Hi, and thank you for joining us today. My name is Jimmy Connor, and I'm with Bloor Street Capital, which is a corporate access firm based in the city of Toronto. Today, I have the pleasure of introducing you to Randy Smallwood. Randy is the President and CEO of Wheaton Precious Metals. Before Randy begins his presentation, I'm going to say a few words, first on the format of this presentation. We're going to keep it to 45 minutes. In order for us to meet that timeline, I'm going to be asking questions. A number of attendees have already submitted questions, and I'm going to be asking those throughout the presentation. If, however, you would like to ask a question during the presentation, please send us an email to info@bloorstreetcapital.com, info@bloorstreetcapital.com. Now for a few words on the company.
Wheaton Precious Metals is not a mining company per se, but rather a financing company that provides innovative financing solutions to mining companies. As you know, mining companies are very capital intensive and are always looking for new sources of capital, this is one way for them to do it, through a streaming agreement. To give you a very simple explanation, a mining company would need money. Wheaton Precious Metals might give that money to the mining company, and in return, the mining company would give them a portion of their production in either gold or silver. That's it in a very simple form. Wheaton Precious Metals trades on the New York Stock Exchange and the Toronto Stock Exchange under the symbol of WPM. It has a market cap of $20 billion, CAD 30 billion.
It has 450 million shares outstanding, fully diluted, and it pays a quarterly dividend of $0.10 per share or $0.40 annually. With that, I'm going to hand things over to Randy. Randy, thank you very much for joining us today. Before you begin your formal presentation, why don't you give us a little bit of background on yourself and also how you became involved in Wheaton Precious?
Thanks, Jimmy, always a pleasure to work with you and sharing our story. My name is Randy Smallwood, President and Chief Executive Officer of Wheaton Precious Metals. I've been with the company since we founded this company back in 2004 when we created the streaming business model. I'm a geological engineer by background. I used to work for Goldcorp, in fact, was looking to raise capital for Goldcorp in being part of the team that founded the original Silver Wheaton back in 2004. 2007, swung over to this company on a full-time basis, then took over as the CEO in 2011. As I mentioned, my background is a geological engineer. I've got plenty of experience in the mining industry, all the way from grassroots exploration up to operations.
I had the good fortune of being part of a discovery team on some very profitable, small scale, but very profitable gold mines here in Canada. What that's really sort of driven home in our company is the demand for technical expertise, technical best practices in terms of reviewing projects. We really do focus on understanding the technical risks and the opportunities that exist in these investments. Yeah, it's allowed us a very strong foundation of current assets, and I'm sure through this presentation you'll see that. Thanks, Jimmy. Can I start with this now?
Yes, by all means.
There will be, of course, some forward-looking statements in this presentation. I urge everyone to understand the risks associated with those forward-looking statements, some of which are described in the fine print here. I'm going to start off with a description of who Wheaton Precious Metals is. Wheaton Precious Metals, of course, as I mentioned, we created the streaming business model, which is clearly a model that is designed to benefit all stakeholders. Our vision here at Wheaton is to be the world's premier precious metals investment vehicle. Our mandate in achieving and striving for that vision is to deliver value through that streaming model to all of our stakeholders. That includes our shareholders.
First and foremost, that's who I work for directly. We're constantly looking to deliver profitable precious metals production, a long-term and high margin precious metals production with a relatively low risk profile attached to that production. It's a very different offering than traditional mining companies and, for that matter, traditional bullion buying. To our partners, the operators that we work with where we help them crystallize, typically, crystallize the value of a non-core portion of their production stream. Generally, these are base metal companies that have precious metals byproduct. We find a way to give them the value for that precious metals byproduct and bring that into our portfolio.
We also work with our partners past the original upfront payment to purchase the stream in the sense that we have technical ambassador programs, and we also have a very strong ESG program that provides parallel support with our operators in terms of strengthening social license within the local communities, looking for sustainability initiatives and such like that. That really is our third group of stakeholders, which is our neighbors. That is the neighbors that are around us and our employees in this company, but also the neighbors that are living around the mine sites that deliver us our metal. Even though we don't operate these mines, that doesn't absolve us the responsibility of making sure that we leave sustainable benefits to the communities that are most impacted, most benefited from this mine, and deliver those back.
We provide support by working with our partners in improving and strengthening their social license. The streaming advantage really, it's high upside with much lower risks than what you see in the precious metal sphere. Because of the streaming model, we have commodity price leverage. We have a base price that we pay on a per ounce basis, but that still delivers consistently good, strong margins. That does give us leverage over owning bullion. We do get the exploration upside. These are life of mine agreements, where we get a percentage of whatever metal is produced from these mine sites. Any exploration success or expansion potential all comes into play through that optionality. We have a number of projects that still aren't delivering metal to us, but will sometime in the future, and delivers some really good upside from that perspective.
The huge advantage of the streaming model compared to a traditional mining investment is our predictable costs. The fact that our capital costs are fixed in the original upfront payment, and our operating costs are also fixed in the contract as typically either a fixed amount on a per ounce basis or a fixed percentage of the spot price. The fact that we don't have that cost risk dramatically lowers the risk profile for traditional precious metals investors. Tax confidence, we spent a lengthy time going through an audit and a reassessment, and successfully defended our business model here in Canada through an agreement with the Canada Revenue Agency, which is much different than a court victory.
