Silver Wheaton's CEO Discusses Q2 2012 Results - Earnings Call Transcript

 |  About: Silver Wheaton Corp. (SLW)
by: SA Transcripts


Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Silver Wheaton's 2012 second quarter results conference call. All lines have been placed to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) Thank you. I would like to remind everyone that this conference call is being recorded on Friday August 10 at 11:00 AM eastern time. I will turn the conference over to Mr. Brad Kopp, Senior Vice President of Investor Relations. Please go ahead

Brad Kopp

Thanks Tracy and good morning, ladies and gentlemen and thank you for participating in today's call. And I'm joined today by Randy Smallwood, Silver Wheaton’s President and CEO and Gary Brown, Senior Vice President and Chief Financial Officer. I would like to bring your attention that some of the commentary on today's call may contain forward-looking statement. There could be no assurance that forward-looking statements will prove be accurate as actual results and future events could differ materially from those anticipated in such statements.

Please refer to the section entitled Description of the Business Risk Factors in Silver Wheaton’s annual information form which is available on SEDAR and in Silver Wheaton’s Form 40-F on file with the US Securities and Exchange Commission. The annual information form sets out the material risk factors that could cause actual results to differ including the assets to control our mining operations from which Silver Wheaton purchases silver and gold with risks related to such mining operations and the risk of a decline in Silver and Gold prices. Lastly it should be noted that all figures refer to on today's call are in US dollars unless otherwise noted. Now I would like to turn the call over to Randy, our President and CEO.

Randy Smallwood

Thank you Brad and good morning ladies and gentlemen. Thank you for dialing in to our second quarter 2012 conference call. We are very pleased to report that another strong quarter puts us on track for our best year ever.

Solid performance from our portfolio of mines combined with a reduction in concentrate produce, but not yet delivered has resulted in record silver sales and revenues for the second quarter in a row.

Operating cash flow has also reached a record high and yesterday we announced our third quarterly dividend for 2012 which increased to $0.10 per share due to the increased cash flows.

As announced earlier in this week, the addition of two new streams from HudBay Minerals subsequent to the quarter will build on our already industry leading growth profile. The first stream is the precious metal stream with both gold and silver from HudBay currently producing flagship mine, the 777.

The second stream is a silver stream under a key growth project Constancia down in Peru. Similar to all of our agreements, this transaction once again highlights the effectiveness of our business model, which provides healthy capital to our operating partners while combining the certainty of fixed capital and operating costs with production from high quality mines that offer exciting upside potential.

These new HudBay streams deliver immediate cash flow with 777 contributing average annual production of approximately 4.2 million silver equivalent ounces until the end of 2016.

Our 2012 production guidance has been increased from 27 million to 28 million silver equipment ounces. Once Constancia reaches full operations, silver equivalent production levels from these two assets will increase to about 4.9 million silver equivalent ounces resulting in 2016 production guidance of 48 million ounces, a 90% increase over our 2011 production levels.

And importantly, we’ve added these assets in to our portfolio by using existing cash on hand allowing us to maintain our exceptionally strong balance sheet and to continue to pursue even further and to continue to pursue even further growth to new value enhancing acquisitions.

In the second quarter of 2012, we achieved production of 6.7 million silver equivalent ounces. Silver equivalent sales reached an all time high of 6.9 million ounces. This strong quarter resulted in record financial results including revenues of over $200 million and operating cash flows in excess of a $170 million which represent a cash operating margin of 86%.

More detail on the finances will be provided shortly by our Senior Vice President and Chief Financial Officer, Gary Brown.

On the operations front, production from most of our assets was very solid with Zinkgruvan once again delivering a storing quarter and with sales of concentrate produced, but not yet delivered from Yauliyacu contributing considerably to our revenues and cash flow.

While we did see some temporary short falls in production at Peñasquito mine and a delay announced at Pascua-Lama, we remain confident in our partners and view both of these assets as core streams which solidify our industry leading growth profile.

Second quarter mill throughput at Goldcorp's Peñasquito mine was impacted by water shortages due to prolonged drought conditions in the region resulting in a reduction of a 2012 forecast silver production attributable to Silver Wheaton.

