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Wheaton Precious Metals Corporation
Canadian Tax Settlement Conference Call and Webcast
Event Date/Time: December 14, 2018 - 9:00 a.m. E.T.
Length: 35 minutes
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CORPORATE PARTICIPANTS
Patrick Drouin Wheaton Precious Metals Corporation – Senior Vice President, Investor Relations Randy Smallwood Wheaton Precious Metals Corporation – President, Chief Executive Officer Gary Brown Wheaton Precious Metals Corporation – Senior Vice President, Chief Financial Officer CONFERENCE CALL PARTICIPANTS Ralph Profiti Eight Capital – Analyst Fahad Tariq Credit Suisse – Analyst Cosmos Chiu CIBC World Markets – Analyst Trevor Turnbull Scotiabank– Analyst Chris Terry Deutsche Bank– Analyst Shane Nagle National Bank Financial – Analyst Dan Rollins RBC Capital Markets – Analyst Carey MacRury Canaccord Genuity– Analyst Brian MacArthur Raymond James – Analyst
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PRESENTATION
Operator
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Wheaton Precious
Metals Canadian Tax Settlement Conference Call and Webcast. All lines have been placed on mute to prevent any
background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to
ask a question during this time, simply press star, then the number one on your telephone keypad, and if you
would like to withdraw your question. Thank you. I would like to remind everyone that this conference call is
being recorded on Friday, December 14 at 9:00 am Eastern time.
I will now turn the call over to Mr. Patrick Drouin, Senior Vice President of Investor Relations. Please go
ahead.
Patrick Drouin – Senior Vice President, Investor Relations, Wheaton Precious Metals Corporation
Thank you, Operator, and a very good morning, ladies and gentlemen. Thank you for participating in
today’s call. I’m joined today by Randy Smallwood, Wheaton Precious Metals’ President and Chief Executive
Officer; Gary Brown, Senior Vice President and Chief Financial Officer; and Curt Bernardi, Senior Vice President,
Legal and Corporate Secretary.
I’d like to bring to your attention that some of the commentary on today’s call may contain forward-
looking statements. There can be no assurances that forward-looking statements will prove to be accurate as
actual results and future events could differ materially from those anticipated in such statements. In addition to
our financial results cautionary note regarding forward-looking statements, please refer to the section entitled
Description of the Business Risk Factors in Wheaton’s annual information form available on SEDAR and on file
with the U.S. Securities and Exchange Commission.
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The annual information form and the press release from last night set out the material assumptions and risk
factors that could cause actual results to differ, including among others, fluctuation in price of commodities, the
absence of control over mining operations from which Wheaton purchases silver or gold, and risks relating to such
mining operations, the continued operations of Wheaton’s counterparties, and risks in estimating cash taxes
payable in respect of the 2005 to 2010 taxation years and assessing the impact of the settlement with the CRA for
years subsequent to 2010. It should be noted that all figures referred to on today’s call are in U.S. dollars unless
otherwise noted. In addition, references to Wheaton or Wheaton Precious Metals on this call include Wheaton
Precious Metals Corp. and/or its wholly owned subsidiaries, as applicable.
Now, I’d like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you, Patrick, and good morning, ladies and gentlemen. We are very excited to be speaking to you
today as we are here to discuss the resolution via a principled settlement of our tax dispute with the Canada
Revenue Agency regarding our foreign income over the years 2005 to 2010. Gary Brown, our Senior Vice President
and Chief Financial Officer, will go into the details of the settlement shortly, but the basic foundation of this
settlement is that Wheaton’s foreign income and profit will not be subject to tax in Canada. While the settlement
is specific to the reassessments related to the 2005 to 2010 tax years, the transfer pricing principles laid out in this
settlement will also apply to subsequent taxation years and additionally on a go-forward basis, so this settlement
provides us and perhaps, more importantly, our shareholders past, present, and future with clarity and certainty
in our business model going forward. It puts the tax risk issue behind us and allows the Wheaton team to focus on
what we do best: managing and expanding our high-quality precious metals portfolio both organically and by
accretive acquisitions.
