Good morning, ladies and gentlemen. Thank you for standing by. And welcome to the Wheaton Precious Metals 2021 First Quarter 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.
Or type your question in the Q and A box of the webinar. If you would like to withdraw your question, press the pound key. I would like to remind everyone that this conference call is being recorded on Friday, May 7, 2021 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 Officer Gary Brown, Senior Vice President and Chief Financial Officer and Haitham Hodoy, Senior Vice President, Corporate Development. Please note for those not currently on the webcast, the slide presentation accompanying this conference call is available in PDF format on the Events page of the Wheaton Precious Metals website.
I'd like to bring to your attention that some of the commentary in 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. Slide 2 of this presentation and our financial results contain important cautionary notes regarding forward looking statements, and I would direct everyone to review those notes in connection with the presentation as well as the risk factor We've been waiting for the annual information form, management's discussion and analysis for the year ended December 31, 2020 and in Wheaton's Form 40 F. It should be noted that all figures referred to on today's call are in U. S.
Dollars unless otherwise noted. In addition, reference Wheaton or Wheaton Precious Metals on this call 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 joining us today to discuss Wheaton's 1st quarter results of 2021. I do hope everyone has been keeping healthy and safe since our last quarterly conference call. I am pleased to announce that in the Q1 of 2021 Wheaton's high quality portfolio of assets generated record breaking revenue of over $320,000,000 and operating cash flow of over $230,000,000 Given Wheaton's innovative dividend policy, this strong cash flow has resulted in a 40% increase to the quarterly dividend relative to Q1 of 2020, marking the 3rd quarterly dividend increase in a row. In addition, we continue to execute on our growth strategy, closing the previously announced stream on the Cozamin mine located in Mexico and announcing a new stream on the Santo Domingo project located in Chile.
Both assets are owned by Capstone, a company we are very pleased to repartner with as they grow these exceptional assets. Haitham will provide more details on our corporate development activities later in this call. Our organic growth profile continues to advance with Hudbay announcing that they are on track to achieve production from the Papacancha deposit in Quebec at the Constancia mine in the second quarter. 2 of our development projects transitioned into operating mines in the Q1 with Wheaton receiving silver from Alexco's Keno Hill and Cobalt from Vale of Boise's Bay. Lastly, in addition to our usual 1 5 year forecasts.
I will provide more details on our growth profile later in this call, But I would first like to turn the call over to Gary Brown, our Senior Vice President and 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 190,400 gold equivalent in the Q1 of 2021 comprised of 77,700 ounces of gold, 6,800,000 ounces of silver, 5,800 ounces of palladium and 1,200,000 pounds of cobalt with Q1 representing the 1st period that the company had reportable Cobalt Production from the Boise Bay Stream. The cobalt production in the Q1 of 2021 includes some material produced at the Boise Bay Mine from prior periods as the company is entitled to any cobalt processed as of January 1, 2021. Relative to the Q1 of the prior year, this represented a decrease of 2% on a gold equivalent basis With lower production at Salobo being attributable to lower throughput and grade due to unplanned maintenance during the quarter, being partially offset by the 1st reported production relative to cobalt. On a gold equivalent basis, sales volumes were virtually unchanged as the decrease in production was offset by a 4,200 gold equivalent ounce decrease in ounces produced but not delivered or PBND in Q1, 2021.
As of March 31, 2021, ounces in PBND amounted to approximately 136,000 gold The average PBND balance of approximately 140,000 gold equivalent ounces over the preceding 4 quarters. Revenue for the Q1 of 2021 amounted to $324,000,000 representing a 27% increase relative Q1 2020 due to the increase in the average realized gold equivalent price. Of this revenue, 41% was Driven by the increase in commodity prices, gross margin for the Q1 of 2021 increased 42% to $175,000,000 Cash based G and A expenses amounted to $11,000,000 in the Q1 of 2021, representing a decrease of $1,000,000 from Q1 2020, primarily due to lower accrued costs associated with the performance share units or PSUs. The company continues to estimate that non stock based G and A expenses, which exclude expenses relating to the value of stock options and PSUs will amount to $42,000,000 to $45,000,000 for 2021. During the Q1 of resulting in an effective interest rate on outstanding debt of 1.17 percent as compared to $6,000,000 of interest costs at an effective interest rate of 3.03 percent incurred in Q1 2020.
