“Throughout the first half of 2022, we have focused on optimizing our portfolio and further enhancing our financial flexibility in order to ensure that we are well positioned to respond to accretive growth opportunities and continue creating value for our shareholders,” said Randy Smallwood, President and Chief Executive Officer of Wheaton Precious Metals. “While not without its challenges, our diverse portfolio once again delivered strong operating cash flow and an attractive dividend yield, highlighting the resiliency of the streaming model to the inflationary pressures currently being felt across the global economy. Furthermore, we are pleased with our continued progress and leadership on sustainability initiatives as highlighted in our third annual Sustainability Report.”
Second Quarter 2022 Highlights:
- Over $300 million in revenue and $206 million in operating cash flow, resulting in a cash balance of $449 million and no debt as at June 30, 2022.
- $149 million in adjusted net earnings1.
- Announced the proposed termination of the Keno Hill precious metal purchase agreement (“PMPA”) for $135 million.
- Subsequent to the quarter, Wheaton added a sustainability-linked element in connection with the extension to its existing undrawn US$2 billion revolving credit facility.
- Recognized as one of the Best 50 Corporate Citizens in Canada by Corporate Knights.
- Declared quarterly dividend1 of $0.15 per common share, consistent with the comparable period in 2021.
Operational Overview
| (all figures in US dollars unless otherwise noted) | Q2 2022 | Q2 2021 | Change | YTD 2022 | YTD 2021 | Change | ||||||||||||
| Units produced | ||||||||||||||||||
| Gold ounces | 68,365 | 90,072 | (24.1) % | 146,419 | 168,601 | (13.2) % | ||||||||||||
| Silver ounces | 6,537 | 6,529 | 0.1 % | 12,770 | 13,294 | (3.9) % | ||||||||||||
| Palladium ounces | 3,899 | 5,301 | (26.4) % | 8,387 | 11,070 | (24.2) % | ||||||||||||
| Cobalt pounds | 136 | 380 | (64.1) % | 371 | 1,542 | (76.0) % | ||||||||||||
| Gold equivalent ounces 2 | 162,569 | 190,272 | (14.6) % | 333,265 | 387,028 | (13.9) % | ||||||||||||
| Units sold | ||||||||||||||||||
| Gold ounces | 84,337 | 90,090 | (6.4) % | 162,238 | 165,194 | (1.8) % | ||||||||||||
| Silver ounces | 5,848 | 5,600 | 4.4 % | 11,401 | 12,257 | (7.0) % | ||||||||||||
| Palladium ounces | 3,378 | 3,869 | (12.7) % | 7,453 | 9,000 | (17.2) % | ||||||||||||
| Cobalt pounds | 225 | 395 | (43.0) % | 736 | 527 | 39.7 % | ||||||||||||
| Gold equivalent ounces 2 | 170,371 | 176,502 | (3.5) % | 336,436 | 348,773 | (3.5) % | ||||||||||||
| Revenue | $ | 302,922 | $ | 330,393 | (8.3) % | $ | 610,166 | $ | 654,512 | (6.8) % | ||||||||
| Net earnings | $ | 149,074 | $ | 166,124 | (10.3) % | $ | 306,542 | $ | 328,126 | (6.6) % | ||||||||
| Per share | $ | 0.330 | $ | 0.369 | (10.6) % | $ | 0.679 | $ | 0.729 | (6.9) % | ||||||||
| Adjusted net earnings 1 | $ | 149,285 | $ | 161,626 | (7.6) % | $ | 307,292 | $ | 322,760 | (4.8) % | ||||||||
| Per share 1 | $ | 0.331 | $ | 0.359 | (7.8) % | $ | 0.681 | $ | 0.718 | (5.1) % | ||||||||
| Operating cash flows | $ | 206,359 | $ | 216,415 | (4.6) % | $ | 416,899 | $ | 448,569 | (7.1) % | ||||||||
| Per share 1 | $ | 0.457 | $ | 0.481 | (5.0) % | $ | 0.924 | $ | 0.997 | (7.3) % | ||||||||
| All amounts in thousands except gold, palladium & gold equivalent ounces, and per share amounts. | ||||||||||||||||||
Revised Annual and Long-Term Production Guidance
