Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wheaton Precious Metals Voisey's Bay Acquisition 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. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, you may press the pound key. I would like to remind everyone that this conference call is being recorded today, Tuesday, June 12th at 11:00 A.M. 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 Officer, Haytham Hodaly, Senior Vice President of Corporate Development, Gary Brown, Senior Vice President and Chief Financial Officer, and Curt Bernardi, Senior Vice President Legal and Corporate Secretary. We will be referring to on the presentation today on today's call that is available on the company's website at www.wheatonpm.com. For those of you on the webcast, we do ask that you please open the PDF as we will not be automatically forwarding the slides of the presentation. 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 in 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 last night set out the material assumptions and risk factors that could cause actual results to differ, including, among others, fluctuation in the price of commodities, the absence of control over mining operations from which Wheaton purchases silver or gold or cobalt, and completing new transactions and risks related to such mining operations. It should be noted that all figures referred to on today's call are in US dollars unless otherwise noted. 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 the Voisey's Bay acquisition that we announced yesterday. Before I get into details, I would like to start off by saying that Wheaton has and always will be a precious metals-focused company. However, we welcome the opportunity to invest into another low-cost, long-life asset with a partner of Vale's caliber. While cobalt isn't considered a precious metal, we think it is far from being just a base metal. Through Voisey's Bay, we not only get exposure to the rapidly growing demand for cobalt, we also get this exposure from what we believe to be the cleanest, most politically stable source of the metal in this world. Furthermore, we are very excited about the contributions our new cobalt stream makes to both Wheaton's growth profile and cash flow.
If I could encourage everyone to turn to the presentation itself, of course, on slide two, there is some forward-looking statements that I think Patrick just summarized very well. I'll start off on page four of the presentation itself. Starting on January 1, 2021, Wheaton will be entitled to 42.4% of cobalt production from Vale's Voisey's Bay operations until the delivery of 31 million pounds, and then dropping to 21.2% thereafter for the remaining life of mine. It should be noted that the timing of the onset of our stream is coincident with the anticipated ramp-up of the underground operations at Voisey's Bay.
Wheaton will pay a cash payment of $390 million on closing and 18% of the Metal Bulletin spot price per pound delivered until the value of the upfront cash consideration is reduced to zero, at which point the spot price per pound climbs to 22%. Wheaton's attributable cobalt production is forecast to average 2.6 million pounds per year for the first 10 years, which, for context, is approximately 80,000 gold equivalent ounces per year at current spot prices. At the current cobalt price, that production results in additional operating cash flow to Wheaton forecast to average over $75 million US dollars per year for the first 10 years. Along with strong cash flow and production, Voisey's Bay diversifies Wheaton's portfolio with an integral metal for clean energy as cobalt is primarily used in battery technology, especially in the rapidly expanding electric vehicle market.
While most cobalt supply comes from high political risk jurisdictions, Voisey's Bay is located in Newfoundland and Labrador in Canada. The cobalt produced at Voisey's Bay is among the most environmentally friendly, cleanest, and conflict-free cobalt production in this world. In addition, there is great exploration potential as deeper drilling has already shown that mineralization does continue well below the current resource boundaries. Finally, with the strongest cash flows in the streaming space, I would like to highlight that we will be funding this transaction with the ample capacity available under our current revolving credit facility. With that, I'd like to turn the call over to Haytham Hodaly, Senior Vice President of Corporate Development here at Wheaton to provide more details. Haytham?
Thank you, Randy. By now, you've all had a chance to go through the specifics of this transaction, I'll just point out some of the highlights so that we can leave time for questions at the end. On slide number five, some additional details, transaction overview. Randy has already pointed out that what Wheaton has entered into is a stream with Vale effective January 2021 on an amount of finished cobalt from the open pit and the underground equal to 42.4% of the cobalt produced at Voisey's Bay, and which reduces after 31 million pounds delivered to 21.2% of cobalt production for the life of the mine. Wheaton will make a cash payment of $390 million, as Randy mentioned, and Wheaton will utilize its existing revolving credit facility for the upfront payment.