Net earnings amounted to $162,000,000 in Q1 of 2021, a 71% increase compared to $95,000,000 in Q1 2020. Basic adjusted earnings per share increased 54 percent to $0.36 compared to $0.23 in the prior year. Operating cash flow for the Q1 of 2021 amounted to $232,000,000 or $0.52 per share compared to $178,000,000 or $0.40 per share in the prior year, representing a 30% increase on a per share basis. Based on the company's dividend policy, the company's Board has declared a dividend of $0.14 a share payable to shareholders of record on May 21, 20 21, a 40% increase from the comparable quarter of 2020, an 8% increase from the prior quarter and the 3rd consecutive quarterly increase, highlighting the participation that the company's unique dividend policy provides to increasing commodity prices. 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 1% discount to market.
During the Q1 of 2021, the company repaid the $195,000,000 which had been standing on the revolving facility, invested $150,000,000 relative to the Cozamin stream and $4,000,000 relative to the Brewery Creek Royalty. With these cash outflows being partially offset by proceeds from the sale of First Majestic shares generating proceeds of $112,000,000 $5,000,000 from the exercise of stock options. Overall, net cash decreased by $2,000,000 in Q1, 2021, resulting in cash and cash equivalents at March 31 of $191,000,000 and no outstanding debt. That concludes the financial summary. And with that, I will hand the call over to Haitham for an update on corporate development.
Thank you, Gary, and thank you all for joining us today. I'm sure by now you've all had a chance to go through the economics Our newest stream on Capstone's Santadomingo IOCG project located in Chile. Hopefully, you're as excited as we are on this one. As you can see from the attached slide, we've entered into a gold stream on a polymetallic asset and that's exactly when streaming works best as Taking precious metals out of a company that's getting a base metal valuation and getting a rerating within Wheaton, which we're also able to share with our partner in our acquisition price and that ensures a win win scenario. It's a life of mine stream on 100 percent of the gold, dropping to 2 thirds of the gold after a certain threshold ounce number has been delivered with an 18% production payment that increases to 22% once the upfront deposit is reduced to 0.
The total stream deposit is $320,000,000 of which was paid on April 21, with the remainder to be paid during construction. It's a fully permitted project Assuming everything keeps moving forward at the plant base, could be contributing as early as 2024. We also see significant upside with potential for increased throughput and a cobalt circuit, which would actually increase our overall gold reserves down the road. This project is a long life asset with low operating costs falling in the 1st cost quartile that will continue to contribute to the high quality of our existing streaming portfolio. In addition, I'd like to give you a bit of an overview on our streaming opportunity landscape.
Needless to say, we've been quite busy. Lots of new precious metal streaming opportunities to look at with the majority falling, I would say, into the $100,000,000 to $300,000,000 range, primarily development stage opportunities that fit into our early deposit structure, where we're taking precious metals as a byproduct from a base metal mine. As I said just a little while earlier, this type of opportunity is where streaming works the best. To a lesser extent, there's a few opportunities that are focused on funding expansions, Not much these days in the way of balance sheet repair, but strong commodity prices tend to fix that for a lot of companies. The fact that streaming is considered for all of these areas further highlights the competitive cost of capital and flexibility the streams can provide relative to other financing options.
There have also been some royalty packages in the past And we
do take the time to
look at these packages, but none have made sense from Wheaton perspective, in large part because of their size or because they come with a And we are continuing to focus on precious metal streams. I would also note that the valuation for these royalty packages are often ridiculous as junior up and coming royalty and streaming companies tend to overpay regardless of quality just to build scale in an effort to get to the higher valuations. All in all, we're very optimistic that we can continue to deploy our cash flows to accretively add quality streams in the current Department. Thank you, everyone, and over to you, Randy.
Thank you, Haitham. We are pleased to reiterate 2021 and long term production guidance previously announced in February. For 2021, Wheaton's estimated attributable production is on track to produce between 370,000 to 400,000 ounces of gold, 22,500,000 to 24,000,000 ounces of silver and 40,000 to 45,000 gold equivalent ounces of other metals being cobalt and palladium, amounting to total gold equivalent production of approximately 720,000 to 780,000 ounces. As our strong development pipeline continues to deliver organic growth, I would like to highlight a few assets to watch for as we look toward the rest of 2021. As I mentioned at the beginning of the call, in April, Hudbay achieved a significant milestone as they completed the final land user agreement for the Pampacancha deposit at Constancia.
