Wheaton Precious Metals Corp. (WPM) Q3 2014 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen, thank you for standing by. Welcome to Silver Wheaton’s 2014 Third Quarter Results Conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would like to remind everyone that this conference call is being recorded on Wednesday, November 12 at 11 AM Eastern Time. I would now like to turn the call over to Mr. Patrick Drouin, Senior Vice President of Investor Relations. Please go ahead.

Thank you operator. Good morning ladies and gentlemen and thank for participating in today’s call. I’m joined today by Randy Smallwood, Siver Wheaton’s President and Chief Executive Officer; Gary Brown, Senior Vice President and Chief Financial Officer; and Haytham Hodaly, Senior Vice President, Corporate Development. I’d like to bring to your attention that some of the commentaries in today’s call may contain forward-looking statements. There can be no assurances that these forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Please refer to the section entitled Description of the Business Risk Factors in Silver Wheaton’s annual information form, which is available on SEDAR and in Silver Wheaton’s Form 40-F on file with the U.S. Securities and Exchange Commission. The Annual Information Form sets out the material risk factors that could cause actual results to differ, including the absence of control of our mining operations from which Silver Wheaton purchases silver, risk related to such mining operations and the risk of a decline in silver and gold prices. Lastly, it should be noted that all figures referred to on today’s call are in U.S. 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. Thanks for dialing into our third quarter 2014 conference call. The strength in Silver Wheaton’s streaming model was once again highlighted in what can only be described as a challenging third quarter for precious metals. Despite a substantial drop in precious metal prices, during the quarter, we continue to generate cash operating margins of over 70% while maintaining one of the highest production levels in the silver industry. During the quarter, we once again saw excellent progress at two of our key growth platforms Salobo and Constancia. The Salobo mine reached record production as their expansion continues to ramp up and construction at the Constancia project keeps moving forward with the mine remaining on track for first production any day now. While our overall production and margins remain strong in the quarter, lower commodity prices did impact two of our smaller assets Mineral Park and Campo Morado, both of which we recognized an impairment charged against. Gary Brown, our Senior Vice President and Chief Financial Officer will provide more detail on this shortly. Despite this we remain confident in our portfolio. As a reminder 86% of our current production comes from mines in the first cost quartile of the respective cost curves. And we challenge you to find a higher quality portfolio of our size anywhere in the precious metal space or in the mining industry in general. With respect to the third quarter, our production was 8% lower than the comparative period last year at 8.4 million silver equivalent ounces However, silver equivalent sales volumes were 12% higher than the comparative period last year coming into 8.7 million ounces. Our average realized sale price per silver equivalent ounce was 11% lower than Q3 of 2013. As mentioned, despite the lower commodity prices, we once again maintained a healthy cash operating margin with cash flows in excessive of $120 million. Speaking of cash flows, our quarterly dividends continue to deliver 20% of the average cash generated by operating activities in the previous four quarters. The dividend remain to be linked to our ability to make additional accretive acquisitions, commodity prices and the Company’s organic growth profile, which is shaping up nicely with Saloba and Salobo II ramping up and Constancia on the verge of commissioning. Despite the volatility of the markets our dividends are sustainable as evidenced by our third quarterly dividend payment of 2014 of $0.06 per share. In addition, our recently implemented dividend reinvestment program continues to be well received. Throughout the third quarter, there was a steady downward trend in precious metal prices that continued into the fourth quarter. The trend was generally related to the strength in the U.S. dollar due to improving economic indicators, as well as the pullback in quantitative easing by the U.S. Federal Reserve. Despite the near-term down trend we remain bullish on precious metals in the longer term. That being said, given the emergence of our key growth platforms over the next couple of years, we look forward to improving production, cash flows and as a result our dividends even in a flat gold and silver price environment. On the corporate development front, evidence continues to show that streaming provide an attractive funding solution for both large and small miners by always improving internal rate of return in any investment. However, because of the current commodity price environment, the focus of most major and mid-tier mining companies is on saving cost structures, with very little capital being invested right now. With this, most of our growth opportunities currently relate to helping existing producers strengthen their balance sheets, assisting in asset acquisitions or providing supports to single asset companies. Of course, the current weak equity market does open up plenty of opportunities with early deposit structure agreements. As earlier stage single assets new capital reach that bankable feasibility stage, where they can then access the debt markets. But our continual focus on ensuring that we invest into well-managed, high-quality assets, producing in the lowest half of the respective cost curves, means that we will continue to patient and wait for the right opportunities. Finally, on a bit of a laboratory note, Silver Wheaton recently marked the ten year anniversary of streaming, a model that we created in October of 2004 when we signed the very first streaming agreement on the San Dimas mine. Over our first 10 years, the Company has grown to have over 20 assets in the portfolio, including such cornerstones as San Dimas, Peñasquito and Salobo. Our streaming model has been adopted across the industry and is now recognized as a valuable way for traditional mining companies to raise funds and crystallize the value of their non-core precious metals production. Our business is based on the premise of paying low predictable costs for precious metal streams from a diverse portfolio of high quality mines. So any increases in previous metal prices, flows directly to our bottom line. Case in point over our first ten years, Silver Wheaton’s share prices climbed over 500%, while the price of silver has rose just under 140%. We are proud of the value that we have created over the first ten years, and look forward to further opportunities over the next ten. With that, I would like to turn the call over to Gary Brown, our Senior Vice President and Chief Financial Officer, to provide a bit more detail, Gary?

