Wheaton Precious Metals Corp (WPM) 2013 Q3 法說會逐字稿

Good morning, ladies and gentlemen, thank you for standing by. Welcome to Silver Wheaton's 2013 third quarter results conference call.

(Operator Instructions)

I would like to remind everyone that this conference call is being recorded on Tuesday, November 12, at 11.00AM eastern time. I will now turn the conference over to Mr. Patrick Drouin, Vice President of Investor Relations. Please, go ahead.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call. I am joined today by Randy Smallwood, Silver Wheaton's President and Chief Executive Officer, Gary Brown, Senior Vice President and Chief Financial Officer, and Haytham Hodaly, Senior Vice President of Corporate Development.

I'd like to bring to your attention that some commentary in today's call may contain forward-looking statements. There can be know 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 CR10 and Silver Wheaton's Form 40 [app] 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 over mining operations from which Silver Wheaton purchases silver, risk related to mount 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 would 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 to our third quarter 2013 conference call. We are very proud to announce that in terms of silver equivalent production in sales 2013 is well on its way to becoming our best year ever at Silver Wheaton. We had another record quarter of production putting us on track to exceeding our 2013 guidance of 33.5 million silver equivalent ounces.

The third quarter also represented the second best quarter we have ever had in terms of ounces sold. The strength in sales was the result of our year-to-date record production flowing through that sales pipeline. This was specifically true of the Sudbury and Salobo mines, both of which began delivering consistent sales to us in this third quarter.

Today we also announced our fourth quarterly dividend of 2013, $0.09 per share. Our dividend policy gives shareholders a significant and sustainable portion of our operating cash flows and provides direct exposure to our strong production growth. As we grow, so will our dividend.

And, as announced this past week subsequent to quarter end, we added a new gold stream on the Constancia project with Hudbay Minerals. And, late last night we announced the acquisition of an early deposit gold stream with Sandspring Resources on its Toroparu project there in Guyana. We will explain both of these in more detail shortly.

These transactions once again highlight the effectiveness of our business model which provides well needed funding to our operating and development partners while providing Silver Wheaton shareholders exposures to precious metals production from high quality mines and projects.

With respect to our third quarter performance, we achieved record production of 8.9 million silver equivalent ounces, an increase of 17% from the third quarter of 2012. Silver equivalent sales were 52% higher than a year ago coming in at 7.8 million ounces.

While both production and sales were higher in the third quarter, the average realized silver equivalent price was 32% below the third quarter of 2012 which, of course, has a direct impact on our revenue earnings and cash flow. Gary Brown, our Chief Financial Officer, will provide more detail on our financial results shortly.

With respect to the dividend policy, earlier this year we made improvements to this policy in order to reduce the volatility which is caused by rapid moves in silver prices and quarterly fluctuations in our produced but not yet delivered ounces. Our amended policy provides investors with sustainable and now more stable predictable dividends that are directly tied to both commodity prices and Silver Wheaton's organic growth.

As a result of this new policy, our fourth quarterly dividend of 2013 will be, as mentioned, $0.09 per share. This is almost 30% higher than it would have been using the previous dividend policy. So, this is delivered to our shareholders.

With respect to our asset portfolio, subsequent to the end of the third quarter, Barrick announced the suspension of the construction activities at the Pascua-Lama project. Given our stream of -- or for 25% of the life of mine silver from Pascua-Lama, this announcement certainly was disappointing. But, that being said, we do believe that Barrick's decision was fiscally prudent and should improve the economics of this project going forward.

Furthermore, Silver Wheaton did secure an additional year of production from three of Barrick's other mines in exchange for extending the Pascua-Lama completion test deadline by one year to the end of 2017. Though the project suspension is clearly not the ideal situation, we view the additional year of silver as adequate compensation for extending the deadline, and we continue to believe in the Pascua-Lama project.

On the corporate development front, we remain very busy as evidenced by our two recent announcements regarding Hudbay and Sandspring. Firstly, last week we announced that Silver Wheaton had acquired 50% of the life of mine gold production from Hudbay's Constancia project for $135 million.

