Wheaton Precious Metals Corp. (WPM) Q3 2018 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wheaton Precious Metals, 2018 Third 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. [Operator Instructions]. I would like to remind everyone that this conference call is being recorded on Thursday, November 15 at 11 O’clock AM Eastern Time. I will now turn the conference over to Mr. Rory Quinn, Director, Investor Relations. Please go ahead.

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 Curt Bernardi, Senior Vice President, Legal. I’d like to bring to your attention that some of the commentary on today’s call may contain forward-looking statements. There can be no assurances that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. In addition to our financial results’ cautionary note regarding forward-looking statements, please refer to the section entitled Description of the Business Risk Factors in Wheaton’s annual information form and the risks identified under Risks and Uncertainties in Management’s Discussion and Analysis, both available on SEDAR and in Wheaton’s Form 40-F and Wheaton’s Form 6-K, both on file with the U.S. Securities and Exchange Commission. The Annual Information Form, Q3 2018 Management’s Discussion and Analysis and the Press Release from last night set out the material assumptions and risk factors that could cause actual results to differ, including among others, fluctuations in the price of commodities, the outcome of the challenge by the CRA of Wheaton’s tax filings, the absence of control over mining operations from which Wheaton purchases precious silver or gold, and risks related to such mining operations and the continued operation of Wheaton’s counterparties. It should be noted that all figures referred to on today’s call are in U.S. dollars unless otherwise noted. In addition, references to 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, Rory, and good morning ladies and gentlemen. Thank you for dialing into our conference call to discuss the third quarter results of 2018. I am pleased to report that Wheaton continues to deliver solid results from our portfolio of high quality assets, which has been steadily growing since the beginning of this year. In the third quarter of 2018 Wheaton completed the acquisition of a Precious Metals Stream with Sibanye-Stillwater and received first production of both gold and palladium from the Stillwater and East Boulder mines, which are already exceeding our expectations. With this latest Stream and another strong quarter from Salobo, we had record gold production and sales volume for the first nine months of 2018 and operating cash flow of almost $370 million. And with three quarters, now behind us, Wheaton is currently on track to exceed production guidance for the year. Gary Brown, one of our Senior Vice President and Chief Financial Officer will now provide more details on our results. Gary.

