be limited to San Dimas assets. As part of the transaction, in addition to the new
stream, Wheaton will receive 20,914,590 First Majestic common shares. Primero has
indicated that closing of the Arrangement is anticipated to occur before the end of April 2018.2
Sudbury
In the fourth quarter of 2017, Vale’s Sudbury mines produced 8,600 ounces of attributable
gold, a decrease of approximately 4% relative to the fourth quarter of 2016 primarily due to
lower throughput, partially offset by higher grades and recovery. According to Vale’s fourth
quarter of 2017 production report, the decrease in throughput was primarily due to the
extended unscheduled maintenance at the Coleman mine as well as the cessation of mining
activities at the Stobie mine since the second quarter of 2017.
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Constancia
In the fourth quarter of 2017, Constancia produced 0.7 million ounces of attributable silver and
2,900 ounces of attributable gold, a decrease of approximately 7% and 6%, respectively,
relative to the fourth 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
partially offset by higher throughput and silver recovery.
Other Gold
In the fourth quarter of 2017, total Other Gold attributable production was 8,800 ounces, a
decrease of approximately 60% relative to the fourth 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 lower grades as part of the
extended mine plan.
Other Silver
In the fourth quarter of 2017, total Other Silver attributable production was 2.2 million ounces,
a decrease of approximately 13% relative to the fourth quarter of 2016. The decrease was
driven primarily by the cessation of production from Cozamin as the Cozamin silver purchase
agreement with Capstone Mining Corp. (“Capstone”) expired on April 4, 2017.
In October 2015, in order to incentivize additional exploration and potentially extend the limited
remaining mine life of Stratoni, Wheaton and Eldorado Gold Corp. (“Eldorado”) agreed to
modify the Stratoni silver purchase agreement. The primary modification was to increase the
production price per ounce of silver delivered to Wheaton based on the amount of exploration
Eldorado completed. As a result, according to Eldorado’s news release dated November 13,
2017, Eldorado has completed over 5,900 metres of underground exploration drilling that
demonstrated continuity of the orebody into previously untested areas. Eldorado further
reports that it has two drill rigs currently active at the mine testing additional stepouts to the
deposit.
Development Update - Kutcho
Effective December 14, 2017, Wheaton participated in an equity financing undertaken by
Kutcho Copper Corp. ("Kutcho") in connection with the Kutcho Early Deposit Agreement,
acquiring, by way of private placement, 6,153,846 common shares and warrants to acquire
an additional 3,076,923 common shares of Kutcho for total consideration of $3 million (Cdn$4
million). Additionally, the Company advanc ed to Kutcho $16 million (Cdn$20 million) in
exchange for a subordinated secured convertibl e term debt loan agreement receivable
bearing interest at 10% per annum.
Produced But Not Yet Delivered 31
As at December 31, 2017, payable ounces attributable to the Company produced but not yet
delivered³ amounted to 4.5 million payable s ilver ounces and 79,500 payable gold ounces,
representing a decrease of 0.7 million payabl e silver ounces and 3,200 payable gold ounces
during the three month period ended December 31, 2017. Payable silver ounces produced
but not yet delivered decreased primarily as a resu lt of decreases related to the Yauliyacu,
Antamina, Zinkgruvan and Peñasquito silver interests. Payable gold ounces produced but not
yet delivered decreased primarily as a result of decreases related to the Sudbury gold interest
partially offset by increases at the Salobo and Minto 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 for silver and two to three months
for gold 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’s consolidated MD&A in the ‘Results of Operations and Operational
Review’ section.
Events Subsequent to the Quarter
Minto Mine
As per Capstone’s news release dated February 2, 2018, Capstone has entered into a
definitive share purchase agreement pursuant to which it has agreed to sell its Minto
mine to Pembridge Resources plc ("Pembridge"). Capstone expects the transaction to close
in the second quarter of 2018. According to Capstone’s fourth quarter of 2017 MD&A, at the
start of 2017, it was Capstone's intention to place the Minto mine on care and maintenance at
the end of 2017, but as a result of rising copper prices and the downside protection provided
by the renegotiation of the precious metals stream with Wheaton in 2017, Capstone had made
the decision to continue operations until at least mid-2021.
Reserves and Resources
As of December 31, 2017, Proven and Probable Mineral Reserves attributable to Wheaton were
572.8 million ounces of silver compared with 727.8 million ounces as reported in Wheaton’s 2016
Annual Information Form (“AIF”), a decrease of 21%, and 11.31 million ounces of gold compared
with 11.41 million ounces, a decrease of 1%. On an attributable Measured and Indicated Mineral
Resource basis, silver resources were 894.2 million ounces compared with 807.3 million ounces
as reported in Wheaton’s 2016 AIF, an increase of 11%, and gold resources were 2.81 million
ounces compared with 2.97 million ounces, a decrease of 5%. On an attributable Inferred Mineral
Resource basis, silver resources were 452.0 million ounces compared with 381.2 million ounces
as reported in Wheaton’s 2016 AIF, an increase of 19%, and gold resources were 2.76 million
ounces compared with 2.80 million ounces, a decrease of 1%.
