VANCOUVER, Nov. 14, 2019 /CNW/ - Wheaton Precious Metals™ Corp. ("Wheaton" or the "Company") is pleased to announce its results for the third quarter ended September 30, 2019. All figures are presented in United States dollars unless otherwise noted.
In the third quarter of 2019, Wheaton generated over $140 million in operating cash flow resulting in adjusted net earnings of over $70 million, an increase of 31% and 107%, respectively. In addition, Wheaton had attributable gold production of over 100,000 ounces and remains on track for record annual gold production in 2019.
Q3 2019 Q3 2018 Change
Gold 104,175 106,255 (2.0)%
Silver 6,095 5,584 9.2 %
Palladium 5,471 8,817 (37.9)%
Gold equivalent2 184,868 184,139 0.4%
Gold 94,766 89,242 6.2 %
Silver 4,484 5,018 (10.6)%
Palladium 4,907 3,668 33.8 %
Gold equivalent2 155,049 154,815 0.2%
Sales price per ounce
Gold $ 1,471 $ 1,210 21.6 %
Silver $ 17.09 $ 14.80 15.5 %
Palladium $ 1,535 $ 955 60.7%
Cash costs per ounce 1
Gold 1 $ 424 $ 418 1.4 %
Silver 1 $ 5.16 $ 5.04 2.4 %
Palladium 1 $ 271 $ 169 60.2 %
Cash operating margin per ounce 1
Gold 1 $ 1,047 $ 792 32.2 %
Silver 1 $ 11.93 $ 9.76 22.2 %
Palladium 1 $ 1,264 $ 786 60.8 %
Revenue $ 223,595 $ 185,769 20.4 %
Net earnings $ 75,960 $ 34,021 123.3 %
Per share $ 0.17 $ 0.08 112.5 %
Adjusted net earnings 1 $ 72,692 $ 35,132 106.9 %
Per share 1 $ 0.16 $ 0.08 105.4 %
Operating cash flows $ 142,300 $ 108,413 31.3 %
Per share 1 $ 0.32 $ 0.24 33.3 %
Dividends declared 1 $ 40,197 $ 39,921 0.7 %
Per share $ 0.09 $ 0.09 0.0 %
All amounts in thousands except gold, palladium and gold equivalent ounces produced and sold, per ounce amounts and per share amounts.
•Wheaton generated $142 million in operating cash flow in the third quarter of 2019, leading to a reduction in net debt of $146 million.
•Attributable gold production was relatively unchanged primarily due to higher production at Salobo and San Dimas being offset by lower production at the Stillwater mines due to reported production for the third quarter of 2018 including some material processed in prior periods.
•The increase in attributable silver production was primarily due to higher grades at Peñasquito.
•The decrease in attributable palladium production was due to lower production at the Stillwater mines due to reported production for the third quarter of 2018 including some material processed in prior periods.
•The increase in gold sales volume was due to positive changes in the balance of payable gold produced but not yet delivered to Wheaton, partially offset by lower production levels.
•The decrease in silver sales volume was due to negative changes in the balance of payable silver produced but not yet delivered to Wheaton at Peñasquito, partially offset by the higher production levels.
•The increase in adjusted net earnings was primarily due to higher margins resulting from increased realized prices for gold, silver and palladium sales of 22%, 15% and 61%, respectively.
•Declared quarterly dividend of $0.09 per common share in accordance with Wheaton's setting of a minimum quarterly dividend of $0.09 per common share for the duration of 2019, subject to the discretion of the Board of Directors.
•In September, Wheaton joined the United Nations Global Compact and announced its endorsement of the World Gold Council's Responsible Gold Mining Principles, demonstrating the company's continued commitment to corporate sustainability.
Updating Production Guidance
•Wheaton is updating production guidance for 2019, with estimated attributable gold production being increased to approximately 390,000 ounces due to continued outperformance primarily from the Salobo mine, while estimated attributable silver production has been adjusted to approximately 21 million ounces to reflect production interruptions at the Peñasquito mine. Forecast palladium production in 2019 remains unchanged at approximately 22,000 ounces.
•For the five-year period ending in 2023, the Company continues to estimate that average annual gold equivalent production2 will amount to 750,000 ounces.
"Wheaton's portfolio of high-quality, long-life assets continues to deliver strong results with over $140 million in operating cash flow generated in the third quarter of 2019," said Randy Smallwood, President and Chief Executive Officer of Wheaton Precious Metals. "Gold and silver prices increased on average approximately 17% over the previous year, while our cash flow and net earnings increased by over 30% and 100%, respectively. These solid results once again demonstrate the strength of Wheaton's business model, which focuses on reducing risk while providing significant leverage to higher commodity prices."
