Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Wheaton Precious Metals Annual and Special Meeting of Shareholders Conference Call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Doug Holtby, Chairman of the Board of Directors.
Please go ahead, Mr. Holtby.
Thank you very much. Good morning, ladies and gentlemen. Welcome to the Annual and Special Meeting of Shareholders of Wheaton Precious Metals Corp. And welcome those of you who are joining us today on our webcast. As you just heard, my name is Doug Hopi, and I'm Chairman of the Board, and I will chair this meeting.
Before we begin the formal business of the meeting, I would like to introduce certain members of Wheaton's Board of Directors and senior management team who are here this morning. Our Board members that are here is John Krupp and Eduardo Luna, 2 lifers who have been with the company since day 1. So they are wonderful directors. With me is Randy Smallwood, our President and CEO. Randy is also a Director of the company Gary Brown, Senior Vice President and Chief Financial Officer Kurt Bernardi, Senior Vice President, Legal and Corporate Secretary, Tatham Hadley, Senior Vice President, Corporate Development and Patrick Drouin, Senior Vice President, Investor Relations.
2018 was a very successful year for Wheaton on many fronts. We generated over $475,000,000 in cash flow founded on the production of 370,000 ounces of gold, 24,000,000 ounces of silver and 14,000 ounces of palladium, all of which were in excess of the company's 2018 guidance. Our 2018 gold production and sales were records for the company. Randy will provide more details of Wheaton's other significant accomplishments in 2018 following the formal portion of the AGM. Let us now proceed with the business of the meeting.
For the purposes of this meeting, Wheaton Precious Metals has appointed Leslie MacFarlane and then bought on behalf of AST Trust Company Canada to act as scrutineers. Kurt Bernardi, the Senior Vice President, Legal and Corporate Secretary of the company will act as secretary of this meeting. I have been advised that the notice calling this meeting together with notice and access notification and the form of proxy were mailed to shareholders of record as of March 20, 2019 in accordance with applicable law. AST Trust Company Canada has filed with me proof of service of such mailing and I directed a copy of such proof of service, the annex to the minutes of this meeting as a schedule. The scrutineers have also advised me that prior to the meeting, proxies were received from the holders of a sufficient number of common shares to the quorum.
I therefore declare that the meeting to be regularly called and properly constituted for the transaction of business. I direct that a formal report of the scrutineers be annexed to the minutes of this meeting as the schedule. I would like to take a moment to comment on the voting procedures could be used at today's meeting. Voting will proceed by way of show of hands. However, voting for the directors of the company and the company's approach to executive compensation will proceed by way of ballot.
If you are a registered shareholder proxy holder, you should have received a ballot on blue paper and a ballot on yellow paper upon checking in with AST Trust Company. If you are a registered shareholder or proxy holder and do not have these ballots, please raise your hand and a representative on behalf of AST Trust Company will bring you the ballots. Only registered shareholders and duly appointed proxy holders can address the meeting. I don't think we have any shareholders here doing. As the first item of business of this meeting, I present to the meeting the company's financial statements as for the year ended December 31, 2018.
Copies of the financial statements were mailed to those shareholders who request to receive copies of them in accordance with applicable law. And unless there is any objection, I do not propose to read them to the meeting. The next item of business is the election of directors by the company's shareholders to hold office until the close of the 1st annual meeting of shareholders following such election or until their successors are elected or appointed. The company's bylaws include an advanced notice requirement for the nomination of directors by shareholders in certain circumstances. The company did not receive notice of any director nominations in connection with this meeting.
Accordingly, the only persons eligible to be nominated for election to the Board at this meeting are the management nominees. Management nominees George Brack, John Bruck, Peter Gillen, Chantel Gosselin, Charles Genes, Douglas Hopi, Eduardo Luna, Marilyn Schornbner and Randy Smallwood as Directors for the ensuing year or until their successors are elected or appointed. I declare the nominations closed. As a result of the company's majority voting policy, it is necessary to vote by ballot for the election of each director. I therefore direct the poll be taken.
Each shareholder or proxy nominee should record his or her vote in respect to the election of each director nominee by marking the appropriate box beside each director's name and by signing and printing his or her name on the blue ballot. Once you've done so, please raise your hand and the scrutineers will collect the ballot from you. I've been advised by the scrutineers that the proxies deposited for the meeting have overwhelmingly voted for the election of each of the directors. Therefore, I declare George Brack, John Brack, Peter Gillan, Chantelle Gosselin, Charles Geness, Douglas Hopi, Eduardo Luna, Marilyn Schornbirner and Randy Smallwood to be elected as your Board of Directors to serve in that capacity until the company's next Annual General Meeting or until our successors are elected or appointed. Rather than hold up the business of the meeting for the final tabulation of votes cast, I direct that the results of the poll for the election of the directors be included in the minutes of this meeting and filed on SEDAR and EDGAR.
