Wheaton Precious Metals Corp. Q3 FY2024 Earnings Call

Good morning, everyone. Thank you for being here. Welcome to Wheaton Precious Metals' third quarter results conference call for 2024. All lines have been muted to minimize background noise. Following the speakers' presentations, we will have a question-and-answer session. I want to remind you that this conference call is being recorded on Friday, November 8, 2024, at 11:00 A.M. Eastern Time. I will now hand it over to Ms. Emma Murray, Vice President of Investor Relations. Please proceed.

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’s 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, a slide presentation accompanying this conference call is available in PDF format on the presentations page of our website. 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. It should be noted that all figures referred to on today's call are in U.S. dollars unless otherwise noted. With that, I'd like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.

Thank you, Emma, and good morning everyone. Thank you for joining us today to discuss Wheaton's third quarter results of 2024. I am pleased to announce that our portfolio of long-life, low-cost assets delivered another robust quarter, generating record quarterly operating cash flows of $254 million and underscoring the effectiveness of our business model in leveraging rising commodity prices while maintaining strong cash operating margins. The company has produced approximately 450,000 gold equivalent ounces year-to-date, and we are well on track to achieve our 2024 production guidance of 550,000 to 620,000 gold equivalent ounces. Shortly following the quarter, we announced two accretive precious metal streaming agreements. First, an expansion to the existing stream on Rio2’s Phoenix project for an additional $100 million. And second, a new $625 million gold stream on Montage's Kona project, marking the largest streaming transaction done by a single streamer in nearly a decade. Together, these transactions further diversify our strategic partnerships and the geography of our portfolio. And once ramped up, the Kona project is forecast to contribute meaningful near-term production supporting Wheaton's already prominent position as a leader in the sector's growth landscape. Our corporate development team remains actively engaged in evaluating new opportunities, and we continue to see a healthy appetite for streaming as a source of capital for the mining industry. The company's balance sheet also remains very strong with approximately $700 million cash at quarter's end and a $2 billion undrawn revolving credit facility, which when coupled with the strength of our forecasted operating cash flows, provides strong flexibility to fund all outstanding commitments as well as the capacity to acquire additional accretive streams. During the quarter, we launched the inaugural Future of Mining challenge, which will award $1 million to the winning venture. The award will be used towards advancing a technology aimed at minimizing environmental impacts while improving productivity and efficiencies in our industry. This exciting challenge will help ensure that key resources are responsibly available for future generations. This award is reflective of our commitment as the founders and architects of sustainable streaming to operate responsibly and help others in our industry to do the same. Our performance year-to-date supports our belief that the strength of our organic growth profile combined with favorable commodity price trends firmly positions Wheaton as the premier choice for high-quality, long-life precious metals exposure. And with that, I would like now to turn the call over to Wes Carson, our Vice President of Operations, who will provide more detail on our operating results. Wes?

