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Wheaton (WPM) Gains From Streaming Agreements Amid Low Prices
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Wheaton Precious Metals Corp. (WPM - Free Report) is well-poised to continue benefiting from its solid streaming agreements in place in high-margin assets that are operated by leading mining companies.
WPM stands to gain from the mine exploration and expansion activities carried out by these companies at no additional cost. Its diverse portfolio and solid business model are driving growth amid headwinds from the recent market volatility.
Upbeat Outlook
Wheaton expects attributable gold production of 320,000-350,000 ounces for 2023. The figure indicates an increase from gold production of 286,805 ounces in 2022. The company expects total attributable production between 600,000 GEOs and 660,000 GEOs for 2023. The company had produced 638,113 GEOs in 2022.
Wheaton has set a five-year average of 810,000 GEOs, which includes sector-leading organic growth of over 40%, with two-thirds of the same coming from assets already in operation. The company has a 10-year average of 850,000 GEOs.
Solid Agreements in Place
WPM has invested around $9.6 billion in streams to date. It currently has a portfolio of streams with over 30 years of mine life based on proven and probable reserves. Around 93% of Wheaton’s production comes from high-margin mines operating in the lowest half of their cost curve. Along with other projects, the company expects Salobo and Constancia to be significant growth drivers.
Wheaton Precious has a precious metals purchase agreement (“PMPA”) with Vale S.A (VALE - Free Report) to acquire 75% of the gold produced from the latter’s Salobo mine. The Salobo copper and gold mine located at Carajas, Para is the biggest copper deposit in Brazil. Vale has invested in the Salobo III mine expansion to include a third concentrator line which will increase the mill throughput by 50%. The project consists of two lines, both of which are already in operation, and is expected to reach full capacity in the fourth quarter of 2024. Production from Salobo in the first quarter of 2023 was 43,700 ounces of gold, which was an increase of more than 15% from the fourth quarter of 2022, due to the steady ramp up of the Salobo III expansion. This will boost Wheaton Precious’ top-line performance.
Wheaton Precious has another PMPA with Vale to acquire 42.4% of the cobalt production from the latter’s Voisey’s Bay mine, until the delivery of 31 million pounds of cobalt. On achieving this level, Wheaton Precious will buy 21.2% of cobalt production thereafter for the life of mine. Vale has been working on the underground mine expansion at Voisey’s Bay which includes Reid Brook and Eastern Deeps and has announced its 83% completion at the end of the first quarter of 2023. The Reed Brook underground mine is likely to be one of the most sustainable sources of cobalt in the world. Eastern Deeps has started to extract development ore from the deposit and is expected to begin the main production ramp up in the second half of 2023. These expansion projects are expected to be growth drivers for Wheaton in the coming years.
Wheaton Precious has a PMPA in place with Hudbay Minerals (HBM - Free Report) to purchase 100% of silver and 50% of gold from its Constancia mine in Peru. Hudbay’s Constancia is one of the lowest-cost open-pit sulfide copper mines in South America. It also includes the nearby Pampacancha satellite pit, a high-grade copper-gold deposit where mining activities began in 2021. Commencement of ore production from the Pampacancha will significantly boost the mine’s gold production and fixed gold recoveries.
Solid Business Model
As of Mar 31, 2023, Wheaton remained debt-free. Backed by this, the company continues to add streams, which have brought immediate production, as well as medium and longer-term growth to its robust portfolio of assets. Its business model focuses on reducing risk while leveraging higher commodity prices.. Wheaton is committed to deploying more than $1 billion over the next three to five years on streams that will further boost its outlook.
In May 2023 Wheaton Precious acquired a gold stream in the Cangrejos gold-copper project, which is the largest primary gold deposit in Ecuador. Cangrejos is expected to be a high-margin mine with a life expectancy of 26 years and has strong exploration potential. This deal further adds to WPM’s portfolio of high-quality, low-cost assets.
Recent Dip in Gold & Silver Prices
Gold prices have recently lost steam on a stronger dollar and hawkish Fed remarks. The Fed has decided to keep interest rates unchanged but hinted at further tightening this year. Per market expectations, the Fed will likely raise rates again by 25 basis points in July and stop afterward. This has impacted silver prices as well. Safe haven demand for these metals has been dampened by rising stock markets. Lower gold and silver prices might impact the company’s results.
Termination of Yauliyacu Mine Stream
Wheaton has terminated its silver stream at Glencore's (GLNCY - Free Report) Yauliyacu Mine in Peru for a cash payment of $150 million. Since 2006, WPM has generated a cash flow of more than $485 million from the stream, which, when combined with the termination payment, will yield an absolute return of more than 220% of its original investment. This move will help Glencore facilitate the sale of the Yauliyacu Mine. However, the termination may impact WPM’s top-line and margin performances.
Price Performance
Wheaton’s shares have gained 14.5% in the past year against the industry’s 4.9% fall.
