Wheaton Precious Metals(WPM) - 2023 Q2 - Quarterly Report

Financial Statements This section presents the company's unaudited interim consolidated financial statements, including earnings, comprehensive income, balance sheets, cash flows, and shareholders' equity Condensed Interim Consolidated Statements of Earnings For the three months ended June 30, 2023, the company reported a decrease in sales to $265.0 million from $302.9 million in the prior-year period, with net earnings also declining to $141.4 million from $149.1 million Q2 & H1 2023 Financial Performance (unaudited) | Financial Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Sales | $264,972 | $302,922 | $479,437 | $610,166 | | Gross Margin | $151,856 | $162,297 | $269,358 | $342,146 | | Earnings from Operations | $135,216 | $149,844 | $233,844 | $309,575 | | Net Earnings | $141,448 | $149,074 | $252,839 | $306,542 | | Diluted Earnings Per Share | $0.312 | $0.330 | $0.558 | $0.678 | Condensed Interim Consolidated Statements of Comprehensive Income Total comprehensive income for Q2 2023 was $94.4 million, a decrease from $115.5 million in Q2 2022, primarily due to a larger other comprehensive loss driven by long-term investments Q2 & H1 2023 Comprehensive Income (unaudited) | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings | $141,448 | $149,074 | $252,839 | $306,542 | | Total Other Comprehensive Loss | $(47,039) | $(33,525) | $(6,339) | $(33,629) | | Total Comprehensive Income | $94,409 | $115,549 | $246,500 | $272,913 | Condensed Interim Consolidated Balance Sheets As of June 30, 2023, total assets increased to $6.88 billion from $6.76 billion at December 31, 2022, primarily due to a significant rise in cash and cash equivalents Balance Sheet Summary (unaudited) | Account (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $828,837 | $696,089 | | Mineral stream interests | $5,691,166 | $5,707,019 | | Total Assets | $6,879,905 | $6,759,906 | | Total Liabilities | $33,492 | $42,231 | | Total Shareholders' Equity | $6,846,413 | $6,717,675 | Condensed Interim Consolidated Statements of Cash Flows For the six months ended June 30, 2023, cash generated from operating activities was $337.5 million, down from $416.9 million in the prior-year period, with an overall increase in cash and cash equivalents Six Months Ended June 30 Cash Flow Summary (unaudited) | Activity (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Cash generated from operating activities | $337,482 | $416,899 | | Cash used for financing activities | $(121,806) | $(109,972) | | Cash used for investing activities | $(83,410) | $(84,224) | | Increase in cash and cash equivalents | $132,748 | $222,581 | | Cash and cash equivalents, end of period | $828,837 | $448,626 | Condensed Interim Consolidated Statements of Shareholders' Equity Shareholders' equity increased from $6.72 billion at the end of 2022 to $6.85 billion as of June 30, 2023, driven by net earnings partially offset by other comprehensive losses and dividend payments Shareholders' Equity Movement - H1 2023 (in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2022 | $6,717,675 | | Net Earnings (H1 2023) | $252,839 | | Other Comprehensive Loss (H1 2023) | $(6,339) | | Dividends Paid (H1 2023) | $(131,091) | | Other (SBC, Options, etc.) | $13,329 | | Balance at June 30, 2023 | $6,846,413 | Notes to the Condensed Interim Consolidated Financial Statements This section provides detailed disclosures and explanations supporting the condensed interim consolidated financial statements Note 1. Description of Business and Nature of Operations Wheaton Precious Metals Corp. is a Canadian-domiciled precious metal streaming company generating revenue from the sale of gold, silver, palladium, and cobalt acquired through long-term purchase agreements - The company's business model is based on precious metal streaming, generating revenue primarily from selling gold, silver, palladium, and cobalt[13] - As of June 30, 2023, the company has 29 long-term purchase agreements (PMPAs) with 23 different mining companies, covering 19 operating mines and 13 development projects[14] Note 2. Basis of Presentation and Statement of Compliance The unaudited condensed interim consolidated financial statements are prepared in accordance with IAS 34, Interim