I will now turn the call over to Gary, who will provide more details on the settlement. Gary?
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Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Thank you, Randy, and good morning, ladies and gentlemen. In order to better understand the nature of
the settlement, it is important to refresh the basis of the CRA’s original reassessments for the 2005 to 2010
taxation years. In those reassessments, the CRA had asserted that virtually all of the income earned from precious
metal purchase agreements, or PMPAs, entered into by the Company’s foreign subsidiaries on foreign assets
should be re-characterized as being Canadian income and therefore subject to Canadian income tax. As a
secondary position to be asserted only if the re-characterization argument was unsuccessful, the CRA had argued
that the inter-company charges for services rendered by the Canadian parent company to the foreign subsidiaries
should be increased such that virtually all of the income earned outside of Canada be transferred to the Canadian
parent company.
The key terms of the agreement that we have reached are as follows. The income earned by our foreign
subsidiaries from precious metal purchase agreements for the 2005 to 2010 taxation years will not be subject to
re-characterization. In addition, we have agreed to increase our inter-company charges for the services rendered
by the Canadian parent company to the foreign subsidiaries by first including the third party costs incurred by the
parent company directly associated with raising capital that was used to fund investments made by foreign
subsidiaries in PMPAs, and secondly increasing the mark-up on costs incurred by the parent company that are
charged to the foreign subsidiaries, including attributable capital raising costs, from 20% to 30%. In addition, the
transfer pricing penalties included in the re-assessments for 2005 to 2010 will be reversed. Interest will be
adjusted to reflect the implementation of this agreement, and finally, the principles included in this settlement
will apply to all taxation years subsequent to 2010.
To be clear, the settlement does not definitely determine the Canadian taxable income in years after
2010; rather, it establishes a framework that we will apply and the CRA will abide by, assuming of course that
there hasn’t been a change in law or a material change in our facts that has an impact on the transfer pricing
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analysis. The application of this agreement, after applying non-capital losses otherwise available, will result in no
additional cash taxes for the 2005 to 2010 taxation years, although a small amount of interest will likely accrue.
The application of the principles of this agreement to taxation years 2011 to 2017 is expected to result in cash
taxes payable of approximately $5 million. The net result is a cash outlay for all past taxation years of less than
$10 million.
From an accounting perspective, share issue costs reduce share capital rather than being deducted as an
expense in the statement of income. Accordingly, the tax benefit related to these costs, which are deducted for
tax purposes over a five-year period, is also recognized in share capital. As a result, in recognizing the tax benefit
of the non-capital losses utilized to offset the additional taxable income arising from this settlement, a significant
component of which relate to share issue costs, we anticipate recording a deferred tax expense of approximately
$15 million in the statement of earnings with an offsetting deferred tax recovery reflected directly in the
statement of shareholders equity.
As we have previously indicated, the implication of the terms of this settlement will all be reflected in the
Company’s financial results for the three months and year ending December 31, 2018. The total impact of this
settlement on our Q4 2018 after-tax earnings, including current and deferred taxes, ancillary interest, and
associated legal expenses, is estimated to be $30 million, of which approximately $15 million would relate to a
deferred tax expense.
To estimate the go-forward impact of this settlement on future income, we can use 2017 as an example.
The impact of this settlement on 2017 is estimated to increase Canadian taxable income by about $3 million to $4
million, which, assuming that we are taxable, would result in additional Canadian taxes of approximately $1
million. We believe this represents a fair proxy of the impact for taxation years subsequent to 2017 assuming the
capital raising costs associated with funding requirements of our foreign subsidiaries is not significantly different
from those incurred in 2017.
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As Randy has already stated, we view this as a great outcome for the Company and its shareholders as,
with this settlement, we have eliminated any uncertainty as it relates to the 2005 to 2010 taxation years and
clarifies the anticipated Canadian tax implications for all taxation years subsequent to 2010.
