Wheaton Precious Metals Corp. Q4 FY2022 Earnings Call

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. Thank you. I would like to remind everyone that this conference 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.

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.

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 the 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?

Thank you, Randy, and good morning, ladies and gentlemen. The company's precious metal entrust produced 148,300 gold equivalent ounces 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 payable production along with 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, dispersed $60 million in dividends, invested $31 million relative to the Goose Project, and $13 million relative to the Curipamba Project, showcasing 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 31 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 an 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 costs 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.

Thanks, Gary, and good morning. Overall production in the fourth quarter came in lower than expected, 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 the 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.

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 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 ounces of annual production; continued portfolio optimization efforts enhancing and improving the quality of our asset base, contributing to one of the strongest balance sheets in the industry; a 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?

The first question comes from Brian MacArthur of Raymond James.

I have a couple of questions. Can I just ask about 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 stop date of January 21 or January 1 next year just a hard date? Is there anything else you have to do?

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.

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

I'll let Gary take that one.

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.

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.

Very clear. And then there has been talk historically about Salobo IV. Is there anything changed? Is there anything that would happen there? As a result of this agreement, is there anything different?

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

Great. I have another topic to discuss regarding the refundable deposit for the 777. I have two questions. First, with the numbers you provided, including the discount rates, will you actually receive payments over time through 2052? Secondly, are there any other long-dated contracts where a situation could arise similar to this one, where if you do not receive the upfront payment, there might be a true-up? I noticed you have a detailed chart that shows the upfront payments for your deposits and how much you have received back. For instance, if I consider Hudbay, which may have around 10 years remaining, could it potentially have a true-up situation like the 777? Or is that something you cannot comment on due to confidentiality?

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 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 in other areas like copper and 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 time away.

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

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

Hey, Randy, Gary and team, good morning. Thanks for the update here. I wanted to ask one follow-up on Salobo. So Vale has guided to Salobo III achieving full capacity in Q4 '24. I was curious, 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?

So this is Wes. They are ramping up to full production by the end of next year, targeting 36 million tonnes. Remember, the 90-day test can be conducted at any time, which means they could operate at that level sooner. The full year will take a bit longer to achieve, similar to Vale's approach. They aim for full production by the end of next year, and moving forward, we expect to see them reach that full capacity.

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 five-year guidance, actually, to be specific. But could you maybe just clarify when more precisely you have Copper World and Rosemont coming into that five-year guidance? Like is that end of '27 or is that early '27?

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

We are staying in 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, which will give us a better idea as these things move through, and we'll just continue to work with Hudbay as we move forward on.

Okay, fantastic. And then just one follow-up then on Rosemont. In terms of the discussions, both sides you and Hudbay have indicated that there will be some sort of discussion around what the agreement looks like, and there's 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?

Well, we already get 100% of all the silver and gold from the asset. So that's not going to change concerning the over and above that. If you look at the copper world, sort of the numbers that have been put out to date, that is, of course, subject to continued studies down there. But it looks like it's about two-thirds of what we were expecting out of the original Rosemont concept. And so I think we've just got to sit down and hammer that out. We are 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 more firm in terms of their plans going forward, that's when we'll sit down and get a bit more firm in terms of how the contract is going to be adjusted to reflect that difference. And so again, we will continue working with them as partners.

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

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

The next question comes from Martin Pradier of Veritas.

The first question is about Salobo. You mentioned that the throughput is expected to increase by 50%, but the grades are also decreasing. What is the expected increase in production, and how do the current grades compare to the previous ones?

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 maintain higher-grade feed through the mill, but it's a function of how much low-grade they stockpile, which 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 are a lot of variables moving there, and it's very tough to sort of lay that out. That being said, you're right, the overall grades are going to continue pushing down on this deposit as it gets a little more mature. A 50% increase in throughput capacity is not going to result in a 50% increase in metal production. But depending on stockpiling, it could be pretty close to a 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. 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. So there are so many variables there that it's really tough to give you a clear answer, but hopefully, you understand that there are a lot of different issues to consider. I think that's one of the reasons why we were very happy with the way the new expansion payment is structured, as that it will be based on yearly performance with respect to maintaining the minimum grades through the mill, but also total materials moved at the site itself.