Financial Reporting, and IFRS, presented in US dollars - The financial statements adhere to IAS 34 and IFRS, using the same accounting policies as the 2022 annual statements[17] - The preparation of these statements requires management to use accounting estimates and exercise judgment[18] Note 3. Material Accounting Policy Information The company adopted amendments to IAS 12 and IAS 1 in 2023 with no material impact and applied a temporary exception for the Pillar Two Global Minimum Tax - New accounting standards (Amendments to IAS 12 and IAS 1) were adopted effective January 1, 2023, with no material impact on the company[20][21] - The company has applied the mandatory temporary exception for deferred tax related to the upcoming Pillar Two Global Minimum Tax rules[23] Note 4. Key Sources of Estimation Uncertainty and Critical Accounting Judgments The significant areas of estimation uncertainty and critical judgments made by management remain unchanged from those disclosed in the audited consolidated financial statements for the year ended December 31, 2022 - There have been no changes to the key sources of estimation uncertainty and critical accounting judgments since the last annual report[27] Note 5. Financial Instruments The company manages capital risk to maintain financial flexibility, is in compliance with all debt covenants, and holds significant cash reserves with no outstanding borrowings - The company is in compliance with all debt covenants as of June 30, 2023, and is not subject to any other externally imposed capital requirements[29] - As of June 30, 2023, the company had cash and cash equivalents of $829 million and working capital of $831 million, ensuring sufficient liquidity for operational needs[35] Canadian Dollar Currency Risk Sensitivity (as at June 30, 2023) | (in thousands) | 10% Increase in Cdn$ | 10% Decrease in Cdn$ | | :--- | :--- | :--- | | Increase (decrease) in net earnings | $(1,852) | $1,852 | | Increase (decrease) in other comprehensive income | $7,493 | $(7,493) | | Increase (decrease) in total comprehensive income | $5,641 | $(5,641) | - The company is exposed to equity price risk from its long-term investments; a 10% change in equity prices would impact other comprehensive income by approximately $26 million[45] Note 6. Revenue Total sales revenue for Q2 2023 was $265.0 million, with gold sales contributing 56% and silver sales 41%, recognized upon transfer of metal control to the customer Revenue Breakdown by Metal (in thousands) | Metal | Three Months Ended June 30, 2023 | % of Total | Three Months Ended June 30, 2022 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Gold | $149,511 | 56% | $157,842 | 52% | | Silver | $107,081 | 41% | $130,228 | 43% | | Palladium | $4,879 | 2% | $7,203 | 2% | | Cobalt | $3,501 | 1% | $7,649 | 3% | | Total | $264,972 | 100% | $302,922 | 100% | Note 7. General and Administrative Consolidated general and administrative expenses for Q2 2023 were $10.2 million, a slight increase from $9.7 million in Q2 2022, primarily due to higher audit, regulatory, and professional fees General and Administrative Expenses (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30 | $10,216 | $9,685 | | Six Months Ended June 30 | $20,315 | $19,089 | Note 8. Share Based Compensation Total share-based compensation expense for Q2 2023 was $4.5 million, a significant increase from $1.6 million in Q2 2022, driven by cash-settled Performance Share Units Share Based Compensation Expense (in thousands) | Type | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Equity settled (Stock options, RSUs) | $1,859 | $1,497 | | Cash settled (PSUs) | $2,625 | $111 | | Total | $4,484 | $1,608 | Note 9. Donations and Community Investments The company's donations and community investments totaled $1.9 million in Q2 2023, up from $1.2 million in the same period last year, mainly due to higher contributions to the Partner Community Investment Program Donations and Community Investments (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30 | $1,940 | $1,160 | | Six Months Ended June 30 | $3,318 | $1,973 | Note 10. Other (Income) Expense The company reported other income of $8.7 million in Q2 2023, a substantial increase from $0.8 million in Q2 2022, primarily driven by a significant