Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Wheaton Precious Metals Year End 2018 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I would like to remind everyone that this conference call is being recorded on Thursday, March 21 at 11 am Eastern Time. I will now turn the conference over to Mr. Patrick Drouin, Senior Vice President of Investor Relations. Please go ahead.
Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call. I'm joined today by Randy Smallwood, Wheaton Precious Metals' President and Chief Executive Gary Brown, Senior Vice President and Chief Financial Officer and Haitham Hodlay, Senior Vice President, Corporate Development. I'd like to bring to your attention that some of the commentary in today's call may contain forward statements. There can be no assurances that forward looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements.
In addition to our financial results cautionary note regarding forward looking statements, please refer to the section entitled Description of the Business Risk Factors in Wheaton's Annual Information Form and the risk identified under Risks and Uncertainties in Management's Discussion and Analysis, both available on SEDAR and in Wheaton's Form 40F and Wheaton's Form 6ks both on file with the U. S. Securities and Exchange Commission. The Annual Information Form Q4 2018 Management's Discussion and Analysis and the press release from last night set out the material assumptions and risks that could cause actual results to differ, including among others, fluctuations in the price of commodities, the absence of control over mining operations from which Wheaton purchases precious metals, risks related to such mining operations and the continued operation of Wheaton's counterparties, risking estimating cash taxes payable in respect to the 2,005 to 2010 taxation years and assessing the impact of the settlement of the CRA for years subsequent to 2010. It should be noted that all figures referred to on today's call are in U.
S. Dollars unless otherwise noted. In addition, reference to Wheaton or Wheaton Precious Metals on this call will include Wheaton Precious Metals Corp. And or its wholly owned subsidiaries as applicable.
Now I'd like to turn
the call over to Randy Smallwood, our President and Chief Executive Officer.
Thank you, Patrick, and good morning, ladies and gentlemen. Thank you for dialing into our conference call to discuss our 2018 Q4 year end results. I am pleased to report that Wheaton Precious Metals had an incredibly successful year on so many fronts. Our high quality portfolio of low cost, long life assets once again delivered solid production results. During 2018, we produced over 370,000 ounces of gold, 24,000,000 ounces of silver and 14,000 ounces of palladium, all in excess of the company's guidance.
Furthermore, annual gold production and sales represented a record. We continue to generate strong operating margins resulting in sector leading cash flow of over $475,000,000 in 2018 from revenue of close to $800,000,000 In addition to our strong production and cash flow, we strengthened our stream on San Dimas making it more sustainable. We also completed the largest acquisitions of the year in the streaming space by adding 2 new high quality streams to our portfolio, Voisey's Bay and the Stillwater Mines. And perhaps most notably, we closed the year by reaching a settlement on our long standing tax dispute with the Canada Revenue Agency. Our foreign income is not taxable in Canada.
So from this firm foundation that 2018 has provided, we look forward to a steady and strong organic growth profile in the coming years. Before I get to that, I'd like to turn the call over to Gary Brown, one of our Senior Vice Presidents and our Chief Financial Officer, who will provide more details on our results. Gary?
Thank you, Randy, and good morning, ladies and gentlemen. The company's precious metal interests produced 107,600 ounces of gold, 5,500,000 ounces of silver and 5,900 ounces of palladium in the Q4 of 2018. Relative to the Q4 of the prior year, this represented an increase of 11% in gold production and a decrease of 23% in silver production, with the decrease in silver production being primarily due to the termination of the San Dimas silver stream effective May 10, 2018, and the expiry of the streams relative the Lagunas Norte, Veladero and Parina mines on March 31, 2018. The increase in gold production was due primarily to the new streaming agreements relative to the San Dimas and Stillwater mines, partially offset by lower production at Sudbury and the other gold interests, including Minto, which was placed into care and maintenance in October of 2018. Sales volumes amounted to 102,800 ounces of gold, 4,400,000 ounces of silver and 5,000 ounces of palladium in the Q4 of 2018, representing an increase of 9% for gold and a decrease of 40% for silver relative to the Q4 of 2017.
The increase in gold sales volumes was attributable to the increased production, partially offset by relative changes to the payable gold produced but not yet delivered to Wheaton. The decrease in silver sales volumes was attributable to the combination of decreased production coupled with relative changes to payable silver produced but not yet delivered. As at December 31, 2018, approximately 77,500 payable gold ounces, 3,300,000 payable silver ounces and 5,300 payable palladium ounces had been produced but not yet delivered to the company. We estimate a normal level for payable ounces produced but not delivered to equate to approximately 2 to 3 months for gold, 2 months for silver and 3 months for palladium, with the balances at December 31 being consistent with these expectations. Revenue for the Q4 of 2018 amounted to $197,000,000 representing a 19% decrease relative to Q4 2017, primarily due to a 40% decrease in the number of silver ounces sold combined with a 12% decrease in the average realized silver price, partially offset by increased gold and palladium sales.