The next item of business is the appointment of auditors for the ensuing year and the authorization for the Board to fix their remuneration. I ask that someone move and someone second the following resolution. Deloitte LLP Independent Registered Public Accounting Firm, be and they are hereby appointed as auditors of the company. To hold office until the close of the next Annual General Meeting of Shareholders or until their successors are appointed at such remuneration as may be fixed by the directors and the directors be and they are hereby authorized to fix such remuneration. Will someone move this resolution?
I so move. Thank you, John. Someone second this motion? Second. Thank you, Eduardo.
Any discussion? All shareholders and proxy holders in favor of this resolution, please so signify by raising your hand. Contrary, if any, I declare the resolution carried. The next item of business is the approval of the company's approach to executive compensation as more particularly described in the management information circular. The resolution to approve the company's approach to the compensation is set out on Page 85 of the management information circular.
In order to be effective, this resolution must be approved by the affirmative vote of not less than a majority of the votes cast at this meeting. I'm advised by the scrutineer that just over 5% of the shares already voted by proxy were voted against the resolution to approve the company's approach to executive compensation. As said, I was on Page 85 of the management information circular. So we will proceed to vote by way of ballot. Each shareholder or proxy nominee should record his or her vote in respect to the company's approach to executive compensation by marking the appropriate box and by signing and printing his or her name on the yellow ballot.
Once you've completed your ballot, please raise your hand and the scrutineers will collect them from you. I've been advised by the scrutineers that the proxies deposited for this meeting have been overwhelmingly voted for the confirmation of the company's approach to executive compensation. As sufficient votes have been cashed in favor of this resolution, I declare the resolution carried. Rather than hold up the business of the meeting for the further tabulation of votes cast, I direct that the results of the poll be included in the minutes of this meeting and filed on SEDAR and EDGAR. Is there any further business?
I ask that someone move and someone second the resolution at this meeting now terminate. I so move. Thank you, John. Will someone second the motion? Thank you, Eduardo.
Any discussion? All shareholders and proxy holders in favor of this resolution, please so signify by raising your hand. Contrary, if any, I declare the formal portion of the meeting not terminated. I will now turn the floor over to our President and CEO, Randy Smollett. Following Randy's comments, there will be a chance for questions.
Thank you, Doug. My name is Randy Smallwood. I'm President and CEO of the company. Just like to thank the directors and management for coming out. I am honored to lead such a strong team.
I'm am going to do a bit of a presentation just summarizing what I consider one of the best, if not the best years of our company's history in 2018 in terms of our accomplishments and how it has set us up for an incredibly strong position going forward. There will be some forward looking statements in this presentation. As you understand the risks associated with those forward looking statements, They are in here and
in the fine print. And
so please make sure you understand those risks associated with those forward looking statements. So 2018, as I mentioned, was an incredibly successful year for our company in terms of our accomplishments over the course of that year. You can see 4 main transactions that or main events that helped us build such a strong foundation, what I call a foundation here. The first one was the restructuring, announcing the restructured Santamas stream. This is San Dimas was the first asset we streamed way back when we created this company in 2004.
And we knew that we have learned a lot since that time. And the opportunity to apply that learned wisdom to a restructured deal to create value not only for us but also for our partner, our new partner at San Dimas. And then of course an acquisition Cobalt on Boise's Bay with Vale, a long time partner of ours. We closed that in June of last year. It's our first ever cobalt stream.
We're very excited about the future for that as a commodity. I think that by the time we start receiving production of cobalt, it may be a precious metal, but definitely increases the demand over time. Shortly after that, announcing a transaction on the Stillwater Mine down in Montana, gold and palladium, the first palladium that we've ever brought into our company and but also a very healthy gold component to the value of that transaction. The Stillwater Mine, one of the most incredible geological ore bodies, potential ore bodies that I have seen over 45 kilometer strike length, still so underdeveloped and so unoptimized. And so there's all sorts of opportunity for that mine to continue to grow and deliver value to us going forward.
And then of course the transaction probably having the biggest effect on us is the settlement with the CRA in December, a long standing tax dispute that we've had, that essentially clearly defines the fact that our business model, which we created back in 2000 and and 4, is sound and that we are not taxable in Canada on our foreign earned income. So a very, very strong and sound decision that provides tax confidence and tax clarity to our company on a go forward basis. So unlocking the value, a couple of little bit more detail on this. We the new stream on San Dimas with First Majestic First off having First Majestic a long standing operator with plenty of experience in Mexico itself, being able to take on San Dimas. I think this mine is perfectly suited for a company of this skill set, very used to underground neuro vein, low sulphidation, epithermal vein system, selective mining and etcetera, etcetera.