In terms of the production payment, 18% of the Metal Bulletin cobalt spot price per pound is what Wheaton will pay until the value of upfront consideration is reduced to zero, then 22%. It's important to make the distinction between the Metal Bulletin pricing and LME pricing. The LME trading of cobalt is based on very light volume. As an example, LME trading reflected only 0.5% of global sales in 2017. The other 99.5% of global sales is based on the Metal Bulletin reference price, which as of this morning has a lower and upper range of $41.65-$43, depending on the quality of the cobalt metal produced. Keep in mind that Vale will produce one of the highest quality cobalt metals that is optimal for use in electric vehicles in the form of cobalt rounds that meet the cobalt high-grade specification.
I'll turn you to slide number 6. Continuing on with the transaction overview, Wheaton will take physical delivery of high-quality finished metal by way of warehouse certificates. Payable rates for cobalt and concentrate have generally been fixed at 93.3%, and Wheaton has a completion test related to the ramp-up of the underground operations measured by through-put rates. Wheaton will also be responsible for Canadian tax on the sale of finished cobalt to a third party off-taker. We don't expect to actually pay any cash tax for a number of years, given the upfront capital that we're making. The stream is guaranteed by the project owner and has a financial guarantee by Vale S.A. as well.
The stream area of interest applies to Voisey's Bay's mining lease, plus a two-kilometer surrounding area, so long as any cobalt is extracted using the same underground infrastructure as the planned Reid Brook and Eastern Deeps deposits. Reid Brook comes in first, Eastern Deeps comes in second, is ramped up. Reid Brook effectively is fully ramped up by about September 2021 and Eastern Deeps by about 2024. Turn you over to slide number 7, the asset overview. Just a few of the highlights here. It's an open pit mine transitioning into an underground mine. Deposit type, it's a magmatic sulfide, and it's located off the north coast of Labrador. The open pit began in 2005, and the underground is expected in the beginning of 2021. The 10-year average production of contained cobalt metal is roughly 2.6 million pounds, and cobalt payable rates are fixed at 93.3%.
Looking at reserves and resources combined, we estimate at least 14 years of mine life based on reserves and resources and are very excited about the exploration potential, which could further expand that. I'll turn you over to slide number 8. In terms of an asset overview, the primary metal here is nickel, with by-product cobalt and copper. This asset was originally discovered in 1993 in Newfoundland and Labrador, approximately 1,200 kilometers north of St. John's. It's an open pit mine and concentrator, which became operational in 2005, and the first full year of production, as previously stated from the underground mine, is forecasted for 2021. The underground development is focused on two deposits. We'll go in a little bit more detail on those, the Reid Brook and Eastern Deeps.
There is a revised development agreement with the government of Newfoundland released yesterday. It indicates that Vale now has ample time to actually meet the required timeline. Infrastructure, the Long Harbour processing plant became operational in 2014 and currently processes all nickel concentrate. The cobalt circuit started up in the first quarter of 2017 and is undergoing ramp-up. This is a hydrometallurgical facility, which results in significantly higher cobalt recoveries. Slide number nine. The plan view on slide number nine highlights the Ovoid deposit and the southeast extension. The Ovoid deposit, which is the current open pit, as well as the Reid Brook and Eastern Deeps deposits, will provide the underground feed.
Far, Vale has prepped the collars for both Reid Brook and Eastern Deeps. They will access these deposits with ramps, with conveyors at Eastern Deeps to get ore out, and at Reid Brook, ore will be trucked out of the mine. Slide 10 highlights the existing reserves and resources. You can see the original discovery hill there. Slide 11 shows the significant exploration upside potential, which exists at depth below Reid Brook and Eastern Deeps. Just a reminder that the area of interest is the existing lease plus a two-kilometer surrounding area, which uses the same planned infrastructure. You can see why we're excited about the exploration potential of depth. Turn you over to Slide 12. It's an overview of the Long Harbour facility. Long Harbour, as I previously mentioned, began in 2014.
In late 2017, all of Voisey's Bay nickel concentrate began going to Long Harbour. The cobalt circuit began in early 2017. It's a hydrometallurgical facility that will produce nickel and cobalt rounds, as well as cathode copper. Voisey's Bay is the most environmentally sound and cleanest cobalt production in the world. I'll turn you over to Slide 13. As you can see on this slide, Wheaton has more than enough capacity to fund this transaction. As of the end of the last quarter, our net debt was approximately $547 million and decreasing, given our strong cash flows. We'll use our revolving credit facility and cash on hand to fund this transaction. Even after this transaction, we have significant capacity of more than $1 billion for other transactions, excluding the $500 million in free cash flow annually. I'll turn you over to Slide 14.
