Wheaton Precious Metals Corp

TSX:WPM

Earnings Call Transcript 2022-Q4

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Wheaton Precious Metals 2022 Fourth Quarter 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 Friday, March 10, 2023 at 11:00 AM Eastern Time.

I will now turn the conference over to Mr. Patrick Drouin, Senior Vice President of Investor Relations and Sustainability. Please go ahead.

[Patrick Drouin]

Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call. I'm joined today by Randy Smallwood, Wheaton Precious Metals' President and Chief Executive Officer; Gary Brown, Senior Vice President and Chief Financial Officer; Haytham Hodaly, Senior Vice President, Corporate Development; and Wes Carson, Vice President, Mining Operations.

Please note that, for those not currently on the webcast, the slide presentation accompanying this conference call is available in PDF format on the Presentations page of the Wheaton Precious Metals website.

I'd like to bring to your attention that some of the commentary on today's call may contain forward-looking statements and I would direct everyone to review Slide 2 of the presentation, which contains important cautionary notes regarding forward-looking statements. It should be noted, all figures referred to on today's call are in U.S. dollars unless otherwise noted. And in addition, reference to Wheaton or Wheaton Precious Metals on the call includes 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.

[Randy Smallwood, President and Chief Executive Officer]

Thank you, Patrick, and good morning, everyone. Thank you for joining us today to discuss Wheaton's fourth quarter and year end results for 2022. During 2022, we remained extremely active as we added more streams, optimized our current portfolio and made several industry-leading commitments on the sustainability front. While gold held historically high levels throughout the year, inflationary pressures had a significant impact on traditional miners, resulting in their margins being compressed. Wheaton, however, continued to deliver cash operating margins of 75% in the fourth quarter, reflecting the resilience of our business model.

From a financial perspective, in the fourth quarter, Wheaton generated $236 million in revenue, $172 million in operating cash flow and $166 million in net earnings, as Gary will discuss shortly. This solid performance contributed to our record annual dividend distribution of $237 million to shareholders.

As we continue to see a healthy appetite for streaming as a source of capital for the mining industry, we are actively pursuing a number of new accretive opportunities. Furthermore, we have demonstrated our continued willingness to identify strategic opportunities both externally and within our portfolio that create value for our shareholders. To that end, in the quarter, we completed the previously announced sale of the Yauliyacu stream back to Glencore for $132 million, a continuation of our portfolio optimization efforts, which also saw sale of Keno Hill stream for $141 million earlier in the year. The sale of Yauliyacu and Keno Hill streams contributed to the overall quality of our portfolio, where now 93% of Wheaton's production comes from assets that fall in the lowest half of the cost curve.

In addition, the sale of these assets positions Wheaton with one of the strongest balance sheets in the industry, and we enter 2023 exceptionally well positioned to deliver long-term shareholder value through the significant organic growth profile that is already embedded into our portfolio, as well as through additional accretive acquisitions. Wheaton continues to demonstrate our leadership in sustainability with sector-leading scores, including a AA rating from MSCI and a genuine #1 rating in precious metals from Sustainalytics.

I would now like to turn the call over to Gary Brown, our Senior Vice President and Chief financial Officer, who will provide more details on our results. Gary?

[Gary Brown]

Thank you, Randy, and good morning, ladies and gentlemen. The company's precious metal entrust produced 148,300 gold equivalent announces or GEOs in the fourth quarter of 2022. Relative to the fourth quarter of the prior year, this represented a decrease of 20%, primarily due to lower production from Salobo, Peñasquito and Voisey’s Bay, coupled with the closure of the Stratoni and 777 mines and the termination of the Keno Hill and Yauliyacu streams. Revenue for the fourth quarter of 2022 amounted to $236 million, representing a 15% decrease relative to Q4 2021 due to the combination of a 10% decrease in sales volumes and a 6% drop in commodity prices. Of this revenue, 50% was attributable to gold, 45% silver, 3% palladium, and 2% cobalt. As at December 31, 2022, approximately 112,000 GEOs were in PBND in addition to cobalt inventory amounting to 12,000 GEOs with a combined figure of 124,000 GEOs representing approximately 2.3 months of payable production. This balance is 24,000 GEOs lower than the average over the preceding four quarters.

Gross margin for the fourth quarter of 2022 decreased 20% to $121 million, reflecting not only the 15% decrease in revenues, but also a higher proportion of sales volumes being attributed to streams with a higher unit cost, coupled with the cobalt inventory write down. G&A expenses and donations amounted to $11 million in the fourth quarter of 2022, virtually unchanged from Q4 2021. During the fourth quarter of 2022, the company terminated its Yauliyacu stream, resulting in a gain on disposal of $51 million. Including the Yauliyacu disposition, net earnings amounted to $166 million. Neutralizing for the Yauliyacu disposition, together with other anomalous items, adjusted net earnings amounted to $104 million compared to $132 million in Q4 2021, with the decrease being attributable to the lower gross margin.