Hudbay has commenced development activities in the open pit and the first production is expected in Q2 of 2021. At Salobo, Vale has reported that physical completion of the Salobo III expansion was at 73% at the end of the first quarter and remains on track for start up in the first half of twenty twenty two. And lastly, we closed our previously announced stream on ARRIS Gold's Marmato mine last month and advanced the initial upfront payment of $34,000,000 for 6.5% of the gold and 100 percent of the silver produced at from the mine. We expect to record our first production from Marmato with our 2nd quarter results, which will include a catch up from the effective date of the stream back in July 1, 2020. In summary, Wheaton recorded a strong first quarter distinguished by several key highlights.
We achieved record revenue and declared a record quarterly dividend, which was the 3rd consecutive dividend increase in a row. Our commitment to accretive growth was emphasized by the announcement of a new stream on the Santo Domingo project located in Chile, where we are pleased to once again be working with our partner Capstone. While our portfolio continues to remain heavily weighted to precious metals, Wheaton received an inaugural cobalt from Vale's Boise Bay Mine, which we consider to be one of the most sustainable sources of cobalt in the world. Wheaton has always strived to be a sustainability leader, and we were honored to be recognized by external rating agencies for our performance in this area with sector leading scores. We look forward to updating the market on our journey in our 2nd annual sustainability report, which will be published later this month.
And lastly, we believe our portfolio continues to deliver ample opportunity for organic growth, the benefits of which we expect to see from assets such as Constancia, Keno Hill and Boise's Bay here in 2021. So with that, I would like to open up the call for questions. Operator?
The first one comes from Jackie at BMO and she's asking if we could please talk about cobalt sales As they were below production in the quarter, and perhaps we can also again elaborate a bit more on The strong production we saw in cobalt as well. Sure.
So with respect to any new stream as it comes on, there's always going to be a bit of a working inventory build. And typically in most of our precious metals mines, we guide towards 2 to 3 months' worth of production from each asset depending on whether it's a dore product Whether it's a copper concentrate. Now what happens is we do have several assets that are very vertically integrated. Sudbury is one We've had for many, many years now where the finished product that goes through the smelters and it is a finished product that we receive. And it's the same now with Boise's Bay Cobalt.
It is not only mined at the Boise's Bay operation, but it's now it's process through the smelter down at Long Harbor, which means that the period that it's in process is a much longer period because it vertically integrated operation. So our guidance would be that we expect to have about 4 to 5 months worth of working inventory in process. Now the way the contract was structured with Vale is that anything that was in work in progress as of January 1st is to the credit of Wheaton. And so we stepped into this contract with acquiring not only the actual production from Q1, But also the working inventory that was in the system and being wintertime, it was likely a bit of a Higher inventory than normal just because of shipping in winter through that area. And so all in all, it means a much higher working inventory at the site itself.
And that's what we've reported is the higher production. The sales, of course, as we took over ownership of this stuff in inventory, we had to fill up the sales end of it and start. We have our own warehouses and our own sales agency. And so we had to our first sales didn't happen until the near the end of that Q1 and that's why sales are so much lower than the overall inventory. But with respect to Voisey's Bay, we will continually build up or continually have probably about 4 to 5 months with the production and sort of a working inventory in process.
All right. So we're going to we're just going to go with this format. Michael Jalonen Has reached out and asked us for the thoughts on Barrick's successful drilling so far at Lama, including the Penelope pits and whether or not you had thoughts So whether we are entitled to that material as well.
Yes, we get 25% of whatever silver is produced from any of that area in the Pascua and the Lammas side of the border. And so we recognize that as exploration potential. We did the original transaction, but we never really felt that we were going to see production From that the Pascua Lama deposit is definitely a core focus area. But with Penelope and other regions around Lama having capacity to deliver upside value. It further reinforces why we wanted to keep this stream.
Even though we had the option to collapse the stream and get our money back from Barrick, we chose to keep it. This is an asset that we are confident will Eventually deliver metal to us and in one form or another, it sounds like it will be coming.
Another question coming in, Randy. As far as the discussions on Papa Cancho with Hudbay, if we can provide any additional color On that as far as the penalty payments that were to be due coming at the end of the second quarter?
