Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Wheaton Precious Metals Stillwater Acquisition Conference Call and Webcast. An accompanying presentation for the acquisition is available on the company's website. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer session. Thank you. I would like to remind everyone that conference call is being recorded on Monday, July 16 at 11 am Eastern Time. I will now turn the conference over to Mr. Patrick 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 Officer Haitham Hodley, Senior Vice President, Corporate Development and Gary Brown, Senior Vice President and Chief Financial Officer. I'd like to bring to your attention that some of the commentary on today's call may contain forward looking 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. The press release from this morning set out the material assumptions and risk factors 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 we purchased this precious metal and completing new stream transactions and risks related to such mining operations. It should be noted that all figures referred to on today's call are in U. S. Dollars unless otherwise noted.
Finally, we will be referring to a presentation on today's call that is available on the company's website at www.wheatonpm.com. 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, everyone, for dialing into our conference call on short notice in order to discuss the Stillwater acquisition announced earlier this morning. Wheaton has obviously been very busy on the corporate development front, pursuing low cost, long life assets to add to our high quality portfolio, and Stillwater marks our 2nd successful acquisition of 2018. We are very excited to add another producing asset to Wheaton's portfolio, especially one of the caliber of Stillwater, which is expected to contribute both production and cash flow for decades to come.
And we are pleased to welcome a new partner to Wheaton, Sauvignier Stillwater. So if I turn to the presentation, and we'll start off on Slide 4. We, of course, provide an overview of this transaction on Slide 4. Stillwater represented an attractive opportunity to acquire both gold and palladium from 1 of the lowest cost, highest margin platinum group metals mines in the world. And unlike the vast majority of PGM mines, Stillwater is located in a very low political risk jurisdiction, specifically Montana in the United States.
While palladium is a new precious metal to our streaming interests, we believe it has strong fundamentals on both the supply and demand basis, which Haitham will discuss shortly. The stream will not only add immediate production but also long term longer term production growth. For the next 10 years, production is forecast to average approximately 14,500 ounces of gold 29,000 ounces of palladium per year, which for context is approximately 37,000 gold equivalent ounces per year. In addition, this stream adds decades of gold and palladium production as the existing mine plan has 24 years based on reserves, along with significant inferred mineral resources as well as what I would describe incredible exploration potential that could extend its life well beyond that. Finally, I would like to highlight that the upfront payment will be made using available funds under the existing revolving credit facility, which Gary will discuss in more depth later in this call.
So with that, I would like
to turn the call over to Haitham Hornblich, Senior Vice President of Corporate Development at Wheaton, to provide more details. Haitham?
Thank you, Andy, and good morning, everyone. As I've done before, I will assume you all have the slides in front of you and will just point out some of the highlights on each slide and leave plenty of time for questions at the end. I'll turn you to Slide 5, the transaction overview slide. The takeaway from this slide is that we get 100 percent of the gold produced for the life of the asset and have a 4.5% palladium stream, which declines when certain thresholds are met. For that, we're paying $500,000,000 upfront and 18% of spot for both gold and palladium to start until we get all of our original investment back and then 22% thereafter.
Turning to Slide 6. We have fixed payable rates as we usually do to reduce our risk and also have a completion test, which gives us some comfort for the development of the Blitz project. Our stream is guaranteed by the parent company and certain subsidiaries, and our area of interest is on all patented and unpatented claims. Turning over to Slide 7, the corporate overview slide. The takeaway here is that the Stillwater assets are the best way to get low jurisdictional risk and low cost PGM exposure with excellent exploration and expansion upside.
Also, I'll point out that Stillwater is continuing to focus on improving the balance sheet and further enhancing its focus on safety through the use of digital technology, which we are happy to have committed some funding to. Slide 8, the social license and environmental. The key point is that there is a legal agreement between Stillwater and the local NGOs, which governs the transport of employees and equipment along the roads, which works because of the strong relationship that's been established there. Turning to Slide 9, the asset overview. We have a stream on 2 producing mines and one development project with strong growth potential.
And as you can see from the long section on the bottom, the mineralization is traced over continuous length of 32 kilometers. So we're very excited about the potential upside here. Slide 10 is an overview of the Stillwater Mine. It's an underground mine that's been operating since 1986 with strong reserves and excellent potential for further reserve expansion. Slide 11 highlights the Blitz development project, which is currently ramping up and should be in full production by 2021 to 2022 with ore to be processed at the soon to be expanded still water concentrator.
