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

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Wheaton Precious Metals 2023 Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would like to remind everyone that this conference call is being recorded on Friday, August 11, 2023, at 11:00 a.m. Eastern Time. I will now turn the conference over to Mr. Patrick Drouin, Senior Vice President of Investor Relations and Sustainability. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call. I'm joined today by Randy V. Smallwood, Wheaton Precious Metals' President and Chief Executive Officer; Gary Brown, Senior Vice President and Chief Financial Officer; Haytham Hodaly, Senior Vice President, Corporate Development; and Wes Carson, Vice President, Mining Operations. Please note that for those not currently on the webcast, the slide presentation accompanying this conference call is available in PDF format on the presentation page of Wheaton Precious Metals website. I'd like to bring to your attention and some of the commentary on today's call may contain forward-looking statements, and I would direct everyone to review Slide 2 of the presentation, which contains important cautionary notes regarding forward-looking statements. It should be noted that all figures referred to on today's call are in U.S. dollars unless otherwise noted. In addition, reference to Wheaton or Wheaton Precious Metals on this call include Wheaton Precious Metals Corp and/or its wholly owned subsidiaries as applicable. Now I'd like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.

Thank you, Patrick, and good morning, everyone. Thank you for joining us today to discuss Wheaton's second quarter results of 2023. We I am pleased to announce that our portfolio of long-life, low-cost assets delivered another solid quarter, generating over $200 million of operating cash flow and over $140 million in net earnings. Our strong performance was underscored by significant progress at the recently commissioned expansion at our largest asset, Salobo, the ramp-up of which we expect to continue throughout 2023. And despite operations at Penasquito being suspended in early June due to a labor dispute, we achieved quarter-over-quarter gold equivalent production growth, highlighting the resilience of our high-quality diversified portfolio. Our growth pipeline of development projects was further derisked in the quarter when Aris Mining received approval of their environmental management plan which now permits the development of the Marmato lower mine. In addition, the acquisition of Sabina was completed by B2Gold, an experienced senior gold producer with a proven track record of successful mine development who will now be managing and building the Goose project. These projects are among the assets that are forecast to contribute to our impressive organic growth profile of over 40% production growth in the next 5 years. Looking into the remainder of 2023 and assuming the labor dispute at Penasquito was resolved by the end of the third quarter, we maintained our previously stated production guidance of to 600,000 to 660,000 gold equivalent ounces, albeit with a slightly higher weighting towards gold. On the corporate development front, we continued to see good momentum with the addition of a new gold stream on Lumina Gold's Cangrejos project and the expansion of our existing gold stream on Artemis Gold's Blackwater project, both of which are strong development projects that complement our portfolio of high-quality assets. In this environment of high interest rates and increasing demand for metals, our team remains exceptionally busy as we continue to see a healthy appetite for streaming as a source of capital for the mining industry, and we are actively pursuing several new accretive opportunities. During the quarter, we released our annual sustainability report as well as our inaugural climate change report, demonstrating our continued focus on transparency and delivering value to all of our stakeholders. I encourage you to take a look at these reports to learn more about Wheaton's approach to sustainability and the programs that we support globally. At our Annual General Meeting held this past May, we welcomed Jeane Hull to our Board of Directors, bringing her strong skill set to the Board and increasing female Board representation to over 40%. I would like to thank departing Board member, Eduardo Luna, for his contributions during his tenure. And I would also like to pay homage to John Brough, who, after resigning as a director in May, sadly passed away just recently. He is and will be dearly missed by all of us at Wheaton. I had the privilege to work with both Eduardo and John since the inception of Wheaton, and I'm immensely grateful for their invaluable guidance and leadership. I would now like to turn the call over to Wes Carson, our Vice President of Operations, who will provide more details on our results. Wes?