Thank you, Randy and good morning ladies and gentlemen. Prior to reviewing Silver Wheaton’s unaudited financial results for the three months ended September 30, 2014, I would like to remind everyone that all monetary figures discussed are denominated in U.S. dollars unless otherwise noted. The Company’s precious metal interests generated 8.4 million silver equivalent ounces of attributable production in the third quarter of 2014, 7% lower than production from the comparable period of the prior year, due primarily to lower production from San Dimas and 777, with such being partially offset by increase production from the Yauliyacu, Salobo and Minto. Of the overall production, approximately 28% was gold with the remainder being silver. Payable silver equivalent ounces produced but not yet delivered by our partners amounted to 4.7 million ounces as of September 30, 2014, a decrease of approximately 1.3 million ounces over the quarter with the largest decrease relating to Yauliyacu. Silver equivalent sales volumes amounted to 8.7 million ounces in Q3, 2014 representing a 12% increase from Q3 2013 attributable to increased silver deliveries relating to Yauliyacu, Peñasquito and Minto. Revenue for the third quarter of 2014 amounted to $166 million, consistent with comparable period of the prior year, despite an 11% decrease in the average realized silver price, per silver equivalent ounce sold with such being $18.98 for Q4 2014. Earnings from operations for the third quarter of 2014 amounted to $82 million, representing a 10% decrease relative to the third quarter of 2013, with operating margins decreasing by 5% to 49% in the third quarter of 2014 due to lower commodity prices. Cash based G&A expenses were $6.4 million in the third quarter of 2014, representing a 10% decrease from Q3 2013 with such being primarily attributable to a decrease in the expense relating to potential payouts and to the Company’s performance share unit program. The company now expects non-stock-based G&A expenses, which excludes expenses relating to the value of stock options granted and PSUs at the lower end of the previously provided range of $31 million to $34 million for 2014. During the third quarter of 2014, the company recognized an impairment charge of $68 million, relating to silver interests in Mineral Park and Campo Morado. The value of the Mineral Park interest was impaired by $37 million resulting in a carrying value of nil, at September 30, 2014. This impairment was recognized as a result of Mercator, the parent company that wholly owns Mineral Park filing for bankruptcy during the quarter, combined with the uncertainty associated with the recovery of proceeds from any potential sale of Mineral Park, especially in light of the current low commodity price environment. The impairment charge relating to Campo Morado amounted to $31 million, resulting in a carrying value of $25 million as of September 30, 2014. This impairment was recognized as a result of the continued deterioration of ore grades associated with G9 deposit and the uncertainty as to whether any other satellite deposits can be economically processed. This resulted in a reduction of the estimated future production from Campo Morado which in turn gave rise to the impairment charge. It is important to highlight the Mineral Park and Campo Morado represented two of the higher cost producers in our portfolio and reinforce that 86% of Silver Wheaton’s current production is thrived from mines that operated in the lowest quartile of their respective cost curves. It is also important to highlight that the company has recovered more than its original investments on both of these streams. Net earnings adjusted to neutralize the affect of the impairment charges amounted to $73 million in the third quarter of 2014 compared to $77 million in the comparable period of the prior year with adjusted basic earnings per share decreasing by 9% to $0.20 per share in Q3 2014 from $0.22 per share in Q3 2013, with the decrease being primarily attributable to the decrease in commodity prices. On adjusted net earnings amounted to $4 million or $0.01 per share for the third quarter of 2014. Operating cash flow for the third quarter of 2014 amounted to $120 million, compared to $119 million in Q3 2013. This translates into operating cash flow per share of $0.34 and resulted in a dividend of $0.06 per share being payable to shareholders record on November 26, 2014. 