Given the proposed termination of the Keno Hill PMPA, lower production from Stillwater due to severe weather and flooding in the state of Montana in June as well as lower than expected production at Salobo, Wheaton is lowering production guidance. Wheaton’s estimated attributable production for 2022 is now forecast to be approximately 640,000 to 680,000 gold equivalent ounces2 (“GEOs”). For the five-year period ending December 31, 2026, average annual production is expected to increase to 820,000 GEO’s2, primarily due to anticipated continued production growth from Salobo, Stillwater, Constancia, and Voisey’s Bay as well as incremental production ounces from Marmato, Blackwater, Toroparu, Marathon, the Copper World Complex (formerly referred to as Rosemont) and Santo Domingo towards the latter end of the forecast period. Average forecast production for the ten-year period ending December 31, 2031, is expected to now be 870,000 GEO’s2 and includes incremental production from the Kutcho project and the Victor mine in Sudbury. Vale S.A. has indicated the potential for an additional expansion after the completion of the current Salobo III expansion, but Wheaton does not currently include this in its forecast.
2022 Production Guidance Forecast
| Original Guidance | Updated Guidance | |
| Gold Ounces | 350,000 to 380,000 | 300,000 to 320,000 |
| Silver Ounces (‘000s) | 23,000 to 24,500 | 22,500 to 24,000 |
| Other Metals2 (GEOs) | 44,000 to 48,000 | 35,000 to 40,000 |
| Total GEOs2 | 700,000 to 760,000 | 640,000 to 680,000 |
| Long-Term Forecast | ||
| 5-Year Annual Average (GEOs)2 | 850,000 | 820,000 |
| 10-Year Annual Average (GEOs)2 | 910,000 | 870,000 |
Financial Review
Revenues
Revenue was $303 million in the second quarter of 2022 representing an 8% decrease from the second quarter of 2021 due primarily to a 5% decrease in the average realized gold equivalent² price; and a 3% decrease in the number of GEOs² sold.
Revenue was $610 million in the six months ended June 30, 2022, representing a 7% decrease from the comparable period of the previous year due primarily to a 4% decrease in the number of gold equivalent² ounces sold; and a 3% decrease in the average realized gold equivalent² price.
Cash Costs and Margin
Average cash costs¹ in the second quarter of 2022 were $440 per GEO² as compared to $444 in the second quarter of 2021. This resulted in a cash operating margin¹ of $1,338 per GEO² sold, a decrease of 6% as compared with the second quarter of 2021.
Average cash costs¹ for the six months ended June 30, 2022 were $431 per GEO² as compared to $451 in the comparable period of the previous year. This resulted in a cash operating margin¹ of $1,383 per GEO² sold, a decrease of 3% as compared with the comparable period of the previous year.
Balance Sheet (at June 30, 2022)
- Approximately $449 million of cash on hand.
- Subsequent to the quarter, the Company extended its existing undrawn $2 billion revolving term loan (the “Revolving Facility”) with its maturity date now July 18, 2027. As part of the extension, Wheaton added a sustainability-linked element which impacts the interest rate paid on drawn amounts and standby fees.
- The Company is well positioned to fund all outstanding commitments and known contingencies as well as providing flexibility to acquire additional accretive mineral stream interests.
Second Quarter Asset Highlights
Salobo: In the second quarter of 2022, Salobo produced 34,100 ounces of attributable gold, a decrease of approximately 39% relative to the second quarter of 2021, primarily due to lower throughput and grades. According to Vale S.A.’s Production and Sales 2Q22 report (“Vale”), mine movement saw continued improvement throughout the quarter, but concentrate production was negatively impacted by plant performance due to delays in ramp-up after planned and corrective maintenance. Vale expects further maintenance work to continue in the second half of 2022.