Of this revenue, 65% was attributable to gold sales, 32% was attributable to silver sales and 3% was attributable to palladium sales. Gross margin for Q4 of 2018 decreased 32% to $65,000,000 with the decrease being primarily driven by the decrease in silver based revenue. However, it is important to highlight that the cash operating margins continue to be robust at 68% for the quarter, just 3% lower than Q4 2017. By far, the most significant highlight for the Q4 of 2018 was the settlement agreement that the company reached with Canada Revenue Agency, or the CRA, on December 13, 2018. This agreement provides a definitive resolution of Wheaton's tax appeal in connection with the reassessment of the 2,005 to 2010 taxation years.
As a reminder, under the terms of the settlement, foreign income on earnings generated by Wheaton's wholly owned foreign subsidiaries will not be subject to tax in Canada. In addition, Wheaton agreed to increase the fees charged by the parent company for the services rendered to its foreign subsidiaries by 1st, including the 3rd party costs incurred by Wheaton directly associated with the raising capital that was used to fund investments made by its foreign subsidiaries in precious metal purchase agreements and secondly, increasing the markup on costs incurred from 20% to 30%. Importantly, subject to there being no material change in facts or change in law or jurisprudence, the principles included in this settlement will apply to all taxation years subsequent to 2010, providing clarity on the implications of Canadian taxes to our business model moving forward. As a result of this settlement, we have recorded several one time adjustments in the statement of earnings during the Q4 of 2018. Specifically, we have recorded an income tax expense of $20,000,000 of which $16,000,000 represented a noncash expense.
Additionally, we have reflected interest and penalties totaling $4,000,000 and a onetime success fee relating to legal services rendered in the amount of $5,000,000 In total, expenses relative to the CRA settlement amounted to $29,000,000 in Q4 2018 with net cash expenses amounting to $13,000,000 consistent with company guidance. Cash based G and A expenses amounted to $20,000,000 in the Q4 of 2018, representing an increase of $12,000,000 from Q4 2017, with the increase being primarily related to increased accruals relative to the outstanding performance share units or PSUs during Q4 2018 coupled with the previously noted one time success fee of $5,000,000 Interest costs for the Q4 of 2018 amounted to $13,000,000 resulting in an effective interest rate on outstanding debt of 3.83 percent as compared to $6,000,000 of interest costs at an effective interest rate of 2.8% incurred in Q4 2017. After reflecting the impact of the CRA settlement, net earnings amounted to $7,000,000 in the Q4 of 2018 compared to a net loss of $138,000,000 in Q4 2017, with the prior year loss reflecting a $229,000,000 impairment taken on the Pascua Lama silver stream. After negating the impact of the CRA settlement for Q4 2018, the impairment charge for Q4 2017 and other items that are non recurring in nature, adjusted net earnings in the Q4 of 2018 amounted to $37,000,000 a decrease of $46,000,000 relative to Q4 2017, with the decrease being primarily due to the lower silver sales volumes and prices, combined with increased interest costs and PSU charges.
Basic adjusted earnings per share decreased to $0.08 compared to $0.19 in the prior year. Operating cash flow for the Q4 of 2018 amounted to $108,000,000 or 0 point compared to $165,000,000 or $0.37 per share in the prior year, representing a 35% decrease on a per share basis. Under the company's dividend policy, the quarterly dividend per common share is targeted to equal approximately 30% of the average cash generated by operating activities over the previous 4 quarters. To minimize the volatility in quarterly dividends, the company has set a minimum quarterly dividend of $0.09 per common share for the duration of 2019. On this basis, the company's Board has declared a dividend of $0.09 a share payable to shareholders of record on April 5, 2019.
Under the dividend reinvestment plan, the Board has elected to offer shareholders the option of having their dividends reinvested in newly issued common shares of the company at a 3% discount to market. For the year ended December 31, 2018, gold, silver and palladium production all exceeded company guidance with gold production representing a record for the company. As anticipated, silver experienced a 14% decrease relative to 2017, with this decrease being the result of the termination of the San Dimas stream and the cessation of deliveries from Lagunas Norte, Veladero and Parina. This decrease in silver production was partially offset by the introduction of palladium to the company's product mix and a 5% increase in gold production, with the contribution from the new streaming agreements relative to the San Dimas and Stillwater mines being partially offset by lower production at Sudbury and the other gold interests. Revenue for 2018 amounted to $794,000,000 representing a 6% decrease relative to 2017.