Thank you, Randy, and good morning ladies and gentleman. Prior to reviewing Wheaton's unaudited financial results for the three months ended September 30, 2018, 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 interest produced 5.7 million ounces of silver, 101,600 ounces of gold and 8,800 of palladium in the third quarter of 2018. Relative to the third quarter of the prior year, this represented a decrease of 25% in silver production and an increase of 7% in gold production, with the decrease in silver production being primarily due to the termination of the San Dimas silver stream effective May 10, 2018, the expiry of the streaming agreements relative to the Lagunas Norte, Veladero and Pierina mines on March 31, 2018 and lower production at Penasquito. The increase in gold production was due primarily to the new streaming agreements relative to the San Dimas and Stillwater mines, partially offset by lower production at the Sibanye, Salobo and other gold interest. Sales volumes amounted to 5 million ounces of silver, 89,200 ounces of gold and 3,700 ounces of palladium in the third quarter of 2018, representing a decrease of 13% for silver and an increase of 8% for goal relative to the third quarter of 2017. The decrease in the silver sales volumes was attributable to the decreased production, partially offset by relative changes to payable silver produced but not yet delivered to Wheaton. The increase in gold sales volumes was attributable to a combination of increased production and positive changes in the balance of payable gold produced, but not yet delivered to Wheaton. As of September 30, 2018 payable ounces produced, but not yet delivered otherwise referred to as PBND to the company amounted to approximately 4.5 million silver ounces, 77,100 gold ounces and 4,700 palladium ounces. We estimate a normal level for ounces produced but not delivered to equate to approximately two months’ worth of payable production for silver, two to three months for gold and three months for palladium, with the balances for gold and palladium at September 30 being consistent with this expectation and silver being slightly higher than expectations. Revenue for the third quarter of 2018 amounted to $186 million, representing a 9% decrease relative to Q3, 2017, primarily due to lower commodity prices with realized silver and gold sales prices decreasing by 12% and 6% respectively. Of this revenue, 40% was attributable to silver, 58% was attributable to goal and 2% was attributable to palladium. Gross margin for the third quarter of 2018 decreased 30% to $58 million, with the decrease being primarily driven by the lower commodity prices, coupled with a higher cost per ounce sold. The increase in per ounce costs are primarily the result of the termination of the silver stream at San Dimas, which was originally acquired in 2004, with the new gold stream having depletion rates which are more reflective of the current commodity price environment. However, it is worth noting that cash operating margins continue to be very robust at 66% of revenue despite the drop in commodity prices. Cash based G&A expenses amounted to $7 million in the third quarter of 2018, virtually unchanged from Q3 2017. Interest costs for the third quarter of 2018 amounted to $12 million, resulting in an effective interest rate on outstanding debt of 3.61% as compared to $6 million of interest costs at an effective interest rate of 2.75% incurred in Q3, 2017. Net earnings amounted to $34 million in the third quarter of 2018 compared to $67 million in Q3 2017, resulting in basic adjusted earnings per share of $0.08 compared to $0.15 per share in the prior year. Operating cash flow for the third quarter of 2018 amount to $108 million or $0.24 per share, compared to $129 million or $0.29 per share in the prior year, representing a 16% decrease on a per share basis, due primarily to the decline in commodity prices. Based on the company's dividend policy, the company's board has declared a dividend of $0.09 a share payable to shareholders of record on November 30, 2018. 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. The operational highlights for the third quarter of 2018 relative to the third quarter of the prior year included the following: Attributable silver production relative to the Penasquito mine decreased 36% to 1 million ounces, which Goldcorp states is a result of a planned transition to lower grade ore from stockpiled during 2018 with the third quarter production being further impacted by a reduction in mill throughput as much harder low grade stockpiles were processed during commissioning of the Carbon Pre-flotation plant, which is the component of the Pyrite Leach project. Goldcorp also reported that the construction of the Pyrite Leach project has been completed with pre-commissioning activities together with area based commissioning having commenced and commercial production being expected in the fourth quarter of 2018. Silver sales volumes in Q3 2018 relative to Penasquito increased 12% to 1.2 million ounces with lower production levels being offset by positive changes in silver ounces produce, but not yet delivered to Wheaton. Attributable silver production relative to Antamina in Q3 2018 amounted to 1.5 million ounces, while sales amounted to 1.3 million ounces, a decrease of 15% and 13% respectively, with the decrease being consistent with expectations and due to lower silver grades resulting from mine sequencing in the open pit, with more copper zinc ore and less lead rich ore being mined in the quarter. Attributable silver production relative to the other silver interests in Q3, 2018 amount to 2.4 million ounces, while sales amount to 1.9 million ounces, a decrease of 4% relative to production and an increase of 13% relative to sales, with the decrease in production being primarily due to the expiry of the Lagunas Norte, Veladero and Pierina streams at the end of March, partially offset by the restart of deliveries relative to the Aljustrel stream during the second quarter of 2018. Attributable gold production relative to Salobo in Q3, 2018 amounted to 68,600 ounces, while sales amounted to 65,100 ounces, a decrease of 6% and 3% respectively, with the decrease in production being consistent with expectations and attributable to the mining of slightly lower grade ore related to mine sequencing. During the quarter Vale announced the approval of the Salobo III copper project, a brownfield expansion, which if completed as proposed would increase processing throughput capacity from 24 million tonnes per year to 36 million tonnes per year. Based on Vale’s disclosure relating to the size and timing of this expansion, we estimate that an expansion payment of between $550 million to $650 million would become payable by Wheaton in 2023. Attributable gold production relatives to Sudbury in Q3, 2018 amounted to 6,000 ounces, while sales amounted to 2,600 ounces, a decrease of 30% and 21% respectively, with the decrease in production being primarily due to Sudbury’s annual scheduled maintenance shutdown, which last year occurred during the second quarter rather than the third quarter. Attributable gold production relative to Constancia in Q3, 2018 amounted to 3,300 ounces, while sales amounted to 3,000 ounces, an increase of 31% and 35% respectively, with the increased production being primarily due to record mill throughput and higher grades. Attributable gold production relative to the new gold stream at San Dimas amounted to 10,600 ounces, while sales amounted to 9,800 ounces. Relative to the gold equivalent production attributable to the previous silver stream in Q3 2017, this represents a decrease of only 23%, which given that the restructured stream was expected to reduce attributable production by about 50% is a very positive result. According to First Majestic, silver equivalent production in Q3, 2018 increased by 90% relative to the prior quarters due to increased throughput as some of the lower grades stokes that were deemed uneconomical under the old streaming agreement have now become economical under the new streaming agreement, validating that the restructured stream is operating as intended. Attributable gold and palladium production volume relative to the recently acquired streaming agreement of Stillwater amounted to 6,400 and 8,800 ounces respectively, while sales volumes amounted to 2,100 ounces and 3,700 ounces respectively. The attributable production from Stillwater for Q3, 2018 reflects golden and palladium that was produced in prior quarters with Wheaton having the rights to be attributable production for which an off-taker payment is received after July 1, 2018. Attributable gold production and sales relative to the other gold interests in Q3, 2018 amounted to 6,700 ounces, a decrease of 41% relative to production and 32% relative to sales. Primarily due to the mining of lower grade material at Minto, which Capstone as announced was placed in the care and maintenance in October. During the third quarter of 2018 the company repaid $28 million on the revolving facility, made dividend payments of $34 million, made an up-front cash payment of $500 million to Sibanye’s Stillwater relative to the newly acquired gold and palladium stream at the Stillwater mine, which was partially funded by drawing down $452 million from the revolving facility. We also received $48 million from the disposal of the investment in Arizona Mining, representing a $34 million gain on this investment. Overall, net cash increased by $27 million in Q3, 2018, resulting in cash and cash equivalents of September 30 of $119 million. This combined with the $1.4 billion outstanding under the revolving facility, resulted in a net debt position as at September 30, 2018 of approximately $1.3 billion. The company's cash positions, strong forecasted future operating cash flows, combined with the available credit capacity under the revolving facility positions the company well to satisfy its funding commitments, sustain its dividend policy, while at the same time providing flexibility to consummate additionally accretive precious metal purchase agreements. Finally, there's no material update relative to the company's ongoing dispute with the CRA. However, of note on September 26, the Tax Court of Canada ruled unequivocally in favor of Cameco in its dispute with the CRA. While it is important to understand that these tax cases are complex and very fact specific, we are very encouraged by the court's decision and although it has been appealed that’s a very positive precedent. As a reminder the Tax Court has scheduled the Wheaton trial to commence in mid-September of 2019, with the trial process said to be conducted over two month period and we continue to work diligently with counsel to advance the case as expeditiously as possible. That concludes the financial summary, and with that I'll turn the call back over to Randy.

