Wheaton Precious Metals is the pre-eminent ostensibly precious metals streaming company, with 30 high-quality precious metals streaming and early deposit agreements relating to assets in Mexico, Peru, Canada, Brazil, Chile, Argentina, Sweden, Greece, Portugal and the US.
In the context of known production and sales, Q420 financial results were closely in line with our expectations, while results for the full year were characterised by record annual revenues and operating cash flows. In conjunction with virtually extinguished net debt, these caused management to increase Wheaton Precious Metals’ (WPM’s) declared quarterly dividend by 30% to US$0.13/share per quarter. After the conclusion of a series of new precious metals purchase agreements in the past 12 months (eg Marmato, Cozamin, Santo Domingo), we estimate that gold equivalent production will rise 13.3% in FY21, driving continued increases in earnings and revenues, notwithstanding the recent relative weakness in precious metals prices.
Under normal circumstances, we believe that WPM could easily justify a valuation of US$53.37, or C$67.44, per share. In the current environment however, we believe that a valuation of US$75.98, or C$96.01, in FY21 is achievable. At the same time, it remains cheaper than the average valuations of its peers in a majority of cases. This follows the settlement reached between WPM and the CRA in December 2018 whereby income from WPM’s international subsidiaries will remain exempt from Canadian tax.