Basic adjusted earnings per share amounted to $0.23 compared to $0.29 per share in the prior year. Operating cash flow for the fourth quarter of 2022 amounted to $172 million or $0.38 per share compared to $195 million or $0.43 per share in the prior year, representing a 12% decrease on a per share basis. Based on the company's dividend policy, the company's Board has declared a dividend of $0.15 a share payable to shareholders of record on April 6, 2023.

During the fourth quarter of 2022, the company received $132 million in exchange for the termination of the Yauliyacu stream to dispersed $60 million in dividends, invested $31 million relative to the Goose Project, and $13 million relative to the Curipamba Project, highlighting that these projects are advancing, fueling Wheaton's future organic growth.

Overall, net cash inflows amounted to $201 million in Q4 2022, resulting in cash and cash equivalents at December 31st of $696 million.

Looking at our annual results. For the year ended December 31, 2022, production amounted to 638,000 GEOs. Revenue amounted to $1.1 billion representing 11% decrease relative to 2021 due to the combination of lower sales volumes and commodity prices. Of this revenue, 50% was attributable to gold, 44% silver, 3% palladium, and 3% cobalt.

Gross margin decreased 14% to $565 million. G&A expenses amounted to $36 million, and donations amounted to $6 million with a total of $42 million being virtually unchanged from 2021. However, this was $5 million below the lower end of our original guidance, primarily due to lower professional fees and employee compensation costs. For 2023, the company expects the G&A expenses and donations will amount to $47 million to $50 million with the increase from 2022 being attributable primarily to higher marketing and due diligence costs, in addition to cost associated with the company's ATM program.

During 2022, the company terminated the Keno Hill stream in exchange for $141 million of Hecla common stock. Together with the disposal of the Yauliyacu stream, the total income inclusion reflected in our annual results from these two dispositions amounted to $166 million. Basic adjusted earnings per share decreased 15% to a $1.12 compared to a $1.32 in 2021. From a cash flow perspective, the company generated $743 million in operating cash flow, a decrease of 12% primarily due to lower sales volumes and commodity prices. This translated into operating cash flow per share of $1.65 compared to $1.88 in 2021. In addition, the company distributed $237 million of dividends in 2022, received $132 million in proceeds from the disposal of the Yauliyacu stream and dispersed $152 million in upfront payments relative to our portfolio of development stage projects.

Overall, cash increased by $470 million during 2022. The $696 million cash balance as at December 31, 2022 combined with the capacity provided by the undrawn $2 billion revolving credit facility and the strong forecast operating cash flows, positions the company very well to satisfy its funding commitments and sustain its dividend policy; while at the same time, having the flexibility to consummate additional accretive precious metal purchase agreements.

That concludes the financial summary. And with that, I'll turn the call over to Wes.

[Wes Carson, Vice President-Mining Operations]

Thanks, Gary, and good morning. Overall production in the fourth quarter came in lower than with weaker production from Salobo and Constancia offset by higher-than-expected performance from Antamina. In the fourth quarter, Salobo produced 37,900 ounces of attributable gold, a decrease of approximately 21% relative to the fourth quarter of 2021, due to lower throughput and grades.

Vale reported that production was lower than expected due to reduced plant availability during the quarter caused by additional planned and corrective maintenance. That being said, Vale also reported that Salobo III mine expansion was completed at the end of the fourth quarter with the first line starting up during the quarter and the second line expected to start in the first quarter of 2023.

Subsequent to the quarter, Wheaton and Vale agreed to amend the Salobo PMPA to adjust the expansion payment terms in order to provide increased flexibility for the ramp up of the expansion, while also maintaining an incentive for Vale to maximize grade on an annual basis. During the quarter, Constancia produced 700,000 ounces of attributable silver and 10,500 ounces of attributable gold, an increase of approximately 13% and 6% respectively.

Relative to the fourth quarter of 2021, the increase in both silver and gold production was due to higher grades resulting from additional ore production from the Pampacancha satellite deposit. Gold production was lower than expected during the quarter as a result of short-term changes in the mine plan that prioritized lower grade stockpiles and shorter haul distances. These changes were implemented as Hudbay was forced to ration fuel during the period of nationwide social unrest and road blockades following the change in Peru's political leadership in December 2022. These changes did however allow Hudbay to continue to operate the process plant continuously through the quarter. During the fourth quarter, Antamina produced 1.1 million ounces of attributable silver, a decrease of 19% relative to the fourth quarter of 2021, primarily due to lower grades, as per the mine plan. Antamina did however continue to exceed expected production for 2022, driven primarily by increased productivity and better-than-expected mine grades. Additionally, in 2022, Antamina submitted a Modification of Environmental Impact Assessment to the Peruvian regulators to extend its mine life from 2028 to 2036. The regulatory review process is progressing as scheduled with an approval anticipated in the second half of 2023.

Estimated attributable production in 2023 is forecast to be 320,000 to 350,000 ounces of gold, 20 million to 22 million ounces of silver and 22,000 to 25,000 GEOs of other metals, resulting in production of approximately 600,000 to 660,000 GEOs. For the five year period ending in 2027, the company estimates that average production will amount to 810,000 GEOs and for the 10 year period ending in 2032, the company estimates that the average annual production will amount to 850,000 GEOs. This includes organic growth of over 40% with total production from our current portfolio increasing to over 900,000 GEOs by 2027.