Well, look, Wheaton has long prided itself on being a partner in our streaming agreements. And Hudbay is, of course, a very important partner for us from 777 all the way through to Constancia and ultimately to Rosemont. And so we will work with them. I mean, we do have to preserve the reason we have these measures in place, these penalty payment mechanisms in place is to protect our own shareholders and the value that we've delivered. But we will work with Hudbay.
We're in discussions with them to find a way that will deliver good solid value to not only preserve the value that we have, but also work and provide some support to Hudbay. And so that's a discussion that's in process.
I'm just going to sorry, ask one more time, is the operator on the line currently? Okay. I appreciate the e mails coming in. We'll stick with the questions as they are coming in. And I appreciate, analysts, You rolling with us on this technical issue we're having.
I am here to have.
Okay. Can we start queuing up the questions? I do see that there is a number of people in the queue.
Okay. Thank you, ladies and gentlemen. We will now conduct the Q and A portion of the call.
I think we can skip the first question. Okay. Your
first question is from Tyler Langston.
Yes. Good morning, everybody. Thanks for taking my question.
Thanks, Tyler. Thanks for your patience.
No problem. With Isolobo, I think Randy, maybe last quarter, you had talked about that you're hopeful that they might be close The value might be close to making a decision on whether they would stockpile the low grade or maybe sometime in the first half of this year. Just kind of any updates or thoughts there?
Yes. And this relates to the mining plan for the Phase 3. As the Phase 3 comes in, what portion of the ore will they stockpile versus Feeding through the mill. What grade profile do they choose to move forward with? It is an active discussion.
We've been in talks with them. They haven't made any know decisions yet. And so we're continuing to work with Vale to see which direction it should go. It's quite clear That in the copper industry worldwide in large scale open pits, there's a lot of economic sense. And especially in today's price environment, there's a lot of economic sense in moving some of the higher grade products forward and stockpiling low grade materials.
It makes strong sense in every copper operation in the world. And so we're hopeful that Vale does choose that path or can choose to continue on that path. That's what they're doing right now with the first two phases. Again, we're just waiting for a final decision out of that group.
Okay. No, that's helpful. And then just One more additional question on slop. I guess, I think in the release you mentioned that production was just impacted by lower throughput. I guess there are some changes in the maintenance routines.
You should this largely be behind them going forward? Just how to think about that?
It was really They basically had to go through a bit of a safety reset on the maintenance side, because of a couple of incidents that they had in the Q4 of last year. Something that we strongly, strongly support. Net zero harm is always an objective that we want all of our partners to And it is exactly what Vale is striving for. And so they had to go through a bit of a reset in the maintenance side and what Where this had an impact really was equipment availability during the Q1. They're definitely better than they were at the start of the They definitely have improved, but there is still some progress to be made.
Again, it has to be done safely and we're in full support of that. But There may still be some residual impacts into the 2nd quarter. The advantage of the opportunity here is in terms of making sure again that all the operations are run with net zero harm.
Perfect. That's it for me. Thanks so much.
Thank you.
Your next question comes from the line of Ralph Profetti from 8 Capital.
Good morning, Ralph.
Good morning. Thanks for taking my questions. Randy and maybe Haitham, When I look across the Wheaton Stream portfolio, the vast majority of term exposure is life of mine. And however, I'm seeing more and more transactions happening in the market with these buyback options on the part of the operator. And I'm just wondering, would you say that that's a characteristic that you're seeing in some of the corporate development threshold when you look at those types of deals given the potentially lower optionality.
Hey, Tim, I'll let you answer that one.
Sure. You bet. Thanks for the question, Ralph. And just to answer your question, yes, we are seeing a lot more buybacks at least by our competitors. Buybacks are appropriate for certain size companies, for junior companies that are building and Have a strong potential for an acquisition opportunity where they are going to be acquired.
We see that as pretty important to them. What you've seen in our transactions We've offered buybacks in the event of a change of control. But in that buyback, we do tend to get some pretty reasonable returns. If we're looking at buybacks without a change of control, we really are quite opposed to that unless we're getting a return that's well, well above our typical returns for these streaming opportunities. And our typical return, I believe, is somewhere around 17%.
So we'd be looking for something between 530 if we're going to do something to that effect. But again, we're opposed to that. We're really pushing on these life of mine contracts with buybacks for these junior companies and these early deposit structures only in the event of change of control, Ralph.