rise in interest income Other (Income) Expense Breakdown (in thousands) | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Interest income | $(8,181) | $(441) | | Dividend income | $(700) | $(108) | | Other items | $(189) | $(271) | | Total other (income) expense | $(8,692) | $(820) | Note 11. Accounts Receivable Total accounts receivable decreased to $7.0 million as of June 30, 2023, from $10.2 million at the end of 2022, across trade receivables from provisional concentrate and cobalt sales Accounts Receivable Breakdown (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade receivables from provisional concentrate sales | $1,105 | $2,516 | | Trade receivables from sales of cobalt | $4,945 | $6,642 | | Other accounts receivable | $921 | $1,029 | | Total accounts receivable | $6,971 | $10,187 | Note 12. Cobalt Inventory Cobalt inventory was valued at $5.0 million as of June 30, 2023, down from $10.5 million at year-end 2022, with a recorded inventory write-down reversal of $1.5 million Cobalt Inventory (in thousands) | Date | Value | | :--- | :--- | | June 30, 2023 | $4,955 | | December 31, 2022 | $10,530 | - At June 30, 2023, the Company recorded an inventory write down reversal of $1.5 million[72] Note 13. Mineral Stream Interests Mineral stream interests, the company's largest asset, had a carrying amount of $5.69 billion at June 30, 2023, following strategic acquisitions and amendments including the Cangrejos PMPA and partial disposal of the Goose PMPA Carrying Amount of Mineral Stream Interests (June 30, 2023) | Interest Type | Carrying Amount (in thousands) | | :--- | :--- | | Gold interests | $3,621,700 | | Silver interests | $1,481,724 | | Palladium interests | $224,099 | | Cobalt interests | $354,195 | | Total | $5,691,166 | - Acquired the Cangrejos PMPA from Lumina Gold Corp. for a total upfront cash consideration of $300 million, with $12 million paid on closing[95][96] - Amended the Blackwater Gold PMPA, committing to an additional $40 million in upfront consideration in exchange for an increased gold stream[98] - Following B2Gold's acquisition of Sabina, B2Gold exercised an option to acquire 33% of the Goose PMPA stream for $46 million, resulting in a $5 million gain on partial disposal for Wheaton[92] Note 14. Early Deposit Mineral Stream Interests The company holds three early deposit mineral stream interests for development projects (Toroparu, Cotabambas, and Kutcho), with $46.1 million paid to date and a further $322.3 million committed upon project election Early Deposit Mineral Stream Interests (as of June 30, 2023) | Project | Upfront Paid to Date (in thousands) | Upfront to be Paid (in thousands) | | :--- | :--- | :--- | | Toroparu | $15,500 | $138,000 | | Cotabambas | $13,750 | $126,250 | | Kutcho | $16,852 | $58,000 | | Total | $46,102 | $322,250 | Note 15. Long-Term Equity Investments The fair value of long-term equity investments was $255.5 million at June 30, 2023, stable compared to year-end 2022, with fair value adjustments recorded in Other Comprehensive Income Long-Term Equity Investments (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Common shares held | $255,076 | $255,535 | | Warrants held | $458 | $560 | | Total | $255,534 | $256,095 | - In H1 2023, the company disposed of Sabina shares valued at $48.8 million and received B2Gold shares as consideration following an acquisition[107] Note 16. Property, Plant and Equipment The net book value of property, plant, and equipment increased to $8.5 million at June 30, 2023, from $4.2 million at the end of 2022, primarily due to additions to Right of Use Assets Property, Plant and Equipment Continuity (in thousands) | Description | Net Book Value | | :--- | :--- | | Balance - January 1, 2023 | $4,210 | | Additions | $5,022 | | Disposals | $(4) | | Depreciation | $(774) | | Net book value - June 30, 2023 | $8,458 | Note 17. Credit Facilities The company extended the maturity of its undrawn $2 billion revolving credit facility to June 22, 2028, now including sustainability-linked pricing adjustments, while remaining in compliance with all financial covenants - The term of the undrawn $2 billion revolving credit facility was extended by one year to mature on June 22, 2028[114] - Interest rates on the facility are now linked to the