That concludes the operations review. And with that, I'll turn the call back to Randy.

[Randy Smallwood, President and Chief Executive Officer]

Thank you, Wes. In summary, while 2022 was not without challenges, our high quality portfolio proved to be resilient, and was distinguished by several key highlights, including sector-leading five year organic growth -- production growth of over 40% with approximately two-thirds of that growth coming from mines that are already in operation; accretive growth emphasized by the addition of four new streams that will collectively provide over 65,000 gold equivalent announces of annual production; continued portfolio optimization efforts enhancing, improving the quality of our asset base, and contributing to one of the strongest balance sheets in the industry; record annual dividend distribution of $237 million; and lastly, continued leadership in sustainability with sector-leading ESG ratings.

With that, I would like to open up the call for questions, please. Operator?

[Operator]

[Operator Instructions] The first question comes from Brian MacArthur of Raymond James.

[Brian MacArthur, Raymond James]

I have a couple of questions. Can I just on the revised Salobo III payment? Do they still have to do a 90-day trial run to execute that like they did in the old one? Or is the -- what I call the stop that date of January 21 or January 1 next year, just a hard date, is there anything else you have to do?

[Randy Smallwood, President and Chief Executive Officer]

No. It still has the 90-day completion test. So for each of the phases, they have to run at those levels or in excess of those levels for a 90-day period to qualify for that phased payment.

[Brian MacArthur, Raymond James]

So in your financials, you sort of do put the full $552 million as an obligation this year. So does that imply you're reasonably comfortable they're going to get those 35 million tonnes with that 90-day run this year?

[Randy Smallwood, President and Chief Executive Officer]

I'll let Gary take that one.

[Gary Brown]

Yes, hey, Brian. Look, we're always trying to be conservative in the way that we frame the timing associated with the payment of those upfront payments. And so we're continuing to reflect that as potentially going out in 2023.

[Randy Smallwood, President and Chief Executive Officer]

And I think it's important. I mean, Vale is doing their best to try and satisfy that, right? They have told us they're going to do their best to try and move the entire site up to those production levels. So I think we have to reflect that possibility in terms of, as Gary said, maintaining a conservative forecast. I would be very happy if we had to make the whole payment this year. But realistically, there's a lot of work to do down there yet. And I do think that Vale has definitely got the desire. It's a matter of there's a lot of work yet to do. So we'll see how it goes.

[Brian MacArthur, Raymond James]

Very clear. And then some -- there has been talk historically about a Salobo IV. Is there anything changed? Is there anything were to happen there. As a result of this agreement, there's nothing different?

[Randy Smallwood, President and Chief Executive Officer]

Nothing has changed. It's still -- you can still see Salobo IV on their longer-term vision within the Vale production objectives. So it's still their reference, but there's been no progress on that front.

[Brian MacArthur, Raymond James]

Great. And if I could just ask one other topic. The 777 refundable deposit -- I've got two questions. One, just you put some numbers in there, discounting rates and all the rest of it. Do you actually get payments over time through 2052? And the second thing is, can I just ask, are there any other I mean most of your contracts, I realize they're life of mine, they're long dated. But are there any other contracts here where there might be a situation where if you don't get the upfront pack, there's a true-up like this one. And I guess where I'm going with is you have a very good chart in the back that shorter those upfront payments for your deposits and then how much you've got back. But if I look at Hudbay, which maybe has 10 years left, depending what happens, you may or may not get there. Does it -- would it have a true-up thing, if I want to call it that, like the 777 one does? Or maybe you can't comment on that for confidentiality?

[Randy Smallwood, President and Chief Executive Officer]

Yes. I mean some of our contracts are structured in that method where there is a minimum amount focused around the deposit. I will say, and all you have to do is go back and look, Hudbay did not have as much exploration success at 777 as we anticipated, and we did have to take a write-down on that asset in years past, because of that lack of success.

And so in most cases, the deposit level is something that, in fact, I'm trying to think of another asset we where we're not going to get to that number. It is one of the functions of the contracts. I would just highlight the fact that Hudbay is a strong partner of ours. We do a lot of work with them, obviously, Constancia. And other -- the copper world, Rosemont, we've got a lot of other discussions coming up with them. And so it is a partnership with Hudbay and that's the way it's structured through this contract, but it is something that 2052 is a long ways away, so.

[Gary Brown]

And just to add to that, Brian, we won't be receiving any money in between. We don't get paid until the -- until 2052, assuming that we don't come to some other arrangement with Hudbay.

[Operator]

Thank you. The next question comes from Lawson Winder of Bank of America Securities.

[Lawson Winder, BofA Securities]

Randy, Gary and team, good morning. Thanks for the update here. I wanted to ask one follow-up on Salobo. So I mean, Vale has guided to Salobo III achieving full capacity in Q4 '24. And I was curious is based on your understanding, when they say full capacity, is that the 35 million tonnes per year by Q4 '24, is that the 35? And then what is baked into your long-term guidance in terms of when that 32 and then the 35 is hit?