Gold Corp is working to improve water supplies through additional wells and improvements in decanting of their tailings. At Pascua-Lama Barrick announced a one-year delay to the expected project start up and a substantial increase to its capital cost forecast. So the weakness is not subject to these capital cost increases, but production is now slated to begin in mid 2014. Even with this delay Pascua-Lama remains a world class project and will be one of the best gold, silver mines in the world once it begins operations.

With an average of 9 million ounces of silver per year delivered to Silver Wheaton over its first five years and the 25 year mine life, Pascua-Lama remains an important part of our growth.

In addition Silver Wheaton will continue to receive silver from three of Barrick's other operations to the extent that Pascua-Lama is running below 75% of its design capacity or the end of 2013 whichever occurs later.

On the corporate development front, we remain focused on doing accretive deals for our shareholders. While considering new opportunities we search for low cost operations that can continue to produce through all phases of the commodity price cycle. We also focus on those opportunities that provide or those assets that provide opportunities for growth through exploration or expansion upside, these are key to increasing value for the streams.

We also want strong management teams as operating partners with proven track records of delivering value to their own shareholders. The recent acquisition of the precious metal stream from HudBay Minerals adheres to if not exceeds all of these principals and is a perfect example of the types of assets that we target.

In the current market access to traditional forms of financing such as debt and equity continue to remain challenging in most environments, but particularly this one. Streaming is a very value enhancing form of capital which we believe has once again been validated with a recently announced partnership with HudBay.

Silver Wheaton has a very strong balance sheet and we continue to focus on further growth targeting high quality assets from advanced exploration through the production. And with approximately $600 million in cash on hand after the HudBay transaction and a fully undrawn $400 million revolving credit facility and strong future operating cash flows, we are exceptionally well positioned to continue growing our portfolio of precious material streams.

So in summary 2012 is shaping up to be one of our strongest years yet with record revenues and cash flow in Q2 coupled with the addition of two new metal streams to substantially grow and diversify Silver Wheaton.

Our organic production growth profile coupled with the addition of HudBay's 777 and Constancia project has put us on track to achieve silver equivalent production of 28 million ounces in 2012 and increasing to 48 million ounces by 2016. This represents one of the strongest growth profiles in the precious metal sector.

We remained focused on growth and will vigorously pursue additional opportunities in 2012 to further expand our portfolio of high quality income generating assets and with more than a billion dollars in capacity even after completing the HudBay transaction we still have one of the strongest balance sheets in the industry and are very well positioned to achieve our goals.

Our business model ensures that we can guarantee margin delivery in a rising silver price environment. So with our current high quality portfolio and accretive growth potential, we firmly believe that we continue to offer the premier investment vehicle for silver and 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 on the financials. Gary?

Gary Brown

Thank you Randy and good morning ladies and gentlemen. Prior to reviewing Silver Wheaton's unaudited financial results for the three months ended June 30, 2012, I would like to remind everyone that all monetary figures discussed are denominated in US dollars unless otherwise noted.

Silver Wheaton's second quarter of 2012 was very strong marked by record setting silver equivalent sales volumes, revenue and operating cash flow. The company’s precious metal interests generated 6.7 million silver equivalent ounces of attributable production in the second quarter of 2012 consistent with the prior quarter and 10% above production levels from the comparable quarter of the prior year. Payable silver equivalent ounces produced, but not yet delivered by our partners decreased by approximately 1 million ounces over the quarter to 3.2 million ounces primarily driven by the shipment of concentrate that was produced in prior quarters from Glencore's Yauliyacu mine.

With the strong production levels combined with the reduction in silver produced, but not delivered the company realized record sales volumes of 6.9 million silver equivalent ounces generating record revenue of $201 million. This was 3% higher than the revenue from the second quarter of 2011 with sales volumes rising by 36% partially offset by sales prices being 24% lower.

Earnings from operations for the second quarter of 2012 amounted to $152 million compared with $159 million in 2011 with operating margins decreasing by 6% to 76%. Cash-based G&A expenses were $5.7 million in the second quarter of 2012 with the increase from the comparable period of the prior year being primarily attributable to increased charitable donations.

The company continues to expect cash G&A expenses to be in the 23 million to 25 million range for 2012. Net earnings amounted to $141 million in the second quarter of 2012 compared to $148 million in the prior year with basic earnings per share decreasing to $0.40 per share from $0.42 per share in the prior year. Operating cash flow increased 3% from the prior year to a record setting $173 million or $0.49 per share resulting in a dividend to be paid in Q3 2012 of $0.10 per share.