On Slide 14, you can see that we very comfortably comply with our financial covenants with significant room for future growth. Slide 15 shows that this transaction is accretive on all metrics, production, cash flow, reserves, and resources. Turning over to Slide 17, gives you a bit of an overview on cobalt. Batteries in electric vehicles is a key demand driver for cobalt. Given the significant drive towards electrifying the automotive industry, we believe there's been a paradigm shift in demand for cobalt. Cobalt demand for non-battery related end use is also expected to grow. The anticipated demand for cobalt battery related end use is expected to more than double between 2018 and 2025. As you can see, cobalt is an integral metal for clean energy storage. Slide 18 shows lithium-ion anticipated battery demand overview.
In short, supply constraints and anticipated surge in demand, coupled with the fact that this is already a small market, will result in a price reset such that we expect to see strong near-term and long-term demand. Slide number 19. We will start with the pie chart on the left. Like silver, cobalt is primarily produced as a by-product, and 98% of cobalt is to be exact, is produced as a by-product. As you can see from the pie chart on the right, most cobalt comes from high political risk jurisdictions, which could be exposed to issues which could affect supply. We are very happy to be able to source cobalt, an integral metal for clean energy, right here in Canada. At this point, I will pass it back to our CEO, Randy Smallwood.
Thank you, Haytham. If I can turn everyone to slide 21, you can see where Voisey's Bay fits into our portfolio of low political risk assets. We obviously focus on the Americas and Europe, but good, strong, stable jurisdictions with good, strong, stable partners. It is listed as a development project, but I would dare to say that with the operating history and the track record of production and processing at the Long Harbour facility, that this definitely should be classed as a strong operating asset. It will be delivering to us again in 2021. If you turn to slide 22, you can see our production profile and the impact that Voisey's Bay has starting in 2021. Some of you have heard me say that I would call 2018 a foundation year, and you can see the growth that we see.
Voisey's Bay will add very nicely to that, of course, this slide does not even encounter any of the optionality that we have in Rosemont and Salobo and Navidad coming down the pipe too. It does not include any further acquisitions that we may make. A good strong foundation year here that we see nothing but growth in front of us, and a lot of that organically. To summarize on slide 23, what we believe is that Voisey's Bay will add to our existing high-quality portfolio of low-cost, long-life mines. Of course, it will add to our growth profile and continue building from where we are right now. The exploration upside, I encourage people to really understand that long section that Haytham had in his presentation. The exploration upside on Voisey's Bay is very strong.
We think that life will be much longer than the current scheduled reserve base, very optimistic there. This, of course, is strongly accretive to earnings and cash flow across the company on all metrics. Diversifies our production profile, of course, provides exposure to clean conflict free cobalt. While we remain focused on precious metals, this Voisey's Bay cobalt stream checks all of our boxes. With that operator, we would like to open up the call to questions.
Thank you. Ladies and gentlemen, we will now conduct a question and answer session. If you would like to ask a question, please go ahead and press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. There will be a brief pause while we compile the Q&A roster. Your first question comes from Ralph Profiti of Eight Capital. Please go ahead.
Good morning. Thanks for taking my questions.
Thanks, Ralph. Thanks for calling in.
Yep. Randy. Thank you. Thanks, Randy. I have two of them, if I may. Randy, first off, you had the financial capacity to take down more of the share of the stream. What was your thinking on the 42.4%? If I may, on a second question, with respect to the due diligence on the network on the cobalt circuit, whether or not you guys are seeing upside to the 84% process recoveries assumption. Thanks very much.
I'll take the first one and let Haytham answer the second one. We had capacity, but this is a step out of our area in. When we looked at it and felt the original target for Vale was, of course, to release 75% of the cobalt production to the stream. Because this is our first step out, we were comfortable with taking a piece of this one going forward and working with Cobalt 27 in terms of satisfying this opportunity. We're comfortable with this. As you can see by the cash flows, it's going to be in excess of 10% of cash flow going forward. For us, it's a nice size venture into this space.
Ralph, to answer your second question with regards to recoveries, 84% is the average. It actually ranges between 80% and 89%, and we do think there's further potential for improvement to that.
Very helpful. Thank you.
Thanks, Ralph.
Your next question comes from the line of Cosmos Chiu of CIBC. Your line is open.