Thanks, Randy. Good morning. Overall production in the second quarter came in higher than expected, primarily driven by significant sequential improvement at Salobo. In the second quarter, Salobo produced 54,800 ounces of attributable gold, an increase of 61% relative to the second quarter of 2022. Vale reported production in the quarter was driven by better-than-expected ramp-up of Salobo III, partially offset by planned maintenance activities and additional work on the crushers at Salobo I and II. Additionally, Vale reports that planned maintenance activities will continue in the second half of 2023, and that the ramp-up of Salobo III is expected to be fully completed in 2024. During the quarter, Constancia produced 400,000 ounces of attributable silver and 7,400 ounces of attributable gold, a decrease of approximately 28% and 7%, respectively, relative to the second quarter of 2022, with a decrease in both metals primarily due to lower throughput and grades. Hudbay reported that full mining activities resumed at Pampacancha pit in February and the period of higher planned stripping activities in the Pampacancha pit was completed in June with higher-than-expected production forecast for the second half of the year. In the second quarter of 2023, Penasquito produced 1.7 million ounces of attributable silver, a decrease of approximately 17% relative to the second quarter of 2022 due to lower throughput. On June 8, 2023, Newmont Corporation reported that it had suspended operations at the Penasquito mine due to a labor dispute. To date, Newmont has indicated that it is in ongoing discussions with the leadership of the National Union of Mine and metal workers of the Mexican Republic and remains focused on finding a sustainable resolution to the dispute. Due to the delay between production and sales, we expect the impact of Penasquito suspended operations will be reflected in our sales results in the third quarter of 2023, resulting in a significant quarter-over-quarter decrease to our reported Penasquito sales volumes. On June 15, 2023, Artemis Gold announced the approval of the Schedule 2 amendment for the Blackwater mine. Additionally, on July 4, 2023 Artemis announced receipt of Fisheries Act authorization for development of Blackwater. These 2 permits represent significant milestones in the development of Blackwater and allow the Artemis team to continue their focus on completing Phase 1 construction on schedule and to port first gold in the second half of 2024. As Haytham will discuss later in the call, we expanded our gold stream on Blackwater in the quarter and have been impressed with Artemis' progress in developing the mine. Further derisking our growth portfolio on July 12, 2023, Aris Mining announced that they have received approval from the regional environmental authority in Colombia for their environmental management plan, which now permits the development of the Marmato Lower mine. This is a major milestone for Aris as construction of the lower mine allows for application of bulk mining methods and improved processing, which is estimated to grow Marmato's gold production fivefold once construction is completed in the second half of 2025. Wheaton's estimated attributable production in 2023 is forecast to be approximately 600,000 to 660,000 gold equivalent ounces, unchanged from previous guidance, predicated on Penasquito's restarting production in the second -- in the end of the third quarter. For the 5-year period ending in 2027, the company estimates that average annual production will amount to 810,000 gold equivalent ounces. And for the 10-year period ending in 2032, the company estimates the average annual production will amount to 850,000 gold equivalent ounces. This includes sector-leading organic growth of over 40% with an estimated total production for our current portfolio increasing to over 900,000 gold equivalent ounces by 2027. That concludes the operations overview. And with that, I will turn the call over to Gary.

Thank you, Wes. As described by Wes, production in the second quarter amounted to 148,000 gold equivalent ounces, or GEOs, a 3% increase relative to the first quarter of 2023 and a 5% decrease relative to the comparable period of the prior year with outperformance at Salobo being offset by a 32% decrease in silver production, primarily due to the divestment of the Yauliyacu and Keno Hill, precious metal purchase agreements, combined with the ongoing labor dispute at Penasquito. Sales volumes amounted to over 139,000 GEOs, an 18% increase relative to the first quarter of 2023 and a decrease of 16% relative to the comparable period of the prior year with the year-over-year variance being primarily due to a 6,000-ounce buildup of ounces produced but not yet delivered or PBND, at Salobo during the most recent quarter compared to 16,000-ounce release of PBND in Q2 2022, resulting in a 22,000-ounce swing in sales volumes that is simply driven by the timing of shipments. Strong commodity prices, coupled with our solid production base resulted in revenue of $265 million and a gross margin of $152 million. Of this revenue, 56% was attributable to gold, 41% to silver, 2% to palladium and 1% to cobalt. As at June 30, 2023, approximately 103,000 GEOs were in PBND and cobalt inventory, representing approximately 2.1 months of payable production, which is a level that is consistent with the preceding 4 quarters. G&A expenses amounted to $10 million for the second quarter, and the company anticipates that G&A will amount to $48 million to $43 million for the year. Adjusted net earnings amounted to $143 million, a $7 million decrease relative to the second quarter of 2022. It is worth noting, though, that when comparing the results to the prior year, the estimated impact to net earnings associated with the relative changes in PBND was $18 million, meaning we would have exceeded prior year's net earnings, if not for the timing of deliveries. Despite the persistent inflationary environment, Wheaton continued to deliver robust cash operating margins in the second quarter resulting in cash flow from operations of over $200 million and a quarterly dividend of $0.15 per share, consistent with the second quarter of 2022. In the quarter, Wheaton made total upfront cash payments of $89 million, consisting of a $31 million payment relative to the Goose project, $45 million relative to the Blackwater project and $12 million relative to the Cangrejos project. Wheaton also made dividend payments relative to the prior 2 quarters totaling $131 million. As mentioned by Randy, during the second quarter, B2Gold completed its previously announced acquisition of Sabina. And in conjunction with this acquisition, exercised the option to acquire 33% of the stream under the Goose PMPA in exchange for $46 million, resulting in a gain on the partial disposal of the PMPA in the amount of $5 million and generating an IRR of 48%. Overall, net cash inflows amounted to $29 million in Q2 2023, resulting in cash and cash equivalents at June 30 of $829 million. This significant cash balance, combined with the fully undrawn $2 billion revolving credit facility and the strength of our forecasted operating cash flows positions the company exceptionally well to satisfy its funding commitments and provides us with the financial flexibility to acquire additional accretive mineral stream interests. That concludes the financial summary. And with that, I will turn the call over to Haytham.