Fair enough. Good point. Yes. And then if I can Maybe have a follow-up. Rosemont, Hudbay is talking about sort of alleviating some of the permitting on federal lands going sort of with a smaller footprint on non federal lands.
Just wondering if you have sort of any early indications of what that could mean? And if the footprint and the scale of the project changes, how does that impact the $230,000,000 contingent name. Was that based on a certain output and throughput? Thanks.
Yes, I'll take that one, Ralph. The first off, it will have an impact. It's not so much The actual operation itself, the deposit itself. So mining will still be along the lines. Where it has an impact is where do you Your country rock and your waste rock disposals and where do you stockpile your tailings.
And That's going to have an extra cost to it if you're limited in terms of that. And so you always hate if an operation is going to go forward, I mean, I'm a believer we should always try and make these things as efficient as we can. And costs like that, all they do is drive up the impact of these operations and you're only getting the same benefit. And so it just makes sense from all perspectives, from any sustainability perspective, anything along those lines And so I'm hopeful that they are successful in terms of being able to do it on a best design basis irrespective of federal lands or not. But so the deposit itself, those extra costs will obviously have an impact in terms of cutoff grades and stuff like that.
But the deposit itself has very, very high margins. And so therefore, it shouldn't be a I wouldn't expect any significant impact at all actually. And in fact, I would say that some of the exploration success that they've had in the area will be a very, very pleasant addition to from a value perspective. We've always felt there was good strong exploration potential there And it just hasn't been explored because it's been in a tied up in a permitting process for such a long time. Nobody likes the variability of exploration success What kind of an impact that might have, but this is now looking even we're starting to see evidence of that exploration potential.
With respect to the actual contract itself, we have because it's a development contract where we're funding construction, there'll be completion tests and certain levels of production that have to be attained, standard format for our construction funding contracts.
Your next question comes from the line of Jackie Krowlowski from BMO Capital Markets.
Thanks very much. And I just wanted to ask a follow-up to the question that Patrick, read already. On cobalt, sorry to go back to this, but can you just give me an idea, just because I'm trying To fine tune my model, is the production that you reported for Q1 Cobalt from Boise State, is that something that we would expect to see sort of on a steady state run rate. Do you think that's indicative of where cobalt should be going forward?
No, it's actually light for a steady state run rate mainly because we had to get our own systems in place in terms of warehousing and build up with the agency agreement that we have built up an inventory and start having our 1st sale. So our 1st sales didn't actually occur until near the end of the Q1. When you look at the overall production and you see I mean, again, the way we typically run these things is, I mean, we've given our guidance in terms of production on a 3 year basis. This is going to require about 4 to 5 months worth of working inventory. So if you just take a little bit less than half of that annual production number.
That's what we'll probably wind up having in a working inventory basis from Boise's Bay. And it is going to be It is going to have some a bit more variability than what we've had or volatility than what we've had in some of our other materials, mainly because These are lump sum sales. We tend to sell a block of cobalt at a time. And so depending on whether it happens before quarter end or after quarter end is going to have a bit of an impact. So we will have some volatility in terms of these sales numbers out of Boise's Bay.
But I think that if you sort of blur your eyes a bit, I would set aside about 4 to 5 months' worth of The share of annual production, keep that as a working inventory. And then of course, our annual production should be about sorry, a quarter of production should be about a quarter of our estimated annual numbers.
Yes. Jackie, maybe I'll just add some additional color there. This was the Q1 that we are entitled to cobalt from Boise's Bay. And we're entitled to anything that had been processed but not sold that was sitting in inventory as of January 1, 2021. So
there's probably
4 plus months of production that had been that was sitting in inventory at January 1. So Our production run rate that is attributable to us is estimated at about £400,000 a quarter.
Yes. Okay. That's really what I was That's what I had been modeling. So the production number that you reported surprised us, I guess, on the positive side. So I was wondering if we were just way low on production, but that's really helpful.
Thanks, Gary.
Yes.
Maybe if I can just ask one other question. Of
course, yes.
Your results for Q1. It looks like at least in my numbers and from what I can see the consensus numbers as well, was a little bit lighter than expectation on gold and a little stronger on silver. And it seemed like it kind of worked out to being kind of net net. But I noticed you haven't changed guidance. Are you expecting that ratio to reverse and gold will just strengthen going forward from here?