[Wes Carson, Vice President-Mining Operations]

So this is Wes. So they -- what they've got in there is that ramping up to full production by the end of next year, is that 36 million tonnes that they're getting to. So if you remember, what's in there is actually this 90-day test can be done at any time, which actually allows them to operate at that level earlier on. So the full year is definitely -- it will take them a little bit longer to get to that.

And we've got baked in the same as what Vale does all the way through and it is that full production by the end of next year and then carrying on into the future, we'll see them at that full capacity.

[Lawson Winder, BofA Securities]

All right. Fantastic. And then on Rosemont Copper World, you mentioned in the release that sort of in the latter part of the guidance is where that comes in, in terms of the 5-year guidance, actually, to be specific. But could you maybe just sort of clarify when more precisely, you have Copper World and Rosemont coming into that 5-year guidance? Like is that end of '27 or is that early '27?

[Randy Smallwood, President and Chief Executive Officer]

Yes. Let's just leave it at the latter, latter, latter portion of the 5-year guidance. That probably gives you enough guidance. Near the end of it. I mean, it's -- as we have seen, permitting is a little bit more challenging than you would expect out of Arizona, right? And so there's so many variables that can adjust that. We do know as had base committed to try and move that project forward as fast as they can. And so we've had to sort of try and reflect that. But we do think that the things are lining up quite nicely to have a bit of an impact, but a very small impact on 2027.

[Wes Carson, Vice President-Mining Operations]

We are staying in a really close contact with Hudbay as they work through this prefeasibility study that they've announced as well, and we're expecting that about mid this year, and that kind of gives you sort of a better idea as these things move through and we'll just continue to work with Hudbay as we move forward on.

[Lawson Winder, BofA Securities]

Okay. Fantastic. And then just one follow-up then on Rosemont. In terms of the discussions, I mean, both sides you and Hudbay have indicated that there will be some sort of discussion around what the agreement looks like, and there's this potential for some sort of amendment to the agreement. From your point of view, is it looking like it could become a larger piece of the portfolio for Wheaton or a smaller piece of the portfolio?

[Randy Smallwood, President and Chief Executive Officer]

Well, we already get 100% of all the silver and gold from the asset. And so that's not going to change with respect to the over and above that. If you look at the copper world, sort of the numbers that have been put out to date, and that is, of course, subject to continued studies down there.

But it looks like it's about 2/3 of what we were expecting out of the original Rosemont concept. And so I think that's -- we've just got to sit down and hammer that out. But we are sort of waiting for a bit more clarity in terms of their path going forward.

And as I said, it's a good strong relationship with Peter and the team over at Hudbay. And so as they get a little bit more firm as to their plans going forward, that's when we'll sit down and get a little bit more firm in terms of how the contract is going to be adjusted to reflect that difference. And so again, continue working with them as partners.

[Lawson Winder, BofA Securities]

And then I guess, once they have this study out later in the first half of this year, mean would that be kind of the firmness that you'd be looking for to sit down and sort of finalize this?

[Randy Smallwood, President and Chief Executive Officer]

Yes, ideally, sometime this year, they like the clarity so that they know what they need to do in terms of on a go-forward basis. And so it should be happening within this year.

[Operator]

[Operator Instructions] The next question comes from Martin Pradier of Veritas.

[Martin Pradier, Veritas]

The first question is -- you mentioned that in Salobo, the throughput is expected to increase 50%. But the grades are also coming down. So what is the expected increase in production? Or what is the difference in grades from the previous grades?

[Randy Smallwood, President and Chief Executive Officer]

Well, and it's not a simple answer because one of the variables that comes into play is the amount of stockpiling that they do of low-grade material. And to be honest, they've committed towards trying to strive towards maintaining higher grade feed through the mill, but it's a function of how much low-grade they stockpile, which then itself is a function of mining capacity and how much material they can move, both waste material, low-grade stockpile material and mill feed material.

And so there's a lot of variables moving there, and it's very tough to sort of lay that out. I mean, it's one of the reasons why when we restructured the expansion payment that there's a couple of triggers, both grade and total tonnage that come into play, total tonnage moved that come into play in terms of determining whether they've satisfied that higher grade. So we think that -- I mean, it doesn't -- it's not our payment that should incentivize Vale to maximize that. It just makes common sense for them to stockpile continue stockpiling low grade material and move higher grade material through. But it's really tough to push that out.

That being said, you're right, the overall grades are going to continue pushing down on this deposit as we as it gets a little bit more mature. And so a 50% increase in throughput capacity is not going to be a 50% increase in metal production. But depending on stockpiling, be pretty close to 30% or 40% increase in metal production. Again, depending on their stockpiling approach. And of course, stockpiling all that does is bring forward ounces that would have eventually been mined, right? And so in terms of total metal production, it really doesn't change a lot. It's a matter of the timing of when that metal gets delivered. And so there's so many variables there that it's really tough to give you sort of a clear answer, but hopefully, you understand there's a lot of different issues come in.

And I think that's one of the reasons why we're very happy with the way the new expansion payment is structured is that it will be based on yearly performance with respect to how they do on maintaining not only minimum grades through the mill, but also total materials moved at the site itself.