Thank you, Gary, and good morning, everyone. The corporate development team remains exceptionally busy evaluating opportunities, and we're excited to have announced 2 deals in the quarter, both adding strong accretive growth to our development project pipeline. Starting with the Cangrejos project on Slide 11, which is the largest primary gold deposit in Ecuador and owned and operated by Lumina Gold. This is a project which currently has more than 20 million ounces of gold in resources and 2.5 billion pounds of copper not to mention moly and silver and just recently completed a PFS in April of this year. For the agreement entered into in May 2023, Wheaton will receive 6.6% of the payable gold dropping to 4.4% after 700,000 ounces have been delivered for the life of the mine. In exchange, Wheaton will make an upfront payment of $300 million, the majority going in during construction and ongoing delivery payments equal to 18% of the spot price. Attributable production is forecast to average over 24,500 gold ounces per year for the life of the mine, contributing to our long-term growth profile, which, when coupled with the significant exploration potential, makes this a very attractive addition to our portfolio. It's important to note that Lumina Gold has strong community support for the project and no indigenous groups in the area as well. As with any transaction that Wheaton enters into, responsible and sustainable mining practices are paramount. And Wheaton looks forward to supporting Lumina, both financially as they construct Cangrejos and with their ongoing comprehensive community engagement efforts. On to Slide 12. On June 14, Wheaton amended our existing Blackwater gold precious metals purchase agreement with Artemis Gold to help them arrive at a fully financed transaction. By expanding the threshold, we created a win-win situation where Artemis continues to get strong cash flows in the early days that allows them to service their debt while Wheaton can get a stronger for longer profile in a high-quality asset with a strong operating and management team. This revision now entitles us to purchase 8% of the payable gold production until 464,000 ounces have been delivered, an increase from the previous 280,000 ounces dropping to 4% for the life of the mine. Notably, this threshold will increase should there be a delay in the anticipated timing of deliveries. In exchange, Wheaton will make an additional upfront payment of $40 million, bringing total upfront consideration to the Blackwater project to $481 million. Since our acquisition of the gold and silver streams on Blackwater in 2021, we've been very impressed with the progress made by the Artemis' team in derisking the project and advancing construction activities, and Wheaton is excited to continue to contribute to the success of Blackwater. That concludes the corporate development overview. And with that, I will turn the call back over to Randy.

Thank you, Haytham. In summary, Wheaton's second quarter was distinguished by several key highlights. We achieved solid 3-month revenue, earnings and cash flow and declared a $0.15 quarterly dividend. We believe our significant quarter-over-quarter production growth positions us to achieve our previously announced annual guidance of 600,000 to 660,000 gold equivalent ounces. Our pipeline of development projects was further derisked supporting our impressive organic growth profile of over 40% in the next 5 years. Our commitment to accretive growth was emphasized by the addition of a gold stream on Lumina's Cangrejos project and an expansion of our existing gold stream on Artemis Gold Blackwater project. Our balance sheet remains one of the strongest in the industry, providing ample capacity to add accretive high-quality streams into our portfolio. And lastly, we continue to demonstrate leadership and sustainability with the release of our annual sustainability report in addition to our inaugural climate change report, demonstrating our continued focus on transparency and delivering value to all stakeholders. So with that, I would like to open up the call to questions. Operator?

Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. [Operator Instructions] Your first question is from Brian MacArthur from Raymond James.

I have a couple of questions. My first question relates to Salobo. It looks like the ramp-up is going fairly well there, and I know they need a 90-day period to hit their targets. Do you think that you'll have to make the payment this year? Because I guess, January 1 is a date where if they hit 35 million tonnes, you make your payment? Or is that still something that's more likely to happen next year?

Well, Brian, good to talk to you. The -- we did revise that agreement earlier this year. And so there is 2 phases to the agreement. And so the first step in this is the $32 million level -- sorry, 32 million tonnes per year throughput rate. And Vale has been very, very clear about their intent to satisfy that first phase this year. And so I hope we actually make it. I mean, it's a reflection of the success that they've had in terms of ramping up the third line there. And so things are going a bit better than what we expected, and so we're hopeful that we get to make that payment this year.

Great. And my second question relates to another large option you have that's not in your guidance at Pascua. Another company in made a fairly significant royalty purchase on that asset on the Chilean side recently. Do you have any update on that? Or any read-through for that from your perspective, given your investment there?

Yes. I was pleased to see someone else agreeing with us in the sense that -- and I've said this for a long time, it's the best half-built mine in the world. It is one of the best gold deposits in the world, and it's a deposit that also produces substantial silver. So as a refresher, we get 25% of whatever silver is produced from both the Chilean side of that deposit and the Argentinian side of that deposit. I know Barrick continues to advance and study and work at it to see if there's a way to move that forward. I know Mark agrees with me in the sense that it is a true world-class deposit that would fit into their growth profile very nicely. Obviously, there's some challenges on the Chilean side with respect to permitting. But I know Barrick is investing in on the Argentinian side. So it's important that our stream does cover both sides of the border, not just the Chilean side, but both sides of the border. And so we're hopeful. As a reminder, a couple of years ago, we had the opportunity to collapse the stream and get our money back. And we chose not to because we do believe that this mine will eventually deliver good, strong boost in silver production to our own portfolio as it moves forward. And we're just happy to see not only Barrick continuing to try and strive towards bringing at least the Argentinian side forward, but also in discussions on the Chilean side, but also to see some of our peers also investing into this into the opportunity. So I haven't heard Pascua for a while. So I was pleasantly surprised to hear that it was being brought back into the markets.

Just to remind me, if I remember correctly, because you did get some of your original money back, it's about $250 million is sort of your -- what you put into this so far. Is that the book value on it now?

Well, if we put in $625 million back in the early -- well over 10 years ago, but we did receive silver from a number of other Barrick's operations. And so our net investment into this is just over $250 million.

[Operator Instructions] Your next question is from Ralph Profiti from Eight Capital.

Randy and Haytham, I'd like to get your thoughts on Ecuador. It's not -- with Cangrejos, it's not your first venture into the country. But just wondering how you were sort of factoring in country risk and country factors into the analysis. Is this sort of like 100 basis points type of thing when you're looking at returns analysis on countries that sort of are still developing mining law, mining codes.

Yes. It is a factor that we always bring in to our own valuations in terms of looking at country risk. Ecuador is obviously -- even just recently, some challenges. However, it is -- it does actually have a relatively strong history on the mining side. More recently, there's successful operations ongoing right now. Lundin Gold has had great success in the country. And so I think it really comes down to -- as in a lot of places around the world, country risk is important, but also community risk is important. That's one of the things that we saw with the Cangrejos project is that it's got strong community support in the area. And that goes a long way towards ensuring that you're going to get strong support at the federal government or your national government level in places like that. And so it is a factor that we feed into our own valuations to adjust that. If you look at our portfolio of assets, you can tell that it's a factor that feeds into it because we don't have a lot of our investments in risky jurisdictions because that's how we factor it in. And so Ecuador, depending on the project, we're very comfortable in certain areas in Ecuador as in any country. There's -- it's always one of the more important things and I think society is moving that way, is making sure you have strong community support.

Ralph, I would just add to that. I think it's really important to recognize that we don't advance the vast majority of our upfront payments until there's a construction decision made, and we would expect that, that would only be made in a stable political environment.