Turning to Slide 12. This is an overview of East Boulder mine that's been operating since 2002, again showing significant potential for expansion of additional resources to reserves. Turning to Slide 13, the PGM cost curve. This slide shows that the Stillwater and East Boulder mines fall into the lowest cost quarter. And the bar chart to the right clearly shows that the reserves and resources will be sufficient for decades of mining.
Turning to Slide 14, shows Wheaton's area of influence, which covers all patented and unpatented claims in red and blue respectively along the 45 kilometer strike length of the JM REIT. Slide 15 shows the combined asset overview and the takeaway from this slide is that the attributable stream to Wheaton, as Randy mentioned earlier, is approximately 14,500 ounces per year for gold and 29,000 ounces per year of palladium on average over the 1st 10 year period. And what's key is if that stays strong even over a 20 year period and we believe this will continue to go for much longer than that. Slide 16 provides an overview of Palladium. The takeaways from this slide are that Palladium mine supply is highly concentrated in riskier jurisdictions as a byproduct, which could make it more susceptible to supply disruptions.
And palladium demand is expected to stay strong as it is integral to lowering emissions in gasoline powered automobile engines, including hybrids. I'll now pass it over to Gary Brown, our CFO to go through the next few slides.
Thanks, Ethan. I'm on slide 17. Here, we're just highlighting that we will satisfy the upfront payment through drawing down on our revolving credit facility. When you look at what we have available under that facility, we had prior to drawing down about $900,000,000 drawn on a $2,000,000,000 facility. This will add another $500,000,000 to that.
So we'll be at about $1,400,000,000
net debt,
which leaves us about $600,000,000 of available capacity. And you can see by looking at the right hand side of that chart on Page 17 that we're generating about $600,000,000 of operating cash flow annually at current commodity prices. So we repay that debt by about the middle of 2022. Flipping over the page to Page 18, this just shows how robust capability we have of satisfying the financial covenants under our revolving credit facility. We really have 2 financial covenants.
1, that we need to maintain our net debt to tangible net worth at below 0.75. And you can see that we're at about 0.33 following the consummation of this transaction. And the other financial covenant is that we need to maintain a minimum interest coverage ratio of greater than 3 times. And you can see that we are well above that. So we can comfortably service this debt.
Flipping over the page to Page 19, this really just drives home how accretive this transaction was. It will represent about 4.4% of Wheaton's enterprise value. And you can see that on all measures production per share, payable ounces per share, cash flow per share and reserves and resources per share, this transaction is very accretive for us and our shareholders. And with that, I will turn the call back over to Randy.
Thank you, Gary. I'm going to turn everyone to Slide 21, which is, of course, the global map of our operations and development projects. You can see that this acquisition now brings us 20 operating mines and 9 development projects. And you can also see how well Stillwater fits in with our mix. It's located in a very low political risk jurisdiction and again, one of the lowest cost platinum group metal mines in the world.
On Slide 22, with this latest acquisition, you can now see that Wheaton now not only has a solid growth profile, but also one of the most diversified production bases that it's ever had or is the most diversified production base. You can see our average production over the next 5 years is going to be 385,000 ounces of gold per year, 25,000,000 ounces of silver per year. And with palladium starting, of course, as of July 1, we'll average on an annual basis 27,000 ounces per year. And then cobalt at £2,100,000 per year starting in 2021. That's good solid production growth on scheduled assets.
And that, of course, doesn't include anything from Rosemont, from potential expansions at Salobo and other operations going forward, all sorts of optionality. So I'd like to call 2018 a good foundation year. We've got good strong growth coming forward, both in our scheduled production and the optionality of upside from some pretty attractive projects that we're confident will move forward sometime here in the near term. And we do look forward to this Stillwater acquisition contributing, of course, to production and cash flow even to our Q3 results here in 2018. So finally, on Slide 23, summarize why we're excited about this transaction.
First off, again, the Stillwater asset is, I would argue, one of the best assets in the platinum group metal space. And when you combine that with its low political risk jurisdiction, it is it definitely fits well within our high quality portfolio of low cost, long life mines. This asset, of course, adds decades to our production and cash flow. The exploration potential here is the lowest risk exploration potential I have seen in a very long time in this industry. It adds nicely to our growth profile going forward.