We have the option to pay this $135 million with either cash or Silver Wheaton shares thus allowing us to maintain our capacity on conservative balance sheet. And, our payment will be made only once Hudbay has incurred $1.35 billion in capital expenditures at Constancia.

Production from this gold agreement is forward weighted with the bulk of the gold production being delivered in the first five years coming from the Pampacancha deposit at Constancia. This gold stream is in addition to an existing silver stream [event] from which we will receive 100% of the life of mine silver from Constancia.

Furthermore, yesterday we announced that Silver Wheaton has entered into an early deposit gold stream agreement with Sandspring Resources for the Toroparu project in the Republic of Guyana in South America. This is our first early deposit agreement and we see it as a natural addition to our portfolio of streaming agreements.

This innovative agreement model was created to provide further exposure to hide potential but earlier stage projects. The early deposit agreement structure allows us to act upon these opportunities while minimizing the risk and up front capital and while maintaining our focus on high quality accretive acquisitions regardless of the size of the transaction.

Since this type of agreement is new for Silver Wheaton we can use the Sandspring transaction to illustrate how the early deposit structure works. Based on Toroparu's project -- on the Toroparu projects currently reported reserves and resources and technical studies, we estimate that the up front payment for a 10% life of mine gold stream for this project would be worth $148.5 million.

Given the early stage of the project, we will advance to Sandspring $13.5 million upon closing of the transaction in order to secure the right to purchase that 10% gold stream. The initial funds provided are intended to carry Sandspring through the process of completing a bankable feasibility study and finishing off all of its permitting process.

Once these are completed, Silver Wheaton should have a higher confidence level on the project's economics and we can then decide whether or not to proceed with the gold stream. Should we decide go ahead we will pay the remaining portion of the upfront payment to help Sandspring build the mine once they have made a decision to move forward and have arranged adequate financing.

If, on the other hand, we decide not to proceed, Silver Wheaton is entitled to a return of $11.5 million. This early deposit agreement structure is very appealing to Silver Wheaton as it gives us the ability to lock in precious metal streams on promising projects at an early stage for a very little up front capital.

From a counter party's perspective, it is also very attractive as it provides funding to allow them to advance their project without subjecting their shareholders to excessive dilution as would be required in today's challenging equity market environment. Given the benefits to both parties involved in these transactions, the nature of today's equity market for junior miners, we are confident that there will be additional opportunities using this early deposit structure.

With a development subsequent to quarter end, Silver Wheaton has adjusted its 2017 guidance to reflect the delay at Pascua-Lama which was partially offset by the addition of the gold stream from Hudbay's Constancia project. As a result, our 2017 guidance has been lowered to 42.5 million silver equivalent ounces from 49 million ounces previously. To keep this in perspective, this still represents an increase of 45% over our 2012 production levels.

It is also important to highlight that the bulk of this growth is front end loaded, primarily coming from the continued ramp up at the Salobo mine in Brazil and the start up of Constancia in late 2014. So, in summary, Silver Wheaton continues to have one of the strongest organic production growth profiles in the precious metals industry with over 45% growth anticipated in the next five years.

And, while we are in an ideal market to add to our portfolio of high quality assets, we remain prudent and measured in our pursuit of additional accretive opportunities. Our early deposit structure will also give us access to some of the more exciting earlier stage projects for very limited capital up front delivering great optionality to Silver Wheaton and our shareholders.

And, finally, with a robust organic growth profile, a strong track record of accretive growth, and more silver reserves than any silver company in the world, we believe that we continue to offer the premier investment opportunity in the precious metals space. With that, I'd 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 unaudited financial results through the three months ended September 30, 2013, I would like to remind everyone that all monetary figures discussed are denominated in US dollars unless otherwise noted.