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 grades, 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?

Yes. The Pampacancha gold grades are ten times 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 significantly by having Pampacancha pushed through the mill. Now, unfortunately, some of the challenges that they've had with respect to fuel supply have complicated things. It is a farther haulage distance to bring Pampacancha into 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 that copper grades are also slightly higher, but gold grades are substantially higher. So it's quite a rich ore body for both parties there.

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

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

We can see that the Pampacancha zone won't completely supply the mill because the mining and hauling cannot be done quickly enough over such a long distance. Therefore, it will be processed in batches. Hudbay's guidance for 2023 indicates that more material from Pampacancha will be available towards the end of the year rather than the beginning. This may be a result of the supply challenges they faced last year regarding fuel. If those issues are resolved, we could see some positive developments. It's important to remember that while the grades are significantly higher, they can't rely entirely on it because they lack the necessary mobile fleet to transport everything from Pampacancha without a longer haul to the mill. As a result, there will be batch processing, and I anticipate a substantial increase in gold production from Constancia, estimating it to be three to four times what we've seen in the past. However, this will depend on their ability to transport and process the material efficiently.

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?

Well, and the challenge that Voisey’s Bay faced 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. The open pit is still supplying albeit lower and lower grade material that was originally wasn't part of this. We should see as the underground phases in that we will see cobalt production probably three to four times higher than where we are right now coming out of the open pit. 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, we should see a dramatic uptick in cobalt production from that. That's probably over the next one and a half years, two years.

Okay. But didn't they already start mining one of the deposits at Reid Brook?

It's mostly development ore at this point. Some development ore has been extracted, but we have not yet seen any production from the underground operations. We expect a significant ramp-up towards the end of this year, with open-pit mining dominating this year. In the following couple of years, there will be a notable increase in production.

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. So it's going to be a phased ramp-up over the next, as I said, one and a half years, two years. We should hopefully, a couple of years from now, have a much higher grade underground ore.

But so this year is still going to be weak?

Yes, the majority of the ore this year will still come from the open pit. However, we are only beginning to explore further, and we are experiencing lower grades. This decrease will be balanced by an increase in ore from underground sources. Nevertheless, the grades from open pit material are expected to decline throughout the year.

The next question comes from John Tumazos of John Tumazos 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... 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 Nicaragua and Bolivia that very consistently vote with Russia and the United Nations? And anything else you could tell us about countries?

Sure, I'm glad we're solely focused on the Americas. Political risk is crucial for us. When we invest in an asset, it's typically a long-term commitment, so we need to ensure that the assets we choose have strong operating margins because circumstances can change. We've engaged political specialists and consultants to guide us on political risks and how to incorporate that into our valuations. One important insight is that politics fluctuate; they tend to shift from one extreme to another. Every country experiences this. Therefore, our primary consideration is to ensure sufficient margins, as sometimes the government may seek a larger portion of the profits. Recent events in Central America illustrate that the asset needs to be able to accommodate a little more sharing of profits while striving for a sustainable long-term agreement. Regarding countries we would steer clear of, Venezuela and Cuba are definitely not options. There is a broad range of risk throughout the entire hemisphere, and it's a continuous assessment for us. We emphasize the necessity of establishing solid partnerships and maintaining strong social licenses.

If I could ask a different question, if you wouldn't mind. Of the eight recent portfolio additions, four of them are preproduction companies. Could you provide information on the number of employees Wheaton has added along with the number of external technical consultants to understand if your focus is solely on pre-transaction due diligence? Additionally, I'm looking at Rio2, Artemis, Gen Mining, and Adventus, which are new companies that may be operating for the first time. What kind of assistance can you provide to them?