Hi. Thanks, Randy, Haytham, Patrick, and Gary. Maybe a few questions from me here. First, I spent the last two hours, three hours on cobalt, and thanks to Wheaton Precious Metals, I'm now the de facto cobalt analyst now here at CIBC. I'm still trying to get a better handle on the price. Clearly, cobalt prices have increased close to $40 a pound now. Previously, 10-year average, closer to $15 a pound. I'm just trying to get a better handle in terms of long-term, what should I be looking at? From that perspective, what have you assumed as a long-term price when you look at these opportunities?
Hey, Cosmos. I appreciate the 10-year average. One of the big changes where we see is in society, is just shifting towards power storage, efficient power storage, and the shift towards electric vehicles. We see this as being strong. All the evidence supports it. There's real evidence, there's real numbers out there that are backing the growth in that space. This increase in demand, although a 10-year average is always useful to look at, I don't think what we're talking about here is a phase shift, and that is what's driven this increase in demand. When we look around the world we see that. I don't know, Haytham, you got anything to add?
Sure. Thanks, Randy. Just to answer the question.
Hi, Haytham.
Cobalt pricing is obviously the key here, because cobalt has risen quite dramatically. Keep in mind, when we're talking about cobalt pricing, we're always referencing Metal Bulletin cobalt pricing. As of this morning, it was $41.65-$43, the higher spec material gets closer to $43, and the lower spec will get $41.65 based on today's pricing. You asked the question with regards to where we actually think cobalt prices are going and what we actually use in our analysis. What we look at is spot at a given point in time and try to come up with a reasonable discount to spot. Historically, we've been anywhere between 65%-90% of spot as our long-term. We typically start at spot prices and trend down.
I can tell you we were closer to the lower end of that range on this one.
Okay. Haytham, going back to the pricing here in terms of LME and the Metal Bulletin. If I take the numbers that you've given us, $75 million free cash flow per year, 2.6 million pounds production. If I back calculate and reverse engineer, I come out to a cobalt price of $35 per pound, that doesn't really jive with the over $40 that we had just talked about. I'm just trying to piece it all together.
Yeah. As I indicated, we don't use spot prices long-term.
Got you.
We take a look at the fundamentals, and we have our own internal commodity research department that actually tells us exactly where we think the trend for cobalt prices, where they're going, and that's what we use in our analysis.
Yeah. Maybe one last question on just the demand and supply. Certainly, you've talked a lot about demand, and I've seen electrical cars, vehicles come up in Toronto and whatnot. How much work have you done on the supply side? For one, I went to school around the Cobalt, Ontario area. I know there's a lot of cobalt, even the tailings, from the old-timers that took all the silver. Have you looked at potential for some of those tailings to come out, and what is the potential impact on demand and supply?
Cosmos Chiu, it's Randy here again. We have studied that. A lot of it comes out of the Congo right now. When you sit and look at the worldwide opportunities out there's not a lot of tonnage, actually. When you sit and look at areas around Cobalt, Ontario, very early stage. There's some nice grades there, maybe not so much in the tailings, but small tonnage. They're not going to be big contributors in terms of a volume. The Congo, of course, the DRC is the source of most cobalt in this world. Of course, they've just made it all that much more expensive to produce cobalt with their change in royalties down there. From a market perspective, we're pretty comfortable in this space. You have to obviously believe in the shift towards electric vehicles and more efficient energy storage on a consistent basis.
Just to add and to reiterate what Randy said, the majority of the new cobalt production comes as a byproduct out of the DRC.
We don't anticipate that there's any significant clean cobalt coming in any material volume that would actually depress the actual cobalt price in the near term.
Got you. If I can switch gears a little bit and talk a bit about the operations at Voisey's Bay. Could you maybe give us a bit more color, I don't cover Vale, but give us a bit more color in terms of what they're building with their $2 billion. With the two undergrounds, is it ramp access? I've looked at the long section here in terms of exploration upside. The further question is, it sounds like, it only counts towards Wheaton Precious Metals if the down dip extensions are being accessed through the current infrastructure. At what point would they potentially need a shaft? What does that mean?
Sure. At this point in time, you hit the nail on the head. They're actually accessing both the Eastern Deeps as well as Reid Brook with ramps. There is no plans for a shaft. If you look at the actual longitudinal section on slide number 10, and sorry, number 11, it also shows you that it makes no sense to put in a shaft at this point in time when you have that ramp access underground. We would not expect that to take place anytime in the near future. Keep in mind, we've got at least 15 years, probably closer to just looking at the potential southeast extension of the actual Reid Brook and Eastern Deeps deposits, at least 15 to 20 years of ramp access before they even have to consider a shaft.