The Company's precious metal interests generated record attributable silver equivalent production of over 8.9 million ounces in the third quarter of 2013. 17% higher than production from the comparable period of the prior year due primarily to the production generated from the recently acquired 777, Sudbury, and Salobo gold interests. With the contributions from these new sources of production being partially offset by lower production from the Penasquito and Barrick silver interests. Approximately 76% of this production related to silver with the remainder relating to gold.

Silver equivalent sales volumes amounted to 7.8 million ounces in Q3 of 2013, representing a 52% increase from Q3 2012 with such increase being primarily attributable to gold deliveries relating to 777, Sudbury, and Salobo combined with higher silver deliveries from San Dimas and other silver interests with the latter being primarily attributable to zinc driven 777 silver at Cozamin and Neves-Corvo.

Payable silver equivalent ounces produced, but not yet delivered by our partners, amounted to 5.3 million ounces as of September 30, 2013. An increase of about 300,000 ounces over the quarter with the most significant increase being attributable to Yauliyacu.

Revenue through the third quarter of 2013 amounted to $166 million, representing a 3% increase from the comparable period of the prior year, with increased sales volumes more than offsetting the 32% decrease in the average realized silver equivalent selling price of $21.26 per ounce for the quarter.

Earnings from operations for the third quarter of 2013 amounted to $91 million representing a 28% decrease relative to the third quarter of 2012 with operating margins decreasing by 23% to 54% in the third quarter of 2013 due to a combination of lower commodity price and higher cash costs and depletion rates associated with the recently acquired gold interests.

Cash based G&A expenses were $7.1 million in the third quarter 2013 representing an increase of $1.9 million from Q3 2012 with the increase being primarily attributable to higher donations and personnel costs with the number of full time employees increasing by 16% with 29 employees at September 30, 2013. The Company anticipates the cash based G&A expenses for fiscal 2013 should fall in the lower end of the previously provided guidance of $32 million to $35 million.

Interest costs for the third quarter of 2013 amounted to $4.8 million resulting in an effective interest rate on outstanding debt of about 1.7%. Of this interest, $3.2 million was capitalized to the Pascua-Lama and Constancia mineral interests resulting in an interest expense reflected on the income statement of $1.7 million. Other expenses were just under $1 million for the third quarter of 2013 which was primarily attributable to stand by fees on the revolving credit facility which was largely undrawn for the quarter.

Net earnings amounted to $77 million in the third quarter of 2013 compared to $120 million in the comparable period of the prior year with basic earnings per share decreasing by 35% to $0.22 per share from $0.34 per share with the decrease being primarily attributable to the decrease in commodity prices. Operating cash flow for the third quarter of 2013 amounted to $119 million, or $0.33 per share, compared to $129 million, or $0.36 per share, in the third quarter of the prior year.

Based on the Company's modified dividend policy, whereby the dividend is based on 20% of the average operating cash flow generated for the prior four quarters, the Company's Board has declared a dividend of $0.09 a share payable to shareholders of record on November 27, 2013. During the third quarter of 2013, the value of the Company's long-term investment portfolio of shares and other publicly listed mining and mineral exploration companies increased by $10 million which has been reflected in the statement of other comprehensive income.

The operational highlights for the third quarter of 2013 included the following. Attributable production in sales relative to the San Dimas mine amounted to 1.7 million and 1.6 million ounces of silver respectively during the third quarter of 2013 including 375,000 ounces received from Goldcorp. The production represented a 29% increase relative to the comparable period of the prior year driven by higher mill throughput combined with higher grade ore.

Yauliyacu produced 639,000 ounces of silver during the third quarter of 2013, consistent with the comparable quarter of the prior year. However, only 13,000 ounces of silver was delivered in Q3 2013 resulting in an increase in ounces produced but not delivered of over 500,000 ounces in the quarter. As of September 30, 2013, there was approximately 1.6 million ounces of payable silver contained in concentrate that has been produced but not shipped relative to Yauliyacu.

