Wheaton Precious Metals Corp (WPM) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Silver Wheaton's 2012 year-end results conference call. (Operator Instructions). I would like to remind everyone that this conference call is being recorded today, Friday, March 22, at 11 a.m. Eastern time.

I'll now turn the conference over to Mr. Patrick Drouin, Vice President of Investor Relations. Please go ahead.

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, Senior Vice President and Chief Financial Officer.

I'd like to bring to your attention that some of the commentary in 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. 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 the actual results to differ, including the absence of control over mining operations from which Silver Wheaton purchases silver, risks related to such mining operations, 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'd like to turn the call over to Randy Smallwood, our President and Chief Executive Officer.

Thank you, Patrick, and good morning, ladies and gentlemen. Thank you for dialing in.

2012 was a tremendously successful year for Silver Wheaton. The Company set new financial and operating records and fulfilled its commitments to grow organically, to acquire accretive new streams, and to increase the dividend.

In 2012, our attributable production increased for the fourth consecutive year to a record 29.6 million silver equivalent ounces.

And in August, we were pleased to announce the addition of two new precious metal streams from Hudbay Minerals. This acquisition provided immediate cash flow and maintained our policy of investing in low-cost, high-quality assets with strong operating partners. We remain extremely busy evaluating new opportunities, and in 2013 we have already acquired two new gold streams from Vale, adding yet another strong partner and significantly increasing Silver Wheaton's production profile.

With these additions, we now forecast production of 33.5 million silver equivalent ounces in 2013, and by 2017 we will reach 53 million ounces of silver equivalent production, an increase of nearly 80% from 2012.

With 2013 forecast to be yet another year of record production, we anticipate robust cash flows throughout the year, which should enable us to have the capacity to quickly repay the drawn debt facilities entered into for the Vale transaction. 2012 was an exceptional year for Silver Wheaton, and I am pleased to say that 2013 is shaping up to be even more exciting.

With respect to the fourth quarter of 2012, we're of course proud to announce we finished the year with our strongest-ever quarter of silver equivalent production and sales. In that fourth quarter, our production and sales reached all-time highs of 8.5 million ounces produced and 9.1 million silver equivalent ounces sold, respectively. We expected sales to rebound in the fourth quarter as precious metals produced from various mines worked their way through the processing, transportation, and smelting pipeline, and this is exactly what happened, as we saw sales increase 78% from the third quarter of 2012. And of course, as a result, we experienced record quarterly revenues, with operating cash flows increasing 55% compared to the same quarter in 2011.

This strong fourth quarter resulted in Silver Wheaton achieving record 2012 annual production of 29.6 million silver equivalent ounces and record sales of 27.3 million silver equivalent ounces. And while organic growth certainly contributed, the significant production increase was largely due to the addition of the precious metal streams from Hudbay's 777 mine. Our record production and sales led to record financial results in 2012, with revenue and cash flow increasing around 15% each over 2011 numbers. Gary Brown, our Chief Financial Officer, will provide more detail on this shortly.

In 2011, we introduced a dividend policy where 20% of the previous quarter's operating cash flow is distributed in the form of a quarterly dividend. Having the dividend linked directly to operating cash flows gives our shareholders a direct connection to both the price of silver and to our industry-leading growth profile. This new policy resulted in a 95% increase in dividend payments made in 2012 over 2011, even though this was a period of weakening precious metal prices.

Furthermore, our strong fourth-quarter cash flows resulted in yesterday's announcement that our first dividend of 2013 will be a record $0.14 per share.

We're also pleased to report that Silver Wheaton has reached yet another milestone, surpassing 1 billion ounces in silver equivalent reserves, an increase of over 38% from year-end 2011. With the recent additions of Hudbay and Vale, coupled with organic growth from our partners' exploration success, we now have just over 850 million silver ounces and almost 5 million gold ounces, which, when combined, is more than 1.1 billion ounces of silver equivalent reserves.