Well, gold of course, Salobo is a very important part of our gold production. Salobo though there's a bit of a safety reset that's still in process there. And Vale is taking that very seriously as they should. And so that's unlikely to be made up. You can't process more tons through the mill.
The mill has only got a certain amount of capacity. And so with the lower production in the Q1. We'll climb back up to the regular run rate as these new safety measures are fully embraced and and it returns back to normal operating rates. And so I don't think we'll probably not See some of that gold production that we missed in the Q1, but fortunately we had Penasquito step up and deliver on the silver side As an offset, I mean it's again the benefit of how diversified our portfolio is that when we have one asset week to have it made up elsewhere has done very well for us.
Absolutely. That's it for me. Thanks very much.
Thank you, Jackie.
Your next question comes from Cosmos Hsu from CIBC.
Hi, thanks Randy, Gary, Haitham and Patrick. We made it. We technological difficulties aside. I can ask my questions now. But maybe my first question is on cost.
I noticed that cash cost in Q1 was $6.33 per ounce for silver, higher than last quarter, in part due to this others category, which was 9.41 cents per ounce. Could you maybe talk a bit more about that? Is that Alexco? And what should we expect for the remainder of 2021?
Well, Gary, do you
want to
add anything?
Yes. I mean, from a cash cost perspective, that's Certainly, the primary driver of the increase in silver cash costs. And it's just a mixture. You've also got streams Like Antamina, where we're paying a percentage of spot. So as spot prices increase, so does our production payment.
So it's a
combination across. And We do also have some other contracts where we have incentives for production and higher production payments for higher production levels. And that would also feed into some of those contracts. And so it's a combination of all of the above.
Got you. And then maybe a quick question here on the Santo Domingo. Hopefully, you're kind of monitoring the situation in Chile. I guess they're talking about higher taxes, who isn't. But is this keeping you up at night, Haitham, or How should we look at it?
Would you like to make a comment on the potential impact?
Yes. I'll toss in a word there first and then Haisem you can add in if you want. But it's one of the reasons that we do focus on 1st quartile. We focus on assets that have the capacity to handle impacts like this and still be profitable for all the stakeholders including Governments and Communities and the likes. And so that is an incredibly important aspect of our investment.
I think it's something that really We try and differentiate ourselves here at Wheaton in terms of focusing on it. The bottom half of the respective cost curve, Santo Domingo is a 1st quartile producer. That being said, we are seeing this around the world. As you alluded to there, what government isn't trying to raise tax revenues to try and fund the programs that they're all having to implement around the world. And so again, this is This is something that we're used to seeing.
I mean, some of the increases in Chile are quite surprising in terms of the scale and the difference. And You do get concerned that it's going to have an impact on other investments into the country versus other countries and Perhaps it's going to make countries like Peru or Ecuador or Colombia even more attractive from that perspective. It's something that you do monitor, but again, it really reinforces The importance of having good strong operating margins so that we can handle stuff like this and still deliver positive value to all stakeholders. So, Payson, you want to add anything to that?
Yes. No, you hit the nail right on the head there, Randy. I think the only thing I would say is, this is a as Randy said in terms of a cost quartile, first cost quartile asset, Payback on this based on the economics at the time were less than 2 years. So this is a phenomenal project. It's a fully permitted copper iron ore, Iron Oxide Copper Gold Project.
If you look at what they're doing in terms of overall cost to reduce cost, they've entered into this agreement with Puerto Avierto on the port. They're working on an agreement to replace the iron pipeline with rail option. So there's so many different cost savings that this project is really only getting better. So It's unfortunate that everyone is trying to get their own extra little bit of tax, but I can tell you this project stands on its own.
Of course. Maybe one last question here. As we've heard from silver producers, silver operators, It's much harder to make acquisitions on silver deposits and as we've seen a lot of silver producers are diversifying and acquiring gold assets. Is that the same case in terms of the royalty and streaming business? Are you finding it harder to make acquisitions in silver versus gold?
Or Is that not really the case?
Well, there's definitely a bias. Silver tends to be a more common byproduct from lead zinc Operations and we haven't seen a lot of investment into the zinc space of late. We still haven't seen a big kick up. I mean, the focus on gold sorry, the focus on Copper that we can focus on copper and even nickel to that extent tends to have more of a gold byproduct than it does the silver byproduct. And So we are seeing more gold than we are silver.