This represents an 11% increase in the dividend per share declared for each of the last three quarters and highlight one of the benefits of the new dividend policy introduced last year, whereby shareholders participate directly in the company's strong organic growth profile.

During the second quarter of 2012, the value of company's long-term investment portfolio, shares another publicly listed mining and mineral exploration companies decreased by $34 million which has been reflected in the statement of our comprehensive income.

The operational highlights for the second quarter of 2012 include the following. San Dimas produced 1.2 million ounces of distributable silver in the second quarter of 2012, about 7% higher than production from the previous year but 27% lower than the prior quarter due to the application of the sharing mechanism whereby Primero retains 50% of the payable silver production over and above an annual threshold which is currently 3.5 million ounces, but right at the 6 million ounces starting on August 6, 2014.

Approximately 1 million ounces of silver was produced in excess of this threshold during the second quarter, of which Silver Wheaton received 50%. Given that the annual threshold associated with this annual period associated with this threshold runs from August 6 each year a portion of Q3’s production relating to San Dimas will also be shared.

The Zinkgruvan produced 673,000 ounces of silver in the second quarter, 63% higher than was produced in the comparable quarter in the prior year and representing an all time record for this mine. This represents second consecutive quarter of record silver production since the inception of the silver purchase contract in 2004 and is attributable to improving grades. This record level of production translated into the sale of 580,000 ounces of silver, 45% higher than volumes for the comparable period over prior year.

Although silver production related to Yauliyacu was down 10% in Q2 2012, relative to the comparable period in the prior year, sales volumes increased by 145% to a record setting 1.2 million ounces with such increase being attributable to the shipment of concentrates produced in prior periods.

During the second quarter of 2012, the amount of payable silver contained in concentrate that have been produced Yauliyacu but not yet delivered to Silver Wheaton decrease by approximately 900,000 ounces leaving a balance of approximately 800,000 ounces as of June 30, 2012. Attributable silver production sales relating to Peñasquito record setting 1.8 million ounces in the second quarter of 2012, this represented 42% increase in production and 92% increase in sales from prior year with increased production being primarily attributable to the continued ramping up of the sulfide mill and improved recoveries resulting from more consistent mill operations and increased sales being primarily production related but also augmented with reduction in silver contained in concentrates produced in prior period.

As of June 30, 2012, approximately 1.1 million ounces of payable silver has been produced at (inaudible) but not yet delivered to Silver Wheaton.

These positive variances were partially offset by silver production from sales (inaudible) mine in the second quarter of 2012 putting about two-thirds of the levels of the prior year, primarily attributable to the mining lower grade material.

During the second quarter of 2012, $2.4 million of interest with capitalize cost of various silver of this amount, $2.2 million relates to interest accreting on the discounted future payments due to Barrick with remainder being attributable to bank debt with foreign average interest rate of just over 1%.

As a reminder, the company expects to capitalize all the interest cost associated with currently outstanding obligations until the Pascua-Lama mine achieves commercial production. Overall, the company’s cash balances increased by $105 million in the second quarter of 2012 comprised of $173 million of cash generated from operations offset primarily by $7 million of debt repayments and $64 million of dividend distributions.

As of June 30, 2012 the company had $1.1 billion of cash and cash equivalents on hand and $64 million of debt outstanding of the term loan facility. This cash balance combined with the $400 million of available credit and of company’s revolving credit facility and strong future cash flows, positions the company well to satisfy its funding commitments and sustain its dividend policy while at the same time executing on its growth strategy.

With respect to funding commitments it is anticipated that $638 million of payments will be made in the third quarter of 2012 with $500 million relating to the initial upfront payment for the HudBay transaction and $138 million relating to final payment Barrick relative Pascua-Lama. That concludes the financial summary and with that I turn the call back over to Randy.

Randy Smallwood

Thank you, Gary. Operator we would like to open up the call to questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from the line of John Flanagan, Fundamental Equities. Please go ahead.

John Flanagan - Fundamental Equities

Not being a Canadian mining person, this hard day stuff is new to us can you just briefly say describe the two projects?