On the production side, we released our one- and five-year production guidance earlier in the year. For 2013, Silver Wheaton is forecasting another year of production growth, climbing 13% from our 2012 levels to 33.5 million silver equivalent ounces. This growth is primarily driven by a full year of production from Hudbay's 777 mine, as well as production from the newly acquired Salobo and Sudbury mines around the same time.

Silver Wheaton's growth to 53 million silver equivalent ounces by 2017 will be driven largely by Barrick's Pascua-Lama project and Hudbay's Constancia project, both of which are expected to begin production in late 2014. Further contributing to this organic growth are the expected startups of Augusta's Rosemont project in 2015 and, of course, continued expansions at the newly acquired Salobo and the Sudbury mines.

It is worth highlighting that this growth is organic and does not account for any additional acquisitions that we may make in silver and gold streams. As we have shown already this year with the acquisition of the two new gold streams from Vale, the market has never been better for acquiring new, accretive precious metal streams. With the Vale deal, we showed that sizable deals with the largest of the diversified miners are possible.

That does not mean that we're not still looking at the single asset development opportunities out there. What we will promise to our shareholders is that we will only pursue accretive deals on high-quality, long-life assets with strong operating partners.

It is worth noting that our capacity to continue making additional acquisitions has not been hampered by the Vale deal. We currently have well over $1 billion in capacity, $1 billion in capacity, for additional acquisitions through two credit facilities put into place earlier this year.

So in summary, Silver Wheaton has one of the strongest organic production growth profiles in the entire precious metals industry, with almost 80% growth anticipated over the next five years. Our organic growth track continues to advance with Constancia and Pascua-Lama on track for late 2014 startups, Salobo reaching 24 million tons per annum around the same time, and, of course, Rosemont targeting a 2015 production startup. Complementing this organic growth and with our expected cash flows, our balance sheet remains very strong, and we continue to look for additional accretive opportunities. We feel that we are in an ideal market to further add to our portfolio of high-quality assets with strong operating partners.

With more silver reserves than any other silver company in the world, an industry-leading organic growth profile, and a strong track record of accretive growth, we believe that we continue to offer the premier investment vehicle for not only silver, but precious metals, investors worldwide.

With that, I would like to turn the call over to Gary Brown, our Senior Vice President and Chief Financial Officer, to provide a bit more detail. Gary?

Thank you, Randy, and good morning, ladies and gentlemen.

Prior to reviewing Silver Wheaton's audited financial results for the three months ended December 31, 2012, I would like to remind everyone that all monetary figures discussed are denominated in US dollars, unless otherwise noted.

Silver Wheaton finished 2012 with a record-breaking fourth quarter, marked by record levels of silver equivalent production and sales volumes, which translated into record-setting quarterly revenues, operating earnings, net income, and operating cash flows.

The Company's precious metal interests generated a record-setting 8.5 million silver equivalent ounces of attributable production in the fourth quarter of 2012, 10% higher than the prior quarter, attributable primarily to the cessation of the sharing mechanism at San Dimas, better grades at Veladero, and the inclusion of a full quarter's production from Hudbay's 777 mine. This production level was 22% higher than the production for the comparable period of the prior year, due primarily to production from 777, which was added to the portfolio in Q3 2012.

Payable silver equivalent ounces produced, but not yet delivered by our partners, decreased by approximately 1.4 million ounces during the fourth quarter to 3.8 million ounces, primarily attributable to the shipment of concentrate produced in prior quarters at Yauliyacu, Penasquito, and 777.

Silver equivalent sales volumes amounted to a record-setting 9.1 million ounces in Q4 2012, with 80% of this relating to silver and 20% relating to gold, which was almost 80% higher than the prior quarter due to higher production at San Dimas, combined with the reduction in ounces produced but not delivered at Yauliyacu, Penasquito, and 777. Compared to Q4 2011, sales volumes increased by over 50%.

Revenue for the fourth quarter of 2012 amounted to a record $287 million with an average realized selling price of $31.46 per silver equivalent ounce sold. Again, this represented an increase of almost 80% from the prior quarter and a 50% increase from the comparable period of the prior year.