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 3% discount to market. During the third quarter of 2014, the value of the company’s long-term investment portfolio of shares and other publically listed mining and mineral exploration companies decreased by $24 million, which has been reflected in the statement of other comprehensive income. The operational highlights for the third quarter of 2014 included the following, San Dimas contributed 1.3 million ounces of silver production and sales, including 125,000 ounces being received directly from Goldcorp relating to their four-year commitment to deliver 1.5 million silver ounces per year which ended on August 6th of this year. This compares to sliver production and sales in Q3 2013 of 1.7 million and 1.6 million ounces respectively, including 375,000 ounces of silver being received from Goldcorp. The year-over-year reduction and attributable ounces produced relating to San Dimas is due to a combination of the cessation of the supplemental ounces being delivered from Goldcorp and the mining of lower grade material. The annual threshold of payable ounces produced above which Primero is entitled to retain 50% increased from 3.5 million ounces to 6 million ounces effective August 6, 2014. The Yauliyacu mine generated attributable silver production of 875,000 ounces during the third quarter of 2014, representing a 37% increase from the comparable quarter of prior year with such increase being primarily attributable to significantly higher grades. Silver sales for the third quarter of 2014 relative to Yauliyacu amounted to 1.4 million ounces compared to 13,000 ounces in Q3 2013 with a substantial increase being attributable to higher production and a significant reduction in payable silver ounces produced but not delivered as compared to a substantial build-up in such during Q3 2013. As of September 30, 2014, approximately 900,000 ounces of payable silver had been produced at Yauliyacu, but not yet delivered the Silver Wheaton. So Salobo produced 10,450 in attributable ounces of gold or 718,000 silver equivalent ounces during the third quarter of 2014, representing a 29% increase from the comparable period of the prior year and a record for the company. The increased production is due to the continued successful ramping up of the Salobo II expansion of mill throughput capacity from 12 million to 24 million tons per annum. Gold sales relating to Salobo lagged production during the quarter with 7,180 ounces of gold or 495,000 silver equivalent ounces being delivered and sold during Q3 2014. With gold ounces produced, but not shipped increasing by almost 3,000 ounces during the quarter. As of September 30, 2014 approximately 8,000 ounces of payable gold or 500,000 silver equivalent ounces had been produced in Salobo, but not yet delivered to Silver Wheaton. The Sudbury gold interest produced 5,916 [ph] ounces of gold or 396,000 silver equivalent ounces in Q3 2014. This represented a 19% reduction compared to Q3 2013 with the decrease being attributable primarily to the mining of lower grade material. It is important to note that given the length of the process associated with producing the final products relating to the Sudbury mines, reported production for the most recent quarter represents an estimate of actual production and will adjusted once actual production information is available. In this regard, actual goal production for Q2 2014 was 1,387 ounces, or approximately 90,000 silver equivalent ounces, higher than have been estimated in the MD&A for Q2 2014. As of September 30, 2014 approximately 11,200 ounces of payable gold, or 794,000 silver equivalent ounces, have been produced but not yet delivered to Silver Wheaton relative to the Sudbury mines. Overall, the company’s cash balances increased by $94 million in the third quarter of 2014 with $120 million of cash flow from operations being partially offset by $18 million of dividend payments and $9 million of cash disbursements relating to investment activity, with the latter primarily relating to the company’s investment in the Metais royalty during the quarter. It is important to note that the company did satisfy the $135 million payment obligation to Hudbay relating to the Constancia gold interest through the issuance of shares. As this was a non-cash transaction, it does not appear in the statement of cash flows. As of September 30, 2014, the company had $233 million of cash and cash equivalents on hand and $1 billion of debt outstanding under the non-revolving term loan. The company’s current cash balance and strong future cash flows combined with a $1 billion of credit capacity available under the revolving credit facility positions the company well to satisfy its funding commitments, sustain its dividend policy while at the same time providing flexibility to consummate addition accretive precious metal purchase agreements. Lastly, there has been no substantial change in the status of the audit of the Company’s taxation years 2005 to 2010 by the Canada Revenue Agency. And that concludes the financial summary and with that I turn the call back over to Randy.

