Vancouver, British Columbia – Wheaton Precious Metals™ Corp. (“Wheaton” or the “Company”) is pleased to announce its results for the fourth quarter and year ended December 31, 2017. All figures are presented in United States dollars unless otherwise noted.
In the fourth quarter of 2017, Wheaton generated over $165 million of operating cash flow, resulting in over $535 million for the year. Wheaton’s strong cash flow generation was founded on production of over 350 thousand ounces of gold and over 28 million ounces of silver, both in excess of Company guidance. Finally, subsequent to the quarter, Wheaton announced the proposed new San Dimas precious metal stream as part of the First Majestic Silver Corp.
arrangement transaction, which should result in a stronger, more sustainable operation at the San Dimas mine.
Q4 2017 Q4 2016 Change 2017 2016 Change
Silver 7,211 7,589 (5.0)% 28,646 30,379 (5.7)%
Gold 96,474 111,664 (13.6)% 355,104 366,378 (3.1)%
Silver 7,292 7,506 (2.9)% 24,644 28,322 (13.0)%
Gold 94,295 108,931 (13.4)% 337,205 330,009 2.2 %
Sales price per ounce
Silver $ 16.75 $ 16.95 (1.2)% $ 17.01 $ 16.96 0.3 %
Gold $ 1,277 $ 1,205 6.0 % $ 1,257 $ 1,246 0.9 %
Cash costs per ounce 1
Silver 1 $ 4.48 $ 4.59 (2.4)% $ 4.49 $ 4.42 1.6 %
Gold 1 $ 399 $ 389 2.6 % $ 395 $ 391 1.0 %
Cash operating margin
per ounce 1
Silver 1 $ 12.27 $ 12.36 (0.7)% $ 12.52 $ 12.54 (0.2)%
Gold 1 $ 878 $ 816 7.6 % $ 862 $ 855 0.8 %
Revenue $ 242,546 $ 258,491 (6.2)% $843,215 $ 891,557 (5.4)%
Net earnings $ (137,712) $ 10,865 n.a. $ 57,703 $ 195,137 (70.4)%
Per share $ (0.31) $ 0.02 n.a. $ 0.13 $ 0.45 (71.1)%
Adjusted net earnings 1 $ 82,323 $ 81,865 0.6 % $276,750 $ 266,137 4.0 %
Per share 1 $ 0.19 $ 0.19 0.3 % $ 0.63 $ 0.62 1.3 %
Operating cash flows $ 165,083 $ 174,702 (5.5)% $538,808 $ 584,301 (7.8)%
Per share 1 $ 0.37 $ 0.40 (7.5)% $ 1.22 $ 1.36 (10.3)%
Dividends declared 1 $ 39,815 $ 26,475 50.4 % $145,848 $ 90,612 61.0 %
Per share $ 0.09 $ 0.06 50.0 % $ 0.33 $ 0.21 57.1 %
All amounts in thousands except gold ounces produced and sold, per ounce amounts and per share amounts.
? Attributable silver and gold production for the year ended December 31, 2017 exceeded production guidance of 28 million ounces of silver and 340,000 ounces of gold.
? The decrease in attributable silver production for the three months and year ended December 31, 2017 was primarily due to lower production from the San Dimas mine
resulting from various operational issues coupled with the expiry of the Cozamin silver purchase agreement.
? The decrease in attributable gold production for the three months and year ended December 31, 2017, which was in line with expectations, was a result of a reduction of the Company's share of the gold production at the 777 mine from 100% to 50% effective January 1, 2017 coupled with reduced production at Minto.
? The Company achieved record gold sales volume during the year ended December 31, 2017.
? During the three months and year ended December 31, 2017, the Company recognized an impairment charge of $229 million. The impairment charge was in relation to the Pascua-Lama project.
? The Company paid out a record level of dividends in 2017.
? Declared quarterly dividend of $0.09 per common share relative to the three months ended
December 31, 2017. This represents an increase of 29% relative to the comparable period in 2016.
Subsequent to the Quarter
? In conjunction with the proposed acquisition by First Majestic Silver Corp. (“First Majestic”) of Primero Mining Corp. (“Primero”), Wheaton has agreed to terminate the existing San Dimas silver purchase agreement and enter into a new precious metals purchase agreement relating
to the San Dimas mine with First Majestic.
? Wheaton’s estimated attributable production in 2018 is forecast to be 22.5 million ounces of silver and 355,000 ounces of gold.
? Wheaton’s estimated average annual attributable production over the next five years (including 2018) is anticipated to be approximately 25 million ounces of silver and 370,000 ounces of gold.
“Wheaton’s high quality portfolio of low-cost, long-life assets once again exceeded production guidance for both gold and silver, resulting in sector-leading operating cash flow of over $535
million in 2017. With 30% of our cash flows being distributed in dividends, we now provide the highest yield of all the precious metal streamers,” said Randy Smallwood, President and Chief
Executive Officer of Wheaton Precious Metals. “We also took significant steps to further strengthen our portfolio, including restructuring the stream at San Dimas, and we look forward to welcoming First Majestic as a new partner. Finally, in addition to the substantial organic optionality
embedded in our current portfolio, we see a solid pipeline of new opportunities for additional accretive growth.”