Penasquito generated attributable silver production of 1.6 million ounces during the third quarter of 2013 representing a 16% decrease from the prior year with such decrease being attributable primarily to the scheduled mining of lower grade material with such being partially offset by higher mill throughput. It is important to highlight that production in Q3 2013 was 14% higher than Q2 2013 with Goldcorp having increased mill throughput to an average of 110,000 tonnes per day for the most recent quarter.

Silver sales for the third quarter of 2013 relative to Penasquito amounted to 1.4 million ounces consistent with the prior year with payable silver ounces produced but not yet delivered to Silver Wheaton amounting to 1.1 million as at September 30, 2013.

With respect to water availability at Penasquito, Goldcorp has stated that the Northern Well Field project progressed on schedule during the third quarter of 2013. And, highlighted that year-to-date rainfall has already exceeded the annual average which should contribute to the recharging the water basin over time. This Northern Well Field is expected to be available in the second half of 2014.

The 777 mine generated attributable silver equivalent production of 1.3 million ounces during the third quarter of 2013 comprised of 18,000 ounces of gold and 201,000 of silver, a 9% increase from the prior quarter and a 74% increase from Q3 2012 with the comparable period and prior year reflecting about two months of production.

Silver equivalent sales from 777 amounted to 1.2 million ounces in Q3 2013 which was lower than the prior quarter with Q2 2013 sales reflecting the delivery of 400,000 silver equivalent ounces produced in prior quarters. The recently acquired Sudbury gold interests produced almost 6,000 ounces of attributable gold during the third quarter of 2013, slightly lower than the prior quarter with the reduction being primarily attributable to scheduled maintenance activities carried out during most recent quarter.

Sales volumes relating to Sudbury amounted to over 6,500 ounces of gold with payable gold produced but not yet delivered to Silver Wheaton amounting to approximately 11,000 ounces, or 700,000 silver equivalent ounces as at September 30, 2013.

The recently acquired Salobo gold interest produced over 8,000 ounces of gold during Q3 2013. An increase of 27% from the prior quarter due to a combination of higher throughput grades and recoveries, with such being attributable to the continued successful ramping up of milling operations. This reflects production from the first 12 million tonne per year line which was operating at about 70% capacity for Q3 2013.

Gold sales relating to Salobo amounted to 6,500 ounces with payable gold produced but not yet delivered to Silver Wheaton increasing to approximately 8,000 ounces of gold, or 500,000 silver equivalent ounces as at September 30, 2013.

The Company's net debt position decreased by approximately $129 million through the third quarter of 2013 to $978 million primarily attributable to $119 million of operating cash flow combined with $49 being received through the exercise of warrants being partially offset by $36 million of dividend payments being made during the quarter. As at September 30, 2013, the Company had $62 million of cash and cash equivalents on hand and $1.042 billion of debt outstanding with $1 billion of debt relating to the non-revolving term loan and $42 million relating to the revolving facility.

The Company's strong future cash flows, combined with the $958 million of available credit capacity under the revolving 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 Canada Revenue Agency. 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.

Thank you.

(Operator Instructions)

Chris Lichtenheldt, Dundee.

Good morning, everyone. I just wanted to ask regarding the Sandspring deal that you announced late last night, I guess, a bit of a new and interesting structure. And, starts to look a little bit like a royalty structure when you consider it's a small up front payment with substantial long term optionality. Can you discuss a little bit about your views around this particular structure as it relates to some of the other alternatives such as a royalty? Some of the pros and cons that you see with this arrangement?

Sure, Chris. The structure itself is definitely a stream, it is staggered payments. We have a 10% -- we pay the $13.5 million up front to carry it through. It is focused on a particular commodity, in this case it is gold from a gold project itself. Why we came up with this concept is to replace some of our earlier equity style investments into the earlier stage projects. Just to try and get access to some of the promising projects out there. When you look at some of these earlier stage development companies out there, there are a few projects out there that are really quite attractive and worthy of it. So, this -- it definitely has some strengths to it in terms of providing a source of capital for these companies to move this project forward.