Got you. Maybe one last question from me here. Voisey's Bay is in Newfoundland, Canada. Gary, how is this structured, and do you have to eventually pay Canadian taxes?
Yes. I think we alluded to that earlier. This is a mine located in Canada. Consistent with the way we've structured any of our previous deals that relate to mines in Canada, this will ultimately be subject to Canadian tax.
Not until you've sort of fully recovered your upfront investment.
That's correct.
Okay. Thanks, Randy and team, and good luck.
Thanks for calling in, Cosmos.
Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.
Hello, John.
Thank you for taking my question. There's a little stub of the open pit that might continue into 2021 or 2022, and sometimes they find a little more when they get to the bottom. Will you participate in that little bit of open pit output at the beginning of 2021?
Yeah, we do. We get 42.4% of all cobalt production as of January 1st of 2021, no matter where it comes from. Not only that, the discovery zone itself, it's not part of the current production plan, but it does represent an additional opportunity from an open pit basis eventually, depending on how nickel pricing, copper pricing, and cobalt pricing do in the future. It could actually also play into some potential open pit supplemental production. Yes, we get 42.4% of everything as of January 1st, 2021, John.
I'm looking at the slide 21 with the baby blue exploration prospects and yellow exploration targets, and it looks very wonderful. How deep do you think it's practical to ramp, below one kilometer?
Well, here's what I will say. The Eastern Deeps is actually being accessed, and ore material will be fed out by conveyor. It's not actually being ramp hauled out. Eastern Deeps will be much more efficient in terms of moving materials up. It's got the potential to even go beyond that. It's too early a stage. There's always going to be a crossover point, but one of the biggest challenges, of course, is the expense of trying to define those reserves at such great depths right now. It's too early to say what the crossover is, and all I'd be doing is guessing what that crossover is based on today's economics. We'll see how that changes as it goes forward. That's a great problem to have in the future.
If I could ask one more, and this is maybe crossing over into operator land rather than streaming royalty land. The nice people at Kirkland Lake are doing a 7,000-foot shaft and developing it on a $320 million US budget. How does $1.7 billion get spent here? What are the bigger capital? I guess it's good for Wheaton that they need the money. I'm just wondering how a couple ramps and some conveyors cost $1.7 billion.
Well, I'll answer that Voisey's Bay is a lot farther away from civilization than anything in Kirkland Lake, in Ontario, Kirkland Lake. There's a lot of infrastructure cost in terms of being in the northern part of Labrador. John, I'd be happy to go through some of the details with you if you'd like to give me a call at a later point in time.
Sure. Thank you.
Your next question comes from the line of Josh Wolfson of Desjardins. Please go ahead.
Thanks. Just in terms of timing of cash flows, I think you've given us a 10-year average, but given there are a lot of moving parts, both with the ramp up and the depletion of the open pit, is there any sort of additional guidance you can give us on 2021 or 2022 expectations?
Sorry, can you repeat the question, Josh?
Is there any sort of additional guidance you can give us on some of the more near-term years in terms of production, given the transition to the underground and depletion of the open pit?
Yeah, you bet. In terms of actual attributable cobalt production, I can tell you in the first three years, it averages between, call it 2 to 2.2 million tons of contained cobalt. Sorry, pounds, pardon me, of contained cobalt.
That will, of course, be supplemented. That's including open pit. There'll be supplemental, and as John mentioned earlier on, the potential for further expansions just to keep the mill full through that open pit as it gets near the end of the Ovoid life.
That is our share, Josh.
Got it. With respect to the completion test, is there any sort of penalties or benefits that you would be able to secure if the expansion is delayed or there is a lull in production between the open pit and underground?
Yeah. The way the completion test works, it's a certain throughput that has to be achieved. If a certain bottom-level throughput is not achieved, there is a pro-rata return of the deposit. If they achieve a certain level, then there's a gross up, and potentially, in the end, if they can't get to where they need to go, there's a refund of a portion of the investment.
I just want to clarify, the throughput is from underground production. It's not throughput at the mill. It has been coming from the underground deposits.
Yes.