It is to me one of the factors that does make silver so attractive is the fact that there's just not a lot of growth coming into Basin. And I agree, it seems to be a natural progression that all silver companies eventually become precious metals companies because they just They can't find enough opportunities to grow in the silver space and still stay focused in silver and it kind of highlights it. And so yes, we definitely have a bias towards gold in our corporate development portfolio. I will highlight that in our optionality portfolio, we are very heavily silver biased. Obviously, Pascua Lama.
Rosemont is dominant silver production. Navadad is dominant silver production. And So it's a the optionality will deliver us some good strong silver growth over the next Few years as we continue to add other opportunities that will probably tend to be more gold focused.
Great. Thanks again, Randy and team. Those are the questions I have. Have a good weekend.
Thank you, Cosmos.
Your next question comes from Puneet Singh from Industrial Alliance.
Great. Good morning, guys. Thanks for dealing with these technical challenges. You talked a little bit about it on the last conference call. It did look like you got a premium in the Q1 on the realized Cobalt Price.
Can you give us an update on the marketing side of it and how that's progressing?
Sure. So the cobalt from Voisey's Bay, of course, is all produced at Long Harbor. So it's got good clear provenance all the way down. We have entered into an agency agreement, so we have a representative that markets this product. A representative is of course very familiar with the product.
They've been marketing it now for about the last 5 or 6 years. And so it is a preferred product that goes out to market. There's a clientele that understands the product and understands what it's best used for. And So in a sense, we've been able to take advantage of some of the learnings of the previous and we sort of wrap that into our own portfolio or into our own actions now.
This is a bit
of a as this is It's a new product for us and so there's going to be a bit of a learning curve for us. We are studying it and trying to find ways to even deliver more value as we can. Again, our belief behind the quality of the production from Boise's Bay with a partner like Vale and with An asset like Boise's Bay, this is a product that should stand out in the cobalt space as a preferred product For anything out there that and especially given how important Providence is, we're really happy bringing this product into our portfolio.
Your next question comes from Richard Hatch from Berenberg.
Yes. Good morning, Randy and team. Thanks so much for your time. Just a quick one. Look, on Pampacancha, Can you give us any kind of sort of steer as to how we should or could think about those extra deliveries?
Or is it just a case We have to kind of wait and see how the discussions go with Hudbay. I appreciate it's pretty small, but just kind of getting into the bones of it.
Sorry, I mean, Pappacancha is expected to be producing by here in the Q2 of this year. I think you might be referencing the penalty payments, sorry.
Yes, exactly. Yes, yes. Sorry, if it wasn't clear. Yes, that's exactly it.
Yes. And so we did, given the challenges that Hudbay was facing, especially in the pandemic and trying to Sort of work forward with the community down there, but having all the restrictions on the pandemic. We did give them a 6 month waiver and extended Some of the deadlines in terms of in support of their challenges of trying to work their way through the pandemic and moving forward. They have finally been successful, but it is a bit it was a bit later than expected. And I mean, I can't give you any more color because we're still in discussions with them.
So there hasn't been any final decisions. But we do intend to be supportive of Hudbay. They're They're a good strong partner of ours. They're a partner that recognizes the value of streaming in terms of helping them build their company and what we can actually deliver As a partner with theirs. And so I can't go into any other detail other than the fact that we are in discussions with them to find a way.
It is interesting. There's higher payable rates for the Pampacancha zone than there is for the main Constancia pit. Just because of the higher precious metal grades, it gets better recoveries. And so there's all sorts of opportunities. I've also acquired some additional land in the area.
There's lots of opportunities to discuss and work together. Our intent, as always, is to come up with a solution that not only preserves value for our shareholders, but also delivers value to their shareholders and find a way to make sure that it's a win win situation. And until we finalize Those discussions, there is no more detail to provide because we just don't know what the final number is going to be.
Yes. Understood. Yes. No worries. Thank you for that.
And then just on can I just ask One follow-up? I mean, we talked about this last quarter just on dividends. You sold down your 1st Majestic shares. Got another $112,000,000 in the bank, move to net cash. Completely appreciate that with the Rising commodity price and the way the dividend policy is kind of placed is a natural rising dividend payment just due to the nature of the policy and the way that commodity prices move.
