Wheaton Precious Metals Corp. (WPM) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Campbell Mccrary, and I'm a Vice President of Capital Markets at Amvest Capital in New York. Welcome to the Amvest Capital, Inc. Live Webinar with Wheaton Precious Metals. Wheaton trades on the TSX, the NYSE as WPM, Whiskey-Papa-Mike. We hope that you'll enjoy today's program. It'll also be available in replay mode later. This link will work and the replay links that you get and any ones that you forward will also work. Please feel free to chat in your questions in the question pane of the GoToWebinar control panel, or simply e-mail them in. We'll try and ask the questions in real-time or follow up with you after the webinar. Amvest Capital is a New York-based specialist investment management and corporate finance firm, focused solely on the natural resources sector. Call is hosted by Amvest Capital, Inc. All opinions expressed do not reflect the opinion of Amvest Capital or any of its affiliates. This call is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to sell or buy any security and should not be relied upon as a basis for investment decisions. Amvest Capital, Inc., its affiliates and clients may maintain positions in the digital assets or securities discussed in this call. Presenting today is Randy Smallwood. Randy is the President and CEO of Wheaton, and quite honestly, barely needs an introduction. He's a geological engineer by background and was involved in the founding of the company in 2007. He was also an instrumental part of the team that built the original Wheaton River Minerals and that got folded into Goldcorp, and one of the largest and more importantly, most profitable gold companies in the world. He serves on several Boards and is an active philanthropist, both in the health world and gives back to the mining community in education and things like that. Following the formal presentation, members of Amvest will ask questions with management. We look forward to any attendee questions that are also sent in. And with that, thank you, Randy.

