Wheaton Precious Metals Corp (WPM) 2011 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by.

Welcome to Silver Wheaton's 2011 first-quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions).

I would like to remind everyone that this conference call is being recorded on Monday, May 9 at 10 AM Eastern time. I will now turn the conference over to Mr. Brad Kopp, Vice President of Investor Relations. Please go ahead.

Thanks, Stephanie, and good morning, ladies and gentlemen, and thank you for participating in today's call. I'm joined today by Randy Smallwood, Silver Wheaton's President and Chief Executive Officer and Gary Brown, our Chief Financial Officer.

I would like to bring to your attention that some of the commentary on today's call may contain forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Please refer to the section entitled Description of the Business Risk Factors in Silver Wheaton's annual information form which is available on SEDAR and in Silver Wheaton's Form 40-F on file with the US Securities and Exchange Commission.

The annual information form sets out the material risk factors that could cause actual results to differ including the absence of control of our mining operations from which Silver Wheaton purchases silver, risks related to such mining operation and the risk of a decline in silver prices. Lastly, it should be noted that all figures referred to on today's call are in US dollars unless otherwise noted. Now, I would like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.

Thank you, Brad, and thank you, ladies and gentlemen, again for dialing into our Q1 2011 conference call. It is my great pleasure to speak with you today as Silver Wheaton's new President and Chief Executive Officer.

I thought it would be a good way to start off this call by giving a bit of background about myself for those that don't know me. I originally started with Wheaton River, sort of the parent company way back in the '90s, late '90s, too long ago actually.

I was focused on building Wheaton River and Goldcorp into one of the best gold companies in the world, where it is now. As part of that process, I was on the team that founded Silver Wheaton back in 2004.

Both Peter Barnes and I were part of an overall team in Wheaton River. And after 2004, I wound up providing support on a part-time basis when I continued to also build Wheaton River and Goldcorp into its current form.

Once Goldcorp had completed the Glamis acquisition, I swung over to Silver Wheaton on a full-time basis early in 2007 and joined as the Executive Vice President of Corporate Development with my primary focus being to identify quality accretive investment opportunities for Silver Wheaton's shareholders. As most of you are aware in early 2010, I took on the role of President, a change that was essentially the start of a process of eventual transition into the Chief Executive role which I recently accepted.

Our Company is fundamentally the same; very strong and on track to continue creating significant shareholder value. I am extremely excited and ready to be the CEO of what I consider to be one of the best management teams running one of the best companies in the global mining space.

There will not be significant changes mainly because our management team has strong ownership of the current Silver Wheaton business model. I would like to take this opportunity to once again thank Peter for his significant contributions to the Company and for his great leadership and mentorship over the years.

Peter has dedicated a significant amount of time and effort into growing Silver Wheaton for the last six years. Given the Company's considerable success since its inception, we are now a dividend paying company. We have one of the strongest growth profiles in the precious metals business and we are the second largest silver company in the world by market capitalization.

Peter undoubtedly accomplished many of his long-term goals for Silver Wheaton and made the decision to retire early in April. He will be missed but as a shareholder, I am certain you will find that your Company continues to be in good hands with our management team going forward.

Our team remains committed to positioning Silver Wheaton as the best investment choice in the precious metals space. Silver Wheaton is very unique in that it limits the normal risks associated with typical mining investments while offering all of the rewards of well-run profitable mines.

Nowhere is this more obvious than in this current environment of inflationary cost pressures on operating and capital costs as of course in Silver Wheaton, our operating costs and capital costs are fixed and assured to the investor. It is our view that Silver Wheaton offers investors a very unique and one of the best ways to get exposure to increasing silver prices. We've significantly outperformed the price of silver since our inception and continue to offer significant advantages compared to investing in a silver exchange traded fund or raw bullion.

The introduction of a dividend in the first quarter of this year was yet another way to differentiate us from bullion or ETF investments and last Friday we announced our second quarterly dividend of $0.03 per share. With one of the strongest cash operating margins in the sector which at $28 per ounce was 87% of gross revenues, Silver Wheaton has the capacity to offer its shareholders meaningful long-term growth whether it be via capitalizing on the many silver streaming opportunities that lie ahead or meaningful dividend growth. Both are goals our Company will strive to achieve.