We think there's all sorts of opportunities with this asset to continue growing itself and deliver that right back to us and our shareholders. With that exploration upside, a 45 kilometer strike length on this system with multiple points of access gives it all sorts of opportunity to take that exploration upside and turn it into good solid production. This, of course, as Gary highlighted, was is accretive to immediately earnings and cash flow all the way across the board, and it does add Palladium to our portfolio. So it diversifies our production portfolio. So I'm happy to report that this asset delivers another solid foundation asset to our portfolio.
And so with that, operator,
I'd like to open up the call to questions.
Thank you. And our first question comes from the line of Cosmos Chiu from CIBC. Your line is open.
Good morning, Randy, Gary, Haitham and Patrick, and thanks for the call. A few questions from me here. Maybe first off, can I ask about the security that you have on the stream? It sounds like you have it at the corporate level and certainly somewhat at the subsidiary level as well, but not at the asset level. Can you maybe talk a bit more about that?
And how this one might differ? Or is it the same as, say, some of your other streams, say Salobo?
Sure Cosmos, I'll take that. It's Heath and Eric. So we do have certain guarantees, obviously, as we indicated throughout the presentation. We don't have specific security on the asset in the event of liquidation, but we do have certain trigger events that allow us to protect our stream as we do with all our streaming transactions going forward. So we're fairly comfortable with the strength of our guarantees here.
And how does it compare to Salobo? Can you remind me? I forget the kind of security you have on Salobo.
Well, we wouldn't have security on Salobo, Cosmos. It's similar to what we would have put in place with Vale. We've got guarantees from Sauvignier, the parent company as well as the Stillwater Group. We've placed debt restrictions on both of those entities and we've further included a reduction in the production payment should Sibanye's leverage ratio rise above certain thresholds to further protect that. But I think it's important to highlight that post the confirmation of this stream, Sibanye's balance sheet strengthened quite significantly.
Their leverage ratio should drop to about 1.7 times. They have a target of 1 times leverage ratio. And certainly based on our analysis, there's a real tangible way for them to get there.
Carlos, if I could just sort of summarize. Yes, yes, yes. Every jurisdiction, every asset, every partner is different. And so I don't think everything is nothing is identical. What I can assure you is that we are very comfortable with the position we have through It's it is very similar to what we have at Salobo, but there's always going to be slight differences based on either the asset, the jurisdiction or the partner.
Okay. So I guess your stream will come after some of the debt that Salobo has. But given your analysis, given the situation, you're comfortable with the different covenants and the protections that you've put in place?
So, the global pass? Stillwater.
Stillwater. Yes, sorry, stillwater. Getting confused
here. Our stream would all of the debt that Sibanye has is unsecured debt. So the stream obligation would rank peripassu with that. Yes.
And then I would report you back to the cost curve and looking at this asset, it's a good strong asset. So I'll
add one more thing, Cosmos, is that this is 2 producing assets and a third one that's already started production. So the risk we have in the near term is very, very low. Yes. Good. Yes.
And that
would bring me to my next question. I see that Stillwater is a lower cost producer. But I also know that currently there's already another royalty in place, Frank and Nevada royalty on it. Could you maybe talk about the potential overlap? Is there an overlap?
I believe there's an overlap in terms of the 2 royalties. And have you looked into it in terms of is Stillwater, the asset itself strong enough to pay? I believe they'll be paying $38,000,000 a year to Wheaton Precious Metals. I believe they generated about $20,000,000 or they paid about over $20,000,000 to Franco Nevada last year on their royalty?
Yes. Cosmos, it's Randy here. First off, we don't receive cash from them. We receive gold and palladium. So and so obviously, that gold
and palladium has value, which is pretty close
to what you've just described. When we test these assets, we test them with all possible costs. That's part of our due diligence process, and we see plenty of capacity in this asset to handle both the royalty to Franco and the stream to us.
And is there an overlap? I believe theirs is on East Boulder, Stillwater and also Blitz.
There's definitely an overlap because we our stream covers all of the properties. I'm not sure that their royalties do actually cover all the properties. They cover the ones that are in production right now, but our stream there definitely isn't overlap because our stream covers the entire property package.