Earnings from operations for the fourth quarter of 2012 amounted to $196 million, representing yet another record for the Company and an increase of 57% relative to the prior quarter and 31% relative to the fourth quarter of 2011, with operating margins decreasing by 10% to 68% in the fourth quarter of 2012, due primarily to the higher depletion rates associated with the silver and gold sales from 777.

Cash-based G&A expenses were $7.6 million in the fourth quarter of 2012, representing an increase of $3 million on a year-over-year basis, with the increase being primarily attributable to higher personnel-related costs.

Net earnings amounted to a record-setting $178 million in the fourth quarter of 2012, compared to $145 million in the comparable period of the prior year, with basic earnings per share increasing by 22% to $0.50 per share from $0.41 per share.

Operating cash flow for the fourth quarter of (technical difficulty) 2012 increased by 55% from prior year to a record-setting $254 million, or $0.72 per share, resulting in a dividend to be paid in April of $0.14 per share.

During the fourth quarter of 2012, the value of the Company's long-term investment portfolio of shares and other publicly listed mining and mineral exploration companies decreased by $28 million, which has been reflected in the statement of other comprehensive income.

The strong fourth quarter completed another record-setting year, with the Company achieving new records across virtually every measurable financial metric. Attributable silver equivalent production rose to a record 30 million ounces, 6% above the Company's most recent guidance and 17% above that achieved in 2011. This contributed to record sales of 27 million silver equivalent ounces, representing a 30% increase relative to the prior year, with silver ounces produced by our partners but not yet delivered to Silver Wheaton decreasing by 300,000 ounces to 3.8 million silver equivalent ounces, with significant reductions at Yualiyacu being partially offset by a number of smaller increases at other mines.

Revenue was a record-setting $850 million, compared with $730 million in 2011, with the 16% increase being attributable to the combination of a 30% increase in silver equivalent sales volumes, partially offset by a 10% decrease in the average realized selling price.

Earnings from operations increased by 8% to $631 million in 2012, representing yet another record for the Company, with margins falling to 74% of revenue in 2012 from 80% in 2011, due primarily to a combination of higher depletion rates and lower silver prices. Cash flow from operations increased by 15% to $719 million, compared to $626 million in 2011, again representing a record for the Company. This translated into operating cash flow per share in 2012 of $2.03, compared to $1.77 in 2011.

Cash G&A expenses totaled $24 million, consistent with Company guidance, in 2012, compared with $19 million in 2011, with the majority of the increase relating to increased personnel costs and charitable donations. For 2013, the Company estimates that cash-based G&A expenses will amount to $32 million to $35 million, with the increase from 2012 being largely attributable to increased personnel costs, combined with the Company's heightened commitment to corporate social responsibility initiatives and giving back to the communities in which it or its partners are involved.

Net earnings were a record-setting $586 million in 2012, representing a 7% increase compared to the net earnings of $550 million generated in the prior year, with basic earnings per share amounting to $1.66 in 2012, compared to $1.56 in 2011.

The operational highlights for the fourth quarter of 2012 included the following. San Dimas produced 1.7 million silver ounces in Q4 2012, including 375,000 ounces from Goldcorp, representing a 7% increase relative to the prior year due to improvements in throughput, grade, and recoveries. This increased production translated into silver sales of 1.6 million ounces, a 10% increase from the prior year.

Yualiyacu produced 616,000 ounces of silver during the fourth quarter of 2012, representing a slight increase from the comparable quarter of the prior year. However, silver produced but not delivered relative to Yualiyacu decreased by approximately 550,000 ounces during Q4 2012, resulting in silver sales of 1.1 million ounces. This was almost five times the silver sales recognized relative to Yualiyacu in the prior quarter and almost 70% higher than the silver sales recognized in Q4 2011. As at December 31, 2012, payable silver contained in concentrate that has been produced but not shipped relative to Yualiyacu amounted to approximately 600,000 ounces, a decrease of over 1 million ounces from the prior year.