Thank you, Gary. Wheaton has been very active on the corporate development front this year. In the third quarter of 2018 we completed the acquisition of a precious metal stream from Sibanye Stillwater for a fixed percentage of gold and palladium production from the Stillwater operations in Montana. We’ve made an upfront payment of $500 million and started receiving deliveries of both gold and palladium from the Stillwater operations as of July 1, 2018. As one of the lowest cost palladium mines globally, with a very long reserve life and excellent exploration potential, the Stillwater operations do fit very well within our portfolio. We've also been very pleased with the price performance of palladium since we announced the deal climbing almost 20%. It certainly has been an outperformer amongst the precious metals. With regard to potential new acquisitions, we continue to look at numerous opportunities that would be accretive to our portfolio. The current pipeline of opportunities is mainly related to funding growth and development projects that are generally of a smaller scale than most of our recent acquisitions, but we are optimistic that we should be successful in some of these smaller streams and given our strong cash flow and balance sheet, we have ample capacity for additional grow. And with regard to production, we have reconfirmed both our 2018 and five year guidance. At the beginning of the year Wheaton's 2018 estimated annual production was forecasted to be approximately 355,000 ounces of gold, 22.5 million ounces of silver and with the Stillwater acquisition 10,400 ounces of palladium, all totaling over 650,000 gold equivalent ounces. After three quarters into the year, it appears we will exceed this production guidance. Estimated average annual attributable production over the next five years including 2018 is anticipated to be approximately 385,000 ounces of gold, 25 million ounces of silver, 27,000 ounces of palladium and of course starting in 2021, 2.1 million pounds of cobalt per year; all of this totaling approximately 750,000 gold equivalent ounces per year. And beyond our five year guidance, we look forward to the Salobo Expansion recently announced by Vale. As proposed, the expansion would increase throughput capacity from 24 million tonnes of ore per annum to 36 million tonnes of ore per annum, once fully ramped up. Stock is currently scheduled for the first half of 2022 was an estimated 15 months ramp-up period. As part of the original gold purchase agreement with Vale and based on Vale’s disclosure relating to the size and timing of the Salobo expansion, Wheaton estimates an expansion payment of between $550 million to $650 million once the completion test is satisfied, which would likely be made sometime in 2023. In summary, I believe our production remains founded on the highest quality portfolio of precious and specialty metal streams in the industry, underpinned by a very low cost mining operations, such as Salobo, Antamina and Penasquito. On the corporate development front, our focus continues to be precious metals and on delivering disciplined growth that is both accretive to our current shareholders and comes from high quality assets. In addition, we are encouraged by the recent decision of the Tax Court of Canada regarding Cameco’s tax filings and I assure you we will continue to push toward the timely resolution of our own case. So with that, I would like to open up the call for questions. Operator.