Of this revenue, 55% was attributable to gold, 44% was attributable to silver and 1% was attributable to palladium, with gold sales volumes of 349,200 ounces representing a record for the company. Gross margin amounted to $296,000,000 a decrease of 12% relative to 2017, with operating margins decreasing to 37% in 2018 from 40% in 2017, due primarily to lower realized silver prices, partially offset by lower silver depletion rates. Cash based G and A expenses in 20 18 totaled $46,000,000 representing a $17,000,000 increase relative to 2017, with such increase being primarily related to a $9,000,000 increase in expenses related to PSUs, combined with the $5,000,000 success fee relating to the successful resolution of the company's dispute with the CRA. For 2019, the company estimates that non stock based G and A expenses, which excludes expenses relating to the value of stock options and PSUs, will amount to $36,000,000 to $38,000,000 Interest costs for 2018 amounted to $36,000,000 an increase of $11,000,000 relative to 2017, resulting in an effective interest rate on outstanding debt of 3.57%. After neutralizing for the effect of the gain on disposal of the San Dimas silver stream, which was reflected in the Q2 of 2018, the impact of the CRA settlement and for other non recurring charges, adjusted net earnings for 2018 amounted to $214,000,000 representing a 23% decrease from adjusted net earnings for 2017, due primarily to the lower silver sales volumes and prices in 2018 combined with the higher G and A and interest costs.
Basic adjusted earnings per share amounted to 0.48 dollars in 2018 compared to $0.63 in 2017. Cash flow from operations amounted to $477,000,000 a decrease of 11% compared to 2017, with the decrease being attributable to the lower earnings. This translated into operating cash flow per share of $1.08 compared to $1.22 in 2017. The operational highlights for the Q4 of 2018 included the following. Attributable gold production relative to Salobo in Q4 20 20 Q4 2017 of 1% 5%, respectively, with the sales during the quarter benefiting from positive changes in gold ounces produced but not yet delivered to Wheaton.
Worthy of note is that Vale's Board of Directors approved the $1,100,000,000 expansion of the Salobo project in Q4 2018. This project is expected to increase throughput capacity at the mine from 24,000,000 tonnes per year to 36,000,000 tonnes per year with start up scheduled for the first half of twenty twenty two and a 15 month ramp up. On this basis, an expansion payment of approximately $550,000,000 to $650,000,000 would be made by Wheaton once the completion test has been satisfied with respect to such expansion, with Wheaton's attributable gold production from Salobo benefiting significantly from the 50% increase in throughput capacity. Attributable gold production relative to Sudbury in Q4 2018 amounted to 7,100 ounces, while sales amounted to 4,900 ounces, a decrease compared to Q4 2017 of 18% 60%, respectively, with the decrease in sales being attributable to negative changes in gold ounces produced but not yet delivered to Wheaton. Attributable gold production relative to Constancia in Q4 2018 amounted to 4,300 ounces, while sales amounted to 3,600 ounces, an increase compared to Q4 2017 of 45% 86%, respectively, with the increased production being primarily due to the processing of higher grade material with the higher production combined with positive changes in gold produced but not delivered, explaining the increase in ounces sold.
Attributable gold production relative to the new gold stream at San Dimas amounted to 10,100 ounces, while sales amounted to 8,500 ounces with mill throughput continuing to exceed expectations. Attributable gold production and sales volumes relative to the recently acquired streaming agreement at Stillwater amounted to 3,500 ounces. Attributable palladium production and sales relative to Stillwater amounted to 5,900 ounces and 5,000 ounces, respectively. It is worth noting that for the 6 month period ending December 31, 2018, attributable gold and palladium production from Stillwater exceeded the company's original guidance by 81% and 41%, respectively, with the significant outperformance being partially attributable to Wheaton being entitled to production relating to periods prior to the effective date of the agreement. Attributable gold production relative to the other gold interest in Q4 2018 amounted to 5,700 ounces, while sales amounted to 7,000 ounces, a decrease compared to Q4 2017 of 35% 18%, respectively, primarily due to the Minto mine being placed into care and maintenance during October 2018.
