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

So maybe just do it from the podium, then I'll go from -- or do you want to hold on to? Sure. Perfect. Haytham is President and CEO. He's been in the industry for 30 years and half of that at Wheaton. So lots of experience and became CEO this year.

Thanks, Matt.

Yes, it's a real pleasure. So I want to start out a couple of weeks ago, you hosted your Investor Day. I took away from that five main differentiating elements of your company. The team, the process, the returns, the growth and the scale. And I thought I'd start out with a question on each of those topics. So first, the team. You were appointed CEO March this year. You've got 47 people in the company. It sounds like you're busier than ever. Lots of assets, regions, new deals to look at. Can you talk about how the team is handling the workload? And what are your first impressions in the CEO role?

Sure. Thanks, Matt. Yes, I think the most important thing to note is, I have been there for 15 years and helped to build along with the rest of the senior management team, the team that we have in place. We're now up to actually 48 people. So we've added three people, all on the technical side that within the last month that we've been looking for, for quite some time, the right people, not just any people. And that's because there's a significant amount of opportunities to look at. It's probably double right now what we typically look at. And typically, we're at somewhere around 12 to 15 opportunities. We're probably closer to 20, 25 opportunities that we're looking at any given point in time right now. And the team itself, it's a very well-run organization that hires high performers, that know what they have to do and do it. So there's not a lot of oversight required. Obviously, I ran the corporate development team before stepping in as President and CEO of the company, and I'm still staying very involved in corporate development and ensuring that we continue along the same path.

And that's great. I mean it sounds extremely busy. Second differentiating factor is process. So Wheaton wants the highest quality assets. Can you talk a bit about how the team evaluates assets? And have you seen any changes in the quality of assets in this market?

Sure. Our philosophy within Wheaton is to actually acquire the highest quality, lowest cost, longest life in safe jurisdictions with strong partners. That has always been our strategy. What we're trying to do is create the foundation stock in any portfolio that provides the lowest risk in the entire personnel space. I can tell you, when we're actually looking at a new opportunity, we start from the technical side. So that's why the technical team is probably almost 1/3, if not slightly higher than that of our company. We take the entire drill hole database, we rebuild it. We come up with our own reserves and resources. We do the same thing on the engineering where we're using various benchmarking methods, et cetera. And then we vet that against the existing technical reports. And what's important is that's just step one. And just to figure out if we actually believe in the technical report and the quality and what they're planning on doing. The next step is we sit back and we say to ourselves, what is the opportunity here? Is there an opportunity for expansions in throughput, grades, recoveries, improvements in efficiencies? Is there a good exploration upside? We do enter into life of mine agreement. So that's incredibly important to us as well. And then all that plays a significant portion of our valuation. So once the technical team is done and the social science of it is done, looking at the communities and everything around it, the financial team takes over. They do their analysis as well and the legal teams kind of comes -- steps in and tries to structure it in the most efficient way to provide our shareholders with the best security and the best structure that we can get.

And I think that the team and the process ultimately drives this third differentiator, which is returns. So I think you have a return on invested capital of around 20% this year. There's a lot that goes into that. Can you talk about like how do you attribute those returns across deal size, timing, structure or just the quality of the assets?

Sure. And we have had an IRR over the last 20 years of somewhere close to 20%. And the ROIC that you mentioned is also close to 20% at this point in time. What's important in how we structure these transactions is, we don't put up a lot of the capital until we're very, very close to actually construction. So the more de-risked the project is, and that's when we feel comfortable putting up a lot of capital. Often, what we do is we'll put up like, let's say, 10% of the stream value upfront, to allow them to advance it through to the construction stage and the permitting stage. So when we put our capital in, it's the most de-risked amount of capital, and that immediately generates those cash flows in a much shorter time frame. So that's one of the reasons why our return has actually been so strong.

Okay. On to the fourth differentiator, growth. You've got 50% organic growth by 2030. How confident are you that can be delivered? And how do you think about the sustainability of the growth?