Penasquito generated attributable silver production in excess of 1.4 million ounces during the fourth quarter of 2012, representing a 26% decrease from the prior quarter and a 12% decrease from Q4 2011, with such decreases being attributable primarily to the scheduled mining of lower-grade material. Silver sales for the fourth quarter of 2012 relative to Penasquito amounted to 1.6 million ounces, with the difference between ounces produced and sold being attributable to the reduction in payable silver produced but not delivered to Silver Wheaton.

Water shortages due primarily to an unprecedented regional drought resulted in plant throughput being constrained at Penasquito, reducing throughput to 98,800 tons per day during the fourth quarter of 2012, about three-quarters of designed capacity. Goldcorp has indicated that they continue to bring additional water wells into production, and a water entailing study is expected to be completed in the first half of 2013 to develop a comprehensive long-term water strategy for the Penasquito district.

The Barrick mines produced 934,000 ounces of silver in the fourth quarter of 2012, representing a 29% increase from the fourth quarter of 2011, due primarily to higher grades and recoveries at Veladero. This resulted in silver sales of 826,000 ounces, representing a 9% increase relative to the prior year.

The 777 mine generated attributable silver equivalent production of 1.2 million ounces during the fourth quarter of 2012, representing the first full quarter of production from this mine since closing the transaction with Hudbay on September 28, 2012. However, due to the delivery of silver and gold produced in the prior quarter, silver equivalent sales relative to 777 amounted to 1.8 million ounces, comprised of 28,000 ounces of gold and 300,000 ounces of silver.

In summary, silver and gold produced but not delivered from Yauliyacu, Penasquito, and 777 decreased by approximately 1.4 million payable silver equivalent ounces during Q4 2012.

Overall, the Company's cash balances increased by $223 million in the fourth quarter of 2012, comprised of $254 million of cash generated from operations, offset primarily by $29 million of cash outflows attributable to financing activities, including $7 million of debt repayments and $25 million of dividend distributions. As at December 31, 2012, the Company had $778 million of cash and cash equivalents on hand and $50 million of debt outstanding under the term loan facility.

On February 28, 2013, the Company closed two new credit facilities, a $1.5 billion bridge loan facility with a term of one year and a $1 billion revolving credit facility having a five-year term. These two facilities replace the term loan and the $400 million revolving credit facility, and as such, the $50 million of term debt outstanding at December 31, 2012, was repaid.

In addition, the Company acquired two gold streams from Vale, making $1.9 billion in upfront payments using a combination of cash on hand and a $1.09 billion drawdown under the bridge facility. The Company's strong future cash flows, combined with available credit capacity, including $1 billion available under the new revolving credit facility, positions the Company well to satisfy its funding commitments, sustain its dividend policy, while at the same time providing flexibility to consummate additional accretive precious metal purchase agreements.

Lastly, there has been no substantial change in the status of the audit of the Company's taxation years 2005 to 2010 by the CRA.

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

Thank you, Gary. Operator, we'd like to open up the call for questions, please.

(Operator Instructions). John Bridges, JPMorgan.

I'll take the honor. Thank you very much. Congratulations on the results. (Multiple speakers). At the end of your talk, you mentioned the Canadian tax review. Does that mean it's over or does that mean that's nothing come out of it yet?

No, it means that nothing has come out of it yet. We had hoped that -- this will be concluded sometime this year, but it's very unclear as to what CRA's timing is on this.

Okay. And then, I see you're a good citizen paying or booking Canadian taxes. I just wondered what we could expect going forward there because you've got Canadian expenses, as well. Is that tax that's booked, and then you've got deferrals that will come through? What's -- how should we model that?

Yes. I mean, we will ultimately pay Canadian taxes on the profits from our Canadian operations. That tax rate, I believe, just went up to 26%. And -- but we won't pay cash, so we're accruing taxes on a deferred basis right now on that income. And we will not pay taxes on that until we've exhausted the loss carryforward position that we've got. And we estimate at current silver and gold prices that we will start paying cash taxes sometime in 2015.