We sat down, the CRA went through our business model and is very comfortable with what we're doing now and has signed off and agreed in terms of our business model. Tax confidence in terms of how our business is structured. Sustainable dividend. Our dividend is a function of our cash flows, and so therefore is attached to our production growth and our commodity price, and so good, strong sustainable dividend and a high quality asset portfolio. It's been a interesting year. Obviously this virtual world, I'd much rather be doing this face-to-face with everyone, but unfortunately that's not possible in today's world. We have been busy. Earlier, about a month ago, we announced, or close to a month ago, we announced the intent to list on the London Stock Exchange.
This is a way of expanding our, as I say, another step in our desire to be a global solution to stream finance and to then to precious metals investing. And really the London Stock Exchange, we're not raising capital there. This is really about expanding our potential shareholder base and providing options, into the streaming model, into our company as an investable way to get into precious metals. We published our inaugural sustainability report, and earlier on this year, obviously we've made great progress in improving the disclosure around our sustainability initiatives and our ESG initiatives. What we have seen is good recognition from a number of the different indices and in fact, just been included into the Euronext Vigeo World 120 Index, sustainability index.
Good strong initiatives, definitely a leader in the streaming and royalty space here and definitely competitive in the mining space in terms of working with the communities to try and leave a positive footprint when we're finished. We did announce a stream earlier on. We're still crossing Ts and dotting Is on it with Caldas Gold. It's the Marmato project down in Colombia. It's relatively small deal, about $110 million total, for 6.5% of the gold and 100% of the silver. This is an asset that currently isn't producing very much, but they've had incredible exploration success and are looking to use this capital to construct a new facility for some deeper, much more higher grade and more consistent mineralization and more massive mineralization that they've found at depth. Pretty exciting project to be associated with.
Of course, earlier this year, about a month ago, I took over as the chairman of the World Gold Council. I'm very proud. I don't think there's a better advocacy group for gold in this world. In fact, one of the areas that we've been improving transparency and credibility of gold is Responsible Gold Mining Principles, which were brought in and all members are working their way towards complying with these principles to ensure that we have transparent and strong gold production standards that give confidence to gold investors.
Randy, I'm just curious if you don't mind going back to that last slide, but, the London Stock Exchange. What % of your shareholders are out of Europe? What % would be from North America? Are you getting a lot more calls from the European generalists?
Currently, about 70% of our stock trades on the New York Stock Exchange, and the other 30% trades on the Toronto Stock Exchange. From an investor base, about 15% of our holdings are over in Europe. Mostly U.K. based, we definitely do have some holdings there, some strong shareholders on the continent in Europe. What we've seen is a lot of interest. For the last, ever since we made the announcement, our head offices are here in Vancouver on the west coast of North America, and I've been working London hours of late. We've been up early, dealing with, educating new funds and new faces that have a lot of interest. The London Stock Exchange has never had a substantial streaming company, and in fact has very limited options with respect to investing into precious metals, period.
There's a lot of interest in London. We feel there's about $300 billion-$400 billion worth of assets under management that has restrictions with respect to investing outside of the U.K. We feel that we should provide an option for those funds to bring in some precious metals exposure. Around the world, we're seeing a real strong shift in a lot of the generalist funds around the world to have 5%-10% of their holdings in precious metals exposure, just to provide some stability in such a volatile world. We're hoping to provide that avenue. I think the intent is to just expand our potential shareholder base, and that can only deliver positives to our existing shareholders.
Randy, just a quick question on Caldas Gold. That's a relatively small deal for you.
What was it about that asset that was so attractive?
I think it's the exploration potential. I've seen similar style deposits down in South America, in that region. In fact, in Colombia, I had some experience. We were an investor in Ventana, and what we've seen is these epithermal/mesothermal-type deposits where as you dive deeper, these systems, these broad epithermal veins all over the place seem to coalesce into one or several discrete units that have good continuity and excellent grades and excellent thicknesses. This is what it sure looks like they've uncovered at Caldas or at the Marmato project, is some good, strong continuity, some very robust numbers, and it's totally open. They're still having exploration success there as they work their way towards getting another mill built and new access infrastructure to move this forward. It just looks like an exciting project that'll be delivering value for quite a while.
Very good.
This slide shows our portfolio of assets. As you can see, we currently have 20 mines delivering us metal right now, another nine development projects. A real strong Americas focus. Some of that comes from our history as a silver-focused company originally, where Mexico and Peru were very important to us, being big silver-producing countries. We definitely have expanded our reach since then and are now actually generating more revenue from gold than we are from silver. The Americas-centric political risk is something that's very important to us, and so it does limit some of the other parts of the world. That doesn't stop us from looking in Africa, looking in Asia, looking in Australia. We just haven't closed any transactions there. We'll still continue to explore these areas and truly build ourselves up as a global company in terms of delivering finance to mining companies.
As I mentioned, nine development projects. They also provide good optionality to continue growing our company. What I like highlighting on this slide also is the list of partners that we have down the right-hand side of this slide. You can see that the streaming business model works for everyone in the mining industry, from the large diversified companies like Vale and Glencore and Newmont and Barrick, as large gold companies, all the way down to the single asset developers like Alexco, Gold X, Panoro, Kutcho Copper. Streaming works as a source of finance, a source of capital for the entire mining industry. Bodes very well for us on a go-forward basis. We're blessed with an industry that always needs capital, the streaming model delivers a competitive source of capital to the entire spectrum of the industry.
Randy, of those nine development projects, which ones are closest to production, and are there any that you're really excited about?