The old stream was for 100% of the silver with a cap of 6,000,000 ounces and 50% of anything over that. We've changed it to now being of the gold, 25% of the silver, but we also increased the production payments. So essentially the size of the new stream is about 40% of the value of the original stream in terms of metal value being delivered to us. But we also became the largest shareholder of First Majestic and a supportive shareholder as they continue to advance this. Saint Dominguez is their flagship and they've put a lot of effort into it and we're excited about where they're going to take this asset over time.
We still haven't seen long term forecasts in terms of the work there, But changing this stream to allow First Majestic to explore not only the just for the gold in the past, but now for the entire deposit, the entire district, both the Silkman Ridge areas and the Gold Ridge areas, we know there's going to be a benefit delivered back to us and our shareholders along with First Majestic and their shoulders. The type of transaction that we like doing, win win situation. Boise Bay, of course, an incredible asset located up in Newfoundland owned by Vale. Basically, we've funded a portion of the between $90,000,000 a portion of the underground development. We don't start receiving cobalt from Boise Bay until January 1, 2021.
And we will receive any cobalt produced from the site as of that date. So irrespective of whether it comes from the new underground operations or the continuing open pit operations, which will run beyond that. But 2021, we expect to start receiving. We'll get about 42.4% of the cobalt that this mine produces over time. Woyalties Bay is a very the underground deposits are very under explored.
There's excellent exploration potential, deep drill holes that have already showed a continuity in terms of deeper extension. I think this is a mine that's going to be delivering lentils for a very long time. So very excited. In addition, working with Vale. Vale is a good partner.
We've had great relations with them on a number of different assets. And so the opportunity to work Vale on this one is something that's exciting. One of the main appeals to this asset is the fact that not only is the mine in Canada and probably one of the most socially conscious, most environmentally responsible operations in the world with respect to cobalt production, We also shipped the concentrate to a dedicated smelting facility down at Long Harbor, which means that we can differentiate this product from most cobalt produced in the world. We can guarantee clear provenance on this product and deliver it. And that is something that is becoming more and more important to end knowing where the metal comes from that's in the products that they're consuming.
And so this is an added benefit that we see out of this Voices Day long harbor where we think we can differentiate and actually deliver a bit of extra value because of the quality of the product that we're delivering and because of the clarity that we have on the providence behind this product. So very excited about this one. Even more excited about Stillwater. This is, as I mentioned, a deposit that's got about a 45 kilometer strike length. It's got 2 different mining operations that are about 20, 25 kilometers apart.
And there's minimal development on like when you look at the district as a whole scale, there's minimal development, just around those 2 operating mine sites and then also it's about to make the growth. Sabanye is a relatively new owner on this asset and continues to put focus on it. It has definitely become a flagship in their entire portfolio. And so this is as you can see in the cost curve, this is where we like investing into assets, right down in the bottom decile, the lowest cost and the 3rd most cost assets in the world. And this is an asset that the mills aren't even being fully utilized.
The mill capacity isn't even being fully utilized. So Sabanye is on a campaign to try and maximize that production and try and for additional working phase development cost as the Blitz project is starting off, we're doing some deeper work over the East Boulder operations to try and take those mills and get them from the 70% to 75% utilization up over 100%. Their target is to get this mine up over 1,000,000 ounces of PGMs per year in production currently. It's about a little bit over between 500,000 to 600,000 ounces a year. So we'll, of course, get the benefit of growth with this as that continues moving forward.
A very good mine. And timing wise picking up palladium. Palladium, of course, has done very well price wise. And so we're definitely ahead of curve on that one and we see continued increased demand for palladium. It is generally a catalyst for gasoline engines and there's definitely been a shift away from diesel into gasoline engines and we don't see that changing in the definitely for quite a while.
And then of course the tax settlement in December. This was something that it's a burden that we and our shareholders have been carrying for since 2012 when we first received notice of audit. And so to finally see the business model that we created back in 2004 verified and proven to be correct was incredibly rewarding. We still are working to deliver this value back to our shareholders. But quite clearly, from a potential risk in excess of 1,000,000,000 of dollars to ultimately settle it for about a $4,000,000 tax change.