Revenue was $224 million in the third quarter of 2019, on sales volume of 94,800 ounces of gold, 4.5 million ounces of silver and 4,900 ounces of palladium. This represents a 20% increase from the $186 million of revenue generated in the third quarter of 2018 due primarily to (i) a 22% increase in the average realized gold price ($1,471 in Q3 2019 compared with $1,210 in Q3 2018); (ii) a 15% increase in the average realized silver price ($17.09 in Q3 2019 compared with $14.80 in Q3 2018); and (iii) a 6% increase in the number of gold ounces sold; partially offset by (iv) an 11% decrease in the number of silver ounces sold.
Costs and Expenses
Average cash costs¹ in the third quarter of 2019 were $424 per gold ounce sold, $5.16 per silver ounce sold and $271 per palladium ounce sold, as compared with $418 per gold ounce, $5.04 per silver ounce and $169 per palladium ounce during the comparable period of 2018. This resulted in a cash operating margin¹ of $1,047 per gold ounce sold, $11.93 per silver ounce sold and $1,264 per palladium ounce sold, an increase of 32%, 22% and 61%, respectively, as compared with Q3 2018. The increase in the cash operating margin was primarily due to a 22%, 15% and 61% increase in the average realized gold, silver and palladium price, respectively, during Q3 2019 compared with Q3 2018.
Adjusted Net Earnings and Operating Cash Flows
Adjusted net earnings¹ and cash flow from operations in the third quarter of 2019 were $73 million ($0.16 per share) and $142 million ($0.32 per share¹), compared with adjusted net earnings¹ of $35 million ($0.08 per share) and cash flow from operations of $108 million ($0.24 per share¹) for the same period in 2018, an increase of 107% and 31%, respectively.
At September 30, 2019, the Company had approximately $152 million of cash on hand and $1.0 billion outstanding under the Company's $2 billion revolving term loan (the "Revolving Facility"). The Company uses excess cash to pay down the Revolving Facility, and during the three-month period ended September 30, 2019, the Company has repaid $82 million under the Revolving Facility. The average effective interest rate for the third quarter of 2019 was 4.02%.
Third Quarter Asset Highlights
Operational highlights for the quarter ended September 30, 2019, are as follows:
In the third quarter of 2019, Salobo produced 73,600 ounces of attributable gold, virtually unchanged relative to the third quarter of 2018 as higher throughput was almost completely offset by lower grades and recovery. In Vale S.A.'s ("Vale") Third Quarter 2019 Performance Report, Vale reports that in July, Salobo achieved all-time monthly production records for copper and gold. Vale also noted that physical completion of the expansion at Salobo is now 27%, including the completion of the concrete foundations for the mill and primary crusher bases and the arrival to site of the first loads related to the long-distance conveyor belt.
In the third quarter of 2019, Peñasquito produced 2.0 million ounces of attributable silver, an increase of approximately 93% relative to the third quarter of 2018 primarily due to higher grades. As per Newmont Goldcorp Corporation's ("Newmont") third quarter MD&A, production at Peñasquito was impacted by the operation being placed into care and maintenance for 17 days in the third quarter of 2019 due to a blockade. The blockade was lifted in early October 2019; a gradual ramp up of operations started in late October while government-sponsored negotiations continue. Based on Newmont's disclosure, the impact of the illegal blockade on Wheaton's third quarter attributable production was approximately 0.4 million silver ounces.
In the third quarter of 2019, Vale's Sudbury mines produced 6,600 ounces of attributable gold, an increase of approximately 2% relative to the third quarter of 2018 primarily due to higher grades. Throughput at the Sudbury mines is typically lower in the third quarter as a result of planned maintenance shutdowns occurring in the summer months. This was consistent in 2018 and 2019.
In the third quarter of 2019, Constancia produced 0.7 million ounces of attributable silver and 5,200 ounces of attributable gold, an increase of approximately 1% and 42%, respectively, relative to the third quarter of 2018. As per Wheaton's precious metals purchase agreement with Hudbay Minerals Inc. ("Hudbay") relating to Constancia (the "Constancia PMPA"), should Hudbay fail to achieve a minimum level of throughput at the Pampacancha satellite deposit during 2018, 2019 and 2020, Wheaton will be entitled to an increased portion of gold from Hudbay. As per Hudbay's MD&A for the first quarter of 2019, mining of the Pampacancha deposit is not expected to begin until later in 2020. Assuming ore production does not begin until 2020, the Company will be entitled to receive an additional 8,020 ounces of gold in 2019 and 2020 relative to the Constancia PMPA, with the deliveries to be made in quarterly installments, of which 2,005 ounces were received during the third quarter of 2019 and reported as production.