Randy Smallwood

Sure, 777 is located up here in Canada it’s on the border between Manitoba and Saskatchewan its’ in a district that’s got a long history of mining but the 777 itself started up in 2004, HudBay has been around for 85 years mining history up in that region, but 777 started up in 2004 and it’s the VNS type underground mine that produces copper, lead and zinc concentrates and will deliver to us about 4.2 million ounces of silver equivalent ounces with silver and gold. I think it’s about 800,000 to 9000,000 ounces of silver per year and the rest of that comes in gold form.

Very profitable operation and good exploration potential when it started in 2004, it had 14 years of reserve license in front of it and it’s got about the same right now, it’s pretty typical of these style of depository just keep on working your way along strike down debt and adjacent you have relatively good success with this so it’s a deposit model that we are very familiar with, we have got numerous other production from similar type geology and we are quite happy with it.

Constancia is the second project it’s a copper porphyry project docketed down in Peru it’s a project that we have been following for a long-time HudBay acquired it can’t remember the exact date of acquisition but they have owned it now for quite a couple of years at least a couple years now, pretty promising project really good exploration success they have found some porphyry mineralization it looks like it's looks like even better grades than the main copper porphyry and so they have started moving this project forward, their camp is under construction, they have got relatively strong social license all their permits are in place, all the permits they need to move forward are in place.

Strong community support which is important in Peru from our perspective it looks like they have done a very good job from that social side and that is very important in Peru as we all know and so its expected to be up and running by should be by the end of 2014 and when its up and running, it will increase our overall production to about 4.9 million silver ounces from these two assets.


Your next question comes from the line of Dan Rollins with RBC Capital Markets.

Dan Rollins - RBC Capital Markets

Randy just a quick question on the current inventories, is 3.2 million ounces a steady state level just given the timing of production in sales with regard to concentrate or do you expect to see that come down a little bit more.

Randy Smallwood

Its probably not too far out, I mean one area as Peñasquito when it gets up to its full potential and they have the water resolved their there's going to be, it’s a concentrate producer and so its typically the mine that produced concentrate where we have these inventory issues with this concentrate produced but not sold and so there maybe a bit of upward pressure on that but it is going to be lumpy on a quarterly basis.

In my experience usually the fourth quarter is where the penny gets flushed out and you know just to improve sort of year-over-year results and then first quarter they tend to build up again, so that's about the only trend I can say with respect to the concentrates.

Dan Rollins - RBC Capital Markets

And just on Yauliyacu so all the bulk concentrate’s gone. Now they can easily source the copper and lead concentrates. They are not having issues there anymore, correct?

Randy Smallwood

Yeah, although we have, there has been some press out just recently that the royalty that the smelter that they used to produce and deliver bulk concentrates too and it looks like its going to be up and running again here very quickly. They made the environmental improvements and they are very close to getting that going forward. so we haven't got confirmation yet from Glencore but if that does come on screen, you know, the original product, and most concentrate was ideally suited for shipping up to that lower La Oroya smelter. So if the La Oroya smelter comes on stream, it will definitely, it improve the economics with them because I think it's about 100 kilometers up the road versus all the way down to tidal water and overseas somewhere. So, you know, stay tuned.

Dan Rollins - RBC Capital Markets

Okay, and if that would happen, would you see a significant change in the payable levels between the two separate cons versus the bulk con or would be roughly the same.

Randy Smallwood

It's roughly the same, average is not about the same.


Your next question comes from the line of Michael Dalgleish with SAC Capital. Please go ahead.

Michael Dalgleish - SAC Capital

Question on the revenue Canada audits. There was some disclosure in the release but I was just wondering if you could expand on why you don't see any material impact? If its just going back to what you have been saying all along or there was any increased comfort from recent conversation with revenue Canada and you could just provide an update on the status and the timing for that to conclude?

Gary Brown

There is really not much to update on that front. Revenue Canada continues to be in the information gathering stage. Again this is a routine audit that’s about we fully expected to occur on a regular basis for company the size of Silver Wheaton. As far as timing goes, there is no commitment from Revenue Canada on when they would wrap this up but you know, we would be hopeful that that they would wrap it up by the end of the 2012.


Your next question comes from the line of Chris Lichtenheldt with UBS. Please go ahead.

Chris Lichtenheldt - UBS

My question is actually on inventory you just answered but just to touch on given the deal you found recently and presumably there are some other interesting things you are looking at, can you just comment on what your view is on your long-term investment some of the strategic stakes you hold do you ever look at divesting or are you still looking at further share acquisitions of that order or you really focus just on the streaming deals?