Let's talk a bit about production during the first quarter of 2011. Silver Wheaton reached record production during the first quarter of 6.2 million silver equivalent ounces; represents a very solid start to the year and resulted in earnings and operating cash flows more than doubling in the quarter from a year prior.

We have reviewed our production forecasts after looking at production during the first quarter and are still comfortable and reiterate our 2011 estimate of between 27 and 28 million silver equivalent ounces which represents an increase at 15% over actual production during 2010. The growth over the rest of this year will primarily come from Penasquito and Keno Hill as each of these projects reaches their design production levels going forward.

On the sales side in the first quarter our sales of silver and gold equivalent, 4.9 million silver equivalent ounces. Obviously a discussion on inventory is required because inventories have climbed.

At the end of the first quarter, our silver equivalent ounces produced but not yet delivered by our partners stood at 3 million silver equivalent ounces which is an increase of 700,000 ounces from the end of 2010 from the end of Q4. This increase is primarily due to a timing of concentrate shipments from the Yualiyacu mine and to a much lesser extent from the Zinkgruvan, Mineral Park and Campo Morado mines. You will note that each of these mines produces concentrates and therefore are subject to -- more subject to inventory pressures.

At Yualiyacu we had a bit of a one-off event and as we have experienced this in past quarters, production and stockpiling at bulk concentrate has led to a somewhat inconsistent delivery schedule. This has been an ongoing challenge at Yualiyacu ever since Doe Run's La Oroya smelter ceased operations back in early 2009.

As Yualiyacu is one of our largest producers, our sales have been impacted on a regular basis in terms of these bulk concentrates finding their way to market. In Q1, the Yualiyacu didn't even ship bulk concentrates.

The mine actually produced slightly better than what we expected but none of the bulk concentrates were shipped. It is all in stockpile at the mine site or down at the port facility and hasn't been shipped yet. Those deliveries will occur later on this year.

I am pleased to announce that Glencore has converted their process operations at Yualiyacu and are not producing a bulk concentrate anymore. As of about a month ago, they have swung over to producing three different concentrates at the mine as opposed to the original two.

They now produce -- they continue to produce their zinc concentrate but now instead of producing a bulk concentrate, they are now producing a copper concentrate and a lead concentrate. All of these concentrates are much more salable and therefore should lead to more consistent concentrate shipments and ultimately more consistent silver deliveries to Silver Wheaton. This is a major step forward in some of the challenges we have seen out of Yualiyacu and the impacts on our inventories over time.

Glencore intends to clean up the rest of the bulk concentrates and have them shipped out during 2011 to flush out that inventory and we anticipate these shipments or the first of these shipments -- it actually has occurred here in Q2 in the current quarter.

While we're talking about inventories, there are three points that I think I should make and lay out for investors to understand. First off, as Silver Wheaton grows to 43 million silver equivalent ounces by 2015, our inventories will naturally have pressure to increase.

These inventories represent silver in process and the more silver we produce, naturally the more silver will be tied up in process. This is really prevalent at mines that produce concentrates as there is more shipping challenges and transportation challenges in concentrate shipping.

The second point I want to make is that all mining companies typically see a bit of an increase in product inventories in the first quarter of any year. Operating companies will typically try -- and I quote this -- squeeze the pipeline at year-end during Q4 in order to improve their overall year-end results.

This squeezing of the pipeline, this cleaning out of the concentrate sheds and making sure you get shipments out, is really just to try and get the year-end results up but that pipeline winds up filling back up again in Q1. So I would predict that out of all four quarters, Q1 will be the one where we do see bumps in any mines especially where we produce concentrates.

Thirdly, it is worth noting that as we look at the silver price profile against our inventory buildup, our shareholders have gained significant value. Let's look at Yualiyacu for instance.

If we assume that the inventory that is built up at Yualiyacu to date was to sell right now today, just the timing and difference of silver prices with silver prices appreciating, we've gained over $12 million in value because of the difference in payable schedules because of the delays on inventory. So it's not a -- it's a pretty positive outcome to our inventory situation.

Also during the first quarter, we did provide an update on reserves and resources and really proud to announce this is the sixth consecutive year that we've had strong growth overall. Reserves in 2010 or at the end of 2010 increased by 9% year over year. It's a combination of acquisitions and organic growth.