The Rosemont project, just in Arizona, owned by Hudbay. It had its permit about a year and a half ago. Then there was an appeal launched by one of the NGO groups, so there's a decision that's being run through another appeal process and taken up to a higher level. They're hopeful to be reestablishing that permit within a couple of years and commence construction. It's a very strong copper asset that has healthy silver and gold by-product. We pay about $230 million to get 100% of the silver and 100% of the gold. It'll deliver between 50,000 and 60,000 gold equivalent ounces per year to our credit. It's a very attractive deal for us. It'll be about a two-and-a-half to three-year build. They haven't got a firm timeline. Obviously, they have to reestablish their permits and move forward.
That one I find is pretty exciting and could easily come into production within five, six years if everything lines up. Pascua Lama, of course, the largest of those development opportunities. Barrick, Mark Bristow, is spending a lot of time focusing on trying to reestablish social license down in Chile and trying to get this project back onto the development plate, and so we're patiently waiting. It's a very attractive project for us, and it would deliver about 9 million silver ounces per year to us over the first five years based on their original plan. It would be a nice substantive addition. Of course, Navidad down in Argentina, Pan American Silver continues to move that forward. Michael Steinmann and his team have done a good job in terms of building relationships both within at the federal and the provincial level in Argentina.
Those three projects look pretty promising. Toroparu also had some success. Gold X continues to move forward, and it could be a sleeper in this package.
Randy, somebody just sent me a question, and I think this is a good spot to ask. Can you comment or compare the current environment with later-stage developing opportunities and earlier-stage developer opportunities with the past? For example, is he having to look at earlier-stage developers because of higher gold prices providing cash flow to companies with production?
We typically don't invest until an asset gets to the construction stage. One of the risks that's very tough for us to measure is permitting risk. The way we structure our agreements is we wait until projects are at that construction stage or later. They have to have permits in place, and they also have to have a financing plan in place that ensures us that the company will have the capacity to finish the construction when it gets underway. We don't take a lot of the early-stage stuff. We do have an early deposit structure where we'll fund up to 10% of a stream, with a clause that allows us to get a refund if we don't like the results. I can tell you we're very diligent and selective in what we invest into.
That will go in at the pre-feasibility stage to help a company get through the feasibility stage and through the permitting stage before we'll put any further monies in. We've got a few of those type of projects. Currently, what we're seeing is a shift back towards money going into the ground. That means, instead of improving companies' balance sheets, what we're seeing of more interest is companies are looking for capital to help either build new assets or to expand existing assets or perhaps to fund acquisitions, mergers and acquisitions, but mainly acquisitions on that front. We are seeing a shift into that sort of development cycle all the way across and money going back into the ground versus just strengthening balance sheets.
The next slide, I think if there's a slide that differentiates us from our peers, this is probably the one that does the best job of it in terms of the quality of our assets. I mentioned earlier on, we do really focus on quality investments. The first way we measure quality is through the cost profile. Where does the asset sit on its respective cost curve? That's to say that if I'm taking gold from a copper mine, where does that copper mine fit on the worldwide copper cost curve? We're only interested in the assets in the bottom half of that respective cost curve. We're not really interested in the higher cost assets. As you can see, with 20 mines delivering us metal right now, 88% of our production comes from the bottom half of the respective cost curve.
In fact, the bulk of that, 73%, comes from the bottom quartile. These are truly world-class high margin mines, not only for us, but also for our partners, for our operators. That's very important because that means it's the first place that our operators, our partners, will continue to reinvest in grow and explore and expand. It's the area that delivers them the best return on their invested capital also. It's a very important aspect, and I would challenge any precious metals company to compete with these kind of numbers from a quality perspective, especially when you add in also the mine life. We've got over 30 years of reserves, another seven years of measured and indicated resources, and another 26 years of inferred resources in front of us.
Altogether, a very long life portfolio that has high operating margins will be delivering us and our shareholders metal for a very long time.
Randy, just a couple of questions here if you don't mind. Once again, from the attendees. How many deals do you typically look at in any given year, what's the number 1 criteria you look at when deciding if you are going ahead with a proposal?
We typically look at probably 20. I would say we probably outside look at over 50, but I would say probably about 15 to 20 of them get to the point of a data room review. In a normal year when you do site visits, we'd probably get to about five or six site visits, and we'd be successful on one or two of those. That's probably about the ratio that I would explain out. The criteria, the number 1 criteria is where does this asset fall on the respective cost curve? As I said, we are only interested in assets in the first or second quartiles of the respective cost curve. If they're higher than that, we'll put stink bids in. If we ever make some investments in that space, it'll be for a very good rate of return that reflects the risk.
Our real focus is on the first and second quartile of the respective cost curves, and so that's the number one criteria of any investment that we make.
Just one more question. Do the type of deals you look at differ depending on where we are in the commodity cycle, and if so, how?
It's not so much that. It's how much we're willing to pay. It doesn't really change the type of deal that we're looking for, but it's what kind of a long-term commodity price do we use when we value the asset? What I can tell you is that when we feel we're close or near the bottom of the commodity price cycle, we use a long-term number that's pretty close to the spot price at that time. When we see prices climbing and moving up and, by all means, I don't see gold at a high right now. I see still lots of opportunity for it to continue climbing. When I look around the world, it's pretty tough to see any substance behind our argument of us being at a top in gold. There is still lots of space.
As it climbs up, we wind up dropping down our long-term commodity price assumptions relative to where the spot price is. It's a lesser percentage. What that means is that we're not going to pay as much on a per ounce basis relative to spot price on the sides or near the top of the commodity price cycle. I think what this naturally does is stops us from buying in the top part of the price cycle. That's a very important aspect. We work in a business that has to deal with cyclical commodity pricing, which means there's times to buy and there's times not to buy.