Okay, excellent. And thanks for the higher dividend payment, that's -- I'm sure that's been helpful this morning.

Yes, again it's 20% of our operating cash flow, so there's no change in the actual calculation. But it is definitely a nice bump up, so happy to provide that to our shareholders.

Well done. Thanks, guys.

(Operator Instructions). Trevor Turnbull, Scotiabank.

I just wondered if there was a 43-101 that might be coming out with respect to the Sudbury assets, like we saw for Salobo.

No, the Sudbury assets -- the scale of the Sudbury assets, they are not material with respect to Silver Wheaton and their contribution, so no need for a 43-101 to be completed.

Okay, cool. That's all I had. Thanks.

Cosmos Chiu, CIBC.

Good morning, guys, and congrats. A few questions here. I guess first off on the Barrick stream, maybe I'm looking too far ahead, but in terms of 2014, are you going to continue receiving production from Pierina, Lagunas Norte, and Veladero? Because I know you're confirmed or you're guaranteed for 75% of capacity. Now you're not really going to know until midway 2014. I'm just wondering how I should model that transitional year in 2014.

They expect to be starting up the mills and starting a production in the second half of 2014.

The way the contract is structured is that once they achieve 75% of production rates, they've satisfied the completion test. And so, until they get to that point -- I know it's tough to predict when that will actually happen. It is a 90-day completion test, and so we've modeled it that we will definitely receive some silver from Lagunas Norte, Pierina, and Veladero in 2014. We're hopeful, of course, that Barrick gets it up and running at full capacity by the end of 2014. That would be great for us.

But -- it's tough to sort of accurately predict where that is. We know -- we've been down at the site. We're pretty happy with what we see going on down there. We think Barrick has made some really good moves in the last few months to attain those targets, and so it's tough to sort of be exactly firm with how that's going to transition. But basically until the completion test is satisfied, we pull silver from the other three mines to fill up any shortfalls.

Okay. So certainly Q1 and Q2 2014, you're going to have some type of production coming from those other three currently producing mines.

Yes, definitely. Yes, no, the --

I think we'd expect it for the entire year.

Yes, because it's a 90-day completion test, that it is a shortfall, there will be some for the entire year or close to the entire year. We're hopeful they can actually satisfy it by the end of the year.

Okay. In terms of -- switching gears a little bit, in terms of the bridge loan that you have in place, I guess it's up to the option of Silver Wheaton to choose either option number one, LIBOR plus 1.7%, or Bank of Nova Scotia's base rate plus 0.7. Which one is more favorable at this point in time?

Oh, LIBOR for sure.

Okay, so that's why -- that's how I should model. Is it (multiple speakers) a one-time kind of option? Is that how things work?

No, no, base rate loans would only be taken to the extent that we thought we'd be borrowing for only a few days. Whereas LIBOR, you've got to draw down for a minimum of 30 days. But LIBOR is much lower than base rates.

At this point in time.

Yes.

Okay. And then, I guess, given that there is a duration fee on the bridge, certainly it's going to be pending on what happens in terms of more permanent financing at the end. Would you consider switching some of that outstanding loan on the bridge into the revolver, given that there's no duration fee on the revolver?

Yes, we'd consider that. But I think you need to recognize that we put $2.5 billion of credit facilities in place knowing that we wouldn't need all of those to close the Vale transaction. So it really depends on what additional deal flow occurs here.

Great (multiple speakers)

But we would definitely consider moving some of the bridge to the revolver.

Great, thanks.

[Tyler McKenna], [QB Asset Management].

Great quarter. I (multiple speakers) a question regarding the process of how the stream and the royalty. I understand the basics, but I'm wondering, do you ever take the silver or gold in your possession or are you just kind of a middle person that gets the money?

We take delivery of silver credits. We could hold those if we want and convert them into hard silver, but we don't hold that.

We keep our business model simple for our shareholders to understand we don't hold silver. If our shareholders choose to do that, they're more than welcome to and there's lots of avenues for that.