I'll just add one thing. Keep in mind, the NSR, that gets paid in cash, so they're not getting actual ounces of production, whereas we actually, as Randy mentioned earlier, get physical silver sorry, gold and palladium credits.
Yes. And Cosmos, I would add, as Blitz ramps up here that based on our analysis, the margins here are north of 50%. So this asset is very capable of servicing the stream and the royalty without
any challenges. And still delivering profit back to Sabania.
Yes. Yes. And then I
guess in terms of that blitz, the construction here, I believe there's a completion test. I was on a Sibanye call. I believe it's a 6 year completion test. And potentially, if they don't deliver, then $147,000,000 could come back to Wheaton Precious Metals. Could you maybe talk a bit about that on your conference call?
Sure. What we typically have with completion tests, and in this specific scenario, I guess, is we have a surface certain requirements for infrastructure that's been completed on surface and underground as well as certain throughput rates that have to be accomplished. For example, for this one is 3,100 tons per day for 45 days by the end of 2022. When the company mentioned maximum exposure, I believe, of 147,000,000, that's if they completely fail the completion test. What we typically do is we have a percent of design capacity, then we have a gross up provision and then we have a pro rata return of the upfront deposit.
So the 147 is the absolute maximum exposure if this thing shuts down right now and never produces enough.
But that's likely not going to happen, right? Because I think they also mentioned that 2 third of the CapEx has already been spent on blitz. And but yes, I guess, Wheaton Precious Metals has put those triggers in place just to make sure that you're protected, given how important Blitz could be and is to the future of the operation.
That's right. I mean, Blitz accounts for less than a third of the value. And if you look at what they've already said that they're expecting to produce from Blitz this year, they're already expecting 40,000 to 50,000 ounces of gold from blitz this year alone.
Yes. And maybe one last question from me here, if that's okay. Using your numbers that you've given to us, Haitham, 14,400 ounces in terms of gold and 28,000 ounces of palladium attributable to Wheaton Precious Metals in the 1st 10 years. Is that before or after your 99% 99.6% payable factor?
That's contained metal.
Contained metal, okay. So that's after? No, that's before. That's pretty good.
That's after payability.
Yes. Okay. And then based on so I've used your numbers and I appreciate that the deal is accretive to cash flow and since you're using cash. But I don't know if I'm correct, but I calculate an IRR for the transaction of about 4% to 5%. Is that comparable to what you've calculated based on spot?
And is that sufficient as a return?
So we actually calculate a higher rate of return than that. And I can tell you, Cosmos, that I mentioned it during the call, the exploration potential on this asset, this JM Reef is a 45 kilometer continuous zone of mineralization. And so I would have to encourage everyone to understand that anything that's reported an inferred resource and even the exploration that's on this asset, this is going to be the lowest risk inferred resource you've ever seen. The continuity of this system is incredible. We've got 32 kilometers of identified mineralization all the way along this whole zone that shows that it's economic and robust along the entire 32 kilometer strike length.
And then it along each end adds up to 45 kilometers of total distance. And so I really do think that you have to treat that exploration potential, that upside. I think that this we use the comments in here that we expect this to be delivering metal to us for decades. I'm not thinking about 2 decades or even 3 decades. We're talking decades.
This is a mine that will be producing metal for a very long time, and this is a life of mine agreement on an asset that we think is in a very strong jurisdiction that political risk would come out. And so I do think that it would be I would encourage everyone to understand that there's a lot of value in longevity here.
Great. Thanks, Randy. Good answers. Thanks for the call.
Cosmos, this is Kathy. Let me just clarify. The production numbers we're quoting are in concentrate. They are not pretty payability. So you do have to factor in the payables
as well. I got you. Okay. Thanks, Patrick.
Our next question comes from the line of Marco Sroba from Macquarie Capital. Your line is open.
Good morning, Randy and team. Just a quick question on any expansion potential given the long mine life. Is the current constraint the mining itself or is it the processing side of things? You did mention there was going to be or there's an expansion underway in the plan itself.
That's right. So the actual constraint right now is processing, and that's why there's still a lot of plant that's actually being expanded. And we see a potential for further expansion at East Boulder. So there is a significant amount of potential. Mining is not a constraint at this point.
Okay. And what will be the total processing capacity post expansion of the plant?