But net cash balance sheet, where is your thought process On kind of raising that dividend and pushing it even higher. I mean, is it still a case that we wait to the second half of the year, see how the business development plays out and then consider it? Or is there any other sort of change of view there or is it kind of steady as
she goes?
Well, it's I mean, it'll before the end of this year, it'll still be steady We have entered into a number of contracts where we're actually drip feeding into construction as these projects go into construction. And so there will be some cash going out the door. And then, Hassam, as he described earlier on, is he and his team are incredibly busy on the corporate development front. There's a lot of base metal interest in the world right now. With copper prices and nickel prices doing what they're doing, there's a lot of interest in sort of funding and investing into growth in that space.
And I would say the base metal industry has really woken up slumber, a long slumber and is now really focused on how do they grow. And I can't highlight how much value a stream delivers to a base metal asset when you're looking to build or expand The amount of capital that we contribute versus the share of revenue that we take away will always improve the project's internal rate of return. And we always deliver a higher value for those precious metals that we're purchasing than what they're being valued in those companies' portfolios. And so it just is It's such a positive and we really saw that I think quite strongly in Capstone share performance once we announced the Gozeman deal back in December. It's just it's the best way to equity to provide equity financing for these So we do see a really big opportunity set right now on the corporate development front.
I've challenge, Tassim. And so far, he's doing a pretty good job of stepping up to it in terms of spending the money as fast as it's coming in. But we'll see. Obviously, we'll build up a bit of a war chest, but we don't want anything to get too big. I would expect that next year, if we haven't made any significant Investments and we're still well to the positive from a cash balance, then we will be getting some serious consideration to what that dividend whether Whether the dividend stays at 30% of cash flow or whether it climbs to 40% or 50% or whatever, we'll sort of see as it goes.
But our primary objective is to continue looking for accretive acquisitions and put that money back into the ground and what I call the best vault of the world is ounces in the ground.
And Richard, if I can just add to that, we have really seeded our organic growth profile ignoring what Haitham and team Are evaluating right now. So we've got the Rosemont Development Project, Santadomingo now. We've got the Deep Zone at Marmato, the Salobo expansion.
And so if you look at
the payment profile associated with that, we've got about 1 point $6,000,000,000 of payments that come due when those projects either get completed or start moving forward. So we always Take all that into account when making capital allocation decisions.
Cool. Very helpful and clear. Thanks, Randy. Thanks, Gary, and congrats on a very good course once again. Cheers.
Thanks, Richard. One last question, please.
Your next question comes from the line of Matthew Murphy from Barclays.
Hi. I tried to withdraw it, but Since I'm
here, just not to beat a
dead horse on the cobalt, just checking the guidance, Does the guidance that you put out include the work in process material that you inherited before from pre-twenty 21?
I will admit that we underestimated it. We expected some, but we didn't think it was going to be that much. Okay. So it might be So it might be It looks good for cobalt production this year.
Okay. Thanks a lot.
Well, thanks everyone for dialing in and your patience in terms of some of the technical difficulties at least on that side. It's kind of nice that we have multiple forms of technology here and we were able to get some questions in from email. So Look, I just want to it was it's a good strong quarter. We believe that we are very well positioned to continue delivering value to our shareholders, number of different reasons: Low and predictable costs, leverage to increasing commodity prices and some of the highest margins in the entire precious metal space. Our portfolio, we believe, is some of the highest quality mines in the world, good long life, low cost assets that will deliver value for a very, very long time, reinforced with our 10 year guidance we've put out.
The strength of our dividend policy unique, it's linked to our cash flow, so we're going to see continued strength there, especially as we see the organic growth and commodity prices providing support for that. We're going to see continued strength on the dividend side. And sustainability, something that's incredibly important for us. We work with our partners on a continual basis to try and make sure that Combined, we as a partnership deliver the best products we can for all the stakeholders, including the communities, including the governments, including everyone else that gets benefits from these efforts. And so it's just the right thing to do.
And so with that, thank Thank you everyone for your patience in terms of working through the technical and I do look forward to speaking with all of you again soon, hopefully sometime very soon face to face. Fingers crossed. Thanks again.
This concludes this conference call for today. Thank you for participating. Please disconnect your line.