[Martin Pradier, Veritas]

No, that helps. 30%, 40% gives me an idea. That's sort of what I was looking for. Similar question with Pampacancha. I know that the deposit has higher grade and production will increase for Constancia. But how much higher grade is Pampacancha what is really the expected impact that you see in terms of this higher grade coming through in 2023, 2024?

[Randy Smallwood, President and Chief Executive Officer]

Yes. The Pampacancha gold grades are 10x higher than what are contained in the Constancia pit. And of course, our stream is focused on getting 50% of that gold. So both Hudbay and ourselves profit nightly by having Pampacancha or pushed through the push through the mill. Now unfortunately, some of the challenges that they've had with respect to fuel supply have -- it's complicated things. It is a farther haulage distance to bring Pampacancha in to the Constancia -- or to the milling complex at the Constancia pit right beside the Constancia pit.

But they continue to work forward on that. And again, both companies are very incented to try and move as much Pampacancha through as they can. But the key number there is copper grades are also slightly higher, but gold grades are substantially higher. And so it's quite a rich ore body for both parties there.

[Wes Carson, Vice President-Mining Operations]

It's important to note that that's just delayed that metal come in as well. So I mean it's not that it's got it will come in, and it's over about a 5-year period that we'll see Pampacancha contravened out.

[Martin Pradier, Veritas]

But okay, you have a level of production today. What is the expected impact in 2023, 2024 of this much higher grade coming in?

[Randy Smallwood, President and Chief Executive Officer]

Well, we can see substantially. Yes, we can see upwards of -- they're not going to entirely feed the mill from Pampacancha zone. They just can't mine and haul it that fast and that far. And so it will be batch treated. The guidance that Hudbay has come out with for 2023 has more Pampacancha towards the end of this year versus the start. I do think that might be a result of some of the challenges they had at the end of last year with respect to fuel supply and stuff. And so if that does get resolved, we could see a pleasant surprise.

On that side, if that strengthens and we lessen those restrictions. I think the key thing to keep in mind is that it's 10x higher grade, but they can't shift fully to it because they don't have the mobile fleet to be able to go 100% from Pampacancha just because of its greater haulage distance to the mill. And so there'll be batch treatment through there, and it's I'm going to say that we should healthily see a good increase in terms of gold production from the overall Constancia of I'm going to say the 3x to 4x what we've seen in times past. But again, it's going to come down to the capacity to get that material over to the mill and get it processed.

[Martin Pradier, Veritas]

All right. That's quite helpful. That gives me an idea. And in Voisey’s Bay your production was down 66% and you're talking about the new Reid Brook ore grades. And again, how does that compare with your previous grade, the Ovoid open pit grades?

[Randy Smallwood, President and Chief Executive Officer]

Well, and the challenge that Voisey’s Bay was that there was probably no other asset that was impacted more from the pandemic and the response in support of the local communities around the mine site, the mine was shut down for a period of time.

So the underground development is quite a bit behind schedule. But the open pit is still supplying albeit lower and lower and lower grade material, stuff that originally wasn't part of this. And so we should see as the underground phases in, we should see cobalt production probably 3x to 4x higher than where we are right now coming out of the open pit. And so the whole concept is both I think it's Reid Brook and Eastern Deeps coming on. As they continue to displace this low-grade ore that's being pulled out of the remnants of the open pits, that we will see a dramatic uptick in cobalt production from that. That's probably over the next 1.5 years, two years.

[Martin Pradier, Veritas]

Okay. But didn't you -- they already start mining one of the deposit Reid Brook?

[Randy Smallwood, President and Chief Executive Officer]

Just very -- it's a development ore. So there's some development ore is not to the full scale of production. With the underground operation like that, you need multiple working faces. And they've now got some -- they're down into that point. And so I don't know if you want to add more color?

[Wes Carson, Vice President-Mining Operations]

Sure. Yes. I mean it's over this year that we'll start seeing those undergrounds come online. But it's -- as Randy said, development or that's come out so far, so we actually haven't seen any production or from those underground. So it is a significant ramp-up over the next really closer to the end of this year that we'll really start seeing that come in. So it's open pit most this year. And then over the next couple of years, you'll see that significant increase in the production there.

[Randy Smallwood, President and Chief Executive Officer]

It will be a phased start-up from the underground because as more working faces become developed, you'll be able to access and pull a bit more ore out of each one of those working phases. And so it's going to be a phased ramp-up over the next, as I said, 1.5 years, 2 years, we should -- hopefully, a couple of years from now, we should be entirely on underground or a much higher grade underground ore.

[Martin Pradier, Veritas]

But so this year is still going to be good weak.

[Randy Smallwood, President and Chief Executive Officer]

Yes, yes. Yes the majority of the order this year will still be coming from the open pit. And I will say they're scratching the surface to try and find it. And so we are seeing lower and lower grades. So it's going to be -- it will be offset by some more and more ore from the underground. But open pit material, the grades are actually dropping over the course of this year.

[Operator]

The next question comes from John Tumazos of John Tumazos Independent Research.