It depends on which one you're talking about. If you're looking at throughput rates at each of Stillwater and Sibanye, you're talking roughly 2,750 tonnes per day is what it's been running at. And for Stillwater. And East Boulder has been running around 2,400 tonnes per day. So we see potential for Stillwater and Blitz to get to about 1,400,000 tonnes per year and East Boulder to get to about 600,000 tonnes per year.
Okay. Excellent. Excellent. And a question on the infill drill program. What's the current size of the program they're running given the high level of inferred resources that can be converted across?
Right now, they're mainly focused on developing out the Blitz project. That's their main focus. They've got clear targets at Blitz and they're also looking at East Boulder deeper program. That tends to be their focus. They've got enough in front of them right now with those two projects rather than looking at the infill between the current two operating mines.
We do think that's a further a later life kind of thing, probably mid-twenty 20 before they really start addressing that. They'll have blitz up and running and better handle on E folder D.
Okay. So that inferred resource is primarily in between in that gap that we that you guys discussed earlier?
Yes. There's a gap. There's also it's wide open at depth and wide open on both ends, along strike too. So again, just reinforcing the potential of this operation or this asset, this deposit to to be delivering metal for a very, very long time.
Okay. Excellent. Thanks for that.
Our next question comes from the line of Josh Wolfson from Desjardins. Your line is open.
Thank you.
Good morning.
How are you doing? Fine. Looking for, I guess, the comments earlier on the call about the leverage protection for Sibanye, Do you have any more information on, I guess, when that would be triggered and what that protection, I guess, is?
Well, it's again it's restriction on debt in currents. So there the restriction is Sibanye and Stillwater cannot incur debt to the extent that the incurrence of that debt would take their leverage ratio over 4.5 times. And as I think I've stated previously, they should be at about 1.7 times exiting this transaction. And then there's a reduction in the production payment depending if they are at a leverage ratio of over 3.5 times, which reduces from where it currently is at 18% to down to 10 to the extent that they're over 4.5 times leverage.
Got it. Okay. That's helpful. And looking at the production guidance, I guess near term, so the full ramp up is expected around 2021, 2022 and we've been provided around 10 year average annual guidance. Is there any additional disclosure able to provide at least in terms of what kind of production we should expect up until that steady state is achieved in 2021 or 2022?
So I think that kind of guidance has to come from Stillwater specifically. I can tell you there is a ramp up obviously with blitz ramping up here in the near term. But I think what we've given is what we are able to give you at this point in time.
Okay. And I guess
yes. Josh,
if I could draw your attention, Sabanye did put out a schedule on Slide 12 of their presentation going out on an annual basis out to 2,032. If you look at the streamed gold that they've got, they've got about 11,700 ounces of gold climbing to 14.3 in 2021 pretty linearly and then 14.7 starting in 2020 2 and running its way out.
Okay. That's very helpful. And that may answer my next question, which is the second sort of 10 years of data, I guess, within that 20 year average that was provided. I guess, the production volumes would clip lower from that 4.5% to 2.25%. Is that just to understand that 20 year average includes that reduction of volumes that would be attributable to Wheaton, correct?
That's right.
Yes, gold stays flat pretty much, but the palladium does drop.
Okay. And then last question, I guess, on the leverage that you have, which looks very manageable. Just from a holistic perspective, when you're evaluating new transactions that are available, what would be your maximum leverage that you would be comfortable with? And obviously incorporating the fact that there is multiple commodities and different movement within those commodities that you have in the portfolio now?
Yes. Well, we've got the $2,000,000,000 revolving credit facility, Josh, and I would be comfortable drawing fully on that. I would remind you that we're generating about $600,000,000 of operating cash flow annually here. So we reduced that debt very, very quickly even at current commodity prices. So we still have very significant capacity to consummate additional transactions without having to access any additional capital here.
And Josh, I'll add one more thing to that. The majority of the opportunities we're seeing, there's still a pretty healthy pipeline, but the majority of them are development stage projects, whereas any additional capital contribute will be staged. So that would give us the flexibility.
Got it. Okay. That's very helpful. Thank you, Mike. Thank you very much.
Thanks, Josh.
Our next question comes from the line of Anita Soni from Credit Suisse. Your line is
open. Good morning, Randy, Gary and Haysom. So just a couple of questions. Hi. So just a couple of questions on the inferred category.