The acquisition of the silver and gold stream from Augusta's Rosemont copper project in Arizona increased our reserves by about 7%. And in addition, continued exploration success at the mines from which Silver Wheaton purchases its silver led to another year of strong organic reserve growth, more than replacing reserves mined during the year.

Most importantly on a per-share basis -- and I stress this -- on a per share basis, so it takes out the acquisition side and the financing side of the equation -- attributable silver equivalent reserves have increased in every year since the Company's inception in 2004, growing at an annualized rate of 34% over that period, resulting in the creation of significant shareholder value.

This is a point that I love highlighting when comparing ourselves versus an ETF or a bullion investment. It really shows the strength of our investments. It is also worth noting that every ounce in our reserves and resources all the way across is part of a mining and production plan, making our reserve and resource portfolio one of the highest quality portfolios in the entire industry.

There's only two assets that are still waiting for permits and that is expected very near term and once construction gets going on those, they will be feeding into a production plan. So every ounce is part of a production plan and will be delivered into the market over the next 15 to 20 to 25 years as these assets move forward.

It's probably good to update everyone with respect to our cornerstone assets. Penasquito has achieved, as I mentioned earlier on, production capacity of 130,000 tons per day and will continue ramping up through the quarter.

Mill throughput averaged below 100,000 tons per day in the first quarter, but commissioning activities have focused on getting consistent operation of the high-pressure grinding/re-grind circuit and the second-quarter activities will be directed towards stabilizing this plant performance and reaching that design capacity of 130,000 tons per day.

While first-quarter silver production attributable to Silver Wheaton from Penasquito was slightly less than forecast, our annual production guidance from the mine still remains unchanged. There are other areas where Penasquito is actually doing a bit better, especially metallurgical recoveries and such. So very happy with the way things are moving forward there.

We're also pleased with the development of Pascua-Lama. It is on track for a production start in the first half of 2013. Over 45% of the preproduction capital budget of $3.3 billion to $3.6 billion, over 45% of that pre-production capital budget has been committed. Earthworks are more than 65% complete. The first concrete for the process plant is being poured here in Q2 and the pre-strip mining is expected to begin in Q4 of 2011.

There's already been significant mining for earthworks for the primary crushing pad and [collared the portal] and so the project is moving forward on schedule and on budget; we're very happy with the way Barrick's moving forward there. On the corporate development side, our team remains very busy pursuing further partnerships and some stability in the silver price will likely result in a significant increase in silver streaming opportunities especially as mining companies seek to capitalize on the benefits of the current silver price environment.

Silver streaming as a form of financing is just as attractive today as it was in the lower silver price environment as we continue to step forward in working with partners -- as partners working forward in advancing these projects. For companies striving to grow their core operations or expand their core asset base, streaming provides a very flexible form of financing with many advantages compared to the traditional forms of debt -- financing from debt or equity.

We currently have in excess of $560 million in cash. We have an undrawn $400 million revolver that is available at very attractive interest rates until 2014, and we have very robust operating cash flows.

All of this adds up to Silver Wheaton being extremely well-positioned to help mining companies achieve their growth goals and I'm confident that we will work towards delivering to our shareholders as we have in years past. With that, I would like to pass the call over to Gary Brown our CFO to review our financial results in a bit more detail. Thank you.

Thanks, Randy. Prior to reviewing Silver Wheaton's unaudited financial results for the three months ended March 31, 2011, I would like to remind everyone that all monetary figures discussed are denominated in US dollars unless otherwise noted. In addition, this is the first quarter the Company's results have been prepared in accordance with International Financial Reporting Standards. As a result, some of the comparative figures have changed from what was previously disclosed under Canadian GAAP.

Silver Wheaton started 2011 with another strong quarter, generating record levels of silver equivalent production, revenue, net earnings and operating cash flow. Silver Wheaton's precious metal interest generated 6.2 million silver equivalent ounces of attributable production in the first quarter of 2011, representing a 10% increase from the comparable period of the prior year.

As at March 31, 2011, approximately 3 million silver equivalent payable ounces attributable to Silver Wheaton had been produced by our partners and will be recognized in future sales as they are delivered pursuant to contract terms.