Randy Smallwood

I call the equity investments almost a bit of an exploration department, it’s bit of a we those are small scale investments on the relative overall scale of the company itself but we hope that they bear fruit in terms of turning into streams and so Bear Creek we have had great success or they have had greats success in terms of advancing that into a very attractive project, being the largest shareholder gives us at least a seat at the table in terms of discussions about how they how the project goes forward. And so we do hope that those will bear fruit, they are definitely getting a lot closer than they have been in the past and we still explore that site because there are, its’ quite advantageous to try and get in there is a little bit more risk involved but it’s advantageous to try and get in at exciting early stage projects where there is where we can see some opportunities like this.

So I think there has been some discussions about perhaps changing the structure of these investments and can’t really go into much more than that it would help us in terms of moving these into ultimately in the streams and so all I can say is stay tuned.


Your next question comes from the line of John Bridges with JPMorgan. Please go ahead.

John Bridges - JPMorgan

Just following on from Michael’s question, is there any sort of sense as to what the maximum exposure could be coming from the Canadian audit?

Randy Smallwood

We are not going to speculate on what position CRA may or may not here; we are very comfortable with the structure that we have in place and believe it will withstand scrutiny at the end of the day.

John Bridges - JPMorgan

And congratulations on partnering up with HudBay; I remember how Dave Garofalo was able to finance the Agnico growth without any serious upside, so that’s probably a good omen for Constancia.

Randy Smallwood

Been a long time with David Garofalo; I think he has done a great job at Agnico and doing a great at Hudbay.

John Bridges - JPMorgan

And then just wondering after spending that money on buying in there, what sort of minimum cash levels are you comfortable with within Silver Wheaton; are you sort of is the magazine now or do you have reload or do you feel that you could still go off and buy other things?

Randy Smallwood

Definitely; we have got over a $1 billion in capacity right now. Our business model is -- and John you know it as well as anyone, our objective is to get to zero; I don't like having cash on hand that, I most rather have ounces on the ground and so don’t like having cash on the balance sheet, but at the same time were not going to spend the cash foolishly. We want to make sure that there are good quality acquisitions and accretive and add value to our shareholders all the way across the board. So patience and tempered, but the objective is to move all of that into the ground and if we see quality acquisitions, we won't even stop there; it means we have to go and finance to meet the demand as long as the acquisitions are good, we take on the growth.


Your next question comes from the line of Andrew Kaip with BMO. Please go ahead.

Andrew Kaip - BMO

Just a follow-up question on future silver screens; and I am wondering what's the acquisition that with the Hudbay acquisition this week you are looking at about 10% of your future silver equivalent production; is that the type of size that we should now expect from Silver Wheaton?

Randy Smallwood

You know we I mean we look at assets that are bigger than that. We look at assets that are smaller than that. Some of our best performing assets and best value back to our shareholders are down in the 1 million to 2 million ounce a year range.

And so we don't have any problem adding on that side. To me the diversifying and having a wide range is and you know its sometimes when you sit and look at our individual production estimates from each mine, you get misses and you get the benefit at that and they (inaudible) to the same so then the more assets we bring in you know I think it diversifies our production.

So yeah, I would say that the 4 to 5 million ounces that have been sort on the table is probably middle of the range in terms of what we look at. There is assets that are bigger out there and there is plenty of assets of course smaller out there. Again it just comes down to the quality, we want to make sure that whatever the size they have healthy operating margin.

Andrew Kaip - BMO

And just one follow up question regarding that. Can you comment at this point about the silver stream that is emerging from Xstrata's Hackett River project?

Randy Smallwood

Well, Xstrata has been with a very aggressive drilling campaign on Hackett River this year. I believe its actually a royalty versus a stream, but setback to Sabina and so we do have a right of first refusal on any silver out of the Sabina assets on Hackett River within Sabina. So we’re watching and particularly paying attention in terms of success that Xstrata has on that asset going forward; really happy to have a company like Xstrata in there. They’ve got a lot of experience up at that climate and so we think that in terms of having a company like that and advancing the project, pretty excited about it.


Your next question comes from the line of Steve Butler with Canaccord Genuity. Please go ahead.

Steve Butler - Canaccord Genuity

I wondered if we take longer to watch the paint dry or the audit to be done on the tax side, but to get a sense, do you guys have a sense of timing of the conclusion of the CRA audit?