Yes. Well said. I appreciate that color. We are going to get a Hudbay Copper World pre-feasibility study in Q3, and this obviously follows on the PEA, and it's looking like a very different project from the original deal that valued the stream there. Just wondering, does delivery of the PFS trigger renegotiation in some way on that quantum versus the original stream. Could we see something bigger or smaller depending on what the PEA looks like?

Well, look, Hudbay is an important relationship with us. Peter and the team, we do a lot with them. Constancia, of course, is doing very well for us right now. We had good history with Hudbay and we intend to continue having a good strong partnership there. The original stream was, of course, focused on the Rosemont deposit, and it had a vision in terms of production rates and stuff like that. The Copper World is definitely -- I think it looks like it's probably going to wind up being slightly less, probably around 2/3 of the level of production. But one has to remember that those ounces weren't even in the original forecast. And so Rosemont is still in the background waiting to move forward. And I think once Hudbay proves that Copper World can be operated in a safe and sound environmentally and socially responsible manner, which we know they have the capability of. We've had that experience with them in numerous other locations. And Rosemont/Copper World is a very low risk, very high value project for that community, for the country as a whole. And so once we see that prefeasibility come in, we'll have a good look at it, and then we'll sit down and talk about how we continue to grow our partnership with Hudbay. I'm not expecting any issues there. It's a good, strong asset as a whole, and we'll see how that moves forward. But we're still waiting for those details, too. I think there's still -- Hudbay has got several different options as Copper World comes into play, and I think they're still sort of fine-tuning that. That's why they haven't released it yet.

Your next question is from Martin Pradier from Veritas Investment Research.

My question is about the second half for Salobo. How are we seeing it? Do you think it can maintain or increase the production that they had in Q2?

I'll let Wes take that one.

Sure. Yes. No, thanks for the question. Really, I mean, we're definitely encouraged by what we saw in Q2 here and certainly Salobo III moving ahead and then Salobo I and II seem to come kind of back in line with expectations. We're really excited about where things are going for the rest of the year here. And there was in the forecast and kind of the budget for the rest of the year, there was an increase as they brought Salobo III in line, and we certainly expect them to kind of get in that same kind of vein as what we saw in Q2 and carry on for the rest of the year. As Randy said earlier, I mean, the more that we can see them getting closer to that expansion payment, the better off that we're going to be moving forward.

We know that their intent is to try and satisfy the first phase of that expansion payment, which is 32 million tonnes per annum at a run rate. And so that's a 90-day completion test for that first phase expansion. And so we know that they're striving towards making sure that, that gets satisfied in the second half of this year. And so there's no doubt that we're going to see continued growth at Salobo over the course of the year. What's exciting is the potential scale of that growth.

What would they, in terms of tons per day in Q2?

It was running at about 70%.

The 3 lines.

3 lines [indiscernible]. So in order to achieve the 32 million tons per annum, they would have to be running at closer to 90% present. Still a ways to go to get to that completion test, but they're moving in the right direction. Yes. I should -- worth noting as well that I mean we were down there in April this past April. And really, things are moving along extremely well. And that relationship with Vale continues to improve and really a great group down there that is moving things in the right direction.

Yes, I was going to highlight that 70% is an average over the Q2. It was definitely higher towards the end of that. So it doesn't seem like that far of a stretch for them. They're pretty comfortable that they're going to be able to satisfy this.

Perfect. And on Cangrejos, is that fully permitted and will be impacted by the claim on the presidential decree, the regulated environmental consultation, which is impacting your other mine that seems to be -- well, there is a claim that is unconstitutional, that presidential decree.

So on Cangrejos, the exploration permits have been received. The EIA is obtained for the exploration phase and the environmental baseline studies have been compiled. The exploration investment protection agreement has been signed. But they still need to enter into construction and production agreements and Lumina need to undergo permitting for those operations. In terms of everything that's happening right now with regards to the congressional changes that we've seen there, I think at this point in time, it doesn't really apply to something like Cangrejos, because it's so far out into the future. I think when we look at our profiles, we've got anywhere between -- near term is 1 to 3 years, medium term is 3 to 5 years and longer term is 5 yearns. Then, this definitely falls into the 5- to 10-year profile. So there's going to be a lot of changes in Ecuador between now and then, and we expect a lot of the issues that are now in the limelight to have been resolved by then.