The approach was no taxes on our foreign income and a slight adjustment in how we charge for the services that we do provide out of the Vancouver office. And that cost us of about $4,000,000 a little bit over $4,000,000 in taxes and then an interest fee on top of that well below $10,000,000 in total cost in terms of settling this liability. And the clarity that we provide on a go forward basis and the confidence that we provide, I would argue it puts us ahead of our peer group now in terms of tax risk versus constantly being at the bottom of the peer group from that perspective. We have definite tax confidence on a go forward basis. And so that being said, we still have to get this message out.
We still get questions on the CRA and the tax risk and so on. And so it is something that I can tell you ever since the settlement, we've had a very aggressive marketing campaign to try and get out there and make sure we do get the message out there. So 2018, a foundation year. You can see what we've done in our company, 19 different operating mines and 9 different development assets. What I always like on this slide is highlighting the fact that streaming works for everyone.
You can see the list of partners that we have here, Vale, Glencore, Newmont, all the way down to Hanoi, Yale Grove, Futio Capa. Streaming is a viable source of capital for everyone in the mining industry, no matter the size, no matter the scale, no matter the scope. And so we've got an incredible portfolio of assets. America is focused mainly because we started in the silver space. But we're constantly looking around the world.
We've looked at assets in Africa and Australia and Asia, just haven't found anything that quite meets the criteria level there yet, but we continue to pursue those jurisdictions, very comfortable with where we are right now. This probably this slide probably differentiates us from our peers more than any other slide. You can see here, it's one of the things that we test whenever we're looking at new opportunities. Where do these assets fit within their respective cost curves? If we're taking gold from a copper mine, where does that copper mine fit on the worldwide copper cost curve?
We're only interested in assets in the bottom half of the cost curve. We're really interested in assets in the bottom quartile of the cost curve. You see 68% of our production comes from the bottom quartile of the respective cost curves, be it copper cost curve or the zinc cost curve for lead zinc mines or even the gold cost curve when we pull silver and gold mines. 68%. I would argue that with 19 different assets delivering us metal over this time, there's not another portfolio of precious metals production anywhere in the world that has this high of a quality profile, quality characteristics.
And in the 2nd quartile itself, you can see 87% of production from the bottom half of the respective cost curve. So we've been successful in focusing on the best assets out there. On top of that, mine life, you can see our current reserves and resources, 32 years of reserves and another 34 years of resources on a go forward basis. It's a high quality, high margin mines that not only are profitable for us and our shareholders, they're also profitable for our partners and their shareholders. And that's the type of assets that we should be investing into because they're the first ones that our partners reinvest back into to look for exploration, to look for expansion potential, to drive going forward.
If they're making lots of money in these assets, it drives reinvestment into these assets going forward. So very, very strong portfolio. I think this one really differentiates us from our peer group. Our production profile, as I've described earlier on, 2018 is a foundation year. We did have a couple of term contracts and the readjustment to the tandem mass contract that has dropped us down.
2018 was a bit lower than 2017 in terms of production. But I think we've hit the bottom. In fact, looking at our production guidance on a go forward basis, we're already seeing good growth this year. We did 688,000 gold equivalent ounces back in 2018. Our guidance this year is 690,000, which isn't a lot higher than what our actuals were.
But I can tell you that we have a reputation of always exceeding our guidance. We're very conservative in terms of giving guidance and so very comfortable with that. In fact, our average production over the next 5 years counting the 6 90 that we've got in 2019 is 750,000 Golden Grove analysis per year. So good healthy growth and I need to highlight that although that's all coming from Penasquito having higher grades, from Constancia, the Apatancha zone, eventually it will deliver extra production to us. From still water growth with Litch Project coming on, from the Cobalt team coming on at Boise State.
What it doesn't include, that 750,000 ounces, it doesn't include the Rosemont project, which of course have just received permits for that. And we'll be going forward. We should be getting somewhere around 60,000 gold equivalent ounces per year just from that asset itself. It doesn't include the 3rd phase of expansion at Salobo, where Vale is pushing that project going forward. So we've got really good optionality in terms of that on a go forward basis.
So anyway, that production, that upside optionality, that's even over and above that 750,000 of oil equivalent ounces per year. And we expect that will be delivering extra metal to us. That's the low low expansion. It's a 50% increase in throughput capacity as we know. We still haven't finalized their mine plans in terms of a go forward basis, but we're very, very excited about that organic growth and that's just from within our own portfolio.
This is the beauty of the streaming business. Fixed costs, operating costs, capital cost basis, very predictable costs. We take the cost risk out of a traditional mining investment. We still give you all the optionality of investing into the geological upside and the potential of these mines, But we deliver when we see movements in commodity price, that movement gets delivered right back to our shareholders because our cost base is fixed on an operating cost and a capital cost basis. And so it's a very, very strong and healthy business model that we initiated back in 2004 and it's getting widely copied, the ultimate complement.