Estimated attributable reserves and resources contained in this press release are based on
information available to the Company as of March 21, 2018, and therefore will not reflect updates,
if any, after that date, including those changes associated with the termination of the Primero SPA
and entering into of the San Dimas PMPA by Wheaton. Updated reserves and resources data
incorporating year-end 2017 estimates will also be included in the Company's 2017 Annual
Information Form. Wheaton’s most current attributable reserves and resources, as of December
31, 2017, can be found on the Company’s website at www.wheatonpm.com.
2018 and Long-Term Production Forecast
Wheaton is pleased to provide its updated one-year and long-term production guidance.
Wheaton’s estimated attributable silver and gold production in 2018 is forecast to be
approximately 22.5 million silver ounces and 355,000 gold ounces. Estimated average annual
attributable silver and gold production over the nex t five years (including 2018) is anticipated to
be approximately 25 million silver ounces and 370,000 gold ounces per year.
In 2018, forecast production growth from Peñasquito and Constancia is expected to be offset by
the changes in the San Dimas stream as well as the cessation of production from assets with
fixed terms. In conjunction with First Majestic’s proposed acquisition of Primero, the Primero SPA
is expected to terminate and a new precious metals purchase agreement entered into at a
reduced level starting in the second quarter of 2018. In addition, the 10-year-term contract on
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Capstone’s Cozamin mine, acquired with Wheaton’s 2009 acquisition of Silverstone, expired in
April 2017, and Wheaton’s streaming agreement with Barrick regarding Pascua-Lama provides
the Company with silver production from the Lagunas Norte, Veladero, and Pierina mines until
March 31, 2018.
Average production over the next five years is expected to increase primarily due to continued
production growth from both Peñasquito and Constancia. At Peñasquito, grades are expected to
increase over the next several years and the PLP, which should increase recoveries, is scheduled
to be commissioned later in 2018. At Constancia, Hudbay expects to begin mining the
Pampacancha deposit in the second half of 2018, which has significantly higher precious metals
grades than what is currently being mined; however, should the mining of the Pampacancha
deposit be delayed, Wheaton will be entitled to an increased portion of gold from Hudbay. And
lastly, as a reminder, Wheaton does not incl ude any production from Barrick’s Pascua-Lama
project or Hudbay’s Rosemont project in its estimated average five-year production guidance.
Attributable mine-by-mine actual 2016 and 2017 production and forecast 2018 production are as
follows:
Attributable Production1, 2
2016
Actual
2017
Actual
2018
Forecast
Silver ounces produced (000's)
Peñasquito 5,034 6,024 6,500
San Dimas3, 4 5,212 3,963 1,000
Antamina 6,796 6,554 5,300
Constancia5 2,759 2,374 2,800
Other6 10,578 9,731 6,900
Total silver ounces 30,379 28,646 22,500
Gold ounces produced (000's)
Salobo 228.7 264.7 240
Sudbury7 42.6 33.7 33
Constancia5 14.9 10.2 17
San Dimas3,8 30
Other9 80.1 46.5 35
Total gold ounces 366.4 355.1 355
1) Ounces produced represent quantity of silver and gold contained in concentrate or doré prior to smelting or refining deductions.
2) 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.
3) Guidance for San Dimas assumes that the proposed acquisition by First Majestic of Primero is completed and that the new
precious metals purchase agreement with First Majestic is effective April 1, 2018.
4) Under the existing silver purchase agreem ent with Primero, Primero will deliver a per annum amount to Wheaton equal to the
first 6 million ounces of payable silver produced at San Dimas and 50% of any excess. Wheaton assumes only one quarter of
attributable silver production from San Dimas from Primero in its 2018 production guidance.
5) Constancia silver and gold production guidance for 2018 assumes the expected start of mining at the Pampacancha deposit in
2018.
6) Includes the Yauliyacu, Los Filos, Zi nkgruvan, Cozamin, Neves-Corvo, Stratoni, Minto, 777, Lagunas Norte, Pierina, and
Veladero silver interests. The Cozamin precious metal purchase agreement expired on April 4, 2017.
7) 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.
8) Under the proposed precious metals purchase agreement with First Majestic, San Dimas attributable gold production for 2018 is
calculated based on three quarters of production of which Wheaton is entitled to 25% of gold production plus an additional
amount of gold equal to 25% of silver production converted to gold at a fixed gold to silver exchange ratio of 70:1 from the San
Dimas mine.
9) Includes Minto and 777 gold interests.