For the first quarter of 2011, Silver Wheaton generated revenue of $158 million from the sale of 4.8 million ounces of silver at an average price of $32 per ounce and in excess of 2500 ounces of gold at an average price of $1537 per ounce. This represented an 84% increase relative to the first quarter of 2010 driven by an 85% increase in the average selling price of silver and a 40% increase in the average selling price of gold.

Earnings from operations for the first quarter of 2011 amounted to $127 million representing a margin of 80% of revenue compared with $52 million or 61% of revenue for the first quarter of 2010 with the increase in margin being consistent with the increase in the average realized selling price.

Cash G&A expenses were $5.2 million in the first quarter of 2011 compared to $4.1 million for the comparable period of 2010 with the increase due primarily to increased personnel related costs. Excluding non-cash stock-based comp, the Company continues to expect G&A expenses to be in the range of $19 million to $21 million for 2011.

Under IFRS, the Company's warrants issued with an exercise price denominated in Canadian dollars are treated as financial liabilities on the balance sheet and are remeasured at fair value on a quarterly basis with all fair value changes being reflected in net earnings. This fair value adjustment resulted in a $6 million gain for the three months ending March 31, 2010.

As all warrants with the Canadian dollar exercised price were exercised or expired prior to December 31, 2010, there was no fair value adjustment affecting the 2011 results. This fair value adjustment has no impact on cash flow.

Silver Wheaton generated net earnings in the first quarter of 2011 of $122 million representing an increase of 142% from the first quarter of 2010. Similarly, operating cash flow increased by approximately 121% to $127 million in Q1 2011 relative to the comparable period of the prior year.

Basic earnings and cash flow per share were $0.35 and $0.36 respectively compared with $0.15 and $0.17 for the previous year. After negating the $6 million gain on warrants outstanding with the Canadian dollar exercise price, the previous year's earnings per share would've been $0.13 with cash flow per share being unaffected.

Breaking down the operating results further, during the first quarter of 2011 silver production and sales relative to San Dimas totaled 1.6 million ounces and 1.7 million ounces respectively compared to 1.2 million ounces of production and sales in the first quarter of 2010. The increase in the most recent quarter is primarily attributable to the 375,000 ounces being delivered directly by Goldcorp in connection with their four-year commitment to deliver 1.5 million ounces of silver per year arising as a result of their sale of San Dimas to Primero Mining Corp. which was completed in the third quarter of 2010.

Zinkgruvan produced approximately 500,000 ounces of silver during the first quarter of 2011, representing a 29% increase from the comparable period of the prior year with production in the first quarter of 2010 having been adversely affected by an ore pass blockage. Silver sales for the first quarter of 2011 relating to Zinkgruvan totaled 321,000 ounces compared to 498,000 ounces in the first quarter of 2010 with the difference between ounces produced and ounces delivered relating to the timing of concentrate shipments.

Yualiyacu produced 683,000 ounces of silver in the first quarter of 2011 with only 120,000 ounces being delivered and sold with Silver Wheaton during the quarter. Concentrate shipments from the Yualiyacu mine continue to be affected by the shutdown of the Doe Run Peru smelter and the intermittent delivery of their bulk concentrate to various overseas smelters which has resulted in timing differences between silver being produced by the mine and silver sales being recognized by Silver Wheaton.

Although we understand that Glencore has established alternative offtake arrangements, potential for these timing differences continues to exist. As of March 31, 2011 we estimate that payable silver contained in concentrate which has been produced but not yet delivered to Silver Wheaton relating to Yualiyacu is approximately 1.2 million ounces.

Attributable silver production at Penasquito rose by 117% to 1.2 million ounces in the first quarter of 2011 relative to the first quarter of 2010, reflecting the ramping up of the milling operation. Silver sales in the first quarter of 2011 relating to Penasquito amounted to 941,000 ounces compared with 424,000 ounces in the first quarter of the prior year.

The Cozamin mine produced 325,000 ounces of silver in the first quarter of 2011, a decrease of 19% relative to the first quarter of the prior year with remediation activities in the Avoca regions of the underground mine curtailing mining rates throughout the most recent quarter. Silver sales during the first quarter of 2011 relating to Cozamin amounted to 271,000 ounces consistent with the comparable period of the prior year.