[John Tumazos, John Tumazos Very Independent Research]

Thank you. Could you update us for the Americas where you do the overwhelming portion of your business? What are the countries that might be off limits from a political risk standpoint, I presume, for example, you would never go to Cuba or Venezuela. But there are other things that might change, I don't know. For example, there's five copper projects in Argentina that look like they're very big and very prospective and at least three of them might be streamable from the standpoint of the operator wanting to have financing. In addition to Argentina, could you comment on Ecuador and Bolivia, which have something called plurinationalism, where the indigenous have a state with their own courts and laws. Could you comment on Nicaraguan Bolivia but very consistently vote with Russia and the United Nations. And anything else you could tell us about countries?

[Randy Smallwood, President and Chief Executive Officer]

Sure. Well, that's -- I'm glad we're just focused on the Americas. Thanks, John. And -- so political risk is important to us. When we make an investment into an asset, it's typically a life of mine investment. And so we have to make sure that, first off, the assets that we're investing into have healthy enough operating margins because things will change. We've brought in outside political specialists and consultants to talk to us about political risk and how to how to try and address that in terms of how we do valuations and probably the -- one of the wisest comments is the fact that politics are like pendulums. They kind of swing to the left and they swing to the right. Every country is going to go through that.

And so for us, the first criteria is making sure that we have assets that have good strong operating margins so that not only is Wheaton doing well as a stakeholder in this asset, but so is the operating company and so is the country. And so is the surrounding communities and everyone should be. This industry needs to sort of recognize that all stakeholders need to be benefiting from these investments and going forward. Anyone that's impacted should have a net positive effect in terms of whatever happens in these things. And if that's not the case, then I don't think that's a sustainable situation. And so it's one of the reasons why we also kick-started such a strong commitment towards helping our partners be stronger with respect to social license.

The co-funding that we do with our sustainability initiatives on communities around the mine sites was a first for the streaming and royalty space. We were the first company to do it, and I'm happy and proud of the fact that just about every new streaming and royalty agreement that is out there does now capture a commitment from whoever the actual streaming and royalty company is to try and strengthen that up. And so it is something that we factor into. And when I sit back and look at how our assets have done in the face of some pretty challenging times here just even more recently within South America. Our assets have done well. And I'd like to think that the fact that we really try and encourage and support not just with words, but with capital support our partners in terms of maintaining good, strong social license. That helps us in these types of situations.

The other aspect that I'd say comes into play is political risk is something that's a bit unique, but it also -- it can be offset a bit by the scale of the partner that you're working with, the company, the operating company. And in fact, a lot of times in terms of how we structure these things, we can actually protect ourselves in a little bit riskier jurisdictions by relying on a parent company guarantee that provides that support. There's a number of times I've had to remind potential partners that we are in the business of streaming precious metals. We don't stream political risk. We don't want to be involved in that what we want to be as supportive, but we shouldn't have any role in that space. And so it's very tough for us to take on that type of risk in our own investments. And so we're always exploring for ways to try and make sure that the political risk is stays with the operator, where it should.

The operator itself is the face of the operation, and they are the ones that maintain the government relations and such. And so there's a huge number of factors that all come into play in terms of making sure. And I think you can synthesize it down to just trying to do our best as an industry, not just Wheaton, but as an industry in terms of making sure that all stakeholders are rewarded, that have benefits, have a net positive benefit or impact from these operations. And if there are stakeholders that aren't, then we've got to find a way to get there. And sometimes that takes a very long time, and it's very -- it requires incredible patience to get there. But in the end, you have a good, strong, sustainable project.

And so I can start off by going down and you mentioned Venezuela and Cuba, you're right. We're not even -- I can't remember. I will say 20 years ago, I looked at something in Venezuela. I've never looked at anything in Cuba. There is a spectrum of risk all the way through the entire hemisphere, and so -- or within the Americas, both. And so it's something that you always have to assess. I mean the one caution that you have to have in this industry is because even if a country is politically stable, currently, it doesn't mean that it's not going to be there.

So I just, again, underscore the importance of how I started off my answer here. You have to make sure that there's healthy enough margins because sometimes, the government is going to come knocking on the door and wanting a bit more of that piece of the pie. And as we've just seen in Central America, without mentioning names, the asset better -- better have enough capacity to sort of hand over a little bit more of that pie and hopefully come up with a good long-term sustainable arrangement on a go-forward basis.

Sometimes it's -- well, in fact, most times, it's very challenging. But in the end, it's the only way that we thrive in an industry. I hope that sort of answers you. I don't want to get down to details.

[John Tumazos, John Tumazos Very Independent Research]

So if I can ask a different one, if you'll bear with me. Of the eight recent portfolio additions -- are eight or nine, four of them are preproduction companies. Could you just review the number of employees Wheaton has augmented by the number of outside technical consultants, for us to get an idea whether you solely do pre-transaction due diligence? And for -- I'm just looking at Rio2, Artemis, Gen Mining and Adventus that are new companies that might operate for the first time. How much assistance you might offer to them? And…

[Randy Smallwood, President and Chief Executive Officer]

Yes. So -- and let's not forget Sabina on there, although it's on its way to being taken over by B2Gold. But we pride ourselves on being owners of our own decisions. And that really comes down to a lot of internal technical strength. We have a good, strong technical team. I think we have a total of just over 40 employees right now. Just about 1/3 of us have a technical background, including myself as a geological engineer. And so when you sit and look at that sort of highlights what the focus is in terms of making sure that we have good strength within the company itself on a go-forward basis. It's something that I've always believed is really important because when it comes to measuring risk, having outside consultants to sign off and a report and then go off into the sunset. It just doesn't -- to me, doesn't reflect what we owe to our shareholders. And so we do put a lot of pressure on that. And you're right.