You mentioned that's where a lot of the exploration upside is. And I noticed in the footnotes looking at how the resources there are calculated. I'm assuming that they don't have dilution included in them? It doesn't have that footnote for reserves, but not for resources?
Yes, that's right. Whatever our resource is estimated, it doesn't have the production parameters assigned to it. So dilution wouldn't be factored in.
Okay. Is there a could you provide some kind of estimate guidance about what you would expect dilution to be?
Well, it's quite variable actually. I mean, it comes down to the thickness of the structure in different areas, and thickness does vary in certain areas, right? And so obviously, if you get wider than the working width, which does happen in numerous areas, your dilution should be much less. But if you happen to go in and take a very high grade but narrow section of the vein and take that wall dilution, the mix is going to be higher. So it is quite variable.
Obviously, typically, what happens through the drilling off, we've seen this in blitz, is they one of the things in the drilling is more almost to identify some of the thicker zones in the structure so that they can minimize the dilution, and then they'll sort of bias the production. It will have an impact on how they do their production scheduling. So I would fully expect them to through the conversion of these inferred resources into reserves, be focused on areas where they have thicker intercepts and try and bring that in to minimize the dilution impact. What's particularly impressive about this system is that the structure itself is such high grade nature. It's a bit surprising how much dilution it actually afford.
And they're, of course, constantly trying to find ways to minimize that because nobody likes moving waste if you don't have to. And I'm sure that they're only going to get better as they're already doing a great job, but I'm sure they're only going to get better at that with time. But it's pretty tough to give a global number on that. We've got our own sort of estimates, but they're kind of broadly across and have a look at both the inferred resources and the exploration potential.
So the in terms of the drill density on the inferred category, can you tell me what that is compared to the reserves?
Inferred category, it's going to vary depending on zone, as Randy mentioned. But if you'd like more information on that, so and we can actually go into detail if you want to give me a call after I can help you out with our technical guys.
Sure. Thank you. Our next question comes from the line of Andrew Kaip from BMO. Your line is open.
Hi. Good morning, Andrew. Good morning.
Good morning. Look, I thought I would just tackle Anita's questioning in a different direction. I mean, Haysom, you must have looked at long term conversion rates at the operation. It's got a couple of decades behind it. Is there any comment that you can provide on in resource conversion?
I suspect it's just all inferred because it's underground, wide space drilling, but the continuity of the reef is well known?
That's correct. That's effectively correct, Andrew. We're pretty comfortable if you look at how long the trace mineralization has been 32 kilometers of trace mineralization. The primary reason why it's not in the measured indicator, proven possible categories is drilling. And we suspect that given the 25 year plan that they've already outlined that once they are start getting through that, they'll start putting more money and tightening up that spacing going forward and moving a lot of that into MedGen indicates and eventually applying dilution factor moving into a proven problem.
Did they when you were in discussions with them, did they provide sort of conversion did they provide a discussion on conversion rates, historical conversion rates?
We they probably did earlier on in the conversations, and I can look back into my notes and find that for you if you want to give me a call later on, it.
Andrew, I would add that the structure exists. Its conversion rate is 100%. It's in terms of every time they've had an inferred resource and they've taken it to reserve status, it's only a matter of drilling it off to the higher density and then slapping a mine plan around it. The structure has been continuous. There's no hole off that we've seen so far.
There may be places where it thins out to the point where it may be get post uneconomic. We haven't seen much evidence of that. Usually, it comes down to having to leave support pillars in and the likes when you're driving on these things, and that sort of comes down to the only stuff that gets left behind. The reef the jam reef is continuous. And so I would say that in terms of conversion, it's 100%.
It's just a matter of the thicknesses. As you get the tighter drill densities, the thicknesses, you get more detail in terms
of what the thicknesses of
the reef are in different areas. And that's one that you're not going to know until you get that tighter drill density and drill information in place. But I would say conversion rate is along this thing is 100 they understand the geology very well. It's a very, very impressive asset from that perspective. And so conversion rates, I would say, along the lease itself is 100%.
Okay. And then with respect to just your view on rate of return, was there a component of conversion that you included in that outlook? Or was it really just based on reserves?
Yes. We kind of looked at it and just kept it going.