With that, I turn the call back over to Randy.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you, Gary. Before I open up the call for questions, I would like to take a moment and thank Al
Meghji and his team at Osler, Hoskin & Harcourt LLP for their outstanding work and representation throughout
this process. Certainly, their hard work played a large part in expediting–and I know it didn’t feel like it was
expedited–but expediting the resolution of this dispute. Thank you, Osler team.
With that, we’d like to open up the call for questions, Operator.
Q & A
Operator
Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. If you would
like to ask a question please press star, then the number one on your telephone keypad, and if you would like to
withdraw your question, press the pound key. We also ask that you limit yourself to one question and one follow-
up question.
Your first question comes from the line of Ralph Profiti from Eight Capital. Please go ahead. Your line is
open.
Ralph Profiti – Analyst, Eight Capital
Good morning, everyone. Thanks for taking my question.
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Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thanks, Ralph.
Ralph Profiti – Analyst, Eight Capital
Randy, just wondering, in your view, what compelled the CRA to settle? Was it something in the discovery
appeal process that came out? Was it the Cameco decision, or was it other factors?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Our case is very unique, so I would actually say it was the fact that nothing came out in the discovery
process, is probably the way to put it, as opposed to something in the discovery process. It was a very thorough
process. As most of you have heard, I sat myself on the stand through many days of discovery, and we’re very
comfortable with what we’ve done in this Company, and so I have to say, it’s probably the fact that nothing came
out in the discovery process.
Ralph Profiti – Analyst, Eight Capital
Yes, okay. Gary, what happens to that $164 million that’s secured against lines of credit? Does that
immediately get freed up?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
We would immediately contact the CRA to release that. I would expect it to be released in the very near
future.
Ralph Profiti – Analyst, Eight Capital
Okay, that’s it for me. Thanks very much.
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Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you, Ralph.
Operator
Your next question comes from the line of Fahad Tariq from Credit Suisse. Please go ahead. Your line is
open.
Fahad Tariq – Analyst, Credit Suisse
Hi, good morning. Thanks for taking my question. You mentioned using 2017 as a proxy, and maybe it
would result in additional tax of $1 million. In the past, you’ve said that you have maybe six opportunities on the
radar right now over the next 18 months in terms of M&A, maybe in the $100 million to $300 million range. If we
think about more deal flow in 2019, 2020, have you thought of sensitivity? How high could that additional tax go?
Maybe 2017 isn’t the right proxy, maybe it’s more deals than what was done this year. Any sense of how high
that number could go? Are we talking in the range of $5 million? Is it higher than that?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Right now, we’ve been funding most of our transactions with cash flow, and we still have very strong cash
flow, should be in excess of $500 million, so the financing cost by using our cash flow is essentially zero. There’s
very little cost in terms of closing those transactions. There will be some, but I wouldn’t say it’s substantive by any
means. Our technical team is constantly reviewing projects, some of them in Canada, some of them outside of
Canada. Our legal team, our financial team all provide support on that side, and so I don’t see much of a
difference in that activity level between 2017 when we only had one small transaction and of course this year
where we’ve had several large transactions. The activity level and the effort is pretty consistent across the board,
so really the only difference would be a bit of extra financing expense, which I’d also point out is tax deductible, so
it also protects you on that side. It’s not significant. Not significant at all.
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Fahad Tariq – Analyst, Credit Suisse
Okay, great. That’s really helpful. Just a quick follow-up. On the call, it was mentioned earlier that
something about $5 million in cash taxes. Can you just repeat that–what that was for?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Well, again, what we’ve done here is increase the charges that the Canadian parent charges the foreign
subsidiaries for services rendered from 20% mark-up to a 30% mark-up, so that increases the income in Canada
such that for all past taxation years, we expect the application of this settlement to increase income such that
we’ll owe the Canadian Government about $5 million in past taxes.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
So, that’s the total cost until the end of 2017 for all years.$5 million.