Yes. So we pride ourselves on being owners of our own decisions. That comes down to having strong internal technical strength. We have just over 40 employees right now; about one-third of us have a technical background, including myself as a geological engineer. When you look at our recent transactions, there's a heavy bias towards single-asset development companies. These companies often don't have access to operating cash flows, which is why a stream is the most competitive source of that capital in terms of helping these companies become operators. It’s just it has become incredibly important for us to offer that assistance to maintain our relationships. We don’t rely on outside consultants, although sometimes we pull them in if there's a unique aspect of a project where there's a specialization. But that’s very few and far between.

It's also worth noting 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 maintain relationships.

When you look at that list of recent transactions, the majority come with either people or companies we have done transactions with in the past. It reflects our focus on repeat customers. We have a long list of other people here reflecting. So...

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

Thanks, John. Thanks for the call.

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

Can I ask about your investments in terms of financial specifics for this year? You mentioned Salobo and the potential payment due this year. You also talked about those other preproduction companies, and it seems some of those payments might be due this year or next year. Can you give us an idea of what you have budgeted for investments in the streams this year, perhaps providing a minimum, maximum, and the range it might fall in?

Sure thing, Charlie, I'm going to hand it over to Gary here.

Yes. So, I think we disclosed all of that information in both the notes to our financial statements and the MD&A in our contractual obligations and contingency note. 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 noted, is a conservative estimate, 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 and ’25. The vast majority of the rest of it or just over $400 million will go out after 2027.

It's important to note that those are all based on certain achievements on a go-forward basis. For instance, we'd be very happy if they got to that level, but it requires a lot of work. We have seen improvements from Vale in terms of operations and continued improvement within the first two lines, but it would be a big step to get that full payment in on Salobo this year. But we look forward to funding construction that ultimately delivers a significant portion of the growth we will see over the next four years.

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

The next question comes from Charlie Rothbarth of Berenberg.

Congratulations on your results. I'd like to discuss Fenix, if possible. I understand you haven't provided specific details, but do you anticipate that Fenix will align with your guidance?

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

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 all the color, but anything you could give us is greatly appreciated. Your previous strategy looks to have been 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?

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

Sure. Charlie, just to highlight what happened in the fourth quarter, we saw a significant rise in activity but some very small streams, with 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, 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 seeing a number of smaller opportunities, with the majority still falling into the sub-$300 million range, primarily focused on 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 opportunities, and if all goes well, we hope to narrow down to one or two streams on high-quality assets over the next 12 months.

So a heavy focus on the single asset development companies. As we said in the past, anyone with operations in this environment is actually doing relatively well in terms of operating cash flow. So there is definitely a bias towards early-stage development company and trying to help them gain operating cash flow. The streaming business model is a very competitive source of capital, especially when you look at how the market is supporting a lot of those junior companies.

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

We've always considered royalties, but not new ones. It doesn’t make sense to focus on new royalties because a streaming arrangement creates significantly more value in various ways. However, we will always evaluate existing royalties, particularly if they offer a beneficial opportunity.

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

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

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

When we created the streaming business model 20 years ago, fixed price contracts were the standard. The beauty of that is it provides leverage with respect to commodity prices that you don't see with royalties or with bullion holdings. The challenge is that if we see differences at the site with respect to higher commodity prices, typically higher taxation burdens occur. We concluded over the last five or six years that a more sustainable model, a stronger model is the fixed margin contract. It helps our partners be more sustainable, especially in high commodity price environments. We see this focus reflected across the industry. So a very full list of questions. Thank you, everyone. But I really appreciate everyone dialing in today. Currently, we believe Wheaton is very well positioned to continue delivering value to all of our stakeholders for multiple reasons. Firstly, we have one of the best organic growth profiles in the mining industry at over 40% over the next five years. Secondly, we have low and predictable costs, resilient to inflationary pressures, resulting in some of the highest margins in the precious metals space. Thirdly, we offer our shareholders exposure to our diversified portfolio of long-life, low-cost assets, with 93% from the bottom half of the respective cost curves. Lastly, we return value to shareholders through a unique cash flow linked dividend. With that, I would like to thank everyone for joining us today. I believe that we are in great shape. 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 and stay healthy. We move forward. Thanks.

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