The asset is a great asset. The team is a good strong team. So, their capacity on that side, not having to dilute in terms of using that stream. There are definitely some similarities on the royalty side. But, it definitely is much more flexible, and much more capacity. It gives them a sense of confidence, too, in going forward that as long as the project continues to shine the way it has that we will be there to help them build that project when it gets there. So, I think it's the advantage of it, I think, it gives -- versus a loyalty structure -- is that it gives stronger sense of commitment in terms of the project itself going forward.

Okay, that's great, thanks. Just maybe when we are talking about royalty versus stream again, obviously there was an announcement not too long ago from S&P that they're going to start considering streaming agreements for the sake of their metrics. Does that, in your mind, enhance the appeal of a royalty? Is that something you would consider to avoid being considered debt from your counterparties?

We're still trying to understand where S&P's thinking is on that opinion. If you sit and look at Moody's and the other rating agencies they've come out and stepped the other way. We're still hopeful that we'll be able to work through that because we just don't see it as being that much of an issue. And, we're a bit surprised at S&P's position on that one. So, I think evidence is showing that the streaming model has definitely some strengths to it. But, it doesn't require an S&P rating in terms of moving forward. So, we're pretty comfortable with that.

Okay. That's it for me. Thanks, a lot.

Thanks, Chris.

Andrew Quail, Goldman Sachs.

Hi, Randy, guys, good morning. Thank you, very much, for the update. Congratulations on a solid quarter. Just a couple of questions, one on Constancia Can you just remind us the payment schedule? I know you are at $125 million and then $135 million. Do we expect the $125 million Q1 next year? And, when do you expected that $135 million to be paid?

You've got it right. There is additional $125 million once they reach $1 billion in expenditures on the project which we feel is going to be early in Q1 of next year, as you said. The $135 million would be paid once they reach $1.35 billion on the project in expenditures. We're roughly estimating that to be somewhere around the middle of the year, June, July, somewhere in that range.

Great. And then, Randy, one more on Sudbury. Obviously, there's a little bit of news going around about a potential deal between Vale and GlencoreXstrada. That would bode, if they are trying to rip out synergies, that would bode positive for you guys?

Anything that makes our partners more profitable is positive for us, quite literally. So, we had some discussions with them about that concept. We recognize that there are some opportunities there for both Vale and everyone else in the district in terms of some synergies that way. We do have structures within our contract that protect us to make sure there are no issues from that perspective. Yes, we would consider it a positive. Again, the healthier our partners are, the healthier we are.

Thanks very much Randy.

Great. Thanks, Andrew.

Cosmos Chiu, CIBC.

Good morning, guys.

Hi, Cosmos.

Hi, and congrats on a solid quarter. Got a few questions here, Randy and Gary and team. Gary, you mention that it looks like there is a good chance that you could exceed your 2013 guidance, or I think that's what you mentioned. Maybe to confirm my understanding that Q4 is usually the strongest quarter given that the operators try to meet their full year guidance. Is that your expectation and/or understanding this year as well?

Yes. Q4, that's typical, but it's on top of that we've got several projects that have growth being built in. Particularly Sudbury with the Totten mine ramping up and coming on stream in terms of production but also continued ramp up of production at Salobo. So, we have that growth combined with the fact that the rest of our asset mix is going to have -- there will be a push. Typically what we see is not so much on the production side because most of these operations are running at their capacity. But, where we see it is the sales side. That's the Q4 bump that we have seen in the past. What they'll do is they'll squeeze out those produced but not yet sold inventories and try and make sure that they get it sold and into the -- onto the balance sheets. And that, of course, is good news for us.

And, maybe if I can switch gears a little bit here. When I looked at your Sandspring agreement last night, that's on gold, and looking back on Hudbay, the newest transaction, that was also a gold stream as well. Randy, maybe if you can give me some renewed thinking, if indeed there is one, on gold versus silver opportunities?