Fahad Tariq – Analyst, Credit Suisse
Got it, thank you.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you.
Operator
Your next question comes from the line of Cosmos Chiu from CIBC. Please go ahead. Your line is open.
Cosmos Chiu – Analyst, CIBC World Markets
Hi Randy, Gary and Patrick. I guess you received an early Christmas present here. You can all kind of go
home and take vacation now, I guess.
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Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Never.
Cosmos Chiu – Analyst, CIBC World Markets
Never? All right, I’ll call you on Christmas Eve. The $5 million here, does that include any kind of interest?
I know it’s a much smaller number than what we had anticipated, which is great, but is that the number, and
when will we get a final number because $5 million is what you’ve calculated right now, but when are we going to
get that final number, and when would you have to pay the CRA?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
When will we get a final number? We think that’s a good number. We think $5 million is what will result
from the application of this for all past taxation years. It does not include interest. Roughly, we’d expect that
interest will be about $3 million to $4 million on top of that. That’s why we’ve suggested that, in total, the
disbursement that will result from the application…
Cosmos Chiu – Analyst, CIBC World Markets
Less than 10.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
…is 10, yes. When will this happen? I think what will happen is that the CRA will reassess based upon the
application of these principles. We’ll look to re-file our returns with the application of these principles and settle
up as quickly as possible.
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Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
So, to be clear, the CRA will reassess the 2005 to 2010 tax years, which this is a part of, and then we will
re-file everything subsequent to that following these principles.
Cosmos Chiu – Analyst, CIBC World Markets
And this is–yes, sorry Randy. You were saying?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
I was just going to say, so that will be dealt with over the very short term here and reported into our
quarterly results at the end of this year.
Cosmos Chiu – Analyst, CIBC World Markets
My follow-up question is, this is final, unlike the Cameco situation where the CRA came back and
appealed, this is different. This is an agreed upon settlement between WPM and CRA, so this is final, there’s no
more overhang, that’s it?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Cosmos, for many years now we’ve been saying that our objective was to get a settlement, because the
settlement is principled–a principled settlement because it applies to the future periods. Obviously, we are a
business that’s continuing to grow, and we wanted to provide clarity and certainty in terms of going forward, so
our objective has long been to settle this versus take it to trial. We were confident about winning in 2005 to 2010,
but we wanted to try and find a solution that adds that clarity on a go-forward basis, and I think that’s what we’re
delivering here.
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Cosmos Chiu – Analyst, CIBC World Markets
Great, thank you. Congrats again.
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Thanks, Cosmos.
Operator
Your next question comes from the line of Trevor Turnbull from Scotiabank. Please go ahead. Your line is
open.
Trevor Turnbull – Analyst, Scotiabank
Yes, hey, Randy. I’m having a hard time coming up with any further questions on the (inaudible) $10
million amounts, so maybe just changing gears slightly, given the metal price environment being down a bit year
over year, is there anything we should be thinking about with respect to carrying values going into year-end?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
You mean in terms of potential for write-downs or anything? We’re in pretty good shape. I would say that
in cleaning up the Primero situation, we’ve got a much stronger San Dimas stream when I go down the asset list.
We have all–it’s all first quartile, second quartile production, and so our–you know, the most important thing is
not only are we profitable on these assets, but our partners are profitable, and that’s a real key thing, so even at
these prices I think we’re in great shape, so I can’t see–-when I look at the portfolio, I can’t see anything in terms
of carrying values.
Trevor Turnbull – Analyst, Scotiabank
Okay, great. Thank you very much.
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Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thanks, Trev.
Operator
Your next question comes from the line of Chris Terry from Deutsche Bank. Please go ahead. Your line is
open.