Attributable silver production relative to Penasquito in Q4 2018 amounted to 1,500,000 ounces, a decrease compared to Q4 2017 of 7% due to the lower throughput, which was negatively affected by ore hardness during the most recent quarter. Sales relative to Penasquito amounted to 901,000 ounces, a decrease compared to Q4 2017 of 41% due to a combination of lower production and negative changes in silver ounces produced but not yet delivered to Wheaton. Of note, the construction of the Pyrite Leach project was completed in Q4 2018 with the project achieving commercial production as of December 31. Attributable silver production relative to Antamina in Q4 2018 amounted to 1,200,000 ounces, while sales amounted to 1,300,000 ounces, a decrease compared to Q4 2017 of 15% 26%, respectively, with the decrease in production being a result of lower silver grades resulting from mine sequencing in the open pit, resulting more copper zinc ore and less lead rich ore being mined in the quarter. Attributable silver production relative to the other silver interests in Q4 2018 amounted to 2,100,000 ounces, a decrease compared to Q4 2017 of 3% being primarily due to the expiry of Lagunas Norte, Veladero and Purina streams at the end of March, partially offset by the restart of deliveries relative to the Algeceral stream during the Q2 of 2018.
Sales from other silver interests decreased 29 percent to 1,600,000 ounces due to a combination of lower production and negative changes in silver produced but not delivered to Wheaton. During the Q4 of 2018, the company repaid $117,000,000 on the revolving facility and made dividend payments of $34,000,000 Overall, net cash increased by $44,000,000 in Q4 2018, resulting in cash and cash equivalents at December 31 of $76,000,000 This combined with $1,300,000,000 outstanding under the revolving facility resulted in a net debt position as at December 31 of approximately $1,200,000,000 For the entire year, the company repaid $331,000,000 of debt, distributed $133,000,000 of dividends and invested a net amount of $900,000,000 in new precious metal purchase agreements with these disbursements being funded through a combination of operating cash flow and drawdowns under the revolving facility of $825,000,000 The company's cash position, strong forecast future operating cash flows, combined with available credit capacity under the revolving facility, positions the company well to satisfy its funding commitments, sustain its dividend policy, while at the same time providing flexibility to consummate additional accretive precious metal purchase agreements. That concludes the financial summary. And with that, I turn the call back over to Randy.
Thank you, Gary. Looking forward, we are pleased to reiterate the 2019 and long term production guidance previously announced in February. For 2019, Wheaton's estimated attributable production is forecast to be approximately 365,000 ounces of gold, 24,500,000 ounces of silver and 22,000 ounces of palladium, which amounts to a gold equivalent production of approximately 690,000 ounces. We also anticipate strong organic growth building over the next 5 years. Wheaton estimates that our annual gold equivalent production will average 750,000 ounces per year over that 5 year period.
Near term, we expect our production to increase primarily due to continued growth at Penasquito, Constancia and Stillwater. At Penasquito, the Pyrite Leach project, which is expected to significantly increase precious metals recovery, was fully expected to now move into some of the highest grade material at Penasquito and should be processing that material for the next few years. At Constancia, the Pampacancha satellite deposit has significantly higher precious metals grade than what we are current than what is currently being mined. We have not included Pampacancha in the 2019 forecast given the lack of a definitive schedule at this time. However, it is included in our 5 year production average.
And from our most recent acquisition, gold and palladium production at the Stillwater mines will increase in 2019 as the company has its 1st full year of production. And looking longer term, both gold and palladium both gold and palladium production from Stillwater are anticipated to increase with the continued ramp up of the Blitz expansion project, which is expected to reach full capacity in 2021. In addition, starting on January 1, 2021, Wheaton will be entitled to receive from Vale an amount of cobalt equal to 42.4% of the Voisey's Bay mine cobalt production. I would like to highlight that Wheaton does not include in its 5 year forecast any production from Barrick's Pascualama project, Vale's Salobo III expansion or Hudbay's Rosemont project. We do note that the new management team at Barrick seems to be putting a bit more focus on Chile and Pascua Lama.
Once it is up and running, it would definitely qualify as a Tier 1 asset. The Salobo III expansion project continues to advance, representing a 50% increase in throughput capacity and the current schedule would have first gold being delivered to Wheaton in 2022. And at Rosemont, Hudbay recently announced receipt of the approved mine plan of operations from the U. S. Forest Service, which is the final administrative step in this permitting process.
After the success of Constancia, we do look forward to working again with the Hudbay team through construction of the Rosemont mine. So we are very excited to see these projects advance and potentially add to Wheaton's future growth profile. I reiterate, none of this is included in our 5 year forecast, so the potential for additional organic growth is very real. Our guidance also does not account for future acquisitions. And on the corporate development front, we remain very busy.