Thanks, Randy, and good morning. Overall production in the third quarter came in higher than expected, driven by strong performances at Constancia and Salobo relative to forecast. In the third quarter of 2024, Salobo produced 62,700 ounces of attributable gold, a decrease of approximately 9% relative to the third quarter of 2023, primarily due to lower grades, partially offset by higher throughput. On July 25, 2024, Vale reported that the Salobo 3 processing plant operations had resumed after being halted for 31 days due to a fire on the conveyor belt. Vale has confirmed the 2024 copper production guidance of 30,000 kilotons to 35,000 kilotons has been maintained. In the third quarter of 2024, Constancia produced 600,000 ounces of attributable silver and 10,400 ounces of attributable gold, a decrease of approximately 7% and 45%, respectively, relative to the third quarter of 2023. The decrease in silver production was primarily due to lower grades and recoveries. The decrease in gold production was primarily due to lower gold grades due to the planned stripping activity in the Pampacancha pit, which commenced in the second quarter and continued throughout the third quarter. On August 13, 2024, Hudbay reported that the stripping program for the next mining phase of Pampacancha was underway and expected to lead to significantly higher copper and gold grades in the fourth quarter of 2024. In the third quarter of 2024, Penasquito produced 1.8 million ounces of attributable silver compared to zero production in the third quarter of 2023, which was impacted by a labor strike that lasted from June 7 through October 13, 2023. Production in the third quarter transitioned the focus for mining in the Chile Colorado pit to the main Penasquito pit, which has higher gold but lower silver and base metal grades. In the third quarter of 2024, the Stillwater mines produced 2,200 ounces of attributable gold and 4,000 ounces of attributable palladium, a decrease of approximately 8% on gold relative to the third quarter of 2023, primarily due to lower recoveries, while palladium production was virtually unchanged. On September 12, 2024, Sibanye announced that as a result of low platinum and palladium prices, Stillwater West operations are being placed into care and maintenance, while Stillwater East and East Boulder operations will continue to operate. Sibanye reports that Stillwater West could return to production as prices permit. Based on Sibanye's Q3 MD&A, the company's management estimates that while Stillwater West operations remain on care and maintenance, 2025 production relative to the Stillwater PMPA will be approximately 40% to 45% lower than historical levels. In the third quarter of 2024, the Voisey's Bay mine produced 397,000 pounds of attributable cobalt, an increase of approximately 118% relative to the third quarter of 2023 as the transitional period between the depletion of the Ovoid open pits and the ramp-up to full production of the Voisey's Bay underground mine nears completion. Vale reports the physical completion of the Voisey's Bay underground mine extension was 99% at the end of the third quarter with all surface construction completed and the commissioning of the Reid Brook power plant remaining. In the Eastern Deeps mine, the bulk material handling system achieved mechanical completion in early October, and Vale indicated the focus is now on commissioning with handover operations within 2024. Year-to-date, our portfolio of assets has delivered solid production levels and will remain well on track to achieve our annual production guidance range for 2024 of 550,000 to 620,000 gold equivalent ounces. In the medium-term, production is forecast to increase at an industry-leading rate of approximately 40% to over 800,000 ounces by 2028, primarily due to growth from our operating assets, including Salobo, Antamina, Voisey's Bay, and Marmato. Development projects, which are in construction and/or permitting, including Blackwater, Plat Reef, Goose, Mineral Park, Phoenix, Curipamba, and Santo Domingo and pre-development projects, including Marathon and Copper World for which production is anticipated towards the latter end of the five-year forecast period. From 2029 to 2033, attributable production is forecast to average over 850,000 GEOs in the five-year period. The transactions announced in 2024, including the new stream associated with the Kona project and the amendments related to the Phoenix project, have not yet been incorporated into the long-term guidance. The company will provide updated long-term guidance in normal course in the first quarter of 2025, which will incorporate the impact of recent developments and these recently announced transactions. That concludes the operations review. And with that, I'll turn the call over to Gary.

Thanks, Wes. As described by Wes, production in the third quarter amounted to 144,000 GEOs, consistent with the comparable period of the prior year, with lower production from Salobo and Constancia being offset by higher production from Penasquito. Sales volumes amounted to 123,000 GEOs, an increase of 10% relative to the comparable period of the prior year, primarily due to the timing of sales resulting from the relative changes in ounces produced but not yet delivered or PBND. Strong commodity prices, coupled with our solid production base resulted in revenue increasing by 38% to $308 million. Of this revenue, 61% was attributable to gold, 37% to silver, 1% to palladium, and 1% to cobalt. As of September 30, 2024, approximately 136,000 GEOs were in PBND, representing approximately three months of payable production, a slight increase from the preceding four quarters due to relative differences in the timing of sales and at the upper end of our guided range of two to three months. G&A expenses amounted to $9.5 million for the third quarter, and the company now anticipates that G&A will be at the lower end of the previous estimate of $41 million to $45 million for the year, with these figures excluding share-based compensation as well as donations and community investments. Net earnings amounted to $155 million, an increase of $38 million, with the increased gross margin being partially offset by a $28 million global minimum tax expense, with the related legislation being enacted earlier this year. As we previously stated, GMT accrued to December 31, 2024, will be payable on or before June 30, 2026, or 18 months following year-end. Despite the persistent inflationary environment and thanks to our low and predictable cost structure, third-quarter cash flows increased nearly 50%, or $83 million, to $254 million, representing a new quarterly record for Wheaton. The company's Board declared a quarterly dividend of $0.155 per share consistent with the prior two quarters and a 3% increase from the prior year. During the quarter, we made total upfront cash payments of approximately $30 million, $25 million of which was relative to the Mineral Park stream and $5 million of which was relative to the Delamar royalty. Additionally, the company distributed $70 million in dividend payments. When coupled with the $254 million of cash generated from operating activities, overall, the company generated net cash inflows of $154 million in the third quarter of 2024, resulting in cash and cash equivalents at September 30 of $694 million. We believe this cash balance combined with the strength of our forecasted operating cash flows and the fully undrawn $2 billion revolving credit facility positions the company exceptionally well to satisfy its funding commitments and provides us with the financial flexibility to acquire additional accretive mineral stream interests. That concludes the financial summary. And with that, I will turn the call over to Haytham to discuss our recent partnership with Montage in more detail.