As per Vale’s Second Quarter 2022 Performance Report, Vale outlines the Salobo lll Project progress including the start of commissioning activities at the primary crushing and stockpile areas. In addition, Vale notes that the remediation work for the January 2022 landslide has been completed. Vale reports that physical completion of the Salobo III mine expansion was 95% at the end of the second quarter.
Antamina: In the second quarter of 2022, Antamina produced 1.4 million ounces of attributable silver, a decrease of approximately 11% relative to the second quarter of 2021, primarily due to lower grades as per the mine plan.
Constancia: In the second quarter of 2022, Constancia produced 600,000 ounces of attributable silver and 8,000 ounces of attributable gold, an increase of approximately 25% and 46%, respectively, relative to the second quarter of 2021, with the increases being primarily due to the mining of higher-grade material associated with the Pampacancha deposit.
Sudbury: In the second quarter of 2022, Vale’s Sudbury mines produced 7,200 ounces of attributable gold, an increase of approximately 58% relative to the second quarter of 2021, primarily due to higher throughput as during 2021, operations at the mine were suspended due to a labour dispute which lasted from June 1to August 9, 2021.
Stillwater: In the second quarter of 2022, the Stillwater mines produced 2,200 ounces of attributable gold and 3,900 ounces of attributable palladium, a decrease of approximately 27% for gold and 26% for palladium relative to the second quarter of 2021. As per Sibanye-Stillwater Limited’s news release dated August 11, 2022, regional floods impacted the Stillwater operations on June 13, 2022, including damage to bridges and the access road to the Stillwater mine. Operations at the Stillwater mine, which accounts for 60% of the mined production from the Stillwater operations, were suspended for seven weeks, but resumed on July 29, 2022. Access to the East Boulder mine and the Columbus metallurgical facilities remains intact and both facilities continued operating during the flooding events.
San Dimas: In the second quarter of 2022, San Dimas produced 10,000 ounces of attributable gold, a decrease of approximately 12% relative to the second quarter of 2021, primarily the result of mining lower grade material. According to First Majestic Silver Corp.’s (“First Majestic”) Q2 production report, underground development for stope preparation and ventilation within the Perez vein is progressing and forecast to be ready for initial production in August. Furthermore, First Majestic reports that improving dilution controls at San Dimas and prioritizing long-hole stoping of the Jessica and Regina veins is anticipated to improve ore grade and overall production in the second half of 2022.
Other Gold: In the second quarter of 2022, total Other Gold attributable production was 6,800 ounces, a decrease of approximately 32% relative to the second quarter of 2021, primarily due to the lower throughput and grades at 777, which closed as of June 2022.
Voisey’s Bay: In the second quarter of 2022, the Voisey’s Bay mine produced 136,000pounds of attributable cobalt, a decrease of approximately 64% relative to the second quarter of 2021, primarily due to lower throughput resulting from a scheduled maintenance shut down coupled with lower grades during the ongoing transitional period between the depletion of the Ovoid open-pit mine and ramp-up to full production of the Voisey’s Bay underground project. As per Vale’s Second Quarter 2022 Performance Report, physical completion of the Voisey’s Bay underground mine extension was 74% at the end of the second quarter. Civil works continue for the balance of facilities, with civil completion planned by the end of 2022.
Development Assets
Copper World Complex (formerly referred to as Rosemont): On June 8, 2022, Hudbay Minerals Inc. (“Hudbay”) announced the results of the preliminary economic assessment (“PEA”) of its 100%-owned Copper World Complex in Arizona, which includes the recently discovered Copper World deposits along with the Rosemont deposit. The PEA highlights a two-phase mine plan, with Phase I reflecting a standalone operation on private land and patented mining claims over a 16-year mine life. Phase II expands mining activities onto federal land and extends the mine life to 44 years. In addition, Hudbay is evaluating several opportunities to optimize the project, including the potential to expand Phase I beyond 16 years with additions to the company’s private land package for tailings and waste rock storage and the potential to accelerate Phase II if federal permits are received earlier than as outlined in the PEA. As per the PEA, Hudbay anticipates the Phase 1 feasibility study and permits should be completed by the end of 2023, with a sanctioning decision by Hudbay in 2024, and construction expected to take three years.