Chris Terry – Analyst, Deutsche Bank
Hi, Randy and team. Congrats on getting the deal done. I think most of them have been answered from
previously, but just to make sure I’ve got this right, I guess, previously you had been assessed in different stages,
2005 to 2010, 2011 to 2015, and then beyond, so this deal–I think you’ve already answered this, but just to be
clear, this deal you’ve done relating to 2005 to 2010, there’s no future announcement to make about 2011 and
forward? It’s basically you’ve settled on ’05 to 2010 and then you’ve put a framework in place for how things
move going forward, so this is a clear line in the sand, is that correct?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Yes, it is. You’re right. We were reassessed for 2005 to 2010. We are under audit for 2011 to 2015. We
haven’t been reassessed for that, but the agreement with the CRA and with the Ministry of Justice tax court
representing the CRA, the agreement is that we will apply this principle of charging instead of the traditional 20%
mark-up on services provided, we will now charge 30% for the services that are provided from our Vancouver
team, our Canadian-based team to our foreign subsidiaries and include, obviously, the financing costs in that
calculation that are related to those subsidiaries, the acquisitions those foreign subsidiaries make. It’s a clear
agreement that goes forward, and yes, I’d like to think that this means we don’t have–we’ve got an agreement
there. I mean, we’re all subject–like everyone, we’re all subject to changes in law, but right now we’re very
comfortable with where we are.
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Chris Terry – Analyst, Deutsche Bank
Okay, very good. Then just for Gary, I think you said $30 million total this quarter, so $15 million of
deferred taxes. Where will all the–sorry, the other legal costs, etc., where will they all come through in terms of
the P&L?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Legal costs would be reflected in our G&A, and then the tax and interest would be included in the interest
expense line, and then the taxes, the $5 million of taxes would be reflected in current taxes, and I think we’d
anticipate about a $15 million deferred tax expense as well.
Chris Terry – Analyst, Deutsche Bank
Okay, great. That’s it from me. Well done again, thanks guys.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you, Chris.
Operator
Your next question comes from the line of Shane Nagle from National Bank Financial. Please go ahead.
Your line is open.
Shane Nagle – Analyst, National Bank Financial
Congrats, guys on a good process here. Most of my questions have been answered. Just real quickly on
the–so I guess, structurally, how does it work? When will they formally close the audit for 2005–sorry, for 2005 to
2010, presumably, once you’ve re-stated, and then there never was a reassessment issued, will they have to then
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issue one for 2011 to 2015 and then you re-file, or is this just kind of you restructure it, you pay the penalties and
fees, and it goes away?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Yes, you know, Shane, we’re still working through a lot of those mechanics. What I would anticipate is
that for the 2005 to ’10, we’ll get a revised Notice of Reassessment, and then for future years I would expect that
we would re-submit our returns based upon the application of this agreement and pay any taxes that were owing.
If there were periods where we owed taxes and then because we had losses carrying back to offset those taxes
and their interest, we would wait for the CRA to issue Notices of Reassessment claiming those interest charges.
Shane Nagle – Analyst, National Bank Financial
Okay, so there is a minor headline risk around them maybe continuing to put some of that stuff out, but
nothing major?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Sorry, I’m not sure what you mean by headline…
Shane Nagle – Analyst, National Bank Financial
Well, I guess they may reissue a reassessment, but it’s not like they’ve, I guess, cancelled the agreement
that’s in place. It’s…
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Correct. No, that’s correct.
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Shane Nagle – Analyst, National Bank Financial
And that $30 million, that is your estimate up to 2017, right? I just want to make sure that’s clear, so
2005 (inaudible).
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
That’s our estimate up until Q4 2018.
Shane Nagle – Analyst, National Bank Financial
Oh, okay. Perfect. That’s great.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
That’s the estimate of the impact of this on our Q4 2018 financial results.
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Yes, just to be clear, we’ve always stated that, should we arrive at some kind of negotiated settlement, we
would reflect it in the period that we executed that settlement. Given that that’s happened in Q4 2018, we’ll
reflect the cumulative impact of this settlement in our Q4 2018 financial statements.