Your next question is from John Tumazos from John Tumazos Very Independent Research.

Following up on Martin, how many years out is Cangrejos of Lumina Gold? Is it -- did you say 5 to 10 years? Or could you be precise, 5, 6, 7, 8 years? And more broadly, are you going to target projects that are more than several years out, which is the hardest to finance for the emerging companies, given 5.5% short-term interest rates, tough market for gold stocks, et cetera. It's a great opportunity.

Yes. Thanks for the question, John, to answer your question, Cangrejos falls into the latter part of this decade. It's probably somewhere around 28%, 29% is when it would actually kick in based on the current profile. We are -- the way we structure our transactions is we actually make stage payments, along with the rest of the capital that's being infused into the project. And for -- like what we call those, we call those early deposit structure. So we commit very little at this point in time. And it gives the company a lot of time to actually go back and actually raise the capital, whether it's debt equity, private equity stream, et cetera. So we work with our partners to try and help them get across the line. And I think the longer-term projects -- really our view on where we think commodity prices are going longer term. And we do think assets that contain both gold and copper, not only Cangrejos, which is primarily a gold asset with about 20% of the revenues coming from copper will start to get a lot more attractive, not just to the diversified base metal companies, but to a lot of the pressure most companies, as you've seen them go into base metals of late.

And I think it's important to just have a cross-section of investments, near term and longer term. This isn't an industry where we make acquisitions all the time, right? You have to be sensitive to where you think you are in the marketplace. But right now, we do see good opportunities in that space and good value. Cangrejos is a project that we've admired for quite a while as it's been advanced to move forward. We think it's going to be a good core producer to us. But -- just to reiterate what Haytham just said, we tend to look at things in sort of near term and then 1 to 5 years and then 5 to 10 years, that's how we give out our production guidance. And we don't have Cangrejos contributing in our first 5 years, but we do have it -- we expect it to be contributing in our 5- to 10-year period.

Congratulations on accessing such a fabulous asset.

Yes. Thank you, John. Thanks for the call.

And your last question is from Tanya Jakusconek from Deutsche Bank.

I think it's me from Scotiabank. But anyways.

We were chuckling. We miss that news release.

Yes, maybe like. Okay. I think that's me. Anyway...

Good to talk to you Tanya.

Nice chatting with everyone. I have about three that I wanted to review, and I'm going to start with Gary, if I could, first. Two for you, Gary. I just wanted to ask and I asked on the Franco call as well because the Canadian government has come back with initial commentary and/or -- initial commentary on this global minimum tax and the framework. Have you had a chance to look at it? And anything that you could add there that you think we should be aware of?

Yes. I mean we're still in the process of getting through the details. But it looks like the proposed legislation is in line with the principles that they previously released. So really, we don't see there being any change to our prior guidance, which is that we think that once implemented, and assuming that it does get implemented, that it would have application to the income generated by our non-Canadian subsidiaries. And that would -- from a NAV perspective, we estimate that, that has about an 8% to 10% impact on our NAV. If we were to have it applied -- if it had applied this year, I'd estimate that the implication would have been that we would have accrued like somewhere in the neighborhood of $35 million to $40 million of tax for the first 6 months if that gives you some idea.

More than anything, Gary, was just more, was there anything in there that you saw or read that's anything different from what we have all been led to believe. There wasn't a lot of details on what could be deductibles, et cetera. So I don't know if there was anything in NAV, but you had some intel on?

Yes. So far, it doesn't look like there's any difference from the principles. So I don't think there's anything that you would need to adjust.

Okay. And then just on Penasquito with the timing difference. And Gary, what if Penasquito is down for the entire quarter, so down all of Q3. What do you think we should be thinking about in terms of sales for the quarter from silver just from Penasquito?

You know what, I'm going to turn that over to Wes, who's better positioned to respond to that.

Sure, yes. So I mean we're still expecting that even if Penasquito is down for the entire quarter that we would come in within our guidance range. So we're expecting -- I mean it would certainly have an impact, and it would continue to impact through into Q4 if we're down for the entire quarter. So there is a delay of about 6 weeks to 2 months between that kind of production and actual sales.

So specifically in Q3, we would see a sniff of sales because with that 6- to 8-week delay in sort of the connection between production and sales, obviously, they shut down on June 8, which is 3 weeks before the end of the quarter. So that does leave some residual sales revenue that we should see in Q3, but not a lot, as you'd imagine. And definitely, sales will be impacted on that side.