[Operator Instructions] Your first question today comes from the Ralph Profiti of Eight Capital. Your line is open.

Good morning, everyone. Thanks for taking my questions. Two if I may Randy, one on CRA and the other one, Salobo. So firstly, the chemical peel by the CRA did not appeal on the basis of the Crown’s sham arguments okay, which was I think a key variable in the relative win. Are you aware in the discovery process whether Wheaton's case would have included the sham argument on the part of the crown?

Hi Ralph. This is Curt Bernardi. So yeah, sham has not been alleged and is not part of the case against Wheaton at all.

Okay. Thanks for clarifying that. I appreciate that. Randy, coming back to Salobo payment and 2023 implies that this is going to be sort of a one-time bullet payment. Is that kind of the case that I'm reading it right or is there the potential to be sort of phased in along the lines of CapEx and sort of over a number of quarters?

Well, its actually better than that. It's upon completion of the – or satisfying the completion test and so we don't actually fund it during the construction period. We fund it at the end once they satisfy the completion test and so we don't provide any capital until they’ve actually achieved full production of that expansion. And it is a one-time option, they can only exercise it once and so you know they have to make the choice as to whether and when they choose to exercise it. If there's a potential for a fourth phase of expansion, which you know could possibly happen, they may you know have to reconsider whether they want to continue on or exercise it. It's a one-time option.

Got it. Okay, excellent, thanks very much Randy.

Thank you, Ralph.

Your next question comes from a line of John Tumazos of John Tumazos’ Very Independent. Your line is open.

Thank you very much.

Hey John.

Concerning the debt level and the Vale payment, it looks like you've got four years of future cash flow spent. Should we assume that you are going to be quiet on the deal front given the debt level and the Vale lump sum in 2023 or how should we, I guess view your deal making? Do you think you are going to go out there and spend four more years of cash flow for example [Cross Talk] or some financing?

Yeah, we are quite comfortable. If you sit and look at the – first off, the Vale expansion of course, we don't make that payment and we are already receiving in 2022. Based on the current parameters we’d start receiving additional cash flow from that expansion as they ramp up Salobo, and so there is a good offset there in terms of immediate production once that payment is made. To be honest, I would say and I had mentioned it in my comments, the deal set that we are looking at out there right now is a much smaller set. We see very few opportunities over 300 million in size. Most of them are in the $100 million to $200 million size range. There's just not a lot of companies putting money in the ground right now. There's lots of people exploring the concept, but with the current commodity price environment out there, we are just not seeing a lot of investment into the ground and most of the opportunities you are looking at are quite small. Given that size scale, we don't see any issues at all with our capacity and we are still generating very strong cash flows. Going forward we have a great growth coming out of our current portfolio over the next three to four years. Penasquito is going to see some of the best years it's ever seen over the next three to four years and that's going to dramatically you know add strength to our own balance sheet going forward. And so you have to understand, I mean this is the foundation year and we've got good strong solid core growth within our current operations over the next three, four years that's going to add some real value and so we are very comfortable with the balance sheet, the way it stands right now. We've always been very clear that we are much more comfortable using debt than issuing equity and we are comfortable with this space in terms of where we are and don't see any need to be concerned on that front. We are still very busy on the corporate development front.

John, if I can just add to that, you know at current commodity prices which our view is quite depressed, but even assuming just those commodity prices, we fully repay our current debt by the end of 2022.

I understand that. I don't want to be an expert in Canadian Tax law but you, Franco, Cameco will have these challenges. If in a worst case tax ruling, how much more would that increase your liabilities?

You mean the current reassessment is just under, it’s I guess 395 million Canadian for the year 2005 to 2010. Of course if that was applied on a go-forward basis, but we haven't been reassessed for eight subsequent years after that. And so given the strength of the Cameco decision and the differences in the facts that we are even more confident in our position going forward and as Gary mentioned and as I mentioned, we are doing everything we can to push this forward to a resolution as fast as we can. I think the strength of that decision that Cameco received is something that's worth noting. It was a very strongly worded decision in Cameco’s favor and again, makes us feel very comfortable with their position.