Yes, Cam, thank you for that introduction, and thanks, everyone, for dialing in. I'm hoping that you can all see the cover page of our presentation here and spend about 15, 20 minutes going through the presentation and then look forward to questions and answers. There will be some forward-looking statements made during the course of this presentation. There are risks associated with those forward-looking statements. They're buried in the fine print here and also in the appendices, which are included in our website. So I urge you all to understand those risks associated with forward-looking statements. I can't start off this presentation without making a comment with respect to the current world. I'm here in my house in Vancouver, British Columbia, Canada. We've been working from home for -- this is now our fifth week. And these are tumultuous times. Health and safety has always been a very, very high priority for our company, but we're also a very small company that has always been very agile, and in fact, have had that good strong business continuity plans in place. And so, to be honest, the transition towards the work-from-home environment has been relatively seamless. I hate to say that I might be even a little bit more productive in a work-from-home space than I would be in the office. But there's no doubt that we at Wheaton have also had a bit of a negative effect from this pandemic. Mainly, the impact has been some suspensions and deferrals of production from some of our partner operations. Obviously, Mexico and Peru are very important countries for us. And with the government mandates to suspend production for periods of time while they manage and try and manage the risk associated with COVID-19, something that we strongly support. We've seen -- and in constant communications and have seen good efforts on part of all of our partners in terms of trying to manage this risk. I think if there's any time where the importance of the quality of our portfolio will become apparent, it is in times like this. Our production, 88% of our production comes from the bottom half of respective cost curves. That means that these mines, not only are they profitable for us, they're very profitable for our partners, and they also deliver very good value back to the communities and to the countries that host those assets. And so as we see our partners and countries and jurisdictions around them, we'll try and reestablish and restart the economy. I expect our operations will be leading that charge on a go-forward basis and know that our partners are committed towards that. From a company perspective, Wheaton, we are in great shape. We -- even with the suspensions, we expect to be doing well over $500 million in free cash flow this year. From our production, we have had the standard production guidance for the year, which was originally just up over 700,000 ounces of gold equivalent production. However, we're still pretty comfortable with [ the majority ] of our operations that are continuing to manage the risk and deliver metal to us over the course of this year. I'm still pretty excited about our portfolio. And it is something that is, overall, very, very important to us. We're doing everything we can to find ways to provide additional support to our partners and really just hope that everyone stay safe and healthy through this process. I'm confident that we'll wind up -- all of us will wind up being stronger. And through the course of this, there is light at the end of this tunnel, and we will get there and look forward to everyone staying safe and healthy through this journey. So who is Wheaton Precious Metals? Well, Wheaton Precious Metals 15 years ago came up with the streaming business model. Streaming has got a lot of benefits over traditional methods of investing into the -- in our case, the precious metal space. Streaming business model is a good, strong business model that delivers value to our partners and at a greatly reduced risk profile. Our vision at Wheaton, of course, was and has always been to be the world's premier precious metals investment vehicle, and we continue to strive to deliver that to our shareholders. We do that through our mandate. Our mandate is to deliver that value through that streaming business model. That streaming business model goes towards our shareholder -- most importantly, all of our stakeholders, and that includes, of course, our shareholders. That's who I work for, that's who my management team works for, my Board reports and represents. We deliver that value through delivering low-risk, high-quality, high-margin, diversified exposure and growth potential from profitable precious metals production around the world. It's a good strong business model that has very low risk profiles, especially compared to traditional mining investments. To our partners, the companies that are actually operating these mines, that we supply the capital to, we crystallize the value of a noncore -- typically a noncore precious metal from these assets, and yet -- this is yet to be produced. But not only that, we do lots of work with our partners to try and deliver a long -- longer-term value. We have a mantra in our company, the stronger our partners are, the stronger we are. So we're always looking for ways to provide support to strengthen our partners, to make sure that we're doing everything we can to make this a mutually beneficial relationship. And one of those areas is, of course, our third stakeholder, which is our neighbors. Neighbors around our employees are, of course, the communities that our employees all live in, but perhaps more importantly, the communities around the mines that deliver us the metal that we receive, our gold and our silver and precious metals. And so we have a very strong and active program in terms of combined support to our partners so that they can strengthen their relationships with their neighbors on a go-forward basis. And this is particularly important in times like this. I mentioned streaming several times now. It's an incredible business model that delivers high upside to our shareholders with much lower risk profiles than traditional precious metals investments. From the upside perspective, we offer commodity price leverage. We have a base operating cost that -- on a per ounce basis that is fixed by contract and predictable. And so there's no cost surprises, which is something that all of us that have invested into the mining space traditionally have always suffered from. There is no cost surprises in the streaming space. Exploration upside and optionality, deliver that both to -- both of those to our shareholders by access to life-of-mine agreements, and because our assets are such high-margin, high-quality assets, exploration dollars are always first focused on these type of assets in terms of trying to grow and expand these operations. As I mentioned, on the lower risk side, our costs are predictable. Our capital cost is the upfront payment and our operating costs are fixed by the contract and predictable. Very, very important differentiator compared to traditional investments. We also have tax confidence. For a number of years, we run a dispute with the Canada Revenue Agency. However, a couple of years ago, we've settled it, and I'd like to point out that it is an agreement. It is not a court victory that is subject to appeal. This is an agreement. This is a handshake that we have now tax confidence in our business model, and there is much lower risk compared to some of our peers. Sustainable dividend. Our dividend is attached to our cash flows. And two, our -- it's a function of percentage of our cash flows on a go-forward basis. And so a good strong dividend policy that now is delivering the highest yield in the peer group. Then, of course, the highest quality assets. Our asset base, I would put up against anyone in the precious metals industry in terms of the quality of these assets going forward. So, so many advantages over owning either mining companies or traditional bullion or ETFs directly. I mentioned the high-quality asset base a couple of times now. This slide really sort of highlights the -- this slide and the next one highlight this high-quality asset base. As you can see, we've got 20 different mines delivering us metal right now and 9 different development projects. Those 20 mines will be a strong focus in Mexico and Peru. Our company was traditionally silver focused, but about 6 years ago, we shifted towards gold, and we're actually now more of a gold company than silver. 60% of our revenue comes from gold, about 35% of our revenue comes from silver and 5% comes from palladium right now. So key point here is that you can see the jurisdictions that we operate in, generally very low political risk, good strong jurisdictions, which is important when we have long-life assets in our portfolio. We want to have political stability. The other thing I'd like highlighting here is the list of our partners down the side, and it just highlights how important or how valuable the streaming business model had become as a source of capital for the mining industry. You can see that partners, the big diversified companies, like Vale and Glencore, and the big gold companies, like Newmont and Barrick, they've all taken advantage of streaming as a source of capital. Streaming delivers a competitive source of capital to the entire mining industry, whether you're a big diversified company or whether you're a small, single-asset company, like Alexco or Gold X. These are all good, strong, across the entire mining spectrum, streaming has become an active source of capital -- competitive source of capital. The second slide, and this slide probably differentiates us compared to even our peer group or even beyond the streaming space. I would argue that our precious metals portfolio, our production portfolio are asset-based. It's the highest quality asset base in the entire precious metals space. 