There are several high quality accretive opportunities that we are pursuing related to both operating and development assets. And with the strongest free cash flow in the entire streaming space at well over $100,000,000 per quarter, coupled with the available credit under our $2,000,000,000 revolving facility, Wheaton still has plenty of capacity for continued investments. As always, we will remain disciplined and focus on acquiring streams that are accretive to our current shareholders and come from high quality assets producing in the lowest half of their respective cost curves. We would be thrilled to add to our portfolio. However, if an opportunity does not meet our standard of quality, we are equally happy to use our cash flow to delever the balance sheet in preparation for future larger scale opportunities.
Before I finish, I would like provide an update on our community investment program, in particular our partner CSR program. At Wheaton, we have long believed in giving back to communities in which we and our partners operate. Since 2014, we have provided financial support to our partner CSR Projects in the communities near the mines from which we receive our precious metals production. We are proudly the 1st in the precious metal stream space to initiate such programs, which over the years has now spanned over 4 countries and 6 different operating partners. In 2018, we continued support for an educational initiative near the Antamina mine and a sustainability initiative near the Constancia mine.
And at Salobo, we continue to work with the Vale Foundation on several programs focused on health, community engagement and small business development. And to date, we have been very pleased with the results of these initiatives. Through the partner CSR program, we are helping our partners maintain their social license to operate and doing our part to ensure that the mining industry delivers sustainable benefits to our neighbors. It is the right thing to do and we continue to challenge our peers to follow our lead in making a positive difference as well. So in summary, 2018 has been a very successful year, providing the company with a firm foundation from which we will grow.
Our high quality portfolio of assets exceeded guidance for all precious metals and had record gold production and sales. We optimized our San Dimas stream to be more sustainable in addition to adding 2 new low cost long life assets to our portfolio. Lastly, we finished the year by securing a principal settlement of our long standing tax dispute with the Canada Revenue Agency. This resolution provides us and more importantly our shareholders with clarity and confidence in our business model going forward. We look forward to deploying all of our time and resources into managing our portfolio of high quality assets, remaining active on the corporate development front and ultimately delivering value to our shareholders.
So with that, operator, I would like to open up the call for questions.
Thank Your first question comes from the line of Brian MacArthur with Raymond James. Please go ahead.
Good morning. I just want to delve into a little bit more of the Salobo III expansion payments, which you guide to 5 to 6.50. But if I understand this, there's a function for throughput, a function dependent on grade and a function for timing. So I'm just trying to see if you and Vale has put out different numbers and there's some challenges in Brazil. I guess I'm trying to figure out what would happen if this gets delayed a year or something, because I also think if you look at the mine plan, the grade starts to come down.
So I was wondering if that's possible to get any more color what the biggest factor is that's leading to the delta and what the payment might be?
Sure, Brian. Thanks for call and thanks for the question. The reason we list off a range of $550,000,000 to $650,000,000 is there's a low grade option and a high grade option. And so high grade option would require Vale to make a commitment with respect to maintaining a minimum grade level for a 10 year period. And if they do that, it would allow us to pay in the 2023 year the extra $100,000,000 So it would take it from $550,000,000 to $650,000,000 That's a choice that they haven't made yet and won't likely make until 2021, 2022.
It's going to require some scheduling in terms of an extra mobile equipment if they were going to focus on a higher grade mine plan than what they've got. So we've so through the structure of the contract, we've provided an incentive for them to try and focus on higher grades. We think the economics makes sense to do that in the 1st place, But we provided an additional incentive to them to try and get them to focus on higher grades and move more metal production forward. In addition, as you mentioned, if there's a delay to this contract, and again, hats off to the team that in terms of how we structured and negotiated this contract, it is the amount of this is based on minimum level of throughput or set levels of throughput, but it's also based on timing. And so the $550,000,000 to $650,000,000 number that we're giving you assumes that Vale completed at a 50% increase in throughput capacity in the year 2023.
If it gets delayed, if it's passed in 2024, 2025 that amount drops. It drops relative to the value of moving this production forward. So we and our shareholders more importantly are protected. The cost of any delays, there is no cost of delays to us because what it means is ultimately the expansion doesn't cost us as much. And so it's a very good structure that protects us in the event that there's delays.
It also rewards Vale in the event that they're finished early. If they do actually satisfy the completion test in 2022, the amount paid will go slightly higher. And so it's a perfect sort of win win situation. If they come out ahead of schedule, then they would actually get rewarded for that on our side. And so it's a good strong structure that protects us from delays.
And we've also got incentives in there to try and get Vale to commit to a more focused high grade plan that brings some of that metal production forward for us. Great.
And I guess there if I remember too, there's a one time decision and it's that I mean it's going from 24 to 36. If they get to 36, it's the completion tax based on 36 that triggers the payment, the one time. So like say they decided the middle of this because it delayed, they want to go to 42 or something. Does that then mean the whole thing becomes technically dependent on getting to 42 before you get the completion test and make the payment?