company's performance in three sustainability areas: climate change, diversity, and overall sustainability performance[116] - The company is in compliance with its financial covenants, which include a net debt to tangible net worth ratio of less than 0.75:1 and an interest coverage ratio greater than 3.00:1[115] Note 18. Issued Capital As of June 30, 2023, the company had 453.0 million common shares issued and outstanding, with no shares issued under its $300 million ATM equity program, and paid quarterly dividends of $0.15 per share - The company has an at-the-market (ATM) equity program allowing it to issue up to $300 million in common shares, though no shares have been issued under this program as of June 30, 2023[125][126] Dividends Declared (Q2 2023 vs Q2 2022) | Metric (in thousands, except per share) | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Dividends declared per share | $0.15 | $0.15 | | Total dividends paid | $67,938 | $67,708 | | Paid in Cash | $65,857 (97%) | $58,613 (87%) | | Paid via DRIP | $2,081 (3%) | $9,095 (13%) | Note 19. Reserves Total reserves decreased to a deficit of $26.2 million from a surplus of $66.5 million at year-end 2022, primarily due to the expiration of share purchase warrants and an increase in the negative revaluation reserve for long-term investments - 10,000,000 share purchase warrants with an exercise price of $43.75 expired unexercised on February 28, 2023, with the associated reserve of $83.1 million transferred to retained earnings[132] - As of June 30, 2023, there were 1,361,883 share purchase options outstanding with a weighted average exercise price of Cdn$48.43[138] - As of June 30, 2023, there were 323,759 Restricted Share Units (RSUs) outstanding[141] - The long-term investment revaluation reserve, which reflects unrealized gains/losses on strategic investments, moved from a negative $47.3 million at year-end 2022 to a negative $54.4 million at June 30, 2023[130][145] Note 20. Share Based Compensation This note details the Performance Share Unit (PSU) plan, a cash-settled compensation program, with the PSU liability at $13.2 million as of June 30, 2023, down from $21.2 million at year-end 2022 - The Performance Share Unit (PSU) plan is a cash-settled plan where payment is based on the number of PSUs, a performance factor (0%-200%), and the company's share price at the end of a three-year period[147] PSU Liability (in thousands) | Date | Liability Amount | | :--- | :--- | | December 31, 2022 | $21,239 | | June 30, 2023 | $13,241 | Note 21. Earnings per Share ("EPS") and Diluted Earnings per Share ("Diluted EPS") The calculation of diluted earnings per share for Q2 2023 is based on a diluted weighted average of 453.6 million shares, with dilutive effects from share purchase options and restricted share units Weighted Average Shares for Diluted EPS (in thousands) | Description | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Basic weighted average shares | 452,892 | 451,524 | | Effect of dilutive securities | 683 | 835 | | Diluted weighted average shares | 453,575 | 452,359 | Note 22. Supplemental Cash Flow Information This note provides details on non-cash working capital changes, non-cash transactions, and the composition of cash and cash equivalents, including a significant non-cash receipt of $48 million in common shares - During H1 2023, the company received common shares valued at $48 million as non-cash consideration for the disposal of long-term equity investments[153] Cash and Cash Equivalents Composition (in thousands) | Component | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash | $356,426 | $170,155 | | Cash equivalents | $472,411 | $525,934 | | Total | $828,837 | $696,089 | Note 23. Income Taxes The company recorded an income tax expense of $6.1 million in Q2 2023, with the majority of its income generated in the tax-free Cayman Islands, and anticipates a 15% global minimum tax on non-Canadian subsidiaries from 2024 - The majority of the company's income is generated by its subsidiary, Wheaton Precious Metals International Ltd., which operates in the Cayman Islands and is not subject to income tax[163] - The Canadian government released draft legislation on August 4, 2023, to implement a 15% global minimum tax, which is expected to apply