73% of our production comes from the first quartile. Another 18% comes from the second quartile -- sorry, 15% comes from the second quartile. And so 88% of our total production comes from the bottom half of the respective cost curve for the principal commodity at our partner mining operations. These are the highest profit, the highest margin, most profitable metal mines in the world that we have invested into. And these mines -- what's important there is that these mines will continue to operate through low commodity prices. But more importantly, it's the first place that our partners and we invest to expand, to explore, to grow, to develop, and we get the benefit of that through these life-of-mine agreements. And we can see that. We have a reserve base that's 33 years long and another 33 years of resources beyond that. Over 60 years of reserves and resources. These are very, very profitable mines that have a very, very long life. I would argue, again, that this is the highest quality portfolio with the diversity that we have, this is the highest quality portfolio of assets in the entire precious metals space. Our production profile. As I mentioned earlier, we have had to withdraw our 2020 guidance. 2019 was a very good year for us. In the end, we produced just over 700,000 gold equivalent ounces, that was based on guidance of 690,000 gold equivalent ounces. We have been tracking guidance and beating the guidance for 8 years in a row. Obviously, with the issues that we're seeing around the world with respect to this pandemic of COVID-19 and some of the mining suspensions and deferrals, we had to spend the 2020 guidance. Our original guidance was for, again, just slightly over 700,000 gold equivalent ounces over the course of 2020. Our 5-year guidance, we haven't changed yet. We still feel that there's a reasonable chance of beating that 750,000 gold equivalent ounce, mainly because we've got some substantive growth opportunities in a number of projects organically within our existing portfolio. That's projects like Constancia with Pampacancha zone, that's expected to be up and running by next year, much higher grade. We should see a real kick start in gold production, good deliveries from the Pampacancha zone when it gets running at Constancia. Peñasquito, the silver mine down in -- it's gold mine down in Mexico, but we get silver from that. Newmont has really embraced that asset and is moving it forward. We've seen good strong production at Peñasquito. And the best grades in that ore body are coming over the next 4 to 5 years. And so we're going to see a dramatic uptick in silver production from Peñasquito to our credit. Of course, Salobo going through its third phase of expansion, increasing throughput capacity by 50%, a 50% increase in throughput capacity, expected to come online in 2022 and 2023, sometime. It should be turning on in 2022, reaching full capacity in 2023, that will be a substantial increase in our gold production. Voisey's Bay, of course, we start to receive cobalt at the start of 2021, that project, currently open pit mining and this -- and phasing into an underground operation with excellent exploration potential. Again, another life-of-mine agreement that will deliver metal to us for a very long time. The Stillwater mine in Montana. We get both gold and palladium from the Stillwater mine. And again, they've got -- Sibanye has got a very aggressive Fill the Mill campaign underway at both the mill sites on the Sibanye -- on the Stillwater operations. And so both the Stillwater and East Boulder mines have plenty of capacity to continue and increase production. So good, strong organic growth profile that should easily see us average over 750,000 gold equivalent ounces over the next 5 years. That doesn't count any of our optionality. That comes from projects like Rosemont down in Arizona, a great copper deposit that's going to produce 30,000 to 40,000 gold equivalent ounces to our credit over its life. The Pascua Lama project down in Argentina/Chile that Barrick is continuing to reassess and look at how to bring back into production. And the Navidad project in Argentina with Pan American Silver. Again, projects that I think even have a more likely chance of moving forward as countries and jurisdictions around the world try and kick-start their economies on the tail end of this pandemic crisis. And it doesn't include any potential additional opportunities that we may acquire over the next while. This is a very active time for us. Again, the need for capital is consistent in the mining industry and the need for capital in today's world is even more stronger than it ever has been. We are very active on that front. So I would expect over this next 5 years for us to continue adding on additional production. And to the slide that highlights the strength of streaming model, this is it. The costs are predictable. They're fixed by contract. And so there's no surprises. And what's really important to recognize here is that when we see an increase in commodity prices, that increase is delivered to our shareholders directly. We don't see costs chasing that up. We don't see like most mining companies where they run at a relatively consistent margin and chase lower-grade material, becomes [ ore ] and starts getting processed. With us, when we see silver go up $5 an ounce, we see gold go up $200 an ounce, that entire value is delivered back to our shareholders. We get the benefit of that because our operating costs are fixed by contract. Good, strong, healthy margins and good, strong business model that delivers that value. I mentioned our opportunity set in terms of new acquisitions. Our balance sheet is strong. We, for the last 6 years, have utilized the $2 billion revolver to fund our growth. We've used it very effectively. We've invested over $6.5 billion into new assets over the last 6.5 years, and have been very -- not -- outside of about $1.5 billion in equity financings, we have not had to tap -- we have not diluted our existing shareholder base. Our approach has always been to use low-price debt, low-cost debt to fund the differentials between very lumpy acquisition schedules and our very, very consistent cash flows. As I mentioned, with our original guidance, we expect it to be generating well over $700 million in free cash flow this year. We've now rescinded that guidance, but I don't see any reason why we shouldn't be substantially over $500 million in free cash flow this year. Current net debt [ position ] as at the end of December 31, 2019, so as of the end of 2019, our net debt was around $700 million and change, so $700-and-change million. So still plenty of capacity. And as I mentioned, we are active on the corporate development front looking through opportunities to continue adding additional production to our portfolio. This is what happens when we see a bull run in commodity prices. And as we speak, we see good strength in both gold prices and I think silver is starting its move also. Back in 2011 and '12, the last time we had a bull commodity price cycle and we saw high gold and silver prices, we generated an additional $2 billion in free cash flow over that short period of time. And I just want to remind everyone that with a 60-year reserve and resource life, I know we're going to see a bunch more bumps like that. And it's worth highlighting that we are now producing more than twice the metal that we were back then. And so the exposure, the optionality, the leverage that we deliver through this business model just generates huge returns for us and our shareholders. Dividend is a function of our cash flows. We set a basement every year. Our basement this year is $0.10 per share. And so we will maintain that $0.10 -- a minimum of $0.10 per share for the duration of 2020. As you can see, our yields are higher than our peer group. I don't see any problem why, over time, this 30% of cash flow doesn't climb higher. As our company gets larger and larger, the cash flows that we're generating are going to be so strong. I don't think we'll be able to put it back into the ground as fast as we receive it. So that's when we start returning it back to our shareholders in the form of the dividend. So long term, I see continued growth in this area, but we're already delivering higher yields than any of our peers. So the benefits to the partner mining companies. So this comes down to why would a mining company actually do a stream? Why would they use a stream financing? And you can see all the benefits that it adds compared to the traditional sources of capital, which is equity or debt. Really, the 2 key points that give streaming the advantage is the second one and the third one. It's the initial value creation for both parties and then it's the improvement in the return on invested capital, or internal rate of return that these projects see. Everything else does deliver value, but really, those 2 are the key, key points on a go-forward basis. And they're highlighted on this slide here. The top half of this relates to the arbitrage in value. When we take precious metals from a copper asset or a lead, zinc asset, and we bring it into our precious metals company. And even if we bring it from a higher cost type of silver from a gold mining company, it's generally worth more in our company than it is in the partners company. And therefore, there's an arbitrage in that value. As long as we share that arbitrage with our partners, we generate value for both us and our partners, our new partners. And streaming is the only form of transaction, where whenever we announce the transaction, we actually -- our share price will typically climb a bit and our partner share price will climb a bit. And we are truly creating value through a streaming transaction. The other one -- the other area that I think is really important with respect to mining companies and why would they do a streaming is the improvement on the return on invested capital. And I can't give you a better example than Salobo. Vale operates -- owns and operates the Salobo. It's a copper mine in Northern Brazil. It is one of the best copper mines in the world. They got to that point over 2 phases of -- when they originally started, they only finished up the second phase of expansion. As I mentioned earlier, they're currently constructing a third phase of expansion at the Salobo mine. The first 2 phases cost a total of just under $4 billion to construct, just under $4 billion. Through