Silver Streamer Intensifies Latin American Performance

Q: Given your company’s unique position as a preciousmetal streaming company, how encouraged are you about the price of silver in 1Q17?

A: Given the strength of the US dollar, having gold and silver performing as well as they have is unprecedented. Since the last election in the US, there has been some strength and growth in the US dollar. Holding the value positions us very well because at some point there will be a break and the US dollar’s performance will slacken. When that happens, precious metals is where investors will look. Prices have not yet rallied much and yet the sense of optimism is much greater than what we saw a year ago. I think this is because precious metals have been able to hold its value against the US dollar. But the dollar strength cannot last forever - this is purely an emotional response - and we are preparing ourselves for a good year.

Q: How do you feel Mexico compares to other mining jurisdictions?

A: Of all the countries I have visited, mining does not receive the same level of respect as it does in Mexico. The government and the people understand that there is value in the industry and as long as it is done efficiently, it can only benefit the country. One of the main challenges we see in mining is that it is not always done in a responsible manner and we should continue striving to do better and better. It is one of the reasons why we initiated the partner CSR Program where we, even as a streaming company, supply capital to our partners to help fund community initiatives. We have funded a recreational initiative mainly focused on the youth in the town of Tayoltita, near the San Dimas mine and an educational initiative in the community of Mazapil, near the Peñasquito mine. We are the first streaming and royalty company to do so.

Q: What led to Silver Wheaton’ record quarterly production of 109,000 ounces in 3Q16?

A: We made a few really strong acquisitions but we also saw some expansion. Some projects also came onstream. The Constancia mine in Peru and Salobo in Brazil reached their full production capacity in 2016 so we continue to see the benefits of these projects ramping up. We also acquired the Antamina stream at the end of 2015 so we got the full benefit of one year’s production at the facility. We added another 25 percent of the gold production from Salobo in August 2016 so all of that added up to very strong growth. The strong performance at those mines also offset some weaker performances at Peñasquito and San Dimas. At the latter, Primero is facing some challenges and we are working with the company to try and resolve the issues. With Peñasquito, an investment is now being made into the asset to expand it so we expect stronger performance from these assets in the future.

Q: How do you plan to reinvest the additional cash flow you have generated?

A: We have a revolving credit facility that we can use for capacity and I feel it is more favorable to stay on the debt side. If our profits do not go into new opportunities in the ground, they will go back to shareholders in the form of dividends as our strategy does not involve building up large cash reserves. We are comfortably generating around US$600 million of free cash flow per year, the allocation of which will be reinvestment in mining assets. Mexico has always been a very active space for us although we have not seen a great deal of new developments recently. But it is a country we would be happy to further invest in.

Over the last five years we have spent US$5.5 billion in upfront payments for new streams. Our company has a strong reputation for technical due diligence. This reputation has extended to the point where our partners are now proud to have “the Silver Wheaton stamp of approval.” Our portfolio of high-margin assets that continue to deliver strong results demonstrates the attention we pay to these details.