Thank you very much, Gary. Operator, we’d like to open up the call for questions please.

Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. [Operator Instructions] And your first question comes from the line of Andrew Quail of Goldman Sachs. Please go ahead. Andrew C Quail – Goldman, Sachs & Co.: Good morning Randy, Gary, Patrick, and Haytham, just a couple of questions, firstly congratulations on a pretty solid quarter.

Thanks. Andrew C Quail – Goldman, Sachs & Co.: On the balance sheet, obviously, last year a lot of investments of the debt went up obviously you’re starting to pay back and harvested investment. Is there a level Randy that guys are sort of targeting that you’d be more comfortable with of having debt on the balance sheet?

Yes, Andrew. Right now, where we’re trading – I mean, we monitor our EBITDA, debt-to-EBITDA ratio and we’re trading at about 1.7 times EBITDA that ratio was about 1.7 to 1. I wouldn’t want that to go much over to on a long-term basis. We’re certainly very comfortable with where the debt is today. And as I think we’ve been pretty clear to the extent that we consummated a significant transaction, a new transaction. We would likely look to raise equity in conjunction with that. Andrew C Quail – Goldman, Sachs & Co.: Yes, now that’s great. And it’s coming down at 1.7 on pretty much most people numbers I probably ask you this all the time, but obviously silver is underperformed though. Can you give us a bit of a – sort of insight into the portion or the number of sort of gold projects versus silver projects you are looking at currently and is that changing given the pricing environment?

Yes, I mean, Andrew, you’re right. Silver has underperformed all the way down. Silver has always had a much higher data, much higher volatility than gold that that always equates to outperforming on the way up also I might point out. So it does go in both directions. And there is no doubt that we have suffered a bit more in the gold space. In terms of what we’re looking at out there, we are silver focused although we like gold assets and if we see good quality gold assets, we definitely will step in and invest into that space. The opportunities set that we see right now is probably slightly bias towards the silver side. There are a lot of assets that have both silver and gold as a byproduct and both can be used to stream the inception. So when I sit and look at it from that perspective, it’s probably a slight bias towards the silver side versus the gold side. Andrew C Quail – Goldman, Sachs & Co.: Yes, great. And last one just obviously on the long-term growth, you guys have obviously always focused on the 48 million ounces silver equivalent versus 18 and that implies a couple of expansions at your current sort of streams, is there anything else that needs to happen with your current portfolio to get there?

Sure while I mean the key most of that will actually be delivered over the next couple of years, most of that growth. The only project that’s part of the relative in that timeline for 2018 is of course Rosemont which Hudbay just recently acquired and is looking to way through trying to finish it off. That’s the only outstanding capital commitment that we have in terms of achieving that 2018 target. And of course, we haven’t funded that yet. We don’t start funding until construction starts on that project. So hopeful that something moves forward over the next year with respect to Rosemont and that I believe more than happy to step up and help Hudbay to build that one. Andrew C Quail – Goldman, Sachs & Co.: Thanks very much Randy. Cheers guys.

Always good talking to you Andrew, thanks.

[Operator Instructions] Your next question comes from the line of Cosmos Chiu from CIBC. Your line is open. Cosmos Chiu – CIBC World Markets: Good morning, Randy, Gary, Patrick and Haytham and thanks for hosting the call. Congrats on the 10-year anniversary. Certainly has been a very good 10 years.

Thanks you, Cosmos. Cosmos Chiu – CIBC World Markets: Got a few questions here. Maybe first off on the write-downs. I read that as part of the settlement of the Mineral Park stream, it sounds like you’ve decided to forgo any future claims at the asset level. Certainly you can still make claims at the corporate head office level. I just want to get a bit more detail on that. I would have thought that you want to maintain some kind of claim at the asset level, just in case it gets picked up by future operator as it would start production once again and I think your claim in terms of the stream would still be on it. Just want to get some more clarity on that.