our agreements with Vale, we supplied $3.1 billion. So we supplied 78% of the capital required to construct this project. And yet our streams, where we get 75% of the by-product gold that is associated with this copper deposit, only take about 16% of the revenue away from this mine. It leaves the other 84% of the revenue with Vale. So Vale's shareholders, Vale's company funded only $860 million in capital to get this mine built. It's a $4 billion mine, but they only have to supply capital for $860 million and yet they still get 84% of the revenue. That 84% of the revenue represented $882 million in EBITDA to the Vale's shareholders just in 2018. You can see how dramatically improved the rate -- the return on the invested capital is for Vale's shareholders. This is why streaming works. Streaming will take a good mine and make it a great mine. Benefits to the community. It's something that we're really focused on. As mentioned earlier on, I'm a geological engineer that has an operating background. I understand how important social license is. And social license, I've been using that phrase long before -- or that concept long before it became trendy. But it comes down to being sustainable and making sure that we deliver long-term benefits, long-term value, sustainable value back to the communities where we operate, where we work. So our core focus in Wheaton, this has always been a core focus for us, and it's really represented in 4 different areas. First off, whenever we're looking at new opportunities, our due diligence process is very rigorous and thorough on this front. We're always looking for ways to help and provide support. If there's things that we see that can be done better, we make sure we share those ideas. But we also learn from our partners and share that knowledge with some of our other partners to try and make sure that we, as an overall mining industry, are that much more successful in terms of delivering long-term sustainable value. But we are very diligent in terms of making sure that when it comes to the investments that we make with partners and operations that have a good track record and are constantly working to improve on this area of expertise. This -- one of the other areas that we deliver that back is through our community investment programs. We pushed about 1.5% of our cash flow back to community investment programs, some of which is around our own employees, but the bulk of which goes back to the communities around the mine sites that deliver us the metal. We've also got strong policies and practices in place within the company. We've got sustainability elevated all the way to the Board level. We've last year established a Vice President of Sustainability within the company itself. And so it is something that's -- that is really working its way forward. And then one of the things that I constantly push amongst our senior management is making sure that all of us contribute outside of the job, that to take our time and take our efforts and make sure that we have external voluntary commitments to deliver value back to society as a whole. The community investment program we had, as I mentioned, 1.5% of our average net income comes -- is based -- we budget based on this. About 0.5%, which is about 1/3 of that total gets spent in the community where our employees live. Here in Vancouver and in the Cayman Islands, we have 2 offices, 1 in George Town in the Cayman Islands and 1 here in Vancouver. And constantly looking for ways that we can help make this just a better place. But as I mentioned, more importantly, the Partner CSR program is very, very important to us, and it's very important to our partners. We provide support to help them get stronger social license. This is what the mining industry needs to do as a whole. This is what the streaming and royalty industry needs to do as a whole. And it's to continue to improve that relationship with our partners. And so we've got good strong programs we're quite proud of. Four focus areas: health, education, environment and community. And all sorts of great examples with Vale in Brazil, with Antamina and Hudbay in Peru, and with First Majestic in Mexico. 2019 was a year that we really stepped up our disclosure with respect to a lot of these efforts. We've been -- these programs have been in place for a long time, but we're really stepping up the whole disclosure side of and making some external commitments, some very public commitments in terms of how we operate our company. Wheaton is top rated amongst ESG analysts, and a lot of that comes from these efforts on the disclosure side. We're a signatory, of course, to the World Gold Council, and very active in the World Gold Council. I'm Vice Chair and soon to be Chairman -- sometime in September of 2021, take over as Chairman of the World Gold Council. The Responsible Gold Mining Principles were established last year, and we're a signatory to that. But we also stepped up and we're the first streaming company to have joined the UN Global Compact just because we think it's important to make a bit of a heavier commitment, a stronger commitment towards the importance of making sure that we deliver value and sustainability back. I can tell you in these times, this is never more important than in times like this. So why invest into Wheaton Precious Metals? Well, let's start with the precious metals investment thesis in the first place. If you are going to invest into precious metals, typically you -- the traditional approaches have always been the precious metals miners, mining companies or bullion or ETFs. Now the royalty and streaming companies have been around. Royalty has been around for a long time. Streaming for 15 years now. And so I would say amongst these 3 options as ways to invest, you can see Wheaton checks the box on every option or every reason as to why to invest into -- which way to invest into precious metals on a go-forward basis. We are pure precious metals, which is very similar to what you have whenever you invest into bullion or an ETF, one of the GLDs. We are pure precious metals. As I mentioned, 60% of our revenue comes from gold, another 35% from silver and 5% from palladium. We do not and will not invest into oil and gas. We think that there's plenty of opportunities for you as shareholders to invest into oil and gas with oil and gas companies. And I don't think there's any logic in us dictating what percentage of your precious metals investment should be directly tied to oil and gas. I just don't understand the logic behind that. We also are not interested in base metals. Precious -- specialty metals like cobalt will form a small part of our revenue stream on a go-forward basis, but we are focused on precious metals. Now in terms of how we compare to the other streamers, you can see that the market metrics have us trading at a bit of a discount, really. The most important metric that I look at from any resource company is a P/NAV metric, price to net asset value, mainly because everyone's assets have varying lives and qualities and so net asset value is one way to capture that future value of these assets on a go-forward basis. So we definitely trade at a discount to our peers on a P/NAV basis. And in fact, if we made up that discount, we would add another -- quickly, another $1.5 billion. We are gradually [ clawing ] that differential back. It has been worse in the past. I think that given the quality of our portfolio and the tax confidence that we have, and the fact that we're a pure precious metals means that we should at least trade on the average of our peers, at least trade on the average of our peers. Compared to owning bullion, ETF or mining companies, you can see how Wheaton has delivered from a return basis on multiyear horizons, multiyear comparison -- return comparisons. We -- our business model is the strongest way to invest into precious metals. So our track record to date, we're -- since 2004, just over 15 years since we started this company, we've invested $9 billion into the ground. We've generated -- already generated over -- well over $6 billion in cash flow, $1 billion of that has been given back -- slightly more than $1 billion of that has been given back to our shareholders in our dividend program to date already. We continue to have strong annual cash flows, especially at current commodity prices. And we combine that with over 60 years of reserves and resources. You can see why this has delivered such strong value to our shareholders to date and will continue to on a go-forward basis, 18% average annualized after-tax return from our portfolio. So this is my last slide. And if anyone's got questions. This is the time to start thinking about forwarding those on. But just to reinforce, the strength of our business model: cost predictability, there's no cost surprises in our company; highest quality asset base; sustainable operations with a lot of active support from Wheaton to our partners to ensure and to strengthen that sustainability and that strength within communities and jurisdictions to try and provide that support; leverage to increasing precious metals prices. Obviously, we have an operating cost basis. So we can deliver strong leverage to that. And the fact that our costs are fixed means that any increase in -- increasing precious metal prices gets delivered right back to our shareholders. Attractive valuation relative to other streaming peers. We still trade at a discount to those peers, and we are gradually [ cheering ] our way through that discount. I think we should at least trade at the average of what our peers trade at because we have pure precious metals, and we also have tax confidence. I can't reinforce the importance of having a handshake agreement with the Canada Revenue Agency in terms of the strength of our business model, and we are confident about our approach on a go-forward basis. And of course, we have a competitive dividend. We pay you to own our stock. And so all of that adds up to, in our eyes, the best reason to own Wheaton as an avenue for your -- what you should be owning in the precious metals space, especially in today's world. So with that, I'd like to hand it back to questions.