Well, it's their choice. It's a one time option for them to collect an expansion payment from us. If partway through this they do decide to further expand, then they have to make the decision as to I mean, basically, they make the decision by telling us that they're going to start running the completion test. It's a 90 day completion test. And it's up to them as to when they trigger that 90 day period.
And then over that period, at the end of that, we would make a payment based on the capacity, the grade based on a commitment from them to maintain a minimum grade and the timing. And there's 3 different factors that feed into how much that payment is made. It is, as you said, a one time commitment. So if partway through it, they do decide to expand even further, that would be a choice that they'd have to look at, whether they wait until that subsequent further expansion is completed or whether they would exercise it at the end of this Phase 3.
Great. Thanks. That's very helpful. Sorry to delve into it. Just it is an important part of the growth thing.
So that's very, very helpful.
Yes. We're pretty excited about it, Brian. This is a great asset that we think has got all sorts of opportunity in front of it.
Thank you. Thanks very much.
Your next question comes from the line of Michael Gray with Macquarie. Your line is open.
Hey, good morning, Randy and Gary. Just a couple of questions on Rosemont. First of all, on the installment payments, it looked like in the MD and A, you have an option to pay at least the first $50,000,000 in cash or shares. Did I get that right? Or could you clarify?
Yes. We firmed up the agreement. And so one of the options that we stuck in there just to give us added flexibility is that we can make the payment in cash or shares. It's actually for both payments. They can be both made in cash or shares.
That is a decision that right now I'd have to say, I mean, it all depends on what we've got in front of us from a corporate development perspective In reality, if we see some opportunities out there that look like we may need cash in order to fund going forward, then we have that added flexibility. But I can assure you, it is not our intention in the current environment, it's not our intention to issue shares. Our preference would be to issue cash, but we just wanted to acquire some flexibility in this process.
Okay. Thanks for clarifying. And then with Hudbay's approval of the Mayan Plan of Operations Rosemont, at what point will you incorporate the asset into 5 year guidance will be in connection with Hudbay being fully funded or is there another trigger?
Well, I think it probably there is some time lines. And one of the advantages of the restructuring of the agreement is that we do have some delay payments now if there's a delay. But the timing is triggered by us making our first payments into it. And so I would expect they're still working on some other structural and joint venture things with respect to Rosemont. And so Hudbay has got some work to do yet before we'd be making any payment on this.
But once that payment is made, it will trigger a timeline that is a commitment on their side. And so it would definitely fall into our guidance at that point.
Okay. Thanks very much.
Thank you, Michael.
Your next question comes from the line of Dan Rollins RBC Capital Markets. Please go ahead.
Yes, thanks very much. Just wondering if you could provide a little bit more color on the decision to put in the the floor on the dividend of $0.09 And if we could see this sort of pushed out again into 2020 2021 as the free cash flow builds and the balance sheet strengthens, obviously acknowledging dependent on acquisitions. But interesting to see you put a floor on there with the upside linked to the metal prices.
Yes. We just felt that it's sort of the next step is that our cash flows are strong. We've got a very strong organic growth profile coming down the pipe. And so we wanted to just provide some more surety towards the dividend itself. And we felt the approach to take, We still like the concept of having it loosely tied to our operating cash flows.
And obviously, if we see a dramatic increase in commodity prices or cash flows or both over the next quarters, it is a floor of $0.09 It still has the opportunity to climb up. But we just felt that over the course of the year, we'd given some more surety towards being able to deliver this on a regular basis. It does I mean, it will be reviewed every quarter, but our intent right now is to maintain a minimum of a $0.09 dividend per share through the rest of this year. With respect to 2020 2021 and subsequent years, we're going to have a look at the financial situation at every year end and make that determination. I can't commit one way or the other at all.
There's so much that can change between now and then that it'll be a function of many different factors in terms of that decision. But my hope is that we never have to drop it below this and that we could continue to grow it as our company continues to grow.
I think that'd be an excellent way of gradually increasing it while keeping some stability. One housekeeping question from me, the taxes payable sitting on the balance sheet and current liabilities, when does that get paid out just so we all know when it hits the operating cash flow
line?
We would expect that to be paid And we're talking about $3,000,000 to $4,000,000 then. So we'd expect that to get paid in the Q1, Q2 period as we finalize the reassessments for 2,005 to 'ten.
Perfect. Just want to make sure we sort of know where that falls. And then maybe Haitham, obviously lots of opportunities out there, put you on the spot. How many deals do you think you might be able to ink this year for the team?