I hope Canada is better than Guatemala or some other places.

Yes, it is. Thanks John.

Thank you.

[Operator Instructions] Your next question comes from the line of Michael Fairbairn of Canaccord Genuity. Your line is open.

Hi, just a question on Salobo if I can. Have you guys been given any indication from Vale as to how the mine plan might change going forward, other than increasing the throughput. Are they looking at you know accelerating grade or you know is there any potential for additional resource conversion with the increased throughput?

We haven't, there definitely is – in fact there is a deep drilling campaign underway and they just borrowed a second drill rig to expand that capacity. They are doing a bunch of infield drilling on inferred resources right now and they're doing a deep drilling campaign. They've just finished off their first hole, had some pretty nice – some nice results down in the deep programs. So I have no doubt that over the next couple years there will be some, not only resource conversion, but expiration potential into our resources and then ultimately reserves. So there's no doubt that's coming over the next couple of years. With respect to the mine plan going forward, on the expansion they haven't finalized that yet, that's the reason that we have a range of between $550 million and $650 million when we estimate the cost. There is several different scenarios in terms of high grade, the focused high grade campaign versus something that has a bit lower grades and so that has an impact on what kind of a payment that we make on the expansion, and so that hasn’t been decided yet and to be honest I don't think it's going to be decided until probably somewhere around 2022. It’s going to have a lot of – its going to have a lot to do with what the price of copper is at that time and their own capacities. You know having the processing throughput capacity, you know the only variable that comes into how you focus on high grade or not is whether you bring in more mobile equipment into that open pit and there's plenty of capacity. That pit is currently only producing about 60,000 tonnes per day through the mill. We know there is many copper operations around the world open pit that produce substantially more with much higher strip ratios and so there's plenty of capacity left in that Salobo pit to have a focused high grade campaign. But you know in reality, I don't think Vale will make that decision until closer to 2021, 2022, especially with respect to a final decision.

Okay, thank you. And then maybe one more if I could on the actual payment. I think I remember reading that Vale had estimated that the payment would be between $600 million and $700 million. Do you know what the difference between, what they're estimating or what you're estimating would be driven by their?

Yeah, I think that when they look through it they estimate it to be up and running. There is a timing process, a timing factor that contributes to this and as I said, they were going to be starting up in 2022. We think that it's a 15 month ramp-up for them to get to the levels of production and they have to do a 90 day completion test. So we – our own estimate is we feel that they won’t be satisfying that completion test until 2023. If it’s going to be a 15 month ramp up with first production in 2022, I just don't see how they can satisfy the completion test in that and so by pushing it out to 2023, it’s knocked the number down slightly.

Okay, awesome. Thank you. That’s it from me.

Great, thank you.

Your next question comes from a line of Michael Gray of Macquarie. Your line is open.

Good morning Randy and team; a couple of questions. First of all on Stillwater’s you alluded to you are going to exceed guidance it looks like this year. Was that on conservative estimates on your part or was there specific mining surprise fee upside?

I would say that there was, you know because we had a hard start date of July 1, we wound up capturing some material in processes, and that definitely helped the cause. So I don’t see us outperforming to this degree on a continual basis, but you know Michael I know you’ve been to those project. I think there's all sorts of potential for this to continue going and doing well, and so you know we are very bullish about this asset.

Okay, I appreciate that color. And then can you provide your thoughts on recent sector consolidation we're seeing with Randgold's combination and then Pan American and Tahoe? Is this what the sector needs? And then also, could you comment on the potential as it relates to potential attractive non-core assets becoming available and streaming opportunities?

Well there's no doubt, as non-core assets do come up and we've had discussions with potential partners in terms of helping fund acquisitions through using a streaming arrangement and so there's no doubt that whenever we see increased M&A activity there's usually a need for capital as part of that, whether it's to put into the distressed asset or whatever, you know the newly acquired assets or whether it's to help fund that acquisition, and so we have seen an increase in activity on that side. You know I think the market kind of shapes itself, and so when we see commodity prices as low and companies trading at such lows, what it does is open up opportunities. I’ve been quite intrigued at the Barrick, Randgold merger, just in the sense that there was no premium paid. It was essentially a merger of equals and yet very successfully received I think by the market as a whole and it just shows that there is some value and synergy that doesn't require you know some of the premiums that we've seen elsewhere. So it is something that I think the market kind of shapes itself and right now you know with commodity prices and with companies – the valuations that companies are trading at, it does open up opportunities to try and gain some value back through synergies and combining portfolios of assets.