All right. If you could pull out your crystal ball for a moment and much as you want to answer. Do you have a forecast for gold and silver in the next 18 to 24 months? Or does Wheaton comment on that?

Well, here's what I will commit to is that we're very bullish on precious metal prices, not surprisingly, in today's world, when I look at the amount of dollars that are going to need to be printed to restart the economy. And I can assure you that I don't think the full effect of this global shutdown has truly been measured yet, I really don't think it has. It doesn't take much to see the lack of planes in the air, to see the lack of retail storefronts that are working. It doesn't take much to see this impact around the world. I really do think that there's going to be substantive, for lack of a better word, quantitative easing, which means a lot of dollars being printed. I think the IMF came out with a forecast already commitments to date of over $8 trillion. I remember, it was only 10 years ago that billion seemed like the big number. Now all of a sudden, everything is being measured in trillions. That just so strongly reinforces my belief in precious metals as a liquid strong store of value, as it has been for thousands of years, gold and silver both. So I'm bullish in commodity prices. I don't have any problem envisioning gold over $2,000 an ounce. I don't have any problem envisioning silver over $20 an ounce. I'm actually more focused on silver than I'm on gold, because silver just has so many other attributes that make it attractive from an industrial application and technical application. It is widely used in high-efficiency electronics, wherever you want batteries to last longer. In this age of mobility, of working from home, of being connected by smartphones, we all want batteries that last longer. We all want more processing power. Silver will play a role in that. Silver will play a role in that. Silver also has the best antibacterial qualities of any noble metal in terms of filters and water application systems. And again, in today's world, people talk about how good copper is. Silver is even better than copper in terms of why microbial silver really, really keeping bacterial risk count to a minimum. And so both gold and silver, I don't have any problems seeing continued strength there. The bulk of my optimism in that really comes back to the fact that what we're going to see over the next 6 months to a year is substantive quantitative easing that will highlight the fact that from a store of value perspective, you do not want to be in the U.S. dollar or the euro or the British pound or any of the fiat currencies around the world. They work as good exchange mediums -- the currency exchange mediums, but they are not there for a store of value.