Yes, Cosmos, it’s Gary here. It’s a tough call. When you looked at the silver from Mineral Park, represented about 4% of overall economics, that mine has a lot of moly credits associated with it. Moly is either below $10 as I understand it right now. And so it’s actually below their average cost of production. So the chances of that mine being sold for a significant number in our eyes is pretty low. And we would likely only be entitled to – we have security over the silver contained in the ore body and silver produced. So we were looking at being involved in a very long drawn out legal process that could have caused us a fair amount of money little likelihood of there being any significant proceeds of the end of the day. So we made the call to arrive at the settlement that you just outlined with while we maintain the ability to pursue claim against the parent company. Cosmos Chiu – CIBC World Markets: Of course. Maybe Gary or Randy could you may be talk a little bit about the security on the other streams as well? Are they both at the asset level or at the corporate level? Maybe a bit more detail on that as well.

Yes, cosmos is varies for every asset and for every company. I mean security is always related to the strength of the partner, the strength of the asset and so, it’s a broad range that does the full spectrum from down at the asset level on the left to the parent level, to parental guarantees. Every contract is different and we assess that risk in that perspective. I mean to quickly summarize Gary just to add in my eyes, we’ve just cleaned up our portfolio that this wasn’t an asset that fit into our target asset portfolio being in the bottom half of the cost curve. And so, I would describe this is as cleaning up or cleaning up our portfolio and focusing on those stronger assets. Cosmos Chiu – CIBC World Markets: Yes, of course. And certainly understand that for both Mineral Park and Campo Morado, these are two streams that you don’t usually give a lot of details in terms of quarterly productions that report back to your streams.

Yes, I mean, combined they represent 3% of our total production. Mineral Park is 1% of our total production. So these are very small assets. Cosmos Chiu – CIBC World Markets: Yes. How would you project that? Is Mineral Park pretty much done in terms of future production? We still see some contribution coming from Campo Morado, though, right? Is that how I should look at it?

In terms of Morado, from our side, yes. Campo Morado continues to produce going forward. Nyrstar is continuing to work on trying to improve the metallurgy on those other deposits there. There’s plenty of resource there. It’s a matter of just fine-tuning that metallurgy and see if they can find a way to get done. And when we had to look at it we just decided that we had changed the way we’re looking at that asset in terms of future production and hope this is a good time to clean it up. Cosmos Chiu – CIBC World Markets: Of course. Maybe if I can switch gears a little bit. Looking at your full year guidance, Randy and Gary, it looks like you’ve reconfirmed 36 million ounces at this point in time. You’ve done about 26 million ounces so far in the first nine months. Are you still quite comfortable with your full-year guidance given that it would essentially imply 10 million ounces of silver equivalent in Q4.

Yes we’ve got a number of things that are happening here in the fourth quarter that are contributing to that. It should give – should make our fourth quarter the best quarter that we’ve ever had. Salobo of course is continuing to ramp up San Dimas, we finished the silver sharing process with premier [ph] and so, we get a 100% of the silver production for the fourth quarter from San Dimas and that asset continues to outperform. Sudbury itself the thought in mind is coming on, so we continue to get improvements there and as Gary went into detail in his discussion. It constantly gets upgraded in terms of actuals versus estimates that are made at the end of the quarter. And so generally during year-end, they do a better job of getting to the final numbers or at least tighten that up a bit. So we should be good there. Constancia of course is coming up, should be turning on the switch any day now and [indiscernible] has also got some good high grades coming into it. I just – when we added all up, we’re still pretty comfortable with that 36 million ounce forecast. Cosmos Chiu – CIBC World Markets: Yes, of course. And may be one last question from me. I saw that in Q3, sales exceeded production by quite a bit. As we all know, usually that doesn’t happen into Q4, when operators are trying to catch up. Is there any kind of re-through in terms of how we should look at Q4, Randy?