That's a great question. And this is probably one of the most exciting times in the history of Wheaton because we are growing from 800,000 gold equivalent ounces up to 1.2 million gold equivalent ounces between now and 2030. I will say that, that is not just our expectation or our ambition, that is growth we are incredibly confident with. You look at what's driving that growth. We've got 9 development projects, 6 of them which are already in construction. A couple of them are -- have either already poured gold, haven't hit commercial production yet, but have poured gold or are in the process of getting close to pouring gold. And the last 3 are waiting for final investment decisions probably to come in the next 3 months to 6 months. So when we say we're going to get to 1.2 million ounces, that's just based on those. What we haven't factored into that is the significant amount of organic growth we have on top of that. As an example, we've had a significant number of our partners look at growing their production past the levels that they've actually outlined in their current 5-year plans. To put it simply, Salobo, a perfect example, one of our favorite opportunities for growth. They are -- they've looked at -- initially started at 12 million tonne, one line. They've now put in 3 lines. And on the third line, they're now putting in a coarse particle flotation circuit. That's going to improve the growth of our production by at least 5% to 10%. So that will put us somewhere closer to 300,000 ounces. Then you look at Kone. Kone has done an incredible job of advancing that project, just poured first gold, which we saw a couple of days ago. They are looking at -- and what was nice about the stream that we provided them is we provided them the ability to continue to explore at the same time. So what they found is additional higher-grade material than was in the original plan. So now they're looking at rather than have 300,000 ounces a year and dropping after that, they're looking at maintaining at least 300,000 ounces, probably, I would say, closer to 350,000 ounces to 400,000 ounces a year. And I would -- if I had to guess, I would probably say that's going to last for in excess of 10 years. And you look at projects like Kurmuk, which is developing their project in Ethiopia. That project alone has the potential to -- is designed to 6 million tonnes. They're talking about increasing that to 6.4 million tonnes. And we look at other opportunities like Hemlo, which we've recently helped fund, and they're looking at growing their production base well above the existing level. And that's a mature asset that was starved for capital for quite some time. So that's going to be another way for them to grow. But what we haven't factored in is additional growth that we've seen recently. Generation Mining, another good company has recently raised the full funding needed to actually break ground and start construction of that project. And you look at what's happening with Aris Mining and Toroparu, another example. They're completing a feasibility study. And if that feasibility study comes through, you can see additional growth. All these additional avenues of growth are not even into that 1.2 million gold equivalent ounces number. So when we say 1.2 million gold equivalent ounces, I can tell you, we think that's a very conservative number and a very achievable number.

Okay. The fifth differentiator I picked up from Investor Day is scale. Wheaton has traditionally invested around $1 billion a year in new streams. Cash flow now is closer to $3 billion a year, and you've deployed about $5.5 billion in the last 12 months. So the scale has really increased and the mega deal at Antamina is an interesting development. So my question is, as we head into 2027, do you think we're entering the era of the mega deal? Do you like that idea? What could that mean for incremental returns from here?

Sure. Thank you for the question. I will say that, yes, so far this year alone, just in 2026, we've committed $4.6 billion. You're right, in the last 12 months, it's been about $5.5 billion. This year has been a bit of an anomaly. Typically, we've deployed anywhere from $800 million to $1 billion a year for the last decade. Obviously, with stronger cash flows, you're going to see -- you're going to have an ability to deploy additional capital. We have, in the past, quoted that we are entering an era of multibillion-dollar transactions. And what is interesting, though, is those don't all happen in the same year. We currently have about $2.6 billion in capacity to deploy. And every month, we're adding another $250 million to that. So we've got significant capacity to do a lot of these deals. But I will say, even Antamina, that took -- from our first discussion 5 years ago, to when we actually pitched it again a year ago to when we actually got the deal done. It wasn't a slow process. There's an education process that has to come for a lot of these larger diversified companies that are now looking for ways to unlock value. And that's one of the things that Antamina has done. It's -- I wouldn't say it's open doors, but it's opened a lot of windows where people are now exploring and saying, is there a way for me to unlock value in my existing portfolio and help drive the continued growth of the organization. And that's what streaming is really designed to do. So looking forward, I do think there's going to be additional $1 billion-plus transactions. The majority of the stuff we're looking at is still I would say, sub-$500 million. But I would say I wouldn't be surprised to see a $1 billion transaction at least once a year for the next 5 years to 10 years.