Thank you, Gary, and good morning, everyone. On October 23, Wheaton announced that we had entered into a new stream relative to the Kona project for upfront cash consideration of $625 million in addition to a $75 million secured debt facility. We held the conference call the day after the announcement to discuss the details, the replay of which is available on our website. I will highlight a few of those key points today. With essential permits in place, coupled with its impressive scale, we believe the Kona project stands out as one of the premier gold assets in Africa. Supported by strong shareholder backing from the Lundin Group and Zijin Mining, the Kona project is expected to significantly boost Wheaton's near-term annual gold production and further strengthen our peer-leading growth trajectory. In fact, once fully ramped up, Montage is forecast to become our second largest producing asset over its first five years of production and third largest producing asset overall. Wheaton is focusing on high-quality mining projects that can support streaming transactions in the long-term, maintain social license by operating in a responsible manner, and support the communities around their operations. During our site visit to Kona, we visited various community investment projects in and around the mine that are supporting community members, including providing potable water through newly constructed water walls. Based on the feasibility study published in 2024, Kona ranks as one of the highest quality gold projects in Africa, with a long 16-year mine life, low all-in sustaining costs of $990 per ounce over the life of the mine and sizable total annual production of over 300,000 ounces of gold over the first eight years. Under the Kona stream agreement, Wheaton will receive 19.5% of the payable gold until a total of 400,000 ounces of gold has been delivered, subject to adjustments if there are delays in deliveries relative to an agreed-upon schedule. At that point, Wheaton will then purchase 10.8% of the payable gold until an additional 130,000 ounces of gold has been delivered, after which Wheaton will then purchase 5.4% of payable gold for the life of the mine. In return, Wheaton will make ongoing payments for the ounces delivered equal to 20% of the spot gold price. Attributable gold production is forecast to average over 60,000 ounces of gold per year for the first five years of production, over 47,000 ounces of gold per year for the first 10 years of production, and over 34,000 ounces for the life of the mine. And Wheaton anticipates receiving ounces beginning in early 2027. As outlined in the definitive agreement, Montage will provide Wheaton with corporate guarantees and certain other securities over their assets. In addition, Wheaton has obtained a right of first refusal on any future precious metal streams, royalties, prepays, or similar transactions. In conclusion, we are very pleased to partner with Montage, who, with long-standing relationships in West Africa, has done an immense amount of work to derisk the asset and is rapidly advancing the Kona project towards production. With that, I will hand the call back over to Randy.

Thank you, Haytham. In summary, Wheaton's third quarter was distinguished by several key highlights. We achieved record quarterly cash flows of $254 million and declared a $0.15 quarterly dividend. We are well positioned to achieve our annual guidance range of 550,000 to 620,000 gold equivalent ounces. Construction activity is advanced at a number of our development projects, including Blackwater, Goose, Platreef, and Mineral Park, all of which are expected to be producing within the next 12 months. Shortly following the quarter's end, we announced two accretive precious metal streaming transactions, an expansion to the existing stream on Rio2's Phoenix project and the new stream on Montage's Kona project, further adding to our already impressive organic growth profile of over 40% in the next five years. Our balance sheet remains one of the strongest in the industry, providing ample capacities to add accretive high-quality streams to our portfolio. And lastly, we continue to demonstrate leadership in sustainability with the launch of our inaugural Future of Mining challenge. With that, operator, I'd like to open up this call for questions, please.

And your first question comes from Ralph Profiti from Eight Capital.

Wes, you touched on this a little bit, and I just want to confirm that the Copper World is really the only new asset that will be rolling into new guidance when you roll it forward and you think about that 2029 target, right? I'm just trying to separate existing from new streams that are going to come into the guidance. Obviously, notwithstanding that we're still quite a ways off from providing more details on that guidance that we'll get in the first quarter of 2025.