Okay. To be simple. Right. But that being said, Andrew, it's when you're talking a 25 year reserve life, the additional component of Firdapse doesn't add a lot of value. So it's a very small number.
All right. Thank you very much.
Thanks, Andrew.
Our next question comes from the line of Chris Terry from Deutsche Bank. Your line is open.
Good morning, guys.
Hi, Chris.
Hi. A couple of questions for me. Just starting maybe on the in the appendix on Slide 31 from a high level where you've got the split of revenue on a commodity basis and then a country basis. Just interested on the last two deals in cobalt and some palladium exposure. How do you expect that to look going forward?
Or is it just you just look for deals that are accretive? And if they happen to be in a commodity outside of silver or gold, you'll go after those, but keep, I assume, at least 80% pressure, so probably above 90% pressure exposure. Is that the right way to look at it? Are you focusing on other commodities specifically? Or it's just that that's where you found the value recently?
Chris, we are focused on precious metals. Cobalt the Boise's Bay Cobalt Stream represented a very unique opportunity. As I've said, it's not really a cobalt stream. It's a Voisey's Bay Cobalt Stream, and I differentiate that from so much of the other cobalt production around the world because it represented a very unique with platinum. And so we've always been we spent plenty of time actually looking at platinum group metal assets.
This is the first one that sort of met our criteria for political risk and for economics. My preference is silver. I still think silver has got the best up play potential, but we're more than happy to stay focused on the precious metals. And I do not see us. We will not go into the base metal space.
We will not go into the oil and gas space. I don't see a lot of other cobalt opportunities that, in fact, I can't think of any right now that would pass our criteria in terms of being investable for Wheaton shareholders. And so yes, I would say that we will stay precious metals focused and continue to build on the precious metals side.
Okay. Thanks, Randy. That's pretty clear. And then just to follow-up on the earlier question, I think, around the leverage. It looks like you've got about $500,000,000 to $600,000,000 to go up to that $2,000,000,000 on the revolver.
But I think, Ethan was saying earlier, if for the rest of the year, you'd expect that if you were to do other deals, they're probably more on the development side and probably earlier stages of a smaller nature. Is that fair as in probably $100,000,000 to $200,000,000 deals rather than around the $500,000,000 Is that
the right way to think about it? Yes. Chris, it's Ethan. I think that's a very good way to think about it. I think we're focused on, I'd say, dollars 1,000,000 to $300,000,000 deals.
And I think over the next year, there's probably half a dozen of those to consider.
Okay. That's it for me. Thanks, guys.
Thank you. Operator, one last question, please.
Our next question comes from the line of Carey MacRury from Canaccord Genuity. Your line is open.
Hey, Carey.
Good morning, guys. Just wondering if you can comment on how correlated the gold grades are relative to the PGM grades. Are they pretty consistent? Or are there more higher grade gold zones and vice versa?
Yes. No, it's they're incredibly correlated. But that being said, as we move from west to east, we see a significant increase in gold grades going that way. So we're pretty excited about the potential, especially given the upside at the Right, right, right, right, right, right, right, right, right, right, and given the upside we're seeing at Bliss. So what does the West look
like relative to the East then in terms of the whole grade?
In terms of actual grades?
Like roughly speaking, is it 5% to 10%.
So I'm just trying to find a number here while I'm talking.
Carrie, if I could draw your attention, in the appendix on Page 32, the slide in which we do talk about attributable reserves resources, we give the correlations there, down in the bullets on the right hand side. So we laid out pretty much pretty clear our methodology. Now those the way we calculated those are based on historical production. So as Haitham mentioned, as we do move to the West, we do see increased gold grades. That is not really factored in, in this the current R and R.
And those gold grades could be anywhere between 30% to 40% higher as we move in that direction.
Okay. Thank you very much.
Ladies and gentlemen, this concludes the Q and A portion of today's conference call.
Well, thank you, everyone, for dialing in today. Very confident we have demonstrated on this call why Stillwater is such an incredible asset and the value we expect it will bring for many decades to come. If you look on Slide 24, you can see Wheaton and Sibanye Stillwater are planning to host an analyst tour in the fall, in September of this year to showcase the impressive low cost long life Platinum Group Metal Mining Complex in Montana. So we do hope that some of you can join us firsthand to see why we believe Stillwater is a great quality asset. We do look forward to speaking with you all again soon.
Thank you.