Just by nature of the way that we invest, when prices are really high, I would say the market is relatively frothy and there's lots of capital coming into the market. That's not the time for us to be investing. We still put out proposals, but our cost of capital, by design, is higher than a lot of the other opportunities out there, and we wind up not making acquisitions during those stages of high commodity prices. That allows us to build the war chest and wait for it lower. We are not a deal machine. We don't just constantly try and deliver deals. We only want to deliver deals when the timing is right from the commodity price cycle perspective. This slide number nine, talks about our production profile. We did have an impact from this pandemic early on, had some suspensions.
Six different assets had to shut down for about a two-month period on average. We did release updated guidance in August with our Q2 results that dropped our production down to 670,000 gold equivalent ounces. It was originally estimated to be around 705,000 gold equivalent ounces, so it was about a 5% drop. What's particularly exciting on this slide is the fact that our five-year average is still going to stay at 750,000 gold equivalent ounces, which means we've got some substantive organic growth coming down the pipe over the next few years. It is a good, strong organic growth profile that I think is actually a relatively conservative estimate. Let's start off with Peñasquito, where we're seeing the highest grades that deposit it has. We're going to see that for probably the next three or four years, the highest silver and gold grades.
Gold, obviously, and 75% of the silver to Newmont's credit, but we get 25% of whatever silver comes out of Peñasquito. We are already seeing higher grades than we've ever seen from this operation. We're also seeing benefits of improved recovery rates as Newmont goes in and fine-tunes that operation. We're also seeing growth at the Stillwater mine, a continued effort in terms of trying to improve Fill The Mill campaign. What they've got is infrastructure there that isn't being fully utilized, and so they're trying to expand the number of working faces that deliver more material to the mill. It's a long-term program that'll be delivering extra benefits to us over the next two or three years. It's actually, I think their schedule is about 18 months to try and get to full capacity at these mills.
We should see some continued improvements at the Stillwater operations. The Constancia mine down in Peru, Pampacancha zone is coming on. It's a high-grade satellite zone that'll be delivering upwards of 30,000 extra ounces of gold to us every year, over and above what Constancia normally delivers. That's expected to turn on the switches in the first quarter of next year. We'll see some good increase in precious metals production out of Constancia. Of course, we start receiving cobalt from Voisey's Bay starting in January 1st next year. That'll add about 2% to our, 2%-2.5% to our revenue stream. It's the equivalent of about 15,000 gold equivalent ounces coming on stream starting in January 1st of next year.
Perhaps the most exciting out of all of these, though, is the Salobo mine, which is our key asset, our flagship asset, owned and operated by Vale down in Brazil. Last year, it delivered 278,000 gold ounces to us. It's an incredible asset that has all sorts of potential, and Vale recognizes that. Again, because this is a first quartile producer. It's very profitable for Vale. It's very profitable for us. Vale has been drilling on this project for the last three to four years and filling in increasing confidence levels within the existing pit, but also expanding the depths of the pit. The previous design pit was down to the bottom of the block model, so it was data limited. They've gone a long ways towards improving and expanding that database. That block model now goes 250 meters deeper than it was originally.
Vale is in the process of redoing the mine plan, which is important because they're also substantively through a third phase of expansion down there that'll take the daily processing rate from 60,000 tons per day to 90,000 tons per day. A 50% increase in throughput capacity. They expect to turn the switches on on that expansion sometime in 2022, and we should see some substantive increase in gold production. They haven't released their updated mining plan yet, so we took a conservative approach where we assumed that they would process all the ore through the mill, which meant that it was only going to be a bump of about 30,000-40,000 gold ounces per year with this 50% increase. We don't think they're going to do that, remains to be seen.
We think they're going to continue stockpiling low-grade material and process the higher-grade material. If they do that, this 750,000 gold equivalent ounces will be increased by perhaps as much as 50,000-70,000 more ounces per year from the Salobo operation starting in 2022. We could easily see ourselves on a path of well over 800,000 gold equivalent ounces in production before the end of this five-year period. Of course, all sorts of other growth from assets like San Dimas. First Majestic continues to improve and expand this. They're opening up areas that were closed by the previous operator. They're expanding the mill capacity and improving recoveries with replacing some of the milling to get finer grinds. Constant reinvestment into these assets. That's what happens when you have high margin assets, is your partners want to continue reinvesting and improving these assets.
It's a good, strong production profile.
Very good. Randy, I got a couple of questions here on silver. First of all, just given your background, your view on silver pricing and also silver sensitivities, what does the move in silver mean to your bottom line if silver goes from $30 to $40 to $50 an ounce?
Well, the beauty of our streaming model is that that's a very easy calculation. 80% of our production comes from fixed cost contracts. Currently, I think we're about $4, in fact, I think the next slide does highlight that. You can see current costs are about $5 per ounce of silver and about $421 per ounce of gold. That doesn't change when the spot price climbs. What happens is when we see silver climbing to by $5 an ounce, as you said, that $5 comes right back to our shareholders. Taking current prices of, call it $25 and a $5 cost at $20, that $5 will make our margins now $25, that $5 gain. It's a very easy model to calculate sensitivities because our costs are fixed and predictable.