Could the printing press, I guess, wash out any fears of deflation? I guess, would you agree with that statement?

It's always interesting because you would -- yes, I would agree with that because that's what's going to be required in order to kick-start the economy, is that there's going to be a finding balance. And I can tell you, the impression that I wind up coming away from is it's just a house of cards that's just waiting for the slightest little hiccup, and then we're going to have some serious, serious issues in terms of liquidity, in terms of being able to make everything meet. And so again, the stability and the strength of precious metals, I think that everyone should have some precious metals exposures in their portfolio. Just taking -- and if we look at assets under management around the world in terms of funds and private investors and such and if we just take 5% to 10% of that and put it into precious metals, the demand on gold and silver, we'll see such strength in that space, and I don't think there's a time more apparent, more strong to show that strength than there is right now.

Moving on to more company-specific and model-specific. Well, streaming versus royalty, I guess, what are the pros and cons? Which one might you think is better?

Yes. Well, the fact that we're 100% streaming highlights of what I think is better. But then I would also say the fact that the traditional royalty companies have now also on the streaming companies -- if you look at our peers, Franco and Royal Gold, the bulk of their NAV, the bulk of their revenues come from streams. And so it highlights the strength of streams. Streams reflect a partnership between 2 entities to work towards maximizing value and delivering value back to the respective shareholders, the respective stakeholders. Royalty is a registration on land that typically doesn't have good strength of partnership, doesn't have that contractual relationship. People have argued that this -- the tenure on a royalty is better because it will survive through bankruptcy. I would argue that you just don't invest into assets that have a risk of going bankrupt. And so why would you want to focus in that area? Why wouldn't you want to focus on profitable partners that have margins? And so a stream, as I said, represents a contractual relationship between 2 parties to deliver value back to all stakeholders. I can tell you, it's a very strong relationship. The fact that we have had such strong repeat business from our existing partners to come back and do additional streams with us on other assets in their portfolios. If you look at it, most of our partners, we've got 2 or 3 assets in our portfolio from them because streams work so much better. It's truly a partnership where we can deliver that value. You just don't see that through royalty arrangements. So there's a lot of other ways that streams are much more attractive. We actually get physical metal or metal credits delivered to us. We don't get dollars delivered to us. It is ounces and ounce credits that we receive. So we truly do get exposure to the metal. We're not just collecting checks. And so there are so many strengths to the streaming model that I always point out the evidence of -- the best evidence is the fact that the traditional royalty companies aren't royalty companies anymore, they're streaming companies.

There are numerous streaming companies operating. To the best that you can answer, does Wheaton plan on merging with or buying out any of them in a general strategy?

Yes. I mean we constantly assess opportunities amongst our peer group in terms of consolidation. And there's no doubt that we have had -- we -- it's been said, the ultimate compliment is when someone copies you, and we've been complimented quite a bit over the last 15 years. It seems like more every day. What I will say is that probably the best acquisition that we've made in terms of a return on the capital was back in 2009 when we did acquire a competitor by the name of Silverstone. Silverstone had a number of smaller assets. I will say that, that generally makes up our third and fourth quartile higher cost asset base. But a number of assets that they had failed in terms of delivering confidence back to their shareholders, and we saw an opportunity to step in. So we're constantly monitoring a number of these smaller companies to just see if there are opportunities. And we'll tell you that the strength of the streaming model has also captured the investors out there. And most streaming companies, even if they're small and have high-risk assets, do tend to still trade at a premium over the traditional mining companies. And so we still see better return on our capital by chasing streams on new opportunities. That being said, we're constantly watching our peers and especially the smaller ones. And as they have perhaps hiccups or make bad investments, we do get to see -- we wouldn't hesitate to step in and do some consolidation if the opportunity arises.

What -- this is, I guess, pre-COVID-19. What percentage of revenues come from operations in Mexico, Peru and Canada? And then kind of adding to that, what do you anticipate that those percentages might be due to closures? And then also, that also affects your gold and silver ratio. Someone commented, it was 65% gold, 35% silver. Is this -- so I will throw that out.