Got it. Lastly, in terms of the selling offtakes that you will be looking at, I'm assuming that's something that Wheaton will be managing. I guess in that case, how will you be managing that process, and will you be hiring additional people or individuals to, I guess, sell the metal to the end users in the market?
Well, we have a number of options, and we haven't made any decisions yet because we do have two years to make those decisions. Definitely there's some opportunity when we look at this as being such a Particularly, it's a brand-new mine build, the hydromet facility, from a smelting perspective. This is the cleanest cobalt in the world, and I do think that there's going to be a premium for this, even over and above higher quality cobalt that you'd source from other jurisdictions in this world. It is something that we would want to stay on top of to make sure that we can try and capture some additional value, because we do think that this is worth more from that perspective.
I would fully expect that that's the path that we'd be taking, is trying to make sure that we market this as a unique product, as it is a unique product, and take advantage of that uniqueness. We do have two years to think about that, given that we're not going to see any production until 2021.
Got it. I guess relative to the Metal Bulletin pricing in the context of the costs that Wheaton would incur for the actual selling of this metal or marketing of it, should we be assuming that you receive those Metal Bulletin prices, or should we be assuming a slight premium or discount to it, given the quality as well as the costs?
Well, as you might imagine, we've done quite a bit of study on this. The typical costs for marketing are around 2%. That's what we've seen in this space. I'm hoping that we can claw that and more back from the fact that this is a premium product, time will tell.
Got it. Okay. That's all my questions. Thank you very much.
Thank you, Josh.
Your next question comes from the line of Chris Beer of RBC Global Asset Management. Please go ahead.
Good morning, guys. Thanks for the call. Just wondering on the Long Harbour Argentia plant. I'm a bit foggy on it, but I guess it started up in 2014, I'm not sure if most of these HPALs took four or five years to get up to 80%-85% capacity. In this case, there was some agreement, I didn't read fully the Newfoundland government commentary yesterday, but they had a clause before if the Long Harbour plant wasn't full from Voisey's Bay stuff, that they'd have to bring it from Sudbury as well. Is there anything like that in your contract whereby, I don't know, Sudbury stuff can push out Voisey's Bay stuff?
No, the economics of pulling it in from there. There is a commitment on Vale's side in terms of any ore that was processed from Voisey's Bay in the past, they have to sort of make up that ore at the Long Harbour plant going forward. There's definitely going to be, the contract is structured to accommodate the potential of commingling. With the infrastructure and everything that's in place, we've got some commitments on their side captured, we're very comfortable with the fact that this was really The Long Harbour plant was built for the Voisey's Bay ore feed. It's ideally tuned for that. We're pretty comfortable on that side.
Okay. All right. Thank you.
Thanks, Chris.
Your next question comes from the line of Anita Soni of Credit Suisse. Please go ahead.
Good morning, guys. All my questions have been asked and answered. Thanks.
Thanks, Anita. Thanks for calling in.
Your next question comes from the line of Dan Rollins of RBC Capital Markets. Please go ahead.
Yeah. Thanks very much. Randy, Haytham, I was wondering if you could maybe just comment on your willingness, now that you've stepped out of the gold and silver realm, to take on other metals beyond gold and silver going forward. If there is, what type of proportion of your cash flow would you like to make sure that gold, silver continues to be represented at?
Well, Dan, thanks for calling in. I have to tell you, we could have stepped up possibly for more of this deal if we wanted to. We're pretty comfortable with this as a step out. One of the things that's intriguing, we'll look at anything. My objective, our overall responsibility is to deliver value to our shareholders, period. We focus on precious metals as the best way to do that, if we see other opportunities like this, boy, when we studied cobalt, I have to say, it just reminds me of silver so much in terms of the fact that so much of it is non-core by-product produced, 98% of it worldwide, non-core by-product produced.
The fundamentals and how that works for silver, it delivers that right back to cobalt also in terms of the fact that increases in price of cobalt does not drive an increase in supply. You have to have support from, in this case, nickel prices and copper prices to actually drive that supply. It's a metal that is definitely unique. I have a hard time calling it a base metal, actually, I would say it's maybe on its way to being a precious metal. I will say that when we look around the space, there's not a lot of other cobalt projects that we would invest into in this world, this likely represents one of the only options for us to go into the cobalt space. I don't see any growth beyond where we are on the cobalt side.
We'll have a look at everything. Again, going back, the ultimate target is always to deliver the best value we can back to our shareholders, and what we saw here was an opportunity to pick up a little dessert on the side of the highway and something that'll deliver some value back to our shareholders.