Well the reason that is it was still high and Q3 was Yauliyacu. If you remember, we didn’t have a lot of sales in the Yauliyacu in Q2. And that, it just missed, I think we mentioned this during our last quarterly conference call… Cosmos Chiu – CIBC World Markets: Yes.

That it had been delivered three, four days after the quarter end. Cosmos Chiu – CIBC World Markets: Yes.

Q2 quarter end. And so we had a huge drop in the Yauliyacu. It continues to be tough to forecast. Cosmos Chiu – CIBC World Markets: Yes.

I generally say that in our company you should look at produce, but not yet delivered is being about two to three months since production. And as our production climbs, that number itself also climbs if it is relative to that and so it’s tough to get better guidance than that. Cosmos Chiu – CIBC World Markets: Yes.

The one thing I will say that, traditionally, companies tend to try and squeeze that pipeline a bit and try and move those materials out in the fourth quarter just improve year end results. And we have seen that traditionally and so, we hope that that pressure we hope that pressure is still in place for Q4. Cosmos Chiu – CIBC World Markets: Okay, great, thanks a lot. That’s all I have.

Cosmos [ph] it’s always good talking to you.

Your next question comes from the line of Garrett Goggin with Gold Stock Analyst. Your line is open. Garrett D. Goggin – Gold Stock Analyst: Hey guys, thanks for the call. Couple of questions, one regarding Salobo. What rate of the process right now?

It’s ramping up . The first line is essentially running at full capacity of 12 million tons and then the second line is running at sort of just digging up the numbers…

It’s been average of 70% across both lines in Q3. Garrett D. Goggin – Gold Stock Analyst: Okay.

Yes. Garrett D. Goggin – Gold Stock Analyst: Okay.

So total capacity 24 million tons per annum right now and its running at about 70% of that. Garrett D. Goggin – Gold Stock Analyst: Gotcha. And when is it expected to hit the full 24 ton.

Their guidance is towards the end of next year. Garrett D. Goggin – Gold Stock Analyst: Okay, excellent.

And that adds up, when we look at how long took them to ramp up the first line and get to the full capacity and we know they’re going to be better the second time around, there will be lessons learned and in terms of that first ramp up. And so that schedule hits very comfortably with the experience in the first line. Garrett D. Goggin – Gold Stock Analyst: Okay, good, thank you. And then Constancia, that’s going to be kicking in pretty soon, what sort of contribution you’re expected in terms of gold and silver from Constancia?

Well, during the startup I mean we don’t expect to reach full production until towards the end of next year or latter half of next year. The Pampacancha zone is the gold rich zone and when they bring that in, it’ll little actually bump our gold productions that side. So for the first, it takes some a bit to get in that Constancia, or sorry into that Pampacancha zone. But from years two to four or five, we will be averaging about four million silver equivalent ounces per year from the asset. That’s about, I think its 2.5 million ounces from silver the rest it comes from gold. Garrett D. Goggin – Gold Stock Analyst: Okay, okay and that’s great color. I appreciate it. Thank you very much for your answers.

Great, no problem, Garrett.

Your next question comes from the line of Charles Gibson with Edison. Your line is open. Charles Gibson – Edison Investment Research: Good morning, chaps [ph]thank you and well done on the right solid quarter.

Thank you. Charles Gibson – Edison Investment Research: I wonder if I could just ask two questions not at all, first one on just picking up under points [ph] when you’re answering Cosmos’ question about Campo Morado, is there any state, do you see in light of that do you might be able to write back some of the impairments, or is that not something on, I mean, I see this on something I anticipate, but does that’s go, does that possibility exist, that’s question one. And if I may just question two, in your statement, you said that actual gold production on second quarter was 1,387 ounces higher than had been estimated this is at subgrade. And you talk about that in some sort of the long process line. I just want to – does that mean you will in effect the restating your second quarter results, or I suppose put in other way how you are going to account for that when we come to the full year?

I’ll take both of those questions Charles, it’s Gary Brown here. With respect your first question on Campo, the write-down was $31 million. And for sure to the extent that some of these satellite deposits that they are pursuing turn out to be economical combined we could certainly see that writing that back up. We wouldn’t increase the carrying value for it beyond what we originally had. So we wouldn’t have a recovery of more than $31 million if we did that. With respect to your second question, production is always just an estimate from our perspective until we get final numbers from our parties. And Sudbury tends to be one that we that the actual production numbers aren’t known by the time we release. So we continually update production and we don’t restate our financials, because of production has no impact on the actual financial statement themselves. But we do highlight in the quarterly financial review in our MD&A what the changes are for past production estimates. Charles Gibson – Edison Investment Research: Okay I understand [ph].