Revenue was $243 million in the fourth quarter of 2017, on sales volume of 7.3 million ounces
of silver and 94,300 ounces of gold. This represents a 6% decrease from the $258 million of
revenue generated in the fourth quarter of 2016 due primarily to (i) a 13% decrease in the
number of gold ounces sold; (ii) a 3% decrease in the number of silver ounces sold; and (iii)
a 1% decrease in the average realized silver price ($16.75 in Q4 2017 compared with $16.95
in Q4 2016); partially offset by (iv) a 6% increase in the average realized gold price ($1,277
in Q4 2017 compared with $1,205 in Q4 2016).
Revenue was $843 million in the year ended December 31, 2017, on sales volume of 24.6
million ounces of silver and 337,200 ounces of gold. This represents a 5% decrease from the
$892 million of revenue generated in 2016 due primarily to (i) a 13% decrease in the number
of silver ounces sold; partially offset by (ii) a 2% increase in the number of gold ounces sold;
and (iii) a 1% increase in the average realized gold price ($1,257 in 2017 compared with
$1,246 in 2016).
Costs and Expenses
Average cash costs¹ in the fourth quarter of 2017 were $4.48 per silver ounce sold and $399
per gold ounce sold, as compared with $4.59 per silver ounce and $389 per gold ounce during
the comparable period of 2016. This resulted in a cash operating margin¹ of $12.27 per silver
ounce sold and $878 per gold ounce sold, a decrease of 1% per silver ounce sold and an
increase of 8% per ounce of gold sold as compared with Q4 2016. The increase in the gold
cash operating margin was primarily due to a 6% increase in the average realized gold price
in Q4 2017 compared with Q4 2016 while the decrease in the silver cash operating margin
was primarily due to a 1% decrease in the average realized silver price during the same
Average cash costs¹ during the year ended December 31, 2017 were $4.49 per silver ounce
sold and $395 per gold ounce sold, as compared with $4.42 per silver ounce sold and $391
per gold ounce sold during the comparable period of 2016. This resulted in a cash operating
margin¹ of $12.52 per silver ounce sold and $862 per gold ounce sold, an increase of 1% per
gold ounce sold while the cash operating margin¹ per ounce of silver sold was virtually
unchanged as compared with 2016.
Earnings and Operating Cash Flows
Adjusted net earnings¹ and cash flow from operations in the fourth quarter of 2017 were $82
million ($0.19 per share) and $165 million ($0.37 per share¹), compared with adjusted net
earnings¹ of $82 million ($0.19 per share) and cash flow from operations of $175 million ($0.40
per share¹) for the same period in 2016, an increase of 1% and a decrease of 6%, respectively.
Adjusted net earnings¹ and cash flow from operations for the year ended December 31, 2017
were $277 million ($0.63 per share) and $539 million ($1.22 per share¹), compared with
adjusted net earnings¹ of $266 million ($0.62 per share) and cash flow from operations of
$584 million ($1.36 per share¹) for the same period in 2016, an increase of 4% and a decrease
of 8%, respectively.
At December 31, 2017, the Company had approximately $99 million of cash on hand and
$770 million outstanding under the Company's $2 billion revolving term loan (the "Revolving
Facility"). On February 27, 2018, the term of the Revolving Facility was extended so that it
now matures on February 27, 2023.
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At the end of each reporting period, the Company assesses each precious metal purchase
agreement (“PMPA”) to determine whether any indication of impairment exists. If such an
indication exists, the recoverable amount of the precious metal purchase agreement is
estimated in order to determine the extent of the impairment (if any).
As per Barrick Gold Corp.’s (“Barrick”) fourth quarter of 2017 MD&A, in January 2018, Barrick
received a revised resolution from Chile’s environmental regulator (the Superintendencia del
Medio Ambiente, or “SMA”) in connection with the previously disclosed SMA regulatory
sanctions requiring the closure of existing infrastructure on the Chilean side of the Pascua-
Lama project. Barrick has indicated that the resolution does not affect Barrick’s ongoing
evaluation of an underground, block-caving operation at Pascua-Lama, which would require
additional permitting and regulatory approvals in both Argentina and Chile, unconnected to
the recent SMA decision. In light of the order to close surface facilities in Chile, and current
plans to evaluate an underground mine, Barrick has reclassified Pascua-Lama’s Proven and
Probable Mineral Reserves of approximately 14 million ounces of gold, which are based on
an open pit mine plan, as Measured and Indicated Resources. As a result, Wheaton has also
reclassified 151.7 million ounces of silver Proven and Probable Mineral Reserves associated
with Pascua-Lama as Measured and Indicated Mineral Resources.
As this resolution affects Barrick’s ability to advance the Pascua-Lama project as an open pit
mine and coupled with the resulting reclassification of open-pit reserves to resources, the
Company has determined there to be an indicator of impairment of this asset in the fourth quarter of 2017.
The Pascua-Lama PMPA had a carrying value at December 31, 2017 of $485 million.
Management has estimated that the recoverable amount at December 31, 2017 under the Pascua-Lama PMPA was $256 million, representing its fair value less cost of disposal and resulting in an impairment charge of $229 million.
If the requirements of the completion test have not been satisfied by the completion test deadline of June 30, 2020, the Company may, within 90 days of such date, elect to terminate the Pascua Lama silver purchase agreement in which case the Company will be entitled to a return of a portion of the original upfront cash payment of $625 million, reduced by the cash flows received relative to the Lagunas Norte, Veladero, and Pierina mines. As at December 31, 2017, the Company has received approximately 19.1 million ounces related to silver
production from these mines, generating cumulative operating cash flows of approximately $364 million.
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