When you look at our recent transactions, there's a heavy bias towards single-asset development companies. These companies don't have access to operating cash flows. And so when it comes time to raise capital, stream is by far the most competitive, the most attractive source of that capital in terms of helping these companies become operators. And so we're very busy in that front. Haytham is sitting here beside me, and he's got a long list of assets that he's working on.

But we don't rely on outside consultants. And that's not to say that we don't pull them in. There's sometimes unique aspects of a project where there's a specialization and we're not going to pay to have that expertise on site. And so we don't hesitate to chase down that direction if we need to. But it's very few and far between. We truly believe that having an internal team here means that we own responsibility for these assets on a go-forward basis.

[Wes Carson, Vice President-Mining Operations]

It's also worth noting that.

[Randy Smallwood, President and Chief Executive Officer]

Sorry, John. Wes is going to add something here.

[Wes Carson, Vice President-Mining Operations]

Yes. Sorry, John. I was just going to add in that one of the really important parts of maintaining the relationships with our partners is providing that kind of technical help as well, and it's a huge part of what we do when we do our annual site visits and as we maintain relationships. And that certainly has become a bigger part of that as you bring on some of these smaller companies in there is we can really offer that assistance to them. But it goes across the entire portfolio. We have great relationships with all of our partners, and we continue to build those in as many different ways we can in that technical assistance a huge part of that.

[Randy Smallwood, President and Chief Executive Officer]

Yes. I think, John, one of the things that's worth highlighting on that front, and thank you, Wes, it's a good point. When you look at that list of recent transactions, the majority of those come with either people or companies that we have done transactions with in the past. It really does come down to repeat customers. And we really do put a lot of focus on trying to deliver value not just with the upfront payment, but with material underneath. John, we do have a long list of other people here reflecting. So…

[John Tumazos, John Tumazos Very Independent Research]

Sure, sure. You are busy. Just go and do your next deal.

[Randy Smallwood, President and Chief Executive Officer]

Thanks, John. Thanks for the call.

[Operator]

Thank you. The next question comes from Lord Ashbourne, Edison.

[Lord Ashbourne, Edison Investment]

Can I ask about your investments just in terms of pounds, shillings and pence, how they're looking for this year? You touched upon Salobo there and the potentially being a payment view this year. And then you talked about those other preproduction companies. And it seems to me that some of those payments could be coming due this year or next year. And I just wonder -- can you give us an idea of what you budgeted in terms of how much you're going to have to invest in the streams this year? Or maybe at a minimum and a maximum and the range it might fall in?

[Randy Smallwood, President and Chief Executive Officer]

Sure thing, Charlie, I'm going to -- sorry, Lord. I'm going to hand you over to Gary here.

[Gary Brown]

Yes. So I mean, we I think disclosed all of that information in both the notes to our financial statements and the MD&A in our contractual obligations and contingency note. So if you look at that note, in total, we've got just over $2 billion of commitments outstanding relative to upfront payments for these development stage projects. We're forecasting about $850 million of that being dispersed in 2023. And that as I think I previously connoted, a conservative estimate, conservative meaning that it's likely showing more being paid earlier, but that's our best estimate now. Then we have another $765 million going out in 2024, '25. And then the vast majority of the rest of it or just over $400 million going out after 2027.

[Randy Smallwood, President and Chief Executive Officer]

So it's important to note that those are all based on certain achievements on a go-forward basis. And for instance, Salobo, we'd be very happy if they got to that level, but it's a lot of work. And it strikes us that the team that is coming in. We've seen a lot of improvements from Vale in terms of operations and continued improvement within the first two lines and such like that, but it would be a real big step to get that full payment in on Salobo this year. Be happy to have it.

And everything else is all funding that construction that ultimately delivers a good portion of the growth that we're going to see over the next four years.

[Lord Ashbourne, Edison Investment]

That's understood and appreciated. It's just useful for the -- to understand what you think the timing might be. But I greatly appreciate that.

[Operator]

The next question comes from Charlie Rothbarth of Berenberg.

[Charlie Rothbarth, Berenberg]

Congratulations on your results. I'd just like to talk to you about Fenix, if I may. I'm just about -- I appreciate you haven't impeded. But do you expect -- does Fenix sit within your guidance?

[Randy Smallwood, President and Chief Executive Officer]

No, it does not. I mean we have to wait and see how Rio2 does on a go-forward basis in terms of getting back to the point of getting a permit to operate on a go-forward basis. And so we're patiently waiting for Rio2 to continue advancing those efforts. We were comfortable in our own due diligence in terms of the work that Rio2 did on that project. And so we were a bit surprised at the result. But I would point to the fact that it was a challenging time in Chile. And I do think that we are confident that they'll ultimately be successful. It's a matter of timing, and that's one of the challenges is until we get more clarity on the timing, it's not part.