Sorry, Ralph, you're just talking about ones that are going to come in that aren't in the five-year guidance right now that are rolling in, is that?

Exactly.

Yes, so that is the right Copper World would be the one that’s coming in that 2029 period. So, I mean, obviously, there's quite a number of other assets that are within that five-year period, including the new transactions that we've done. So but as far as ones that are in the current year plan that will be moving forward into the five-year, yes.

Yes, and maybe, Haytham, we're seeing the secured debt as part of the Phoenix transaction. We're increasingly seeing debt structures coming into some of these streams. Just wondering within that bucket in that portfolio, is there an ultimate limit on how much debt you want to carry in some of these partnerships? How far away are we from a limit on how much we can want to provide? And can you talk to me a little bit about the advantages you're getting on securing that in with those streams? Yes, I'll start and then let Haytham add some additional color. There's definitely an appetite in the space for a one-stop shop. We've seen more and more companies look at that. And I have to tell you, when it comes to negotiating security amongst the different number of the debt, combined with the stream and stuff like that. If you're negotiating with yourself, it's pretty easy. It's a lot more comfortable than having to negotiate with other institutes that are coming in. And so it allows us to structure the agreement so that it works favorably for Wheaton on the security side. So it's quite attractive. That being said, I mean, we are a streaming company. And so we won't chase down a situation where there will be more value tied up in the debt side of a one-stop shop financing. We will always be stream dominant in terms of that value. And so there is an increased appetite for it and probably wouldn't be surprised to see even more of these things coming out over the next while. Haytham?

I mean that's well put, Randy. I think from our perspective, when we're looking at these opportunities, obviously, we're always looking to do a stream. If it makes sense for us to come in and do a small piece of debt, whether it's secured debt, whether it's a cost overrun facility, whatever happens to be, then we'll definitely consider it. But our primary focus, Ralph, is always just to put as big a stream on there as possible without detrimentally affecting the economics of the project long-term.

Yes, it really goes back to our belief that the best thing that we can do for our shareholders is just deliver good exposure to high-quality precious metals production. The optionality of that commodity price along with the associated exploration upside and such like that. But I think the Montage deal was a really good example of how we can actually do that and actually provide our shareholders with even more access to precious metal production.

Ralph, I'll just add one thing. That doesn't mean every deal we look at will have a full financing package just to be clear. There are some areas where it makes sense to diversify the risk among other participants as well. So just keep that in mind. For opportunities where we see very low risk, strong production, long mine life, and quick payback, that's the opportunities that we would probably consider.

And your next question comes from the line of Tanya Jakusconek from Scotia Bank.

And it's good that the operator gets my name right. So very excited.

We try hard.

Can I follow-up on Ralph’s question and maybe that Randy or Haytham to continue on. As you look at the environment today, and I know it's quite competitive, what I've noticed is that we have a lot of maybe nuanced changes to these agreements. And Rob touched on the debt portion in addition to the stream. Some have equity, some have prepaid, some have callers. Maybe someone can just review with me what you are seeing out there in terms of yes, you're one-stop shop. But what are some of the things that are being asked that have changed over the last three months, six months because of the competitive environment?

Having been in the business for 20 years and recently celebrating our 20th anniversary, we have a solid understanding of how the industry has evolved. One important factor is our strong capacity at Wheaton, which allows us to consider expanding while maintaining our primary focus on streaming as the optimal way to provide precious metals exposure to our shareholders. We can also tap into some ancillary benefits. Looking back to about seven or eight years ago, private equity began making significant investments in this space. Private equity tends to be somewhat indifferent regarding financing splits, which I believe has influenced the industry's opportunities. We are certainly competing against various sources of capital, including alternative options for future projects. It’s crucial for us to remain adaptable and responsive to the needs of mine operators and developers regarding their capital requirements, as each has a different appetite for financing. We've observed some costly, debt-heavy financings on other development projects involving minor streams. The Kona project, for example, showcases an advantageous capital source in terms of cost and structure, benefiting both parties involved. Ultimately, the key is to be flexible and innovative in our approach while keeping our focus on delivering high-quality precious metals production to our shareholders. This may involve accommodating some ancillary costs, smaller amounts of debt, or equity investments. We have a long history as equity investors, with our first equity investment occurring over 14 years ago. If we believe in a project, we consider equity financing a favorable option. While debt financing is relatively new for us, its emergence aligns with the influx of private equity interest in the industry. I’ve shared a lot on this topic; Haytham, do you have anything to add?