Yes, we are focused on silver. We do see a lot of silver opportunities out there. I think one of the things that has to be said is that the gold commodity prices has dropped significantly more than the base metal production, which is where we see a lot of the silver byproduct production opportunities out there right now. I think there's -- it can probably be said that there is more demand for financing, for stream financing in the gold space than perhaps there is in the base metals space for silver byproduct production. That's one of the reasons that we seem to be being able to crystallize more of these gold ones than silver.

I still look at our active portfolio in terms of the corporate development side. And, there still is heavy silver bias. So, the first criteria for us is, of course, quality of asset. We are silver focused but we are not scared to have a bit of gold in the mix.

For sure. Maybe on San Dimas, to me the production in Q3 was a slight bit higher than what I had expected for the quarter given my understanding of how the contract works. I thought the contract goes from August to August, and given that the threshold had been reached in Q2, that it would have some kind of impact on Q3 as well. Or am I doing my math incorrectly?

You are right. It goes once they reach to a certain level of production then they keep half the silver going forward. And then, as of August 6, I think is the actual anniversary date. I might have the date slightly wrong. As of that date it goes back to us receiving 100% of the silver during the Q3. So, for the majority of August and all of September we'll get 100% of that silver. And, they continue working their way towards that trigger point which typically happens in Q2 when they get back to 50%.

Okay, great. That's all I have. Thank you.

Thanks.

Michael Gray, Macquarie Capital Markets.

Good morning, guys. Thanks for taking my question. On the early deposit streaming agreements, which I like the structure, I just want to confirm timing and election rights. Am I right with Sandspring that once they finish a bankable feasibility study and EIS and permitting that your payment -- you could choose to go forward with the agreement but your payment of $135 million, approximately, wouldn't be due until project financing is secured?

Hi, Michael, it's Haytham. Yes, that's correct. We put up basically $13.5 million now and once final feasibility study has been released and project financing has been secured we contribute on a pro rata basis.

Okay, perfect. Then, in terms of pursuing more of these deals, has the due diligence bar changed? Are you able to be a little bit more nimble? And then, just get more risk taken out of the project? Is that part of the strategy is to not necessary have to do the same level of due diligence?

I would actually -- I think the level of due diligence is the same. It's just that we don't have the same confidence levels as you do when a project has the same feasibility. But, we still have to tear it all the way down to be comfortable that there is healthy operating margins on these projects and that they fall in the lowest 50% of the respective cost terms.

When a project like Toroparu is presented where they've done excellent work, a lot of the work is done in excess of prefeasibility levels, we can take confidence in the fact that it's got healthy operating margins which is a key trigger for us in terms of whether the asset is worthy of investment. And, we just see an asset here that is worthy of that. It has been very busy in that space. We have been looking at a lot of projects out there. I hate to tell you this, there is not very many of them we found worthy of investing into, but this is one of them.

Okay, thanks. Then, on San Dimas, with the threshold going up to 6 million next year, for them having to lever much more by August 14 next calendar year, and the expansion to 2,500 in Q1 2014 at the mill, have you factored in 3,000-ton per day expansion going forward into your projections?

No, we haven't. They haven't made the official decision yet in terms of that 3,000 tons per day, I know they're studying it. They've had great exploration success in that whole western region down there, the western block and the Sinaloa Graben. That western block was an area that was operating back when we originally acquired the mine, back in the early 2000s. It had some real promise. And so, I am pretty comfortable that the progress, the success that they've had down there, I think Joe's done a really good job and the entire Primero team has done a really good job in terms of getting there. We're comfortable that they'll be able to handle that when it does kick up.

So, the production being relatively flat between 2013 to 2017 really doesn't reflect that upside right now.

That's right.

Okay, great, thanks. That's all I have.

Great. Operator, I don't know if you want to prompt for some additional questioners.

(Operator Instructions)

John Tumazos, John Tumazos Very Independent Research.

Congratulations on the debt repayment. That was really good to see. There probably is a huge increase in your deal flow, given that some of the smaller companies have continued difficulty raising money. And, there are also a couple of technical surprises in the industry.