Yes, on Page 14 of our third quarter report, we’ve included ounces of the difference between what we’ve originally estimated as production and what the actuals were. For Q3, I think as Randy indicated we – for Sudbury, we had three production reports for each of the months, July, August and September, but all of those were just estimates from the partner. We’ve received no final production reports for Q3 at this point. And traditionally, production from Sudbury has been the neighborhood of 20% to 30% higher than their estimates. Charles Gibson – Edison Investment Research: Okay, excellent. Thank you very much indeed.

Thank you, Charles.

. : John C. Tumazos – John Tumazos Very Independent Research, LLC: Thank you for taking my call. And I think your results are good all things said, sometimes life is a little rougher than others.

Thank you, John. John C. Tumazos – John Tumazos Very Independent Research, LLC: Over the years, different royalty or streaming companies have describe their businesses. And I think it’s the words of Franco Nevada, your peer, I recall, emphasizing that their royalties or streams are written into the deed that with survive of bankruptcy or enforceable. And should we read into the various events of the last year, including your own impairments today. Well sometimes the mine economics matter, or the parent economics matter, or the legal fees in a couple of different countries between the parents and the subs, the attorneys just charge a lot of money. And it’s not always worth the trouble, or in effect that your top five royalties are streamed you would defended the last, but the little bitty ones those attorneys charging $500 an hour and just to eat you up.

Well. I mean what I would say the best defense of course is making sure that you invest into good quality assets. And that’s what our focus has always been in this now. That being said obviously Mercator’s had some challenges with respect [indiscernible] and so we’ve gone through this. When and it comes down to a decision on our side, do we want to fight the fight out, is it better for us to, in our eyes, we’ve done well on this investment that we are ahead of the game, in terms of our original investment back in and out. And we look at this almost as I mentioned earlier as a chance to just clean up the portfolio and continue to improve the quality of our asset base and the percentage things. So each asset, and you are correct, I mean, I would say that our top five assets or top five producers are very long ways away from the risk to think that those issues like this because they are very profitable assets that – and so, that’s the best defense against that. John C. Tumazos – John Tumazos Very Independent Research, LLC: Thank you.

Great, John. Thanks.

Your next question comes from the line of Dan Rollins with RBC Capital Markets. Your line is open. Dan Rollins – RBC Capital Markets: Yes, thanks very much, and good morning guys. Just a couple of quick questions. With respect to the stress testing of the Campo Morado asset, can you provide a little clarity on what sort of silver price assumptions and discount rate do you assume in driving that valuation if possible?

Yes, we would have been using silver prices in the $16 to $16.50 range for that. And we would have been using discount rate in the 12% range. Dan Rollins – RBC Capital Markets: Okay, great. Perfect. And then maybe, Randy, you recently made the acquisition on the Metates Royalty. Not just sure if this is a one-off type of opportunity. But given a long-term view of the industry, would you look at potentially picking up royalties on projects that have the potential to be developed within the next price cycle or a subsequent price cycle in this current market or is it really – the company is still really concentrated on streaming acquisitions?

Yes, I mean the challenge of the royalty – this is scale and what came at the Metates was developing our relationship with the whole Chesapeake team with [Andy] (ph) and his team there and a commitment towards being able to help them on a larger scale once that mixed price cycle hits. And so we look at business sort of the first step of an ongoing process. When you look at their clients, when you look at most royalties they’re just not big enough to add to our balance sheet. And we’re quite happy in terms of taking that step as long as it reflects the opportunity to drill into something larger. Dan Rollins – RBC Capital Markets: Perfect. And then not too familiar with what the target mine is going to produce, what impact do you expect to have on production, stable production for you guys for the coming Montanore steady state?

Well, it will continue to ramp up. It’s going to be at the higher grade in terms of precious metal grades – gold grades relative to the other deposits, itself moving forward the firm numbers here. Dan Rollins – RBC Capital Markets: That’s okay.