Tanya, in this industry, as in many others, businesses must adapt. We must either adapt or risk being left behind, and I believe we prefer to be at the forefront rather than lagging and to set the standard for future transactions and their structures. As Randy mentioned, our main focus will always be on streaming debt, equity, and cost overrun facilities. However, the more extensive and varied our funding options, the better the returns for Wheaton. That said, as I noted in my response to Ralph, we aren’t prepared to take on a full funding package for every opportunity. There are certain opportunities where we feel confident in leveraging these diverse tools.

And maybe just continue and just want to confirm, I've been in the business while as well. And I remember one of your peers actually taking a joint venture interest in an asset deciding that might be the way to go. I'm just worried we're going to get to that.

Don't worry, Tanya, that's never going to happen. I can tell you right now, the reason the streaming model works is because we have that fixed cost structure without that significant capital cost exposure and operating cost exposure. We're not going to take that away. That's going to continue forever.

As I said, I had deja vu when I was looking at this and I like to wake up and see that model pair up again. So Haytham, maybe now that you've confirmed that's not your model, just coming back to the environment again today. What are you seeing out there? One of your peers mentioned deals that used to be $100 million to $300 million now or $500 million or closer to they're more $300 million with a few over $500 million, can you just tell me what you're seeing out there, deal size and whether anything has changed from what we had previously talked about, which was the funding for construction acquisitions of assets and/or other? How has that changed since our last call?

What we're observing currently is still a focus on opportunities in the single asset development stage. I would estimate the range to be between $100 million and $350 million. There are a couple that exceed $500 million, but they don't necessarily align with Wheaton's investment criteria. Our current emphasis, as we've mentioned over the past couple of years, has been on a few projects over $500 million, and indeed we pursued a couple in that range. However, I believe the best opportunities have been taken. Therefore, our focus moving forward will be primarily on those projects in the $100 million to $300 million range, with the majority being development funding.

And can I just also confirm some of your peers also mentioned a lot of opportunities in the Americas and Australia. Is that what you're seeing? Or are you seeing other areas of the world?

We're seeing everywhere. I mean, listen, there's opportunities in the Americas. There's stuff in Europe. There's stuff in Australia and surrounding countries there. I would say the majority of the stuff we're seeing is in first-world jurisdictions.

Your next question comes from the line of Lawson Winder from Bank of America.

Just maybe where I'd start is on the long-term guidance and picking up where it all started. When you think about the lower PGMs from Stillwater, but then the really big offset from Kona and some of the other moving parts. As you roll forward into 2029, I mean it seems to me that there's going to be a pretty material increase in what your projected GEO production would be for that year. Is that fair? Or are there some moving parts there that we might not be considering?

One of the other projects in the portfolio that really starts ramping up is Platreef in 2029. So that will wind up coming back into as Ralph’s original question, that will be coming back into the five-year guidance and starting to sort of push us up even further. And so yes, you're right. That combined with Kona coming on stream and the larger Phoenix package. Keep in mind that we've substantially grown the size of that stream as part of the expansion of that relationship with Rio2. All will provide good growth on the tail end of that five-year guidance.

I'd also say, Lawson, that really the Stillwater wrap down that they've got right now is hopefully temporary here as well. I mean, we still believe in this asset. I mean, it's a very strong asset, and we'll still see good production out of both East Boulder and Stillwater East over the next number of years. I mean, the impact of that is kind of more in this kind of 10,000 to 15,000 ounce range really overall. It's not that significant compared to the additions that we're seeing from all of these other projects coming online in the next few years. So we do see significant growth there, and really down and Stillwater doesn't impact that growth in a material way.

I wanted to also ask about the projected payment. So there's $238 million projected for Q4. How much of that $238 million has already been committed now quarter-to-date? And is there some piece of that that might slip into 2025?

I'll let Gary take that one.

Yes. Lawson, look, the biggest component of that is the $163 million that would be due to Vale should they satisfy the completion test on the third line there by year-end, which is, I think, very unlikely at this point. So that's likely to move to 2025.

And when it does, it drops down to about $144 million, I think?

Yes.

