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Wheaton (WPM) Gains from Stream Acquisitions & Mine Expansions

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Wheaton Precious Metals Corp. (WPM - Free Report) is poised to gain from its focus on mine expansions, benefits from acquiring additional accretive precious metals streams and a solid financial position.

Wheaton recorded first-quarter 2022 adjusted earnings per share of 35 cents, down 5% year over year. The bottom line surpassed the Zacks Consensus Estimate of 34 cents. The company generated revenues of $307 million during the reported quarter, down 5% on a year-over-year basis. The top line missed the Zacks Consensus Estimate of $311 million.

Upbeat Production Guidance

Wheaton generates revenues primarily from selling precious metals, including gold, silver and palladium. The company has a diversified portfolio of high-quality, long-life assets. The company anticipates achieving current-year production of between 700,000 GEOs and 760,000 GEOs. It produced 752,958 GEOs in 2021. Gold production is expected in the band of 350,000-380,000 ounces. It produced 342,546 ounces of gold in 2021. Production of other metals is expected in the range of 44,000 to 48,000 GEOs for 2022.

Benefits From Mine Expansion

Vale S.A’s (VALE - Free Report) investment in the Salobo III mine expansion to include a third concentrator line was 90% complete at the end of first-quarter 2022. This expansion will increase the mill throughput capacity by 50% and add to gold production in 2023. It anticipates that the Salobo expansion is scheduled to complete in the second half of 2022. The Salobo mine currently has a mill throughput capacity of 24 million tons per annum.

Vale stated that production at the Totten mine, which accounts for approximately 15% to 20% of Wheaton’s attributable gold production from Sudbury, resumed in the first quarter of 2022. Operations at the Sudbury mines are expected to normalize in the second quarter. The mines were affected by the temporary closure of the Totten mine.

At Vale's Voisey's Bay operation, physical completion of the underground mine expansion (Reid Brook and Eastern Deeps underground mines) was 70% complete at the end of the first quarter. In second-quarter 2021, Vale achieved the first ore production from the Reed brook underground mine, which will likely be one of the world’s most sustainable cobalt sources. Eastern Deeps is expected to start by the second half of the current year. These expansion projects are expected to be growth drivers for Wheaton in the coming years.

Last April, the first ore production was achieved from the Pampacancha deposit at Hudbay Minerals’ (HBM - Free Report) Constancia mine, which has higher gold grades than the main Constancia pit. This will significantly boost the mine’s gold production and fixed gold recoveries from 2022 to 2025. In the March-end quarter, fixed recoveries from the Hudbay Minerals’ Constancia mine improved from 55% to 70%. These expansion projects are expected to be growth drivers for Wheaton in the coming years.

Investments in Acquiring Streams to Boost Growth

Wheaton is focused on adding additional production capacity from high-quality accretive metals. Its business model focuses on reducing risk while leveraging higher commodity prices. The company remains active on the corporate development front and is focused on growing a high-quality portfolio of assets.

In the first quarter, the company added two new streams and increased interest in a third stream from the existing mine. On Jan 17, 2022, Wheaton entered into a Precious Metals Purchase Agreement (PMPA) with Alliance Metals International, a subsidiary of Adventus Mining Corporation, to acquire gold and silver streams from the Adventus Curipamba Project.

On Feb 8, the company entered into another PMPA with Sabina Gold & Silver Corp to buy gold stream from its Goose Project. On Mar 21, the company amended its PMPA with Aris Gold Corporation in order to buy gold and silver streams from Marmato mines.

Including these projects, Wheaton has added eight new streams in the past year, which have brought immediate production and medium and longer-term growth to its robust portfolio of assets.

Wheaton is committed to deploying more than $1 billion over the next three years to five years on streams that will further boost its outlook. The company has a revolving credit facility of $2 billion with no outstanding debt.

Price Performance

Shares of Wheaton have gained 2.7% in the six months period compared with the industry’s growth of 17.8%.

Zacks Investment Research
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Zacks Rank & A Stock to Consider

Wheaton currently carries a Zacks Rank #3 (Hold).

A better-ranked stocks in the basic materials space include Allegheny Technologies Inc. (ATI - Free Report) , which flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allegheny has a projected earnings growth rate of 869.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 27.3% upward in the past 60 days.

Allegheny’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI has gained around 15.6% in a year and currently sports a Zacks Rank #1 (Strong Buy).


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