During the first quarter of 2011, silver production and sales relating to Silver Wheaton's interest in the Barrick mines amounted to 722,000 ounces and 680,000 ounces respectively, slightly lower than the comparable quarter of the prior year due primarily to lower production levels at Veladero. Gold production and sales relating to the Minto mine were 2,925 ounces and 2,524 ounces respectively, down significantly from the comparable period of the prior year due to a combination of lower mill throughput and lower grades from stage four of the main pit.

Attributable silver production from other mines amounted to 1.1 million ounces in the first quarter of 2011, representing a 15% increase from the prior year. Attributable to increased production relating to Neves-Corvo and Mineral Park as well as the addition of production from Keno Hill which commenced production in the fourth quarter of 2010.

Silver sales relating to other mines amounted to 741,000 ounces in the first quarter of 2011 compared to 654,000 ounces in Q1 2010 with the difference between silver produced and sold in the most recent quarter due primarily to concentrate buildup at Campo Morado and Mineral Park.

During the first quarter of 2011, $4.6 million of interest was capitalized to the cost of the Barrick silver interest. Of this amount, $4.3 million relates to interest accreting on the discounted future payments due to Barrick with the remainder being attributable to bank debt which bore an average interest rate of just over 1% in the quarter.

As a reminder, the Company expects to capitalize all interest costs associated with currently outstanding obligations until the Pascua Lama mine achieves commercial production. Overall, the Company's cash balances increased by $135 million in the first quarter of 2011 comprised of $127 million of cash flow from operations, $21 million from investing activities offset by $13 million of cash outflows relating to financing activities.

The $21 million of cash flows generated from investing activities related primarily to the disposition of the Company's interest in Ventana. The cash outflows relating to financing activities reflects the repayment of $7 million of debt outstanding under the Company's term debt facility and approximately $11 million of inaugural dividend payments.

As of March 31, 2011 the Company had $564 million of cash and cash equivalents on hand and $100 million of debt outstanding under the term debt facility. This cash balance combined with the $400 million of available credit positions the Company well to execute on its growth strategy.

That concludes the financial summary and with that, I'll turn the call back over to Randy.

Thanks, Gary. Stephanie, I'd like to open up the call to questions please.

(Operator Instructions) Tony Lesiak, Macquarie Capital.

Randy, I was wondering if you could provide some more detail on Yualiyacu. As part of the move to producing the three separate cons, could you indicate whether you expect any changes in the payability terms and could you detail what those terms are at present?

I can't give you the actual -- there will be an improvement in the payable terms mainly because the lead concentrates will have a better payable rate than the bulk. The bulk is pretty similar to what the copper cons will have.

So there will be a slight improvement in terms of payable rates. I haven't seen the actual numbers right now in terms of where they are but it should be a slight improvement.

Okay, where are these various cons expected to be sold?

Well that's the beauty of having these separate cons is that they're open to a much wider market. So they'll move into the trading space and probably move to a much larger -- a broader collection of smelting operations that can handle them. And so they'll go into the open market. Once they make it to Tidewater it's into the open market as to where they go.

Okay, given your forecast growth, where do you see your silver inventory at year-end 2011?

I think we're going to catch up. The bulk con -- cleaning out the bulk con at Yualiyacu will catch up and probably clean up a substantial part of the Yualiyacu inventory. As Penasquito gets up to 130,000 tons per day though, there probably will be continued inventory growth in that area itself.

The rest of the operations -- Keno Hill has a much smaller and a much higher grade operation. There's not a lot of tons there. And because it is so high grade, it will carry some silver there.

You know, I would have to say that I would think that we will be somewhere less than where we are now, but a significant drop at Yualiyacu will probably be swallowed up to a lesser extent by some growth at Penasquito and Keno Hill and a couple of the other assets.

So what you're saying is that it shouldn't change too much by year-end then?

No, I think it will actually be a little bit less. But it's tough to forecast this thing. At year-end, I mean what typically happens, as I mentioned, is Q4 everything gets squeezed and the concentrate sheds get emptied or as empty as they can get. So I wouldn't see significant change in terms of where we are now. I would expect that Yualiyacu will get rid of the bulk concentrates and that will offset any inventory growth at the other assets.