About 20% of our contracts have a production payment that's a function about 20% of the spot price. That means that we have a fixed margin on those ounces of 80%. For 20% of our production, we have a fixed margin of 80%, and for the other 80% of our production, we have fixed prices that are a little bit over $400 per ounce of gold and a little bit over $5 per ounce of silver. Good, healthy response, and that is one of the beauties, is that in the streaming model, our return of price exposure back to our shareholders is compounded over what a traditional mining company has. Mainly because our costs stay the same. Our costs don't climb with those higher prices, which is something that you see the mining industry suffers from on a regular basis. Good, strong returns on that.
My feelings on silver, I'll just whip back one slide. As you can see, gold, we're now producing about 60% of our revenue from gold and about 30%-35% of our revenue from silver. I will highlight that the optionality that we have at Rosemont and at Pascua Lama and at Navidad is very silver focused. There's a little bit of gold at Rosemont, but Navidad and Pascua Lama are silver focused, so those would deliver strong silver production to us. Our challenge is finding good silver investments, which bodes well in my eyes to the price of silver. If you ask me, I'm actually more bullish on silver prices than I am on gold prices, mainly because there's some extra fundamentals behind silver that provide additional support for pricing. Continuing growth in industrial applications. We have hit peak silver production.
The bulk of silver is produced from lead zinc mines, and there hasn't been any substantive lead zinc growth over the last few years, but I've seen several mines shutting down and slowing down in production. It's just we've hit peak silver production already. What we have is increasing industrial demand. We've already seen a decline in silver production on a worldwide basis, and now we have sparked interest from investors, which always lags gold, but as we know, silver has dramatically outperformed gold over the last three, four months. Took gold a long ways to get to where it is. Silver did it in about a month and a half. Very bullish on silver. Silver has always got higher volatility, and silver always outperforms. We have to caution everyone. Higher beta goes in both directions. Right now, very bullish on silver.
I just wish we had some silver opportunities. If I look at our current corporate development portfolio, probably about 60%-70% of it is gold focused. There's probably another 10 or 15 that is gold and silver combined. Then there's a couple of silver projects. That's it.
A couple more related questions to silver. Is silver disconnecting from the monetary metal and becoming more industrial? Has the historic silver-gold ratio that a lot of people talk about, is it becoming more irrelevant because of this?
I don't think it is becoming irrelevant, but I think it's always a good indication of measuring how things are relative to history. There's no real sound financial relationship there that you can stand behind. What I will say is that silver, it always has its core investors, but then in challenging times, in times of distress, in times of concern where people are looking for a store of value, silver has a market that sort of steps in. The increasing industrial demand is only a positive. I don't think there's any change on the supply side or, sorry, on the investment side.
If you go back and look at every bull run in precious metals, gold always started well ahead of silver, and it's like all of a sudden there's a retail side that just has to wake up, and silver takes its run at that point. I think that that's what we've started to see here over the last while, is that as the retail side has steps back in, and the generalist side steps back into the precious metal space, that's when silver wakes up and starts to go for a run. Again, the fundamentals behind it, the increasing industrial demand, and the shortage of supply, the shrinking supply of silver from mines, all of that combined, as that retail, that generalist investor steps back into the silver space, it will outperform.
I already showed this slide 10. It is worth reinforcing the healthy margins that we have and the fact that our costs are fixed by the contracts and predictable. The mining industry suffers from costs climbing as commodity prices climb, because there's a real drive towards high grade waste becoming low grade ore and being processed as prices climb, commodity prices climb. You don't see that here. Our costs on a per ounce basis are fixed by the contracts and defined by the contracts. If there's anything that differentiates us from the traditional mining companies, this is it, the confidence that you have on our operating costs and on our strong and healthy margins.
Randy, I just want to clarify one thing. If when I look at 2019, the silver price, for example, it doesn't matter if silver is 30, 40, or 50 bucks an ounce, your cost is $5.02 an ounce.
For 80% of our production. We do have the Antamina mine, which delivers us silver, and for that mine, we pay a production payment that is 20% of the spot price. Our spot prices will climb by 20% of whatever that change is. There will be a slight increase, but that's only for 20% of our production, which is, in this case, the Antamina operation.
massive upside.
Very
with the move in silver.
All we have to do is go back and look at the 2010 to 2013 period. The last time we had a bull cycle, our company generated well over $2 billion in excess cash flow that wasn't expected because of that run in precious metal prices. I know sometime over the next 60 years of reserves and resources, we're going to have a few more runs like that, and we're producing a lot more metal than we were back in 2010 to 2013. Our balance sheet is strong. We are a bit unique again in the mining space, and especially in the streaming and royalty space, because we're comfortable with debt. Our risk profile is so low that the syndicate of banks from North America, from Europe, and from Japan, offer us a $2 billion revolver at very attractive interest rates. Currently, it's just over 1.6%.
Given that, we find the best way to fund our transactions and acquisitions, and keep in mind that our cash flows are very, very consistent. Currently, we're generating well over $200 million per quarter in operating cash flows. Very, very consistent cash flows, but our acquisition schedule is very lumpy. In 2018, we spent close to $1 billion on new acquisitions. 2019, we didn't do any transactions. 2020, we've already announced the Marmato with Caldas, $110 million, and hopeful to close a few more. What this revolver allows us to do is minimize the dilution that our shareholders have to suffer through. We use the debt effectively, our net debt as of the end of the second quarter, which was back in August, was just over $500 million.