Thank you for bringing that up. It's an important consideration. Regarding Constancia, how should we think about the sales trailing production? Hudbay is indicating a significant increase in Q4 precious metal production compared to Q3, but there's a delivery mismatch. What guidance can you provide to help us account for that timing difference in Q4?

I'll just have an overall comment. We always see this in Q4 that difference between production and sales gets squeezed in Q4 because everyone's trying to get the most sales into the year-end results. And so there's always going to be a lag, especially for something like Constancia, where you're producing a con and having to ship it off. It means that it takes a bit longer to go through the process. We always guide two to three months typically for something like that. But I would say that in Q4, it probably turns into 1.5 to 2.5 months versus two to three months, if you know what I mean, everything gets squeezed a little bit tighter in Q4. And so we're hopeful that on the outside Hudbay will take that approach. It's something that we have traditionally seen. We expect to capture back a lot of that produced but not yet delivered in Q4. So, I don't know, Wes, you got anything to add to that?

I believe that summarizes the situation well. We've observed them beginning to return to Pampacancha in the latter part of Q3, and we will see that continue into Q4. I wouldn't anticipate any changes from what they are stating, apart from what we have typically experienced at Constancia, which usually takes two to three months. However, they will definitely be focused on Q4, just like all our other assets, to try to clear out that PBD.

Can I also get your thoughts on consolidation in the sector and Wheaton's view on that? So as you deploy capital, I mean, it seems like deals are getting done at streaming and royalty deals well into the $2,000 per ounce range. Meanwhile, I mean maybe there's value in looking at just acquiring smaller players to get access to various streams and royalties. Is that a fair statement? Is that something that's on the radar for Wheaton right now? And just any additional thoughts.

Haytham has done an excellent job of managing our cash flow effectively. This, along with our increasing dividend, has resulted in strong performance for our shareholders. The challenge with consolidation is that many smaller streaming companies have had to become less stringent about structure and security to gain a foothold in the market. Consequently, some of their key assets have structural flaws and weaknesses that, in our opinion, don't compare favorably to a traditional Wheaton stream. Therefore, the differences in valuation between them and us may be justified. When considering consolidation, any potential acquisition premium can become quite costly. So far, we have successfully invested in solid operating companies at acquisition prices close to net asset value, which are considerably lower than those of smaller companies. This doesn’t mean we aren’t monitoring the market and looking for opportunities; we will always do that. However, it seems unlikely, especially given the opportunities we currently see. Haytham, do you have anything to add?

Yes. The only other thing, Lawson, I would add is if you look at the actual valuations and where these things are trading relative to NAV, they're all trading pretty close to NAV, and we're actually out there buying assets at NAV or slight discount to NAV. So it always doesn't make sense to pay a 30-plus percent premium on assets that's trading at NAV to consolidate assets that we passed on in the past when we looked at them. So yes, I don't see us doing any consolidation. Now that doesn't mean we wouldn't be opportunistic if one of these companies suddenly had a hiccup and the stock was down 50%, and we felt it was recoverable. That's something we would look at, but that's not in the pipeline right now.

And your next question comes from the line of Will Dalby from Berenberg.

Congrats on the solid quarter. Just a couple from me. The first on producer not delivered. I know you've touched on it already, but got 16,000 GEOs for the quarter; you say about three months' worth, but I'm just looking at kind of steady additions for the last year or so. I wonder if you could maybe give a bit more detail on what's driven that build? And are you said you're expecting that to release, but what kind of certainty do you have around that releasing over the next quarter or so? That's the first question.

Yes. Well, I'm going to let Wes answer that one.

So the single largest thing that we've seen there is really the buildup at Penasquito, and that's really much entirely due to the hurricane that affected the Manzanillo port, which is the main export for Penasquito. So we did see a buildup there. And being our second-largest asset, that certainly adds things up. I mean, we do often see these buildups kind of at various different times during the year. And as we said earlier, we generally see that drawdown in Q4, and that is what we're expecting to see again this year.

And then just a second one on Copper World. I saw as part of their development strategy and financing, they mentioned they're looking to renegotiate the terms of the stream there. I just wonder if you could give some clarity on how you're expecting those terms to be renegotiated.