So we should think, Randy, minimal sales coming in, in Q3, should it be down for the entire quarter.

That's right.

Okay. No, that's helpful. And Randy, can I ask you, does this have an impact? Obviously, you look at your dividend. We've seen obviously a free cash flow growing and you have about 15% payout. Does this push out your thoughts on increasing that payout?

Well, I think what is more has an impact is the fact that Haytham keeps on finding good projects to invest into. We've just committed now to Cangrejos and I can tell you, we're very busy on that front on the corporate development side. And so I'm fully expecting that Haytham is going to deliver a few more ways to invest capital. And so -- we've always been about -- the money, if it's not going into accretive new acquisitions, it's going to go back to the shareholders. And we've got good strong cash flows. We're seeing outperformance in a number of other assets. And so, we're falling into our guidance range. We're comfortable with our year guidance -- 2023 guidance. And so I don't think -- to be honest, I think that the strength of the rest of the portfolio is -- it hasn't had an impact in terms of how we're thinking on the dividend side. And so the dividend is a good strong dividend. I think -- I believe it pays the highest yield in the space, at least amongst the senior streamers. And so it's a good, strong dividend policy, but we've got plenty of capacity. We can see that in the balance sheet in terms of what we've done. And so I don't think it's -- it hasn't had an impact on that front. And I think it's probably -- if we don't bump it, it's probably because Haytham keeps on finding great ways to spend it.

I think it's important to recognize we've set dividend policy based upon long-term forecast. And this is really just a short-term issue in our eyes.

And I was just thinking whether -- should I be thinking about for 2023 or has it been pushed out sort of into 2024 just because of a kind of short-term blip.

I wouldn't expect a change in our dividend policy until 2024 at the earliest.

Okay. No, that's helpful. And if I could just squeeze one up more in for Haytham because he's a money spender. Well, I wanted to circle back, Haytham, with you. I just wanted to just come back and I asked this last quarter, the deal size. Because this deal size seems to be, in my opinion, small relative to the size of your company. But are we still looking at that $150 million to $350 million range for precious metal acquisitions?

Thank you for the questions, money spender, I like that. I can tell you that we're looking at all ranges. So the majority of the stuff probably is still sub-$300 million. There are some that are much smaller than that. And we've got a couple that are actually $500 million plus as well. So we're aggressively trying to move things forward. We're probably trying to move forward on 15 different opportunities at any given time. We'll see how many of those actually get done by the time we're done. But this is one of the strongest environment for streaming that we've seen, and that's likely attributable to the fact that equity is not there. Debt is too expensive. Private equity is very expensive, and Wheaton treats our counterparties very fairly try to give them -- come up with win-win transactions. So we're very excited here over the next little I'll try to get more transactions done.

Well, the plus $500 million one, Haytham, that you have, that you said you've got a couple there. Are they gold focused? Or are they silver?

They are precious metals focused. I would say they're a combination of gold and silver.

Gold and silver, not platinum, palladium.

No, no. I mean our 90-plus percent -- probably 95% of our focus is on gold and silver these days.

Okay. All right. And still looking at the same -- development and operating assets to both categories?

Yes. And I think is we've got some that are closer to the operating stage -- near-term operating stage as well that will contribute to our overall earnings and cash flows in the near term.

Thank you, Tanya, and thank you, everyone, for dialing in today. In closing, we believe Wheaton is well positioned to continue delivering value to all of our stakeholders for a number of different reasons. Firstly, by offering our shareholders exposure to our diversified portfolio of long-life, low-cost assets that we believe has one of the best organic growth profiles in the mining industry. Secondly, by having low and predictable costs which are resilient to inflationary pressures, resulting in some of the highest margins in the entire precious metal space, which has allowed us to consistently return good value to our shareholders. And lastly, by being a leader amongst precious metal streamers in sustainability and by supporting our partners and our neighbors in the communities in which we live, in which we operate. So with that, I would like to finish off by saying that after nearly 20 years at this company, I have never been more excited about our future prospects. We believe that now is a great time to own more Wheaton. I do look forward to speaking with all of you again soon. Thank you.

Ladies and gentlemen, this concludes the conference call for today. Thank you all for participating. You may all disconnect your lines.