If we don't spend any money on any new acquisitions over the next few months, that debt is going to be gone by the first quarter of next year. That is obviously I would much rather be putting money to work in the ground, and so we're constantly looking for new opportunities, and we have plenty of capacity to do that. You can see with strong cash flows, as I said, well over $200 million per quarter right now. We are in the best shape we've ever been. We do have a pretty active corporate development portfolio right now. We're looking at a number of opportunities, some as big as $1 billion. There's several of them that are that big. Hopeful that we can move these projects forward and keep on putting our money to work in the ground.
I will say that if it doesn't go into the ground, we build up a bit of a war chest, but then we look at increasing the dividend. There's more talk on the dividend a bit later on in this presentation.
Randy, a quick question here. First of all, with the revolver, remind me again, what interest rate are you paying on that?
I think it's about 1.67% right now, or 1.65%, somewhere in there.
Very cheap money.
Yes.
Another question. Earlier this year, you announced an ATM or At The Market program. Have you used it yet? Under what circumstances will you use the ATM to raise equity or raise cash?
Jimmy, thanks for reminding me because I quite often forget we even have this ATM in place, and I'm proud of the fact that we are the only mining resource company that has an ATM in place and hasn't exercised it and hasn't diluted their current shareholders, which is who we work for. We put the ATM in place because we've got a number of large-scale opportunities out there, and if we're successful on a couple of these larger ones, we may need to tap into the equity side as opposed to keep on amping up. Obviously, we've got a $2 billion revolver. As of the end of June, we had $1.5 billion in capacity on that.
As I mentioned, we do have a couple of deals that we're looking at that are in the billion-dollar range, and so if we were fortunate enough to close a couple of these things, we would have to look at that. That's what the ATM is there for. It will not get used unless we exhaust our debt capacity. We have plenty of capacity beyond the $2 billion. We're comfortable. We respect the fact that shareholders start getting nervous if we start getting too high on the debt. I'm proud of the fact that in the last eight years, we have spent close to $7 billion in acquisitions. We have only had to raise $1.5 billion through equity financings. The rest of it all came from effectively using this revolver to smooth out the differential between our strong cash flows and those acquisitions.
By our calculations, that has saved our shareholders, our current shareholders, about a 16% dilution. If we had used equity to fund all that growth, we would have 16% more shares issued and outstanding right now. Our debt disappears by next year, our shareholders are 16% richer because of this approach. As I mentioned earlier on, the excess cash flow we generate, this is really what we set ourselves up for, is when we have these bull runs in commodity prices, as long as we have good, strong production delivering all the way through, we build up the war chest. That's when we start looking at if we can't put the money into the ground, then we look at giving it back to our shareholders, and that's where the dividend policy comes into place.
We kicked off the current dividend policy back in that period to start returning cash to shareholders. We've since increased it and good, strong production. Really, the fact that we're producing more than twice the metal we were back in that period. You can imagine the cash flow generation possibilities that we have in this company.
Randy, a general question here. It's more toward the entire mining industry or more specifically gold and silver companies. The average dividend on the S&P 500 is 2%, but with gold stocks, it's less than 1%. Given the cash flow that a lot of producers and royalty streaming companies are throwing off, when will this change?
I think that what we've seen is dividends have been held relatively constant, but prices have climbed and share prices have climbed. I know in our case, it wasn't that long ago, our yields were 2%, but we've delivered such a strong return on the share price that that's forced the dividend down. Obviously, people are building up their balance sheets and I would say the industry as a whole is trying to strengthen their balance sheets and get ready for the next phase of reinvestment into the industry. As those balance sheets get stronger, then there's going to be a continued focus on the dividend side. I can tell you that right now, our dividend on a per share basis will climb because it is a unique dividend. Right now, currently 30% of our cash flows go towards our dividend as a minimum.
Cash flows, of course, are a function of commodity price, it is averaged over the previous four quarters, but commodity price and production growth. We see organic growth, we see higher commodity prices, there will be upward pressure on our dividend. It wouldn't surprise me to see it increase over the next couple of quarters. I can tell you that if we don't make any further investments into the ground, our debt will disappear in the first quarter of next year, and I assure you that by the end of next year, if we haven't made any further investments, we will start looking at returning even more of our cash back to our shareholders.
Very good.
In fact, I've already described most of this slide, but you can see it is competitive. As our share prices have appreciated over the last year and a bit, you can see the yields have dropped on a per share basis. We will see some growth in this. Currently, at the end of the second quarter, our dividend was $0.10 per share. We know that the higher commodity prices and the organic growth that we're seeing in the company will put upward pressure on that price, so stay tuned. Benefits to partner mining companies is really, there's a number of benefits as to why streaming is the best way for partner mining companies to finance operations. The most important ones are the first two, or sorry, the second one and the third one.
The arbitrage in value, especially with a base metals company, when you pluck precious metals out and bring it into our company, we actually gain in value and create that value. We share that arbitrage with the partners. It is unique in that it is truly a win-win situation where our share price will go up on an announcement of a deal, and so will the partners'. Truly a win-win. The second one is the improvement in project internal rate of return. If I go to the next slide. Excuse me. If I go to the next slide. The Salobo mine is an excellent example of this, where Vale spent $3.9 billion building this asset. We supplied $3.1 billion or 78% of the capital. We only took away 17% of the revenue, and so substantial improvement in the rate of return for the Vale shareholders on a go-forward basis.
You can see the benefits there across the board. The dramatic improvement in project rate of return for our partners. Excuse me. It's dry air in here. Yeah, the real advantage is for the partner streaming companies come from both that arbitrage and also from improving the internal rate of return on these projects. At Wheaton, ESG and community support is incredibly important. It's a core value, sustainability, making sure that we leave a positive footprint behind us. We have four areas that we focus on. Of course, there's the due diligence stage. We're selective about what we invest into. We're not scared of areas that need support. In fact, we look at it as trying to be a change agent to try and strengthen our partners on this front. We have strong community investment programs.