I believe the original plan was based on an asset expected to produce around 60,000 gold equivalent ounces per year. Currently, the plan for Copper World has evolved. The original stream was established in 2010, and back then, we had significant exploration potential to the north, which has now developed into Copper World. Thus, we anticipate seeing exploration results come in before the initial ore body, Rosemont, becomes fully realized. Overall, we have more ounces and a larger ore body compared to what we had in 2010. However, the startup for the Copper World is projected to yield about 40,000 gold equivalent ounces annually instead of the original 60,000. We need to have discussions with Hudbay, a long-standing partner on various assets, and we hope to strengthen that partnership. We're still waiting for some concrete decisions from Hudbay before we proceed with talks to understand their future plans and the impact of changes, as the initial deal was based on expectations that were about 50% higher than the current outlook. Nevertheless, considering the reserve and resource base, if common sense prevails and they can transition from private lands to yield, we are in a much better position. We will have those discussions soon; we have a solid relationship with Peter and the Hudbay team, and we look forward to it. We just need a bit more clarity from their side before we can move forward.

I mean just thinking on that one. As the development advances a bit further, becomes more certain those negotiations advance. Is there maybe scope for Wheaton to take a bigger piece there to put in more upfront CapEx, maybe under renegotiated terms. Is that something that is on the table potentially?

I'm not going to sort of bid it by anything. I will say that we do get 100% of the silver and gold. So it's really tough to grow the precious metal stream there. And so not something that we're going to commit to. I wouldn't want to lay anything out here right now that would confine us in the future in terms of those discussions. And so everything is on the table when it comes to these discussions. Hudbay is a good long-term partner of ours, and so look forward to them advancing the project and us being a good part of that.

And your next question comes from the line of Carey MacRury from Canaccord Genuity.

Just a question on cobalt. With Voisey's Bay, like it's finally nearing the finish line, how do you see the cobalt production ramping up for you guys? And when do you expect to hit the steady-state run rate?

I'll let Wes take that one.

We are starting to see an increase, with about a 60% improvement in grade compared to last year and a significant rise in recovery as well. We are making good progress, but the complete ramp-up of the underground operations will take approximately 18 months. Therefore, we anticipate reaching full production in late 2025 or early 2026. I expect to see a steady increase in cobalt production from Voisey's Bay over the next few years.

And what's the steady-state run rate again on an annualized basis?

It comes in somewhere around 2 million pounds to our account.

How does that compare to production last year?

Last year, production was less than 600,000. So we're at about 1.2% this year. So there's still a ways to go.

Yes, there's still quite a bit of growth there, yes.

Yes. And then in terms of a related question, the production has been ramping up in your numbers, but your sales are still quite a bit lower. Is that by design? Or is there something else going on there?

There have been some challenges with deliveries. The delivery timeline is quite lengthy, as products are transported all the way to the Netherlands for sale. This involves a long journey from Labrador to Newfoundland, resulting in delays. It's likely one of our longest timelines. As production stabilizes underground and becomes more consistent, we expect to see improvements in this area. However, this year has presented more challenges.

Yes. Carey, it's interesting. It is out of all of our portfolio, it's probably the one that has the biggest gap of how long it takes for production to actually result in sales. It is one where we take physical delivery. And so, we have warehouses that stock that cobalt product. And then we have sales contracts that move that out, but the sales contracts are longer term. It definitely trades differently than a precious metal. And because of that, it does have sometimes some bigger lags and sometimes some tighter lags. But just by virtue of the location of the asset and then where the ultimate purchases are and where the transaction where sales actually gets recorded, it's always going to be the longest lag. It's probably closer to four months, four, five months in terms of production getting through the sales.

Okay. We should see a healthy ramp-up in 2025, I guess.

Yes, absolutely.

Thank you, Carey, and thank you, everyone for dialing in. We, of course, are very pleased to have reported yet another strong quarter. Wheaton and high-quality portfolio of assets, sector-leading growth profile, and commitment to sustainability provides our shareholders and all of our stakeholders actually with a solid outlook for the future in what we believe is one of the best, if not the best vehicles for investing into the gold and precious metal space. We, of course, have just celebrated our 20th anniversary last month. And as I reflect on the past two decades, I myself, I'm incredibly proud of what our team has been able to accomplish. And I just want to sincerely thank all of our stakeholders for their support and contributions and for being a part of Wheaton's success. We do look forward to speaking with you all again very soon. Thank you.

Thank you. This concludes today's call. Thank you for participating. You may all disconnect.