So we want to make sure that our model is clean and simple and easy to understand. What we provide access to is high-quality precious metals production, and so we don't hold any of that metal. We could choose to, if we wished, if we wanted to, but there's other avenues that I think are probably more efficient than forcing that upon all our shareholders.

Right. So you haven't [paused] -- I know Franco Nevada starts to do that, but I was just wondering if you guys had thought about that at all.

I didn't know that Franco had actually started holding gold, but yes. Again, our objective is to make sure that this Company is easy to understand and easy to comprehend what it provides.

As I mentioned, there's lots of avenues for people to hold silver and gold, so for us to actually mix that into our business model, I think, probably provides complication. I know there are shareholders that we have that do like that idea, but they've got avenues to pursue that. And at the same time, there's also shareholders out there that perhaps don't like that idea. So we choose to keep our business model simple and easy to understand.

Understood, thank you.

Adrian Mitchell, WoodlawnPost.

I was looking at the 80% growth that you have projected, and I want to know how that reflects upon your cash operating activities and your dividend moving forward over the next five years.

Well, because our dividend is actually connected to 20% of our operating cash flow, that's how it's calculated, our dividend will grow with that organic growth.

As we climb in 80% of production, our dividend payments will climb. Obviously it's a function of commodity prices, too, but we are bullish in terms of precious metal prices on a longer-term basis.

So we expect to see growth both from organic -- we also -- this is the best market that we've ever seen in terms of opportunities out there to make accretive acquisitions, and so we see acquisition growth. And then, we also see exposure to precious metals being a good one. So I would see continued -- I am hopeful that we can continue to grow that dividend irrespective (technical difficulty) -- we've got three different (technical difficulty) we'll add to that dividend growth over the next five years.

Steve Butler, Canaccord Genuity.

Good morning, guys. Randy, or maybe for you, Gary, on the tax discussion on Sudbury where you have a -- I guess the upfront payment was $570 million, US, would there be a little longer timeline to paying cash taxes on the Sudbury Vale assets?

Well, I think we would pay taxes on those assets once the deposit is fully depleted. So that really doesn't affect when it is that we're going to ultimately pay cash taxes. What drives that is really the loss carryforward position.

Okay. Second question was -- I can't remember the last quarter you guys actually delivered more sales than production, and of course Q4 was anomalously a great quarter that way, where you reduced concentrate inventories. Is that enough and is that maybe a year-end thing, cleaning house, if you will, but -- sweeping the floors. But Randy, is there any chance here that you get some lingering effects for additional concentrate inventories sold above production in Q1?

Yes, Steve, it's important to sort of reinforce -- and I know I've said this in the past and I'm going to reinforce it again. When it comes to produced but not yet sold, we traditionally do see in the fourth quarter companies squeeze the pipelines. They want to -- their year-ends are important to them and they want to make sure that they get their production and sales numbers out, too.

So the guidance that I've given in the past, and I'd reiterate it now, and thanks for giving me the opportunity to, is that our Q4s will always be good ones in terms of getting sales climbing up. I can't promise that they'll always exceed the production in the fourth quarter, but they will definitely be ones where we do clean out that produced but not yet sold category.

Unfortunately, what happens traditionally -- typically in the first quarter is that that pipeline then swells back up again. So there may be a bit of swelling that -- expanding that total pipeline, that concentrate pipeline back up again here in the first quarter, and we may see a bit of growth there.

Overall, it all averages out in the long run. But it does give us some pretty big swings in Q4 and Q1, mainly because of that year-end incentive that most of our partners have.

Right. And was there also a small quirk, Randy, from Q3 into Q4 with respect to the 777 mine in Manitoba?

There definitely was. I mean, 777 didn't deliver any sales to us, even though they have the production in the third quarter.

And we did announce that back at the conference call, so we had subsequently received a large amount of -- some of the initial deliveries from the 777 shortly after the end of the third quarter. So that definitely does have -- was a bit of a quirk that probably even highlighted this a bit more than expected. It may be one of the things that actually drove it to exceed the production number.