Shane Nagle – Analyst, National Bank Financial
That’s great. Thanks again, guys. Congrats.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thanks, Shane.
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Operator
Your next question comes from the line of Dan Rollins from RBC Capital Markets. Please go ahead. Your
line is open.
Dan Rollins – Analyst, RBC Capital Markets
Thanks very much. Congrats, guys. That’s a great outcome for you, for your shareholders, and for the
space. I’m not going to ask you about $5 million here or there, but two questions for me. How does this change
now? Let’s look forward. What’s the deal flow like, what’s the potential to do some more acquisitions and
continue to grow this business going forward?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Dan, we’ve said it for a long time, we’ve done our best to make sure that this did not interrupt our means
of growing this business, and I think we’ve got a pretty good track record in terms of acquisitions that we’ve made
even this year. It has, obviously, made it a bit more challenging, so I look forward to being able to pursue growth
without having these handcuffs in terms of having this burden on us. There’s still plenty of demand. Our business
is essentially supplying capital to the mining industry, and I think that the cost of our capital is actually very
attractive in today’s world, and so I do see a lot of opportunities in that space. I know that Haytham and his team
are very busy even through the Christmas holidays. They’re kind of whining to me about it, but as I said, we’re
now focused, or we’ve always been focused forward, but now we’re freely focused forward.
Dan Rollins – Analyst, RBC Capital Markets
That’s great. Guess there shouldn’t be any whining anymore. Just on that, the other aspect is you’re
generating a lot of free cash flow now. This really removes any future risk. Any thoughts? I know it may be early,
but you know I love to ask it, any thoughts about maybe increasing that dividend and really starting to share that
wealth with investors?
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Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
We do have a little bit of debt on the books in terms of our revolver. That revolver has been very effective
to help us grow substantially over the last four or five years without penalizing or overly diluting our shareholders,
so it’s been a very effective tool, and I’d like to chew that down a bit. Obviously, the first use of proceeds is
putting money back into the ground. It always has been and always will be, so if we see the right opportunities,
correct opportunities to continue to build the reserve and resource base that is the foundation of value in this
Company, we will do that first; secondly, continue to strengthen up the balance sheet. We’ve got plenty of
capacity on it right now, but strengthen that up, and then thirdly the dividend. That’s been the way we’ve always
ranked our capital allocation here.
Dan Rollins – Analyst, RBC Capital Markets
Okay, perfect. Maybe just Gary, does this help improve the interest costs going forward on that, and with
this risk out of the way, is there potential to increase the debt facility if metal prices continue to be weak and you
need to add a little bit more debt on to add some more accretive transactions?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Dan, I’m constantly approached by banks wanting us to take more debt down. I believe that the $2 billion
revolver that we’ve got is sufficient for our needs today. We’ve got about $800 million available under that
facility. It provides an attractive form of capital for us, and so I don’t anticipate requiring any further capital in
order to execute on the growth strategy that Randy’s alluded to.
Dan Rollins – Analyst, RBC Capital Markets
Okay, perfect. Again, thanks again, congrats, and you make modeling your Company a lot easier now.
Appreciate it.
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Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you, Dan.
Operator
Your next question comes from the line of Carey MacRury from Canaccord Genuity. Please go ahead. Your
line is open.
Carey MacRury – Analyst, Canaccord Genuity
Good morning, guys. Congrats on the deal.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you.
Carey MacRury – Analyst, Canaccord Genuity
I just had a question. In the industry, there’s a few examples of where there’s some offshore streams that
have actually been structured through Canada, and I just wanted to confirm that all your offshore streams are
actually offshore streams. Is that correct?
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
That’s correct, yes. That’s a principle we established when we created this Company. We’ve stuck to that
principle. It’s–we believe that all–it should be tied to where the resources are being mined.
Carey MacRury – Analyst, Canaccord Genuity
Okay, great. Secondly, just on the legal cost that’s sitting in, let’s say G&A this year, is there a quantum
number that we could model for that going forward?