And the other advantage, of course, is that we don't have a lot of G and A. I see probably about 30% of our company sitting here in this room in terms of bench strength. And so our G and A costs are quite low and especially when you compare it to some of the fees. If you look at our G and A and you compare it to the fees that the different ETFs, the Napoleon and holding banks and such charge
really
for not delivering a heck of a lot. All they're doing is holding whatever you've got in there. Whereas we, of course, manage the portfolio. We deliver organic growth. We deliver leverage.
We've actually got a base cost. We deliver accretive growth opportunities and we pay a dividend. So we actually pay the total stock. And so relative to any of this, it's clear that the streaming model is I would argue the best way to invest into the resource sector period. Our exploration, the other advantage is organic growth.
We typically replace pretty well every ounce that gets mined. And I would argue that a lot of our assets aren't anywhere near maturity. So there's all sorts of additional upside as we see here. And so we've got a good track record of replacing pretty well every ounce that's ever been mined in our assets on a go forward basis and expect additional growth on this on a go forward basis. And in fact, one of the ways that we have mentioned accretive growth opportunities when we make acquisitions, We always test it to make sure it delivers real value back to our shareholders on a per share basis.
You can see here back in 2004, our reserves and measured and indicated resources less than 1 gold equivalent ounce per 100 shares in the company. We're now up well over 7, close to 8 ounces per 100 shares in the company. That's hard value being delivered back to our shareholders on a per share basis, not diluted. Our balance sheet is strong. We've got a $2,000,000,000 revolver.
We've got incredibly strong cash flows, should be somewhere between $500,000,000 $600,000,000 in cash flows this year. And the first priority, of course, is the dividend that we pay to our shareholders. But after that, it goes into the ground. If it's not going into the ground, it chews
back
this revolver, the debt that we have in this revolver. Net debt as of the end of March, I think it's around $1,100,000,000 and we'll be chewing that down unless we make acquisitions. We're always out there busy on that front too. And so the revolver has worked very well for us to balance out the very lumpy acquisition schedule that we have to the very, very consistent cash flows that we received from our operations. And that revolver has been very effective at minimizing any type of dilution effects that our current shareholders, which is who we work for,
have to suffer through. So
I mentioned the dividend. We have a guidance of at least 30% of our cash flow being returned to our shareholders. That was raised in mid-twenty 17 from 20%. But we've decided to increase to provide a bit more stability to it. This year, we've decided to maintain it at a $0.09 per share basis.
As long as it's higher than 30% of our cash flow, we'll maintain it at $0.09 for the rest of this year. So definitely the highest yield in the space and pretty good track record in returning some of that value back to our shareholders. This is one of the things that also differentiates us and it is more and more important for the time, something that I'm particularly proud of because I come from the mining industry and understand how important social license is. And I've always kind of felt uncomfortable with the fact that royalty companies traditionally, it's been around forever. They take they get value for all the production from these assets, but they don't contribute anything back into those local communities.
They leave it to the operator itself. Well, I understand that social license at the operator level is incredibly important. If you don't have it, the mine doesn't operate, it doesn't produce. And so we kick started a program probably 5 to 6 years ago that has had great success in terms of delivering a bit of value back to those communities to help make them more sustainable, to help share some of the benefits of the resource that we're all getting a benefit of going forward. So this is a good strong program that I'm proud of being able to support health facilities down in rural parts of Brazil around the Salobo mine to improve overall access to quality health education facilities around the San Dimas operation, education facilities around the Antonina operation, agricultural and business opportunities around the delobero in Argentina and also at Salobo around Pazolam and around Salobo in Brazil.
Those are things that do make a difference. It's one of the reasons why we've got incredibly strong relationships with our partners. It's why a lot of times when it comes to doing transactions, they want to talk to us and us first, see how they can how we can continue to grow our relationship together. It's all about good partnerships. So very proud of what this program has done.
Obviously, it also requires the communities where we and our employees work too. So we've got a good strong program in terms of supporting initiatives here in Vancouver and our international offices to again just leave a positive benefit to the community and make the world a better place. So the last slide here, 2018, when I add up what we accomplished, I think 2018 is a good solid foundation year. I think we have an incredible organic growth profile that will deliver real hard value back to us and our shareholders over the next while even without real acquisitions. Although I assure you we are very busy on that front itself too.
But I do think that 2018 has provided us a good firm foundation that we will build from and build real good hard value in a go forward basis and I'm very excited about where we're going. So that's my last slide. Thank you very much for listening. Is there any questions? Thank you.
Very good. I think
you've already closed it off. That concludes our call. Thank you.
Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.