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Wheaton on track for record gold production; silver output guidance lowered

Wheaton Precious Metals Corp. is on track for record annual attributable gold production in 2019 but had to reduce its guidance on silver production due to an illegal blockade that forced a temporary suspension of operations at one mine.

The precious metals streaming company booked attributable gold equivalent production of 161,571 ounces comprising 100,577 ounces of gold, 4.8 million ounces of silver and 5,736 ounces of palladium during the second quarter. That amounted to an 11% increase in gold production and 19% decrease in silver production year over year, CFO Gary Brown said on an Aug. 9 earnings call.

Gold output increased largely due to new streaming agreements relative to the San Dimas mine in Mexico and Stillwater mine in Montana as well as higher production at the Sudbury operations in Ontario, which helped offset lower production at other gold mining operations, the CFO said.

The drop in silver output stemmed from the termination of the San Dimas silver stream in May and an illegal blockade that shut down the Penasquito mine in Mexico from late April to late June. Brown said Wheaton's attributable silver production relative to Penasquito dropped 45% year over year to 698,000 ounces, while sales decreased by 41% to 912,000 ounces.

Wheaton sold 90,077 ounces of gold, 4.2 million ounces of silver and 5,273 ounces of palladium during the second quarter, a 3.4% uptick in gold and 29.0% drop in silver from the year-ago period while palladium output held steady.

The increase in gold production was largely offset by "negative changes" in the amount of payable gold and silver produced but not yet delivered to the company, Brown said.

By the quarter's end, about 81,000 payable ounces of gold, 3.3 million payable ounces of silver and 4,500 payable ounces of palladium had been produced but not delivered to Wheaton, which is consistent with normal levels, he said.

CEO Randy Smallwood said the company generated nearly US$110 million in operating cash flow during the quarter. Its gold segment is expected to see continued strong results through 2019, offsetting the first half of the year's lower silver production due to the temporary mine shutdown.

Wheaton expects attributable 2019 gold production of 385,000 ounces, an increase from the previous guidance of 365,000 ounces, due to strong production at the Salobo mine in Brazil. It also anticipates 22.5 million ounces of silver production, a drop from the previous expectation of 24.5 million ounces, and maintained its forecast of 22,000 ounces of palladium from Stillwater.

"We continue to expect steady growth from our portfolio such that over the next five years, inclusive of 2019, we expect to produce on average 750,000 gold equivalent ounces annually," the CEO said.

Wheaton generated US$189.5 million in second-quarter revenue, a 10.8% year-over-year decrease due largely to the decrease in silver sales volumes. Gold accounted for 63% of revenue, silver made up 33% and 4% came from the palladium segment.

For the second quarter, the company posted a net loss of US$124.7 million, or 28 cents per share, swinging year over year from a profit of US$318.1 million, or 72 cents per share.