Thanks for the question, Dan. What we're seeing now is a number of opportunities in the pipeline that fall, let's say, between $100,000,000 $300,000,000 in value. These are primarily development stage financing opportunities that would require very little upfront capital as any spending would be staged throughout the development time line, which is typically for a lot of these projects 12 to 36 months. I would hope to be successful on 1 or 2 of these in the next 12 to 18 months. And I think this stage payments will, as Gary mentioned, allow for a continued focus on repaying Wheaton's debt.
Okay, great. Thanks very much and good luck in 2019. Thanks, Dan.
Your next question comes from the line of Trevor Turnbull with Scotiabank. Please go ahead.
Hey, I think you answered my question when you were talking to Brian, but just in case, with respect to the option on the Salobo III expansion that contemplates having a guaranteed kind of high grade option where you would, I guess, have Vale stockpiling some of the lower grade material. Is it safe to say that the mine plan kind of as it exists today in the technical reports from the past is more of the low grade option and what you're contemplating is upside if they do adopt the higher grade guarantee?
They have a number of options in front of them. So they've studied both the high grade and the low grade scenario and they haven't made a decision. It's not even just one or the other. It's a multiple of scalable options. The biggest difference in these in this would be the amount the size of the mobile fleet that they would need.
Obviously, if they were going to stockpile more low grade material, it would require a bit of extra mining capacity in the pit. We don't see the pit itself is not production limited, so there's no issues on that front. And so it's really just a matter of them deciding how much capital they want to spend. It's our belief that the economics behind it would justify it, but there's other factors that come into play. But the economics would support focusing on the high grade and pushing low grade to the side.
So they haven't committed. That's one of the reasons that we don't have it in our 5 year plan is because they haven't committed to which mine plan they're going to follow. And they really don't have to commit to a mine plan until mobile fleet deliveries. That's the quickest part of any of the infrastructure that's required here. And so they probably won't be making a final decision on that front until 2021 or so.
I wouldn't expect there's no need to the processing facility itself is still going to be consistent all the way through.
Yes. No, I understand they haven't made that decision. But given the fact that they would need to add to the mobile fleet, the implication would be there they wouldn't be prepared to do that much kind of management of stockpiles at this stage. So whatever has been in the technical reports up to this point would be more of a less optimized scenario is what I'm getting at.
Yes. Actually, you know what? You're right. They do have low grade stockpiles that they've set aside, it has been sort of a balance between like I would say that right now they've been sort of taking almost the middle of the road path than anything else. They're not pursuing sort of high grade.
They're not also pursuing low grade. They're kind of in the middle of the road right now or current the current mine plan.
Okay. Fair enough. Thanks, Randy.
Yes. Thanks, Jeff.
Your next question comes from John Tumazos with John Tumazos Very Independent Research. Your line is open.
Thank you. Couple of the last streaming deals have been about $250,000,000 by Royal Gold for almost 2,000,000 ounces of silver and Triple Flag paying $100,000,000 for about 5,000 ounces of gold and a half a 1000000 ounces of silver a year. How do those terms strike you? Is there more depth in the market for you to do more cobalt, palladium deals? And can we look forward to lithium, dysprosium, yttrium or other specialized deals?
John, I'll let Haytham answer that one.
Thanks, John. Our focus continues to be on precious metals. We've always said gold and silver are primary focus, although platinum, palladium are also metals we'll consider. When you talk about cobalt and other metals, we're not adverse to looking at other best in class assets and that further contribute to the high quality portfolio we have. But let me be clear, our model works best when you stream precious metals from a base metal asset because there's a valuation arbitrage opportunity that allows us to create value for both parties.
So that is the type of opportunity where we focus the majority of our time.
So what do you think of these deals, dollars 250,000,000 for 2,000,000 ounces of silver, dollars 100,000,000 for 5,000 ounces of gold and 500,000 ounces of silver.
Well, I'd say it reflects the competitive environment out there, John. I'd say it reflects the competitive environment out there. I mean, right now we see a lot of smaller projects. The smaller scale projects and the smaller scale companies are not getting the equity support and so there's a healthy appetite. And so I just think it reflects that.
And when you look at some of the structure and some of the half of the we look at everything because we want to get a good handle in terms of what's out there, what's available. And it's amazing how many times these things come back sometime in the future. And so we do look at everything, but I can tell you that these most recent transactions weren't high priority transactions for our opportunities for us.
So Franco does energy deals and Sandstorm, Osisko and Royal Gold have invested in some mine development projects or startups or working interests. Do you see yourself venturing and tiptoeing into some of those things when the straight gold deals are too expensive?