The debate about [Freddy M's] resource calculations, or Pascua getting halted, or Pierina getting shut which was one of the other mines you were getting a little participation in. How are you changing, if at all, your criteria given issues of there is always technical uncertainty, it just feels a little more when the price doesn't bail you out? Tell us how you are managing things going forward.

Well, I think the biggest change is, of course, the price curve that we use in valuing our assets going forward. And, that changes with the commodity price and with the market. We always buy in the context of the current market. Obviously, this is a bit tougher market than it was a year ago. So, that being said, we've always been, put really -- taken great effort to make sure that our technical due diligence is very thorough. So, we try and avoid some of these issues and move forward. That being said, you can't catch everything, right?

Some of the challenges at Pascua-Lama, it is why we came up with structures where we get silver from the other mines until the completion test has been satisfied because it does limit our risk and our shareholders' risk from that development side. We have these completion tests in place to ensure that we do have measure of protection if not even, I'd say, some healthy compensation with respect to project delays. So, we always -- every transaction we look at we try and identify what and where the risks are. And then, try and address those risks so that at least we're covered if not compensated for those risks.

I think that the experience we've had at Pascua-Lama, I mean it is still going to be one of the best gold mines in the world when it is up and running, gold and silver. It's going to be a healthy silver producer, too. We're confident that it will get there. And, we await the updated schedule out of Barrick in terms of moving that forward. They, of course, are still working on the environmental side and moving it forward. That's why we structure the agreements the way we are.

With assets like Pierina, we -- the extension of life, when we entered into the transaction Pierina was supposed to shut down about now and they were actually applying for a couple extra years of production growth including low grade material. Unfortunately, that low grade material may have been ore at $1,600 gold, but I don't this it's ore at $1,300 gold, so that's one of the reasons that it's slowed down. You have to make sure you cover all those areas when you are going through the due diligence and studying it.

There is always a measure of risk. We try and take as much of that risk out of the equation as we can. And, where we do have risk in there we try and have off sets that reward us in the event that some of that risk is -- returns to us. We continue -- as we like to say, every one of our agreements is slightly better than the one prior to that. We're starting to get pretty good at it, I think.

Thank you.

No problem, John. Thanks.

John Bridges, JPMorgan.

Good morning, Randy, everybody. Very interesting, the new structure. I just wondered, though, what in particular you liked about the Sandspring project. It looks quite remote and I guess you are going to be very exposed to gas prices.

Yes, it's -- I don't know, in terms of access it's got reasonable access. They do have a hydroelectric project in the area, run-of-river hydroelectric project in the area that they've received approval for in terms of moving forward. That should offset a lot of the energy costs.

Although, I haven't operated personally in Guyana, I have been down several times, visited the [OMI] operation. I have always been impressed with the country, it seems very focused. I actually think it gets -- I think it's a country that's worthy of investing into. Others have in the past and have had success there. It's a country that appears to be very good, stable.

So, infrastructure wise this is a relatively simple construction project, the asset itself. The quality of the work, it's one of the things we always look for, the quality of the work, the team at Sandspring has done a great job. As I mentioned earlier, a number of aspects on this project, in advance they're much better than prefeasibility study level. And, the quality of the resource work on it, we're very comfortable with the asset. So, it really comes down to us going through. We tear it apart. We go all the way back to the drill hole assays, we rebuild the block model, we run [sensitivities], we run, in this case because it's open pit, we run our own optimizations. And, this thing stood the test.

And, we're pretty comfortable with the team, some great experience on the team in Sandspring. So, all the way across the board we just feel this is -- and there is a few companies like this. There is a lot of juniors out there that are suffering. We just think that this is one of them where the project is definitely worthy of a lot more than what the market is giving it now.

Okay, interesting. That's very helpful. Thanks a lot.

No problem John. I think that's it. Thank you, everyone, for dialing into our Q3 2013 conference call and we know Q4 is going to be a good one. Thanks, again.

Thank you, everyone, for dialing into our conference call today. Please disconnect your lines at this time.