If you play devil's advocate, one could say, you're stepping out to cobalt. Could one assume there's not as many high-quality opportunities in the gold-silver space? Has the model now changed where, given the free cash flow you're generating, it's really now about focusing on high-quality opportunities with potentially the product mix secondary to that now?
Well, that's a good question. What I will say is that the market has changed in terms of the scale, and we've been pretty clear on that. We're not seeing the balance sheet repair opportunities that we saw over three, four years. The size of the deals that are out there have shrunk over what we saw three, four years ago. There has been a change in the market, but there still is a lot of opportunities in the precious metal space. We're hopeful to deliver a couple more transactions within the year. We're definitely working in that space, and so we still do see demand there. This was just a nice tuck-in. Obviously, we have a very strong relationship with Vale.
To have a company the size of Vale commit to taking their base metal share of revenue from 16% to 30%, we know they're going to be investing into assets like Voisey's Bay and Salobo and Sudbury, because that's the only way they're going to get their base metals up to 30% of overall corporate revenues. We're happy to work with them. They understand how streaming will take a good mine and make it a great mine, and they're using that pretty effectively to help grow themselves and help grow their companies and deliver good returns back to their shareholders. When we have an opportunity like this, we're going to step up and take it. Trust me, the focus, and you'll see that, I hope, very shortly, the focus is still on precious metals.
Okay. Just with respect to the current market, obviously there's always players that come and go, but are you actually seeing more competition and the ability to get deals done tougher on the smaller royalty streaming companies' assets now, just because there's so many more people competing with those?
I think Haytham can answer that one.
Sure, Dan. We put the same amount of effort, whether it's a small deal or a big deal. Are we seeing more competition? We're seeing the same amount of competition. What we are seeing is some companies willing to sacrifice a little more. We know that doesn't always work in this environment. It's okay to do that, especially when you're private, going public, it's a different matter. I think on the public realm, we can compete very well as we've shown, as we've demonstrated.
That's very helpful. Appreciate the color, gentlemen.
Thank you, Dan. One last question, please.
That comes from the line of Michael Gray, from Macquarie. Please go ahead.
Yeah, thanks guys for doing the call. Very valuable color. Just a couple of quick things. I think, Randy, you alluded to the hydromet plant and recovery ramp up for cobalt. Is there any risk to those recoveries? I think you guys have stated 84% is what you're modeling.
Well, the beauty of this one is that it's up and running. You might say there's risk if it was in full construction. That's why I have a hard time calling it the development project. It's up and running and has a reconciliation, has supported everything that they've said. We've gone through and, during our due diligence, studied it thoroughly, and we're very comfortable with that.
Okay, perfect. Last thing, just on this whole ramp question, is it fair to say that you guys had gone down to ramp depths that worldwide have been achieved to estimate some of the upside, say 1,500 meters?
Yeah, I just want to clarify. It sounds like if a shaft gets constructed, we still get the cobalt from this. Whichever works the best. It's ore that feeds through the processing, the mill up at the site that we get access to. Irrespective of how they access the ore, whether it makes sense to do shaft, I mean, the plan right now is ramp access. It makes sense when you sit and look at where the top of these deposits are and where they work down. Obviously, the deeper drilling, it's very tough for us to define those reserves and resources at this stage in order to make those decisions. I think given the remote location and the flexibility that you have behind ramp access, I think that definitely is the best approach right now.
Okay, thanks. That's much clearer. Appreciate that.
Thank you, Michael, and thank you everyone for dialing in today. As I hope we have demonstrated on this call, we're excited about this stream for a number of reasons. Firstly, Voisey's Bay is an asset that fits comfortably into our existing portfolio of low-cost, long-life mines. Secondly, the new stream adds meaningfully to both our cash flow and growth profile. Thirdly, we believe this deal is accretive on all metrics, and especially on cash flow. Finally, this latest stream gives us exposure to some of the cleanest, if not the cleanest cobalt that is also from a non-conflict jurisdiction.
As I mentioned at the beginning of the call, we remain committed to our focus on precious metals, but are pleased to have gained a little exposure to cobalt, a metal that is integral to decreasing environmental impacts around this world, and therefore truly precious to our future. We do look forward to speaking with you again soon. Thank you.
This concludes this conference call for today. Thank you for participating. Please disconnect your lines.