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Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Yes, that number, that $30 million estimate includes the legal costs, so that’s what we expect to see on
our Q4.
Carey MacRury – Analyst, Canaccord Genuity
I guess what I’m saying is what would be sitting in your G&A number?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
What do you mean, like as at the…
Carey MacRury – Analyst, Canaccord Genuity
For 2018, in terms of–you’ve been incurring legal expenses all along, I’m assuming.
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Yes. There will be a bigger legal expense in Q4, and as Randy has indicated, that’s contained within that
$30 million estimate as to what the total impact of this settlement will be.
Carey MacRury – Analyst, Canaccord Genuity
Okay, great. Thank you.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thanks, Carey.
Operator
Your next question comes from the line of Brian MacArthur from Raymond James. Please go ahead. Your
line is open.
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Brian MacArthur – Analyst, Raymond James
Good morning. Most of my questions have been answered, but just so I understand this, and it relates
back to you sort of estimate based on 2017 set-up, it’s $1 million a year, but for this financing, because technically
what happened is–you know, that’s one of the charges you give the subsidiary, so let’s just say going forward, and
I realize you have lots of free cash flow and probably aren’t going to have to do this, but say you drew $400
million on the revolver, that goes to an offshore deal, you have a cost there. Do you charge it up 20% to 30% and
then the interest cost gets deducted back against the Canadian income tax you pay? Is that the way it works?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
Yes, good question Brian. No, the only costs that we’re adding to the costs that we’ve already charged for
are the costs associated with raising capital, so interest costs are not part of what we need to be charging.
Brian MacArthur – Analyst, Raymond James
Ah, okay.
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
It would–there’s a small cost every year that we have for extending the revolver, and we would look at
allocating a portion of those to the foreign subsidiaries and charging for that, but not interest.
Brian MacArthur – Analyst, Raymond James
Right, so the interest provides the shelter to whatever Canadian income you have, effectively, right, and
that other part is just a small part you put out?
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
That’s correct.
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Brian MacArthur – Analyst, Raymond James
Okay, great. Thank you very much, that’s very helpful.
Gary Brown – Senior Vice President, Chief Financial Officer, Wheaton Precious Metals Corporation
You’re very welcome.
Randy Smallwood – President, Chief Executive Officer, Wheaton Precious Metals Corporation
Thank you, Brian. I’d like to thank everyone for dialing in today. On a personal level, I do have to say that I
am excited about future investor meetings and conferences where I get to speak more about our business and
growth potential and less about tax and transfer pricing.
Fifteen years ago, I was part of a team that came up with the concept of precious metal streaming. We
created a fair and sustainable business model that has created value for all stakeholders, and for the last six years
we have had the Canada Revenue Agency trying to pick holes and find weakness in that business model. As a
result, we and our shareholders have suffered. I can’t tell you how happy we are with this result, and I do hope
that with this clarity provided by the settlement, Wheaton can go back to being valued purely based on the
virtues of its portfolio of high quality assets and the strong growth profile that we have over the coming years,
founded on what I consider to be one of the best portfolios of precious metals production in the entire industry.
This has already been a very successful year for Wheaton. We started the year by restructuring our San
Dimas stream. Over the summer, we added two new significant streams on low cost, long life mines. Our
production is currently on track to exceed guidance, and now we’ve settled our longstanding tax dispute with the
CRA. 2018 has truly become a foundation year, and with this resolution I believe that this is the strongest
foundation we have ever had.
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I want to thank the shareholders who have had the patience to support us and persist through this
lengthy battle, and I also want to welcome back the shareholders who felt they needed more clarity on the
strength and sustainability of our business model. We are open for business and will continue in our efforts to
grow the best precious metals Company in the world.
Again, thank you, everyone, and we do wish all of you a merry holiday season and a very prosperous new
year.
Operator
This concludes this conference call for today. Thank you for your participation and please disconnect your
lines.
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