Yes. I mean, when you look at the reserve base, it has a bit higher gold rates and everything else from the portfolio. So as it gets added in and as it – it is very gradual ramp up as lot of those deeper underground mines have. They have to develop more and more working phases, which means more sublevel development and that’s very graduated process, but no doubt the higher grades that come from that will contribute overall.

Yes, I think that Totten is actually expected to deliver about 9% to 10% of our overall production from Sudbury. Dan Rollins – RBC Capital Markets: Okay, perfect. Thanks a lot guys and congrats on the quarter.

Thank you, Dan.

Your next question comes from the line of John Paul Lotesto [ph] with BMO Capital Markets. Your line is open.

Hi, guys. Congratulation again on wonderful third quarter.

Thanks, John Paul.

My question is in regards to the asset highlights. You have mentioned a correction by Goldcorp back from December 31, 2013. I was wondering how you guys do that play out on your side.

Sorry. How did it play out on our side?

Yes, with regards to the increase there with resources then.

Yes. So Goldcorp went back and impressed their reserves based on updated commodity price inception. If you remember the start of this year had, well, I think there was a drop in reserves. They want from 18-year mine life down to about a 13-year mine life. So the lower grade portion, there was a correction. The original report that came out that was – I don’t want to describe anymore than what Goldcorp described it, a correction in terms of one of the tables in their updated report was incorrect. And when it got corrected, it came in after our year-end. And so earlier this year and so that’s added to some of those. I would look at as being some of those reserves ultimately shifted over into the resource base itself and now have been reported on the resource side. And as they’re working on a number of different – and for that, to our benefit we get the benefit of 25% of silver contained in those updated resources. Goldcorp continues to work on both the copper concentrate option and the Pyrite treatment system, which may go long ways towards be able to bring in that resource back into a resource status and then they’ve also had additional success and continue look towards having loaded and well in place, which will mean water isn’t the limiting factor anymore in the operations and that will also help. They’ve also had additional exploration success with respect to the deposit skarn and Mineralization, in fact now looks like some of that maybe open-pittable. So overall we see the next two years of Peñasquito being pretty exciting. This though was really just a correction in terms of the original adjustment maybe in the reserves and not being affected into the resources.

Okay. Thank you so much.

Thank you, John Paul.

Your last question comes from the line of Michael Gray with Macquarie Capital Markets. Your line is open. Michael Gray – Macquarie Capital Markets: Good morning, guys. Just following up on Peñasquito, how do you see it contributing to this strong fourth quarter? You’re projecting 10 million ounce of silver equivalent. Is it going to be one of the ones? I didn’t hear you mention it, Gary.

Yes. I mean, it continues to improve. We do see continued improvements. Grades are still a little bit lower for the rest of this year, but should be ramping up. Peñasquito is going to reach its prime in the two to three years, some of the best grades they see come out and then mine schedule. That’s all laid out in the reports that have been filed on it. And so what we see as I go over the next couple of years, it’s going to continue and plough additional fee and bumping grades in the next quarter. Michael Gray – Macquarie Research: Do you see any opportunities with respect to the metallurgical projects that according to Goldcorp they’re going to combine the Pyrite Leach and copper concentrate. Do you see an opportunity there for Silver Wheaton?

Definitely. The initial estimates that they’ve got on that was that it will contribute more than 1 million ounces of silver towards this about 1.125 million or 1.25 million ounces of additional silver production on a yearly basis towards our credit. And so it’s definitely something that we’re following closely and we hope to be make the right decision in that field. Michael Gray – Macquarie Research: Okay, thanks.

Okay, thank you very much and thank you everyone for dialing in. Just a couple of closing comments here. Well, we acknowledge the precious metal space is certainly at a challenging point of the cycle, the cost base of most mining companies leads us to believe that we are near bottom, which is typically the best time to buy a commodity. We continue to believe the Silver Wheaton offers the best option for gaining exposure to precious metals while also offering tangible organic growth, which will grow out cash flows and thus our dividends even if prices stay at their low levels in the near-term. So we thank you for your interest in Silver Wheaton and please stay tuned, we should have a very good fourth quarter.

And this concludes today’s call. Thank you for participating. Please disconnect your lines.