Finally, just a question for Gary. Could you provide some guidance on expected depreciation rates for 2011 and 2012?

You know, I think you can look at the depletion in Q1 and look at the mix of revenue there with 36% of revenue coming from San Dimas which has a much lower depletion rate than all of our other interests and you know, use that as guidance for where you -- where depletion is going to be for the year.

Dan Rollins, UBS Securities.

Just one follow-up question on Yualiyacu. Exactly how much payable is in inventory for Yualiyacu?

I think the number's about 1 million ounces. Gary, can you confirm that?

Yes, we estimate it at about 1.2 million ounces at March 31.

Okay, perfect. And Glencore -- that's going to come out by the end of the year or should we more -- more like four or five quarters? Are they pretty confident it's going to be out by the end of December?

Yes, they're pretty confident. They're not producing bulk concentrate anymore and so it's a matter of just cleaning that out and their target is to have that done by the end of this year.

Excellent, perfect. Just moving on to a second asset that's supposed to come on stream is the Rosemont mine. Right now there has been a few delays. When do you expect you might start paying out your first installments on the current agreement of the $230 million?

Dan, the US Forest Service has given them a firm schedule for the record of decision which is -- I believe it's in January of 2012. And so that's a real key point that they have to have.

It is the Environmental Impact Assessment, impact studies are to be completed and reviewed by that point. And their target is to move forward shortly after that once that goes through and they get full approval.

So we could be -- of course there's a couple of other criteria they have to make. They have to have adequate financing in place and then they have to commence -- commit to commencing the construction and put forward their plans.

Once that happens, we will be stepping up. So if everything falls into play, we'd love to have that one coming on. Construction is starting on that one in 2012 and we could be contributing during 2012, the latter half.

Okay, so really the record of decision until that comes, there's no payments going out?

That's right, no, we don't -- the way the deal's structured, we don't take the permitting risk because we can't manage it. And so we don't put any money in until they actually get the permits going forward and they've got the proper financing to put the mine into production.

Excellent, that's great. Thanks, guys.

Hector Bonilla, H2H Investment Inc.

I'd like to ask you if any of you have any comments regarding the CME Group's decision to raise margin requirements on COMEX a total of five times in the past two weeks. Does that change Silver Wheaton's outlook on the spot price of silver long term?

It's Randy here, Hector. I mean I think it's a case of some short-term pain for some long-term gains. If it strengthens up the overall drive, it will -- it obviously had a big impact last week in terms of the commodity price itself and moving that forward. But I think it will underscore more strength and more stability into the silver market and we are very supportive of that.

David Haughton, BMO Capital Markets.

Randy, returning back Yualiyacu, what sort of production rate should we expect in our status quo here? Should we be looking at the 560,000 to 700,000 ounces a quarter kind of level? Is that sustainable?

Yes, we expect -- I think our official guidance was around 3 million ounces over the year. I don't have the exact number here in front of me but -- and so that would work up to around the 700,000 ounces.

Okay, so the changes that they have got of these various concentrates are not going to alter that outlook by just putting the product into better payable cons?

Yeah the -- we're talking between 92% to 95% and so it's not a significant change in payable rates. So -- and without seeing the detailed agreements, I wouldn't want to commit too much to that over and above. But, you know what we -- I think our guidance for production was around 3 million ounces. So payables would probably be in around the 2.8 million ounce range.

Okay, with any of the contracts you have got with regard to the buildup of inventory, do you have any recourse to penalties to some of the underlying producers?

No, there's no recourse. Of course the bulk of the value in these inventories isn't in the silver, that's the advantage of streaming is that the producers are extremely motivated to move these inventories out also because there's a lot more value in zinc and lead and copper in these inventories than there is in silver. And so we rely on that motivation for them to minimize the amount of inventory.

Saw that you have reiterated your guidance for the year at 27 million to 28 million ounces production. How do you feel about your confidence level of reaching that in sales?

We won't reach that in sales. We will -- sales is always going to be -- there's a payable rate applied to every single one of our operations. And so that's a production number between 27 and 28. Sales -- it varies at each -- the payable rates at each operation vary and so we will probably be around 90 to 95% of that number.