We've got strong policies and practices in the company itself in terms of making sure we go forward. We also really push external and voluntary commitments from all of our senior management and such. It's a good, strong framework that we have within this company that I think makes us a leader in this space, definitely in the streaming space, and I think in the entire mining space. We strive to be a leader in this, and I believe we've attained that, and we strive to maintain that lead. The community investment program, we're the only streaming company that has a core portion of its revenue going back in, about 1.5% of our free cash flow goes back to our communities around us. 0.5% of that actually goes to the communities where our employees live in Vancouver here in Vancouver and also our international offices.
1% of it goes back to providing parallel support with our partners to try and improve sustainability initiatives and community benefits within the communities around the mine sites. Those areas, there's four pillars that we focus on, health, education, environment, and community, and all sorts of examples of where we've been able to work with our partners to expand and improve health facilities, education facilities, community infrastructure, support entrepreneurial programs to try and build long-term sustainable businesses. We are also the only of the streaming and royalty companies to establish an additional $5 million, US $5 million CSR fund, Community Support and Relief Fund, in response to COVID-19. We in the precious metals industry have survived relatively well through this pandemic, whereas the rest of the world is still suffering.
This has been put in place to provide additional frontline support to help with the communities, again, dealing with the impacts of COVID-19 and this pandemic. A lot of that money has gone towards food banks, shelters, hospitals. We brought in an ambulance, funded an ambulance at the San Dimas mine or in the Tayoltita community or in around San Dimas. All sorts of additional programs. We've kickstarted a mask-making program down in northern Brazil around the Salobo mine. Again, this is an area that the stronger our partners are, the stronger we are. We continually look for ways to help our partners be stronger. This is a way to strengthen their social license and make sure that they can continue operating in these districts. All of this, along with a bunch of increased disclosure.
I think a lot of these things we had in place, but we've really amped up the amount of disclosure. We just published our first sustainability report, and it's made Wheaton a top-rated mining company amongst the ESG analysts here, ranked an A by MSCI, and Sustainalytics ranked us as number one. We are carbon neutral. We've committed to, obviously, the World Gold Council's Responsible Gold Mining Principles, but we're also the first streaming company committed to the UN Global Compact, which actually has some higher standards in terms of expectations. We're not striving to meet these. We're striving to exceed these. We think we already do, and it's a matter of just working our way forward through this whole process. Very important aspect for us, and I will highlight that this is something that's also very important, more so within European investments.
Lots of interest in these programs from some of the funds that we've been talking to out of London and out of Europe. Why invest into Wheaton Precious Metals? Here's your traditional options. You could usually buy bullion or you could buy the mining companies. Obviously, our success has spawned other streaming companies, but I still say we differentiate ourselves from those other streamers by the fact that we're the only one that's pure precious metals production. We've got tax confidence, and we have a very sustainable dividend policy, where it's tied to our cash flows. Versus bullion and ETFs, we provide all the upside of a traditional. Our risk profile is very similar to bullion or an ETF. The fact that we have all the exploration upside, we pay a dividend, we actually have increased leverage.
There's so many reasons why we're much more attractive than a standard bullion and ETF. Our risk profile is very similar. Comparatively to the precious metal mining companies, as you can see, the fact that our costs are fixed, that is usually the source of most disappointment with respect to investing into a precious metals or traditional mining company is the cost risk that comes with that. Yet ours are all fixed. Our capital costs are fixed by the contracts, and our operating costs are also fixed.
Randy, just another question that was submitted by an attendee. On the metal price forecasting, it was mentioned that there are optimal times to execute deals, but the exposure to the flat price risk can be harmful to metal streaming as much as for trading companies. How much can Wheaton hedge in its operations in order to mitigate that flat price risk and be more exposed to the spread risk?
Well, we believe that our shareholders invest into us to get exposure to those precious metal prices. Hedging is not something that we've entertained. Now, that being said, we do manage our sales program within any quarter to make sure that we optimize. One of the challenges that we saw with the silver market is that it's so small. Sometimes we get such large deliveries, we'd have an impact on the price just by moving that silver into selling that silver into the market. We have all sorts of programs in place now to try and smooth out that impact over the period of a quarter, but we never carry a hedged amount over a quarter. To us, it's the reason that shareholders invest into us is they want exposure to profitable precious metals production, but they also want exposure to those precious metal prices.
So-
Just to clarify on that, when you take delivery of a metal, gold or silver, you don't speculate on where you think it's going in a month or three months or six months down the road. You sell it right away.
That's right. Exactly. I hate to say it, I wish I could tell you what the price of gold was going to be tomorrow. My belief is that precious metal prices are going substantially higher, mainly because I don't have a lot of faith in the U.S. dollar. I'm not going to risk my shareholders' capital based on that belief. When we make our investments, we make them so that we make a reasonable rate of return based on a flat price profile. As long as we can get a reasonable rate of return and the upside, the optionality of that precious metal exposure, combined with the exploration and expansion potential that investing into good mines does generally deliver. To date, we've averaged over 20% after-tax return to our shareholders.