Randy Smallwood

Its federal government. Yeah, we’re hopeful that as Gary mentioned we are hopeful that it’s done by the end of 2012, but it’s already taken quite a while to get to where we are right now, so.

Steve Butler - Canaccord Genuity

Randy, Gary, I also noticed of course just the way that the dividends fell from Q4 and into Q1 into Q2 if you will. In other words the dividends were almost a double quarter if you will in June and you still generated $104 million of net cash increase. So would you look at dividend policy again, but only maybe after you do another blockbuster transaction or would you still evaluate a dividend increase before another $0.5 billion or $1 billion deal if you were to do one?

Randy Smallwood

I think when it comes to dividends it comes to how much cash do we have on hand and we have always said our focus is growth and so we never were at to the point where if we have got the growth opportunities out there to continue expanding and add a value through accretive acquisitions that’s our principle focus and so fortuning up our cash flow feeding growth opportunities than we are going to maintain the dividend policy as to where it is; if we start building up a decent size cash balance again, then we will start working to push more on to the dividend side and on to the yield side.

So you have to keep in mind that with the growth profile that we have got we were climbing with our current assets up to 48 million ounces a year. We have some pretty healthy cash flows coming and so as those cash flows build up, it comes down to our ability to put it back into the ground but if cant put it back under the ground then we start showing it back.

So I think the best way to describe this as our company matures, grows and matures you will see a shift as those cash flows keep on climbing; you will see a shift more towards the dividend side, but I would have to say that right now we are very hopeful that we can put most of that money back under the ground and just maintain the dividend policy where it is.

Steve Butler - Canaccord Genuity

And Gary maybe a clarification for investors as much as my myself, I think it’s clarified, but of your $455 million of allocated purchase price to 777, that indeed will be accelerated tax shield, right?

Gary Brown

That's correct.


Your next question comes from the line of [John Flanagan] with Fundamental Equity.

Unidentified Analyst

Your volume coming from the current projects cover the shortfall that develops from the back of one year and launch of the mine? Secondly, are you surprised by the degree of shortfall and capital cost increase?

Randy Smallwood

I will answer the first question first. It’s not a shortfall, that's a deferral. We are not losing silver, its just silver is being delayed and so on a year basis yes I mean the first five years of Pascua-Lama will produce 9 million ounces per year delivered to Silver Wheaton, whereas the other operations feed us about two, I think we are about 2.4 or 2.5 million ounces. It fluctuates quite a bit on those other three assets. And so it doesn't, obviously doesn't replace within the year, but we are not losing that 9 million ounces, its just being deferred until the project gets up and running.

So I don't look at that as a shortfall, it’s just the deferral. And was a surprise, I mean the project itself is in a very challenging location. It's THAI elevation in the Andes; but Barrick has a lot of experience building mines. They’ve got three other operations that they’ve built in similar environments, in both Peru and Argentina.

And so I don't think I got to ask of a better partner in terms of being able to move this projects forward, but you know, what we’ve got is a worldwide situation here, where capital costs, the inflation, especially in certain jurisdiction such as Argentina, inflationary pressures have really hit the mining industry and I mean, its perhaps a good time to wave our flag.

So one of the big advantages of Silver Wheaton is that we are not subject to those inflationary pressures. Our contracts are all structured such that the cost risk isn’t there and so it just, the CapEx increases and well I might underscores how does it in the industry right now to get these mines up and running for reason of capital cost and you know, at the same time, this asset is strong enough. As I said earlier on, in the interior areas, one of the best goldmines in the industry and so, we look forward to this coming on stream and it will be on.

Unidentified Analyst

Having said that Randy you still have a solid increase in total silver sales and shipments next year?

Randy Smallwood

Next year we will have the benefit of 777 for an entire year and Peñasquito we see continuing improvements there; Goldcorp is working towards expanding their well field capacity and improving the recovery of water out of the tailing, the decanting or water over the tailings and so as Peñasquito comes onto full stream and as 777, we get the benefit of 777 for full year, yeah we will see growth next year.

Thank you, John. And with that operator, I would like to thank everyone for dialing in. look forward to speaking therefore again soon. Thanks a lot.


This concludes this conference call for today. Thank you participating. Please disconnect your lines.

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