Okay, thanks for that. That’s all I have.

Thank you, Michael.

Your next question comes from the line of Dan Rollins of RBC Capital Markets. Your line is open.

Yes, thanks very much. Randy, I was wondering if could just clarify a comment you made on the Salobo, a sort of grade profile. I think you mentioned there might have been a payment if there was a lower grade campaign that will change the payment structure. Could you maybe, I mean – if I did hear it right, could you explain that a little bit more in detail for us.

Yeah, we have two different matrixes set-up, one that’s based on a focused high grade mining campaign with an aggressive low grade stock piling procedure. And then we have a second matrix that is focused on, I don’t want to say low grade. Its on – its shifted so that there's not as much material going to a low grade stockpile, which means that the lower grade ore would be processed through the mill. And so the intent was to try to incentivize Vale to focus on high grade materials, and so that's why we have these two different matrixes that we have in the agreement. One that’s – and there is some detail in there that’s sort of you know – it's tied on the grades that go through the mill and there is a period, a term – I don't want to give too much detail, but there's a term call back afterwards so that we ensure that there's you know focus on the chosen approach to mining. And so the range as I said is 550 million to 650 million. That is the same no matter where and in 2023 – as I mentioned, our numbers are coming from the 2023 year. So the 550 reflects the low grade option, the 650 million reflects the high grade option. Vale commits to a high grade mining campaign where they push more of the low grade material into a stockpile and save that for later, which of course would mean an increase in the mining fleet capacity, because you still have to move that low grade, it is an open pit and so it has to be moved in stockpiles. So they would have to make a bit of an extra investment into mobile fleet capacity, but that would allow them to shift higher grades into the mills and through the processing circuit. We reward them for that commitment by adding an extra – essentially it's close to $100 million difference and so that’s the scenario. You know we recognize that we wanted to incentivize them to maximize metal production as early as possible and that's why the matrix was set up that way.

Okay, perfect. And then I know the matrix has probably evolved as you've done the additional deals at Salobo, but is there sort of a rough gold price assumption that matrix is sort of based on for the economics there? I’m assuming it’s not at $100 [ph] gold price for now.

Yeah, the matrix was in the very first. If you remember Salobo was three different agreements right; the first one in 2013, the second one in 2015 and the third one in 2016. So the gold price, each time we expanded our stream there from 25% to 50% and now 75% of the gold production, each time we expanded the stream we had to adjust the matrix to reflect that, and so the matrix at each one of those phases was based on the gold price market at the time we did those phases. If I was to average it out, I would say it was probably somewhere on the high side of $1200, like just over $1200 per ounce was sort of used as the overall average valuation for the matrix and then there is other factors that come into play in terms of the development risk side of it and stuff like that, even though our payment doesn't come until after the completion test is done.

Okay, and is the completion test based on the 90% throughput or 100%?

It's not 100%, we’d never do that to any of our partners. 100% is a very tough completion test to satisfy for anyone at a certain stage. I can't remember the specifics on this completion test. It's typically 80% to 90% is what we look at. Again, this completion test would also be because of the grade factor. It would also be – there’ll be a function on grade being pushed through over that period of time too, right. So this one does have a little bit more complexity because of the two different matrixes.

Okay, that's perfect. Thanks very much. I appreciate it.

Thank you and operator, we’ll end the questions there. I just want to thank everyone for dialing in today. Wheaton is well on track to exceed both our 2018 and five year production guidance with additional potential for both near and longer term production growth. At San Dimas First Majestic looks to have operations back on track as shown by this quarter's strong production results; they've done a good job there. In addition we are excited to see what Penasquito can deliver now that the Pyrite Leach Project has been commissioned and the operation returns to processing high grade ore, I would say some of the highest grade ores that mine has ever seen. The next three to four years out of Penasquito will be very, very exciting. At Stillwater we are very pleased with the initial quarter results and look forward to decades more production from this incredible asset. And speaking of longer term, we do look forward to the proposed capacity expansion of Salobo and the added gold production we can expect in the near future from this world class asset. Lastly, given the recent decision from the Tax Court of Canada and unequivocal win for Cameco, we continue to be confident in our business structure and tax filing position and remain committed to advancing this case as expeditiously as possible. With this positive news, a strong growth profile going forward and optionality measured in ounces not acres, we believe Wheaton is well positioned to be the best option for investing into and gaining exposure to precious metals. We do look forward to speaking with you again soon. Thank you.

This concludes this conference call for today. Thank you for participating. Please disconnect your lines.