No, I mean, I reiterate Haitham's comments. Our focus is precious metals. We do see opportunities. We don't need to do transactions. That's one of the key messages I think that we need to put out here is that we have got such a strong organic growth profile in our own portfolio right now that we're happy to sit and wait and be patient.
Deals the size of $100,000,000 to $200,000,000 they're pretty that doesn't move the needle much for us anymore. We like those kind of assets just from a diversity perspective, but they just don't move the needle much for us. And so our focus is to wait for the better quality assets. We are focused on precious metals. We're comfortable in the development stage.
In fact, I'd say this model was built on funding development, where streaming originally came from in terms of that. And I'd say that we're entering that cycle again where most of the stuff that we are looking at is development type where you're funding growth, you're funding expansions, you're funding acquisitions. That's all come into play. But you will not see us do oil and gas deals. You won't even see us focused on other commodities.
As Haitham said, if we have an opportunity for a best in class on a commodity that we're excited about, we'll look at it. But that doesn't mean our focus is looking and as the name implies, continuing to focus on making this company the best precious metals investment company out there.
Thank you for taking my questions.
Thank you, John.
Your next question comes from the line of Stephen Butler with GMP Securities. Please go ahead.
Good morning, Randy. It's Al, it's still before noon here. Guys, Salobo III, just to beat it down a little bit more, beat it up. The percentage change in grade, Randy, that could come from a high grade scenario. Could you give us a sense of that, either percent increase in reserve grade for 10 years or grade profile that otherwise would sit in the low grades?
What's the change, the delta in grade profile that you're talking about or thinking about?
Well, here's what I can tell you is that it's a I don't want to give you the exact number just because of there's some disclosure issues on that front. But what I can tell you is that it's based on production grade, not reserve grades, production grades, what gets processed through the entire processing facility. So not just the expansion facility, not just the 3rd line, but what is the average copper grade? And it is driven by copper grade, not gold grade, because we know there's a very strong correlation between copper and gold at this asset. And so the higher the copper grade, the higher the gold grade.
So we decided to structure it such that it is related to maintaining a minimum copper grade for a 10 year period through the processing facilities. And that's the trigger is a commitment to do that and then all sorts of then we ensure that they maintain that on a go forward basis.
Is that grade higher today or lower than today's copper grade, Randy?
I hate to tell you, I don't know what today's copper grade is because we look at the gold right now. So I'd have to look at I can't answer that question. Sorry, Steve.
That's fine. And then last one just for me, the ongoing improvements that you talked about or referencing of course 1st Majestics efforts, but what are some of the continued improvement initiatives at San Dimas that you're expecting that might be delivered by First Majestic? Thanks.
Well, yes, I have to say, the site management at First Majestic, our own technical team just went down at about 4, maybe 6 weeks ago for a site visit. And I have to tell you, the improvement in site management, First Majestic has brought in, well, it's the original site manager that was there in the early 2000s back when the asset was owned by Wheaton River. And so he's a manager that knows the asset very well and has outperformed there in the past. And I love the little note that he sent me about rebuilding San Dimas back to its former glory. And so we're excited about what we see down there.
We see a real move or real push on First Majestic side to support him as much as he can in terms of rebuilding that San Dimas operation. It is an incredible asset. The newly structured deal that we have there gives them full freedom for the entire property. And so we're chasing both the silver rich veins and the gold rich veins and they get the benefits from both. And so it's we're really excited.
I mean, we still don't have anything more detailed than a year out forecast from First Majestic. And so I hate to say it in our 5 year plan, we're still relying on some very old data from the previous operator. And I do think that there's that also is another area of potential growth and potentially significant growth on our production on our organic production profile. I have to say our team came back extremely impressed with the improvements that have been made at San Dimas since First Majestic has taken over.
And I think a lot of
it has to do with their site manager down there. They've made a good decision in terms of who they've got in there rebuilding that asset.
Okay. Thanks a lot, Randy. Thanks.
Thank you. And I'd like to thank everyone for dialing in today. We believe Wheaton is the premier investment vehicle for precious metals investors worldwide for a number of different reasons. Firstly, by having low and predictable costs that result in not only some of the highest margins in the entire precious metal space, but also sector leading operating cash flow. Secondly, through our steady organic growth profile over the next few years and a proven track record of accretive quality acquisitions.
Thirdly, by offering our shareholders exposure to some of the best mines in the world through our high quality portfolio of long life low cost assets, which I believe is unparalleled in the industry and lastly, by being a leader amongst the precious metal streamers and supporting our partners and the communities in which we live and operate. We do look forward to speaking with you all again soon. Thank you.