In the third quarter of 2019, the Stillwater mines produced 3,200 ounces of attributable gold and 5,500 ounces of attributable palladium, a decrease of approximately 49% for gold and 38% for palladium relative to the third quarter of 2018. The decreases relative to the third quarter of 2019 was largely due to reported production for the third quarter of 2018 including some material processed in prior periods. As part of the agreement, Wheaton was entitled to the attributable gold and palladium production for which an offtaker payment was received after July 1, 2018.
In the third quarter of 2019, total Other Gold attributable production was 4,300 ounces, a decrease of approximately 36% relative to the third quarter of 2018. The decrease was due primarily to the cessation of production at the Minto mine which was placed on care and maintenance in the fourth quarter of 2018. According to Pembridge Resources plc's news release dated October 16, 2019, mining has restarted at Minto in October with milling operations recommencing on October 10, 2019. Wheaton does not currently include any additional production from Minto in its 2019 or five-year guidance.
In the third quarter of 2019, total Other Silver attributable production was 2.2 million ounces, a decrease of approximately 12% relative to the third quarter of 2018. The decrease was driven primarily by lower production from the Aljustrel mine partially offset by higher production from Zinkgruvan.
Development Update – Rosemont
On August 1, 2019, Hudbay announced that the U.S. District Court for the District of Arizona ("Court") issued a ruling in the lawsuits challenging the U.S. Forest Service's issuance of the Final Record of Decision ("FROD") for the Rosemont project in Arizona. The Court ruled to vacate and remand the FROD such that Rosemont cannot proceed with construction at this time. Hudbay stated that they believe that the Court has misinterpreted federal mining laws and Forest Service regulations as they apply to Rosemont. As such, Hudbay is working to appeal the Court's decision to the U.S. Ninth Circuit Court of Appeals as they evaluate next steps for the project. As announced in August, Hudbay has suspended most of its early works activities at Rosemont and has deferred the previously announced process to identify a joint venture partner for Rosemont. Wheaton has not made any upfront payments to date relative to Rosemont nor included any production from Rosemont in its five-year guidance.
Produced But Not Yet Delivered 3
As at September 30, 2019, payable ounces attributable to the Company produced but not yet delivered amounted to 85,500 payable gold ounces, 4.2 million payable silver ounces and 4,200 payable palladium ounces, an increase of 4,300 payable gold ounces and 0.7 million payable silver ounces and a decrease of 300 payable palladium ounces during the three month period ended September 30, 2019. Payable gold ounces produced but not yet delivered increased primarily as a result of an increase related to the Salobo gold interest partially offset by a decrease at Sudbury. Payable silver ounces produced but not yet delivered increased slightly primarily as a result of increases related to the Peñasquito and Antamina silver interests. Payable ounces produced but not yet delivered to Wheaton are expected to average approximately two months of annualized production for silver and two to three months for both gold and palladium 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's consolidated MD&A in the 'Results of Operations and Operational Review' section.
Fourth Quarterly Dividend
The fourth quarterly cash dividend for 2019 of US$0.09 will be paid to holders of record of Wheaton Precious Metals common shares as of the close of business on December 4, 2019 and will be distributed on or about December 16, 2019.
Under the Company's dividend policy, the quarterly dividend per common share is targeted to equal approximately 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. To minimize volatility in quarterly dividends, the Company has set a minimum quarterly dividend of $0.09 per common share for the duration of 2019.
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, including direct deposit, 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.
Wheaton is updating production guidance for 2019.
Estimated attributable gold production has been increased to approximately 390,000 ounces, up from 385,000 ounces previously forecast due to continued outperformance primarily from the Salobo mine. Estimated attributable silver production has been adjusted to approximately 21 million ounces from 22.5 million ounces to reflect production interruptions at the Peñasquito mine. Forecast production of palladium in 2019 remains unchanged at approximately 22,000 ounces. For the five-year period ending in 2023, the Company estimates that average annual gold equivalent production2 will amount to 750,000 ounces. As a reminder, Wheaton does not currently include any production from Hudbay's Rosemont project nor the announced expansion at Salobo in its estimated average five-year production guidance4.
From a liquidity perspective, the $152 million of cash and cash equivalents as at September 30, 2019, 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 15, 2019, starting at 11:00 am (Eastern Time) to discuss these results. To participate in the live call, please use one of the following methods:
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