[Charlie Rothbarth, Berenberg]

Okay. And my final question is just around what you're seeing in the market in terms of options. I appreciate you might not be able to give me get a load of color, but anything you could give us greatly appreciated. Your previous strategy looks to have been sort of around smaller developer companies with very good projects, given that the large company has a very strong balance sheet. Is that still the case? Or are you finding it easier to negotiate with larger companies at this point?

[Randy Smallwood, President and Chief Executive Officer]

I'll let Haytham add a few words to this one. He's the one carrying that charge.

[Haytham Hodaly, Senior Vice President, Corporate Development]

Charlie, thank you for the question. Maybe I'll just highlight what happened in the fourth quarter. The fourth quarter, we saw a significant rise in activity, but some very small streams, some larger royalties changing hands. At what seemed to be some rather expensive valuations by some of our competitors. These expensive valuations have made every company look for royalties in their portfolio, and they're hoping to sell them to try to get similar valuations.

I can assure you we won't be overpaying for royalties or streams regardless of what precedent has been set we're continuing to see a number of smaller opportunities with the majority still falling into the sub-$300 million range, primarily, as you said, the development stage opportunities and the occasional small operator with a focus on streaming precious metals as a byproduct. My team is currently working through a number of diseases process and if all goes well, we hope to be able to narrow down one or two streams on high-quality assets over the next 12 months.

[Randy Smallwood, President and Chief Executive Officer]

So a heavy focus on the single asset development companies because as we've said in times past, anyone that's got operations in this environment is actually doing relatively well in terms of operating cash flow. And so it is definitely a bias towards that early-stage development company and trying to help them get to the point of having that operating cash flow.

The streaming business model is a very, very competitive source of capital, especially when you look at how the market is supporting a lot of those junior companies.

[Charlie Rothbarth, Berenberg]

Understood. Could you clarify, did you therefore say that you would be looking at royalties as well? Or are you speaking to just drilling?

[Randy Smallwood, President and Chief Executive Officer]

We've always looked at royalties, but not new royalties. I mean, it doesn't make any sense. New royalties just -- there's a lot more value created in a stream than there isn't a royalty on a number of different fronts. And so but existing royalties will always sniff at them and see if there's an opportunity there. But again, reinforcing what Haytham just said only for accretive prices.

And so to be honest, we actually have a couple of royalties already in the portfolio, but it's just stuff that was already in existence that came as part of a broader acquisition. So it's -- it's -- our focus is doing streams in terms of new transactions with companies. But if there's existing royalties around, we'll always have a look at them and see if there's an opportunity to create value for our shareholders.

[Haytham Hodaly, Senior Vice President, Corporate Development]

Yes, especially producing royalties, Charlie. We take those very seriously because they have the ability to add to our near-term cash flow.

[Randy Smallwood, President and Chief Executive Officer]

Thank you, Charlie. I think we've got one more question.

[Patrick Drouin]

One question from the webcast. Is there a notable trend towards fixed price contracts or fixed margin contracts? And what does region prefer?

[Randy Smallwood, President and Chief Executive Officer]

So when we created the business model that the streaming business model back 20 years ago, fixed price contracts were the standard. We have -- the beauty of that is, of course, it does give us some leverage with respect to commodity prices that you don't see with royalties or with bullion holdings. And so -- and the challenge with it, though, is that if we see differences at the site with respect to -- and specifically, what we saw was with higher commodity prices typically come higher taxation burdens.

And we just -- we've come to the conclusion over the last five or six years that a more sustainable model, a stronger model is actually the fixed margin contract. And so and I think we've seen this across the industry. It's pretty well the standard in the industry. And the real reason behind that is that it does help our partners be much more sustainable, especially in high commodity price environments because they do wind up getting a bit more of value from the metal that's being delivered into the streaming contract to help offset any additional costs that might be attached to that type of an environment. So definitely focus more on that.

[Randy Smallwood, President and Chief Executive Officer]

So a very full list of questions. Thank you, everyone, but I really appreciate everyone dialing in today. And then we'll close off here by just saying that we currently believe Wheaton is very well positioned to continue delivering value to all of our stakeholders for a number of different reasons.

Firstly, by having one of the best organic growth profiles in the mining industry at 40% over the next five years, more than 40% over the next five years. Secondly, with low and predictable costs, which are resilient to inflationary pressures, resulting in some of the highest margins in the entire precious metals space. Thirdly, by offering our shareholders exposure to our diversified portfolio of long-life, low-cost assets, good, strong asset base, 93% from the bottom half of the respective cost curves. And fourthly, by returning value to shareholders through a unique cash flow linked dividend.

So with that, I really like to thank everyone for joining us today. I believe that we are in great shape. I think it's a great time to own more Wheaton. Thanks for dialing in today, and I look forward to talking to everyone again soon. Stay safe, stay healthy. We move forward. Thanks.

[Operator]

Ladies and gentlemen, this does conclude the conference call for today. Thank you for participating, and please disconnect your lines.