That's a pretty good track record of hedging our bets, so to speak, by making sure we invest into good assets, but not playing any further games. As I mentioned, 100% precious metals production. Our peers, generally Franco-Nevada and Royal Gold are the two companies that we are compared to. We actually generate more revenue than Franco-Nevada, and we are 100% precious metals production. 60% of that comes from gold, another 30% plus comes from silver and a bit from palladium. Palladium has actually been very good for us as an investment. We are focused on precious metals. In fact, what we've delivered versus the mining companies represented by VanEck and the Philadelphia Gold and Silver Index, or just gold and silver, you can see total average rolling returns, multi-year returns compared all the way across the board. We have outperformed consistently.
The streaming model is the best way to invest into precious metals, and we feel at Wheaton that we have the best collection of assets to deliver those returns.
Randy, just a quick question here. Recently, generalist investors have gotten a lot of attention by getting involved in the precious metal sector. For example, Berkshire Hathaway invested $500 million in Barrick, and the Ohio Police & Fire Pension Fund also stated that they were going to allocate 5% of their $16 billion fund toward gold in some form. Are you getting a lot of calls from U.S. generalists?
I was waiting for a call from Warren because I think the last time he even looked at the precious metals industry, the streaming model didn't exist, and I would have loved to have educated Warren Mr. Buffett about the streaming model. That being said, Barrick obviously is a good mining company and a good track record, but I do think that some education might be warranted, so I'm still waiting for that phone call, Mr. Buffett. No, that's where streaming falls into, is that I think, and it's one of the reasons that we like the London Stock Exchange, is there's a large generalist segment there that doesn't have any options for low-risk investing and high return. The risk profile and the reward profile that we deliver is very unique.
It's the best of both sides of the traditional precious metals investing sphere. I do think that we deliver that, especially to generalists. By taking out the cost risk, it reduces the level of technical due diligence that's required at making a good investment because you know that the costs are fixed by the contract itself. You don't have that level of risk. What we've done to date, as of June 30th, we've invested over $9 billion into streams, but have already generated from that $9 billion, $6.9 billion in cash flow. Keep that in mind as we talk about the reserve and resource life that we've got going forward. We've already paid over $1 billion back to our shareholders in the dividend, and we know that that's just going to continue to grow.
We only started paying the dividend in 2012. We're going to see increased return to shareholders over time. Strong annual cash flows. As I said, we're well over $200 million per quarter in cash flow right now. 40 years of reserves and measured and indicated resource life forward. Inferred resources add another 25-plus years. As I said, 20% average annualized after-tax return from our portfolio. A good strong track record in terms of what we've achieved, and that's building us a very strong profile going forward where we've got great organic growth profile over the next while, lots of corporate development opportunities coming forward. Yeah, it looks very positive for us. This is the last slide that I was going to talk about, cost predictability. I mean, why Wheaton? Precious metals is a good store of value.
It's becoming even more widely accepted that everyone should have at least 5% to 10% of their portfolio in precious metals just to protect themselves against the fiat currencies of the world. The challenges that we see, the helicopter money that is going to need to continue to be printed to support economies around the world just bodes so well for precious metals. What we deliver, of course, is very profitable precious metals production. We have confident costs. We have one of the highest quality asset bases, very strong sustainable operations. Of course, with this risk profile, we also deliver leverage and a healthy dividend that's paid to our shareholders. We pay you to own our shares. Tax confidence.
We've gone through and had full sign-off and agreement with the Canada Revenue Agency here. A good strong business model that will continue to deliver superior returns to our shareholders, and excellent exposure to, I think the best exposure possible to precious metals. We continue to strive to deliver more.
Great. Randy, maybe just in conclusion, you can just tell our attendees what we can expect in the coming weeks and months in terms of catalysts or news coming out of Wheaton Precious Metals.
We're working, as I mentioned earlier on, working towards the LSE listing. We announced the intent to list, but it's looking like it'll probably happen sometime within the next 2 to 6 weeks. It's in the regulator's hands, we're just waiting for some signals back, hopefully sooner than later. We did give some updated guidance at the end of the second quarter that had a production drop of about 5% over the year. Obviously, our third quarter results will be coming out in November. I think it's November 9th is when we release. Production looks good. We're very comfortable with where we are on everything as a whole. We're seeing good, strong results from so many of our operations right now. From a pandemic risk perspective, all of our partners are doing a really good job of managing that risk.
Mine sites do have a bit of an advantage in terms of being able to limit access, and therefore limit risk through some strong and strict controls, and so we've been fortunate from that perspective. We are constantly looking at new opportunities. This is an industry that needs capital, so I always like to describe it as there's a bit of a wide spectrum. We could be fortunate enough to have a couple of billion-dollar opportunities come into play over the next year or so. We could not make any acquisitions and pay off the debt by the first quarter of next year and ultimately increase the dividend even more from where it will be currently. Those are two pretty good scenarios. These are good times to be in the precious metals business.
It's good times to be invested into precious metals. Our portfolio is humming right now. We're constantly looking for ways to put the money back into the ground, but if we can't, then we'll give it back to shareholders. Yeah, these are good times.
Well, that's great, Randy. I want to thank you very much. To all the attendees, I want to thank you for taking the time to sign in. I know your time is valuable, and we do appreciate it. If anybody would like to have a deeper discussion with Randy on Wheaton Precious Metals or another member of his team, let me know and I will arrange that. Once again, Randy, I want to thank you.
Jimmy, always a pleasure.
All the attendees, I want to thank you.
Jimmy, always a pleasure, and I hope at some time we can do this again face to face, sometime soon.
Great.
Stay healthy.
Thanks again. Everybody have a good day.