Sure. Well, Mexico and Peru were very, very important to us when we started the company, mainly because we were focused on silver as we originally started off with Silver Wheaton. Brazil has become very, very important to us now with the Salobo investment because we do get substantive gold production from Brazil. And I would say that Brazil is probably about 35% of our value on a go-forward basis. I would say that Mexico is probably a sort of -- I don't have numbers that I'm referencing here directly, but Mexico is probably about 30% of our revenue with the Peñasquito and San Dimas assets and Los Filos also. All of those mines have had suspensions in process right now. The -- Peru, of course, Antamina, Yauliyacu and Constancia are the key investments down there. We've got a couple of development projects too. But those 3 assets probably represented, again, another 15% to 20% of our total production. And in Canada, of course, we've got Sudbury. We've got 777. We've got Voisey's Bay, which we will be receiving some cobalt from starting in January 1, but the stream isn't active right now. It's been suspended, but Sudbury is still moving forward. 777 is still moving forward. And then some development projects at Keno Hill. Minto has restarted. They weren't part of our guidance for 2020 anyways. They're still working their way through moving that forward. So I would say Canada is probably even less, probably around 10% to 15% of our production right now because most of it is coming from the Sudbury camp and 777, which is near the end of its life. So Brazil is probably the most important country for us, the Salobo asset. And then I would say, Peñasquito, second, in Mexico. I will highlight that we're about 60% gold, about 35% silver, and then palladium, of course, the Stillwater mine in Montana is delivering a great value to us. And our timing on that acquisition, we closed that acquisition back in 2018 when palladium was trading at around $900 per ounce, of course, it's well over $2,000 per ounce. And so we're seeing great returns on that investment. There was a $500 million investment with Sibanye on the Stillwater mine where we get 4.4% -- sorry, 4.5% of their palladium and 100% of their gold production from the Stillwater mine. And so palladium is also something that we're quite excited about and think that we see some good support for that over the next block too.

Would you consider streams in Africa?

We have looked. It really comes down -- Africa is a continent. Of course, political risk should be measured in the countries. Botswana and Namibia are both countries that we'd be very comfortable in. We have looked at assets there. We haven't seen anything of the quality yet that we're comfortable with. We've looked at certain assets in South Africa. I don't think we'd invest into a single asset company in South Africa. But if you had a parent company that had a number of assets in and outside of South Africa, we'd probably consider that. There's other jurisdictions in Africa that we have looked at. There are ways for us to temper political risk through corporate guarantees or parent guarantees. I constantly have to remind our potential partners that we're in the business of streaming precious metals, not political risk. And so we do a really good job of focusing on making sure that we don't -- that we minimize our shareholders' exposure to political risk. So there is a real strong focus on that front in terms of how we look. We have looked at many assets in Africa. We haven't closed any yet. Obviously, when we're silver-focused, there's not a lot of silver production in Africa. So it wasn't much of a focus area for us. But now that we are extended entirely to precious metals, including platinum and palladium, certain assets in Africa do definitely have some appeal.

Do we have any hope for a future for Pascua Lama?

I mean it's a classic example of social license and what happens if you break that social license. And from a technical perspective, it is one of the best gold ore bodies in the world, and it's -- we don't have any problem making statement that it's the best half-built gold mine in the world. I think that the original plan that Barrick had from a development process perspective was a pretty attractive one. And it seems to me that when we study it and look at optimization processes, it shouldn't stray too far from what they were building. Obviously, their costs, they had a real lack of cost control and their costs skyrocketed beyond comprehension through that process, and it's one of the reasons that the project has been set aside. Now that being said, with the new leadership at Barrick, what I can tell you is that the Pascua Lama is a focus area of theirs. I think Mark Bristow recognizes the quality of the asset and constantly is looking for ways to continue moving that asset forward. So we were of the opinion that Barrick had to have a bit of a change in approach, and I think Mark has delivered that change. How it moves forward, we'll see. We still have, up until September 30 of this year, the option to collapse that stream and get the rest of our money back from Barrick. I can tell you that right now, we don't have any appetite for that because we do feel that, that mine will eventually become a significant producer of gold. And to our credit, we would get 25% of whatever silver it would represent. And it would actually wind up being one of the largest silver mines in the world, producing close to 40 million ounces of silver per year based on the original production plan, which we see as being a reasonable plan on a go-forward basis. So we're -- currently, we're still in long term. We do have up until the end of September of this year to decide. As Barrick has not satisfied the completion tests, and so we can ask for our money back. But as it stands right now, we're comfortable with keeping that one as part of our optionality. I will say again that there's going to be a real push forward. So when I look around in some of the projects that we've got as optionality in our portfolio, I think there's going to be a real strong push forward from a lot of different countries and jurisdictions to try and stimulate economic growth, especially some that they don't have the support with the governments, they'll have to support themselves. And assets like Rosemont in Arizona and Pascua Lama in Chile/Argentina, to have those projects kick-start through the course of this process on the tail end of this would deliver real strong economic value back to those communities and those jurisdictions. And so I'd say the process -- or pandemic that we're going through right now would actually increase the odds of Pascua Lama being successful on a go-forward basis and Rosemont for that matter and Navidad down in Argentina.

I'm going to now call on my colleague, Stuart Macliver at Amvest Capital, who's got some questions. Stu?

Randy, Stuart Macliver here. I've got a couple of questions more around geographical exposure and opportunities. Firstly, I guess, generally, the streaming/royalty model is better understood in North America compared to Australia. Do you see attitudes changing in Australia towards the model that fits you guys?

Definitely. Again, streaming is a source of capital that competes with other sources of capital. What I would say, over the last few years that Australia has done a really good job of already sourcing a lot of capital. They've got a stronger market in the resource sector. They've got a lot of capital regulations or limitations in terms of where a lot of the funds -- the Australian-based funds can invest. A lot of them are restricted. They can only invest back into Australian enterprises, which of course, generates, again, another source of potential capital for mining enterprises out there. So we have looked at a number of opportunities in Australia. And in fact, we're actively current on one right now. And so streaming hasn't had the same penetration rate in Australia than it has in other jurisdictions. That being said, there are some streams that have been put in place. And I don't -- I think the time will come that there'll be even more streams there. The Australian market has just done a better job of supporting its resource sector than I think probably any other market around the world. And I think that's probably one of the reasons that streaming hasn't been as competitive from a source of capital perspective.