to the company's non-Canadian subsidiaries starting in fiscal year 2024[164] Income Tax Rate Reconciliation (Six Months Ended June 30, 2023) | Description (in thousands) | Amount | | :--- | :--- | | Earnings before income taxes | $252,394 | | Tax at Canadian statutory rate (27%) | $68,146 | | Effect of tax rates in foreign jurisdictions | $(68,938) | | Other adjustments | $367 | | Total income tax recovery | $(445) | Note 24. Other Current Assets Other current assets increased to $4.5 million at June 30, 2023, from $3.3 million at the end of 2022, primarily due to a rise in prepaid expenses Other Current Assets (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Prepaid expenses | $3,505 | $2,856 | | Other | $961 | $431 | | Total | $4,466 | $3,287 | Note 25. Other Long-Term Assets Other long-term assets increased to $28.5 million at June 30, 2023, from $26.4 million at year-end 2022, mainly comprising a refundable deposit, unamortized debt issue costs, and a mineral royalty interest Other Long-Term Assets (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Debt issue costs - Revolving Facility | $6,040 | $5,757 | | Refundable deposit - 777 PMPA | $8,393 | $8,073 | | Mineral royalty interest | $6,606 | $6,606 | | Other | $7,418 | $5,961 | | Total | $28,457 | $26,397 | Note 26. Commitments and Contingencies The company has total contractual obligations of $2.29 billion, primarily related to future payments for mineral stream interests, and is in an ongoing tax dispute with the Canada Revenue Agency Projected Contractual Obligations (in thousands) | Period | Amount | | :--- | :--- | | 2023 | $764,665 | | 2024 - 2025 | $892,878 | | 2026 - 2027 | $444,317 | | After 2027 | $188,716 | | Total | $2,290,576 | - A potential expansion payment of up to $552 million is due to Vale for the Salobo mine if throughput is expanded beyond 35 Mtpa by January 1, 2024[189][191] - The company has ongoing disputes with the Canada Revenue Agency (CRA) regarding domestic reassessments for the 2013-2016 tax years, with approximately $2 million in tax, interest, and penalties assessed[207][208] - The CRA settlement for the 2005-2010 transfer pricing dispute applies to post-2010 years, but the CRA is not restricted from issuing reassessments on other bases[211] Note 27. Segmented Information The company's operations are segmented by mineral interest and geography, with gold and silver interests being the largest contributors to sales and net earnings, primarily from North and South America Segment Results - Three Months Ended June 30, 2023 (in thousands) | Segment | Sales | Net Earnings | Total Assets | | :--- | :--- | :--- | :--- | | Gold Interests | $149,511 | $87,385 | $3,621,700 | | Silver Interests | $107,081 | $68,025 | $1,481,724 | | Palladium Interests | $4,879 | $2,482 | $224,099 | | Cobalt Interests | $3,501 | $(1,009) | $354,195 | Sales by Geography - Three Months Ended June 30, 2023 (in thousands) | Region | Sales | % of Total | | :--- | :--- | :--- | | North America | $97,559 | 37% | | Europe | $16,254 | 6% | | South America | $151,159 | 57% | Note 29. Subsequent Events Subsequent to the quarter's end, on August 10, 2023, the Board of Directors declared a quarterly dividend of $0.15 per common share, payable around September 7, 2023 - On August 10, 2023, the Board of Directors declared a dividend of $0.15 per common share[240] - The company's dividend policy targets a quarterly payout of approximately 30% of the average operating cash flow from the previous four quarters, with a minimum of $0.15 per share set for 2023[239] Corporate Information This section provides essential corporate details including the head office location, stock exchange listings, and key executive officers Corporate Information Details This section provides key corporate information, including the head office address in Vancouver, Canada, stock exchange listings (TSX, NYSE, LSE under symbol WPM), and a list of directors and officers - Head Office: Vancouver, BC, Canada[242] - Stock Listings: Toronto Stock Exchange (TSX), New York Stock Exchange (NYSE), and London Stock Exchange (LSE) under the ticker symbol WPM[243][245] - Key Officers: Randy Smallwood (President & CEO), Gary Brown (SVP & CFO), Patrick Drouin (SVP, Sustainability & Investor Relations)[243]