For sure, for sure. Great quarter. Thanks, guys.

Andy Schopick.

Thank you and good morning. Randy, I want to ask you about average cost trends. When the Company really was established, you were able to acquire these streams at very attractive silver prices. And clearly, the properties and streams that you have in existence are pretty well fixed.

You've characterized the opportunities for acquiring new streams as being very strong, but what I'm really interested in trying to understand is under what terms and conditions are future streams likely to be acquired? Clearly, there appears to be a little bit of creep in your average cash costs, in part from the higher gold contributions when gold is basically -- a silver equivalent. But in reality, I'm wondering whether you can give any color on prospects for future deals in terms of average cash costs, and whether the mix of the business is going to put a little bit of pressure on your average cost per ounce in the future.

One of the, I think, dominant strengths of our business model is the fact that our costs are fixed by contract.

But you're correct in saying that when we've brought on a bit more gold, with the production payments at $400 per ounce, that averages back to a bit higher than our -- when you convert that to a silver equivalent, it averages back to a higher cost than our traditional $3.90 per ounce.

I will point out that when we did the Hudbay transactions, the Hudbay transaction is using a production payment of $5.90 per ounce, not $3.90. So there's also a bit of an increase in there.

I think when you look at the industry as a whole, and I often wonder why, when I look at increased costs for mining across the space, both from a capital and the operating side, and we see a lot of the producing mining companies out there struggling with it, there's significant inflation in the industry. People talk about relatively low inflation rates on an overall basis, but I tell you the mining industry is not seeing that. There's been a significant inflation over time, and there's no doubt that with that, our costs of acquisition, our costs of production are going to climb with that market.

When we started this Company, silver was trading at around $5.00, $5.50 an ounce back in 2004. Obviously, it's worth more now than it was then.

So in terms of -- in terms of costs, I think it's the huge attraction. It's one of the most dominant features that we provide in our Company, in our business model, is the fact that I can tell you what our costs will be in 2015. I can tell you what our costs will be per ounce in 2020. You've got that confidence.

And it's the one significant difference that a Company like Silver Wheaton provides for mining investors, for commodity investors out there, precious metals investors, is that there's not going to be surprises that way. They are fixed. Our capital contributions are fixed by contract and our ongoing operating costs. And so, it really -- in this environment, I think it really highlights the strength of our business model, and obviously our operating is also showing that strength.

That's clearly the case for the existing streams and properties that you have. I think my question is more toward the future prospects and what the costs would likely be to enter in or acquire new streams and really what that's more likely to look at because, clearly, I don't think you can do the kinds of deals that you were able to do in the past when you correctly noted that silver was, like, $5.00 an ounce back when you started the Company.

Yes, Andy, and I agree. I'd love to still buy silver at $5.00 or $10 an ounce, but (multiple speakers)

So would I.

It is worth a lot more. So there's no doubt that metal we buy now is worth more than metal that we've bought in the future.

What we do is, in terms of forward forecasting, we take what we think is a relatively conservative forward cost curve, a series of cost curves. We do a probabilities thing, and that's how we apply it. And what I can assure you is that based on most reasonable projections in terms of where we see commodity prices going, all of our acquisitions will be accretive. It has to pass that test. We haven't changed our method of estimating value. We won't change our method of estimating value, and I think our track record to date has shown that pretty strong.

So in this world, we are confident that precious metals will be -- continue to gain in value. Watching what's been happening in the euro over the last week has been, I think, quite refreshing. It shows how fragile the whole fiscal system is out there. A small little country like Cyprus.

So anyways, I hope that answers your question. There's no doubt it will be more expensive in the future, but that's because gold and silver are worth a lot more than they were in the past.

Of course. Well, I'll be curious to see what kinds of deals you're able to do in the future. Thanks very much.

Thank you, and thank you, Operator. Thanks, everyone, for dialing in.

Thank you, everyone, for dialing in to our conference call today. This concludes today's conference call. Please disconnect your lines.