Image: Bigstock
Wheaton (WPM) Gains From Streaming Agreements Amid Low Prices
Wheaton Precious Metals Corp. (WPM - Free Report) is well-poised to continue benefiting from its solid streaming agreements in place in high-margin assets that are operated by leading mining companies.
WPM stands to gain from the mine exploration and expansion activities carried out by these companies at no additional cost. Its diverse portfolio and solid business model are driving growth amid headwinds from the recent market volatility.
Upbeat Outlook
Wheaton expects attributable gold production of 320,000-350,000 ounces for 2023. The figure indicates an increase from gold production of 286,805 ounces in 2022. The company expects total attributable production between 600,000 GEOs and 660,000 GEOs for 2023. The company had produced 638,113 GEOs in 2022.
Wheaton has set a five-year average of 810,000 GEOs, which includes sector-leading organic growth of over 40%, with two-thirds of the same coming from assets already in operation. The company has a 10-year average of 850,000 GEOs.
Solid Agreements in Place
WPM has invested around $9.6 billion in streams to date. It currently has a portfolio of streams with over 30 years of mine life based on proven and probable reserves. Around 93% of Wheaton’s production comes from high-margin mines operating in the lowest half of their cost curve. Along with other projects, the company expects Salobo and Constancia to be significant growth drivers.
Wheaton Precious has a precious metals purchase agreement (“PMPA”) with Vale S.A (VALE - Free Report) to acquire 75% of the gold produced from the latter’s Salobo mine. The Salobo copper and gold mine located at Carajas, Para is the biggest copper deposit in Brazil. Vale has invested in the Salobo III mine expansion to include a third concentrator line which will increase the mill throughput by 50%. The project consists of two lines, both of which are already in operation, and is expected to reach full capacity in the fourth quarter of 2024. Production from Salobo in the first quarter of 2023 was 43,700 ounces of gold, which was an increase of more than 15% from the fourth quarter of 2022, due to the steady ramp up of the Salobo III expansion. This will boost Wheaton Precious’ top-line performance.
Wheaton Precious has another PMPA with Vale to acquire 42.4% of the cobalt production from the latter’s Voisey’s Bay mine, until the delivery of 31 million pounds of cobalt. On achieving this level, Wheaton Precious will buy 21.2% of cobalt production thereafter for the life of mine. Vale has been working on the underground mine expansion at Voisey’s Bay which includes Reid Brook and Eastern Deeps and has announced its 83% completion at the end of the first quarter of 2023. The Reed Brook underground mine is likely to be one of the most sustainable sources of cobalt in the world. Eastern Deeps has started to extract development ore from the deposit and is expected to begin the main production ramp up in the second half of 2023. These expansion projects are expected to be growth drivers for Wheaton in the coming years.
Wheaton Precious has a PMPA in place with Hudbay Minerals (HBM - Free Report) to purchase 100% of silver and 50% of gold from its Constancia mine in Peru. Hudbay’s Constancia is one of the lowest-cost open-pit sulfide copper mines in South America. It also includes the nearby Pampacancha satellite pit, a high-grade copper-gold deposit where mining activities began in 2021. Commencement of ore production from the Pampacancha will significantly boost the mine’s gold production and fixed gold recoveries.
Solid Business Model
As of Mar 31, 2023, Wheaton remained debt-free. Backed by this, the company continues to add streams, which have brought immediate production, as well as medium and longer-term growth to its robust portfolio of assets. Its business model focuses on reducing risk while leveraging higher commodity prices.. Wheaton is committed to deploying more than $1 billion over the next three to five years on streams that will further boost its outlook.
In May 2023 Wheaton Precious acquired a gold stream in the Cangrejos gold-copper project, which is the largest primary gold deposit in Ecuador. Cangrejos is expected to be a high-margin mine with a life expectancy of 26 years and has strong exploration potential. This deal further adds to WPM’s portfolio of high-quality, low-cost assets.
Recent Dip in Gold & Silver Prices
Gold prices have recently lost steam on a stronger dollar and hawkish Fed remarks. The Fed has decided to keep interest rates unchanged but hinted at further tightening this year. Per market expectations, the Fed will likely raise rates again by 25 basis points in July and stop afterward. This has impacted silver prices as well. Safe haven demand for these metals has been dampened by rising stock markets. Lower gold and silver prices might impact the company’s results.
Termination of Yauliyacu Mine Stream
Wheaton has terminated its silver stream at Glencore's (GLNCY - Free Report) Yauliyacu Mine in Peru for a cash payment of $150 million. Since 2006, WPM has generated a cash flow of more than $485 million from the stream, which, when combined with the termination payment, will yield an absolute return of more than 220% of its original investment. This move will help Glencore facilitate the sale of the Yauliyacu Mine. However, the termination may impact WPM’s top-line and margin performances.
Price Performance
Wheaton’s shares have gained 14.5% in the past year against the industry’s 4.9% fall.
Image Source: Zacks Investment Research
Zacks Rank
Wheaton currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.