[Dennis Rosney], private investor.

Yes, I think my question was already answered. I tried to knock it off before it was asked. It was already asked by somebody. So we can move on to the next question.

Haytham Hodaly, RBC Capital Markets.

Just a couple of quick questions. Most of my questions have also also been answered.

First one I guess will be probably for Gary. Gary, your guidance for G&A for $19 million to $21 million, that was you said excluding stock-based competition?

That's right.

You said there was some additional manpower etc. Where have you added personnel etc.?

Well, Randy has added an individual to his corporate development team and I have added to my finance and admin team. That is primarily where the additions have come in.

And is there some type of severance charge that's going to be associated with Peter's departure at all?

There might be in Q2 here. It won't be -- we still think it will fall within the original guidance that we provided though.

And maybe for Randy, do you have an update on the strike that's taking place at Primero's San Dimas?

Yes, it's over. They settled. It was just about a week ago. I'm trying to figure out what day it is right now.

But the -- just --- it was about five or six days ago, they settled. The inventory that built up -- it's important to note that the mine continued producing through that strike. It was the mill that was on strike.

And so the mine built and stockpiled quite an inventory of ore ready for processing, and they have had excess capacity in that mill for quite a while. So they're going to utilize some of that excess capacity to catch up on the production.

So they are still very comfortable with their year targets even though they've had this -- the strike lasted for about a month. And they're feeling very comfortable in terms of reaching those targets and we think so too.

Okay, now just one question that's come out a lot over the last little while, just with the silver prices rising, when they were in the mid-40s to high 40s, there was speculation that some deliveries wouldn't -- from San Dimas, pardon me, wouldn't get made etc. Was there ever any discussion whatsoever on that with Primero?

No, I mean, in fact the faster they make deliveries, the faster they get to the 3.5 million ounce hurdle point where they get 50% of it. We changed that contract specifically during that transaction between Goldcorp and Primero to specifically give them incentive to sort of maximize those production payables so that they can take advantage of some of the spot price of silver.

And you know for a mine that is typically producing 4.5 million to 5 million ounces a year, that is a very reachable target for them to go forward. So it makes no sense for them to hold back. If anything, they were incentivized to move forward.

Operator, this will be the final question, thanks.

Steven Butler, Canaccord Genuity.

Got in by the wire. Thanks, Gary.

Question for you guys. Randy, as it relates to the dividend and it's -- the increase or the $0.03 per quarter, $0.12 annualized obviously is a nice start, a lot of investors would ask for a lot more than that over time, how does your dividend policy look?

Has it changed at all in light of current sort of bonanza silver prices and bonanza sort of levels of earnings? Will you revisit that dividend policy? Perhaps maybe when -- I think you've said before when Penasquito is more fully ramped up in terms of its profile and/or will it also await potential for more silver stream deals?

Well, Steve, you are right. It has been bonanza times in terms of cash. Q2 is going to be a very impressive quarter for us in terms of that.

The dividend was just started in Q1 and obviously it's left us a lot of capacity to grow that yield. I tend to -- my primary focus and our primary focus as a team in Silver Wheaton is to try and continue with accretive transactions to grow through acquisitions and that to me is sort of the primary focus of where we should feed our cash flow.

That being said, with these kind of cash flows and these kind of operating margins that we're seeing right now, there's no doubt capacity to increase that. We do want to see Penasquito up at 130,000 tons per day.

I am confident that they will be there by the end of the second quarter. I know they're making some good progress there already.

And so we would like to see that get to the design level before we consider that. But with respect to -- we don't have a formal dividend policy as it stands, we've only just initiated it, and I don't want to be -- the one thing we do want to do is put some stability into how we go forward.

So I'm not going to make -- we're not going to make short rash decisions based on things. But definitely towards the latter half of this year, early next year, there's plenty of capacity to add some growth there.

Okay, thanks very much.

Thanks, Steve, and thank you everyone for calling in to I guess my first phone call as -- or conference call as the Chief Executive Officer. I'd just like to reassure everyone that we are owners of this business model, we're very happy with where we have got to and we are still driving forward to add value to you the shareholders. Thank you very much, everyone. Thanks, operator.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.