Fenix: On June 28, 2022, Rio2 Limited (“Rio2”) provided an update on the Fenix Gold environmental assessment process. The Environmental Assessment Service (“SEA”) published the Consolidation Evaluation Report with the recommendation to reject the Environmental Impact Assessment (“EIA”) as it has been alleged that Fenix Gold has not provided enough information during the evaluation process to eliminate adverse impacts over the chinchilla, guanaco, and vicuña. On July 5, 2022, Rio2 announced that the Regional Evaluation Commission has voted for not approving the EIA for its Fenix Gold project in Chile. Following this decision, Rio2 provided a further update on July 11, 2022, stating that Rio2 along with its Chilean environmental and legal advisor, are currently evaluating options to continue to advance the project.
Portfolio Optimization
Keno Hill: On July 5, 2022, Hecla Mining Company (“Hecla”) announced a definitive agreement for Hecla to acquire all of the outstanding common shares of Alexco Resource Corp. (“Alexco”). In conjunction with this agreement, the Company has entered into an agreement with Hecla to terminate the Keno Hill PMPA in exchange for $135 million of Hecla common stock, conditional upon the completion of Hecla’s acquisition of Alexco and other customary approvals.
Produced But Not Yet Delivered3 and Inventory
As at June 30, 2022, payable ounces and pounds attributable to the Company produced but not yet delivered amounted to:
- 61,200 payable gold ounces, a decrease of 20,200 ounces during Q2 2022, primarily due to decreases at the Salobo and Sudbury mines.
- 3.7 million payable silver ounces, a decrease of 0.2 million ounces during Q2 2022 primarily due to decreases at the Peñasquito and Yauliyacu mines.
- 6,300 payable palladium ounces, an increase of 700 ounces during Q2 2022.
- 280,000 payable cobalt pounds, a decrease of 270 thousand pounds during Q2 2022.
As of June 30, 2022, approximately 582,000 pounds of cobalt were held in inventory by Wheaton, an increase of 172,000 pounds during Q2 2022.
Detailed mine-by-mine production and sales figures can be found in the Appendix to this press release and in Wheaton’s consolidated MD&A in the ‘Results of Operations and Operational Review’ section.
Sustainability
Recognized as One of the Best 50 Corporate Citizens in Canada: Wheaton was named to the Corporate Knights’ 2022 list of the Best 50 Corporate Citizens in Canada. Corporate Knights has been producing global corporate and fund rankings for 20 years. Wheaton was selected from a pool of 332 Canadian companies – each evaluated on a set of 24 environmental, social and governance indicators, relative to their industry peers and using publicly available information. The Best 50 Corporate Citizens sets the standard for sustainability leadership in Canada.
Sustainability-Linked Revolving Credit Facility: Wheaton has added a sustainability-linked element in connection with the extension to its existing undrawn US$2 billion revolving credit facility, underscoring Wheaton’s commitment to sustainability initiatives. Under the renewed revolving credit facility, the interest rate paid on drawn amounts and standby fees will be adjusted based upon Wheaton’s performance in three sustainability-related areas including climate change, diversity and overall sustainability performance.
Published third Annual Sustainability Report: On May 24, 2022, Wheaton published its third annual Sustainability Report. Highlights of the report include establishment of a formal ESG strategy with targets and commitments across several material ESG topics and significant enhancement of disclosure around climate change (including inaugural reporting of our Scope 3 financed emissions associated with our Mining Partners).