Yes. Understood. Yes, superannuation system forcing them to buy ASX stocks definitely helps. And then, with the consolidation or more simplification of geographies for the major mining companies, such as selling off the Super Pit, for example, in Australia, do you see that as an opportunity for Wheaton to -- are you seeing more opportunities for those acquirers of those noncore assets of the majors who will need to finance the development or expansion?

Definitely. Anytime there's any type of a transaction that needs capital, there's an opportunity for us to step in. And one of the things that we've been really reinforcing, and it's definitely getting some traction with some of our potential partners, is the fact that when it comes to making an acquisition, having a company like Wheaton stand beside the acquirer during the acquisition can only help. First off, we obviously supply capital. And you've seen how our contribution of capital greatly -- is much larger than the percentage of revenue we take away from the stream. I've used Salobo as an example in the presentation, but it's not any different if someone was coming in and buying that asset. The amount of capital we supply is a much bigger percentage than the percentage of revenue we take away from that stream. And so the other added benefit is the fact that you've had a second independent technical team review this project. And I can tell you, our objective at Wheaton is to make sure that we invest into healthy enterprises. I can -- I've seen plenty of examples, as we've seen a lot of competition come into this space -- into the streaming space of companies that are willing to do anything to get a stream on an asset and don't realize that if they invest in an asset where you chew up all the profit in the stream -- streaming agreement that the mine will shut down. It won't operate on a go-forward basis because why will the operator continue on a go-forward basis. And so it's very important for us to make sure that when we go through our due diligence process that we ensure that we're comfortable with some of those assumptions that have been made. And I can tell you, that gets a lot of traction, not so much in the big diversified companies, although I'd say track records maybe that -- maybe it should happen a bit more. But why would you ever shy away from a good, strong quality second opinion when it comes to making an acquisition? And so we have seen, we've had a lot of discussions that way with potential partners about standing beside them during acquisitions, and I do see continued opportunities down that space. There's just so much -- there's a lot of benefits that come with the capital that we supply.

Great. We'll move over to Gabriel Alonso-Mendoza also of Amvest. Gabe?

Just a question around growth. We've seen sort of -- and you've mentioned lots of competition, new entrants. Do you feel the space is saturated? And then sort of second part to that question is, we've seen some new business models come out in terms of, like, offering new creative ways to get streams. Are -- is Wheaton thinking about doing anything new or different?

Yes. We've already made some changes. I mean the worst thing that anyone can do is get stagnant in terms of structure and looking for ways to make improvements. So we already have most of our new agreements now. The production payment is a percentage of the spot price, not a fixed number. It's a fixed percentage, which gives us a fixed margin, which is, I would argue, still pretty attractive. But this has got some benefits back in terms of helping the partners on a go-forward basis. We do see a strong commodity price move in an upward direction. It protects us on a downside projection side. But there's other changes that we've seen. I would argue that some of those structural changes are probably chewing up too much of the value. I mean the one complaint that I would say isn't getting reflected enough in some of the other agreements out there is the fact that the mining industry has a horrific record of delivering on time, on schedule, on budget. So when I see agreements that have fixed terms or fixed quantities or buyout clauses, I look at those things as basically variable-term gold loans. They're not really streams. And we've seen so many new entrants come into the space that have said, okay, up until this many ounces or up in -- or you have a buyout clause as of this date or you have -- you have to realize that if those buyout clauses aren't exercised, it's only because the streaming company must be losing money and losing value. There's all sorts of challenges on that front. So I just see that as being a real strong issue and just the quality of the -- of those issues on a go-forward basis. So it is something that we watch pretty consistently to make sure that there's not good opportunities out there, but I also caution that some of these new entrants coming into the space have had a real challenge on the structural side, and they're giving up some real strength. I do find it interesting that we've seen some of those new entrants try and go through -- go public processes and have had failures on both fronts. And so it sort of highlights the strength of a good stream versus a variable-term gold loan. Gentlemen, unfortunately, I've got to sign off on to another call here right now that I -- so I'm going to have call the end of...

I'm just about to ask you if you had more time. So we've got more questions, but we'll get to your questions post-show. Let's -- closing statement, Randy.

These are very, very volatile times. We are in great shape from a perspective -- especially from a relative perspective around the world. These -- there's -- I mean, obviously, precious metals are a very important aspect of and should be, and if it's not occurred yet, open your eyes, it should be a part of every portfolio. But at the same time, this is also a time that charity is no more important than it is in times like this. And so I just encourage everyone to obviously take care of yourselves, stay safe and healthy. But if you've got the capacity, there is not a time more important for charity than it is now. And so this is the kind of issue that we as a community work our way through. And so let's all work together. There is light at the end of this tunnel. We will get there, and we will be stronger as a result of this. But please stay safe and healthy and make sure you've got some precious metals in your portfolio.

And some Purell on your -- in your bag.

Exactly.

Thanks a lot. Good day, everyone. A replay will be available in a few hours.

Thank you.