Barely missing a beat

Wheaton Precious Metals 18 August 2020 Update
Download PDF

Wheaton Precious Metals

Barely missing a beat

Q220 results

Metals & mining

18 August 2020

Price

C$69.87

Market cap

C$31.4bn

C$1.3163/US$

Net debt (US$m) at 30 June 2020*

508.7

*Excluding US$3.8m lease liabilities

Shares in issue

448.9m

Free float

100%

Code

WPM

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

33.7

52.8

121.1

Rel (local)

25.4

79.9

138.6

52-week high/low

C$61.2

C$26.6

Business description

Wheaton Precious Metals is the world’s pre-eminent ostensibly precious metals streaming company, with 29 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.

Next events

Dividend record date

27 August 2020

Dividend payment date

c 10 September 2020

Q320 results

November 2020

4th quarterly dividend

November 2020

Analyst

Charles Gibson

+44 (0)20 3077 5724

Wheaton Precious Metals is a research client of Edison Investment Research Limited

Although below the levels of Q1 – unsurprisingly, given the emergence of the worst manifestations of the coronavirus during the quarter – Wheaton’s Q2 results were nevertheless materially above our expectations, as all six of its partners’ disrupted operations returned to production, to a greater or lesser extent, during the period. As a result, EPS that was almost identical to Q120 (which was largely unaffected by COVID-19). In conjunction with the strength of precious metals since our last note, this has caused us to upgrade our EPS forecasts for both FY20 and FY21 by 40% and 58%, respectively.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

794.0

203.1

48

36

110.6

0.7

12/19

861.3

242.7

56

36

94.8

0.7

12/20e

1,161.8

549.6

120

45

44.3

0.8

12/21e

1,478.6

793.4

177

70

30.1

1.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Locked down but not locked out

To put our upgrades in context, we are now forecasting that WPM will generate a profit before tax in FY21 of a similar magnitude to its revenue in FY18. Among other things, we believe that this could result in a materially higher dividend payment of c 15c in Q4 (cf 10c for each of the three quarters of FY20 to date). We also believe that, on its current trajectory, there is a real possibility that WPM will become net debt free early in FY21, which could presage a change in its dividend policy. In the meantime, despite slowing the process, WPM’s announcement of a transaction to buy a stream from Caldas Gold over the 5.3Moz Marmato (gold) project has proved that it is able to successfully conduct new business in a COVID-19 world.

Valuation: C$68.71/share potentially rising to C$97.81

Under normal circumstances, and assuming no material purchases of additional streams in the foreseeable future (which we think unlikely given its business strategy), we would ordinarily forecast a value per share for WPM of US$52.05, or C$68.71 in FY21. However, given its peers’ valuations as well as the current precious metals investing environment, we believe that WPM is capable of supporting a premium valuation that could easily rise to as high as US$74.10 or C$97.81 per share. Note that both of these valuations exclude the value of 20.2m shares in First Majestic held by WPM, with an immediate value of C$318.8m, or US$0.54 per WPM share. In the meantime, WPM’s shares are trading on near-term financial ratios that are cheaper than those of its royalty/streaming ‘peers’ in at least 70% of financial measures considered in Exhibit 13, if Edison forecasts are used, and 50% of the same valuation measures if consensus forecasts are used. Among other things, this could be indicative of the market having more conservative precious metal pricing expectations than Edison, although Edison’s forecasts are based on a continuation of current spot prices for the remainder of the year and only our FY21 silver price forecast is above the current spot price (see page 11).

Q220 results

Although below the levels of Q1 – unsurprisingly, given the emergence of the worst manifestations to date of the coronavirus – Wheaton’s Q2 results were nevertheless materially above our expectations, as all six of its partners’ disrupted operations were returned to production, to a greater or lesser extent, during the period. As all six of the mines are primarily silver producers, this resumption of operations led to a 2.1Moz positive variance in silver production, relative to our expectations, and a 3.1Moz positive variance in sales as inventories were also drawn down. Coupled with a strong silver price, this led to a US$66.3m (or 36.5%) positive variance in total sales, partially offset by US$33.6m (or similar 37.2%) variance in the cost of sales to result in a US$32.7m (or 35.8%) positive variance in earnings from operations relative to our expectations. This, in turn, was partially offset by a US$8.2m positive (ie higher) variance in general and administrative costs – albeit the majority of this increase could be attributed to non-cash performance share unit accrual costs (see Exhibit 9) – to result in a US$25.1m positive variance in earnings before income tax and a US$0.06 (or 34.8%) positive variance in basic EPS.

A full analysis of WPM’s Q220 income statement relative to both Q120 and our prior expectations is provided in the table below:

Exhibit 1: Wheaton Precious Metals underlying Q220 results vs Q120 and Q220e, by quarter*

US$000s
(unless otherwise stated)

Q119

Q219

Q319

Q419

Q120

Q220e

Q220a

Change **
(%)

Variance ***
(%)

Variance ***
(units)

Silver production (koz)

5,614

4,834

6,095

5,962

6,704

1,593

3,650

-45.6

129.1

2,057

Gold production (oz)

93,585

100,577

104,175

107,225

94,707

86,688

88,631

-6.4

2.2

1,943

Palladium production (koz)

4,729

5,736

5,471

6,057

5,312

5,938

5,759

8.4

-3.0

-179

 

 

 

Silver sales (koz)

4,294

4,241

4,484

4,684

4,928

1,593

4,729

-4.0

196.9

3,136

Gold sales (oz)

115,020

90,077

94,766

89,223

100,405

86,651

92,804

-7.6

7.1

6,153

Palladium sales (koz)

5,189

5,273

4,907

5,312

4,938

5,914

4,976

0.8

-15.9

-938

 

 

 

Avg realised Ag price (US$/oz)

15.64

14.93

17.09

17.36

17.03

15.05

16.73

-1.8

11.2

1.68

Avg realised Au price (US$/oz)

1,308

1,320

1,471

1,483

1,589

1,690

1,716

8.0

1.5

26

Avg realised Pd price (US$/oz)

1,443

1,381

1,535

1,804

2,298

1,906

1,917

-16.6

0.6

11

 

 

 

Avg Ag cash cost (US$/oz)

4.64

5.14

5.16

5.13

4.50

5.51

5.23

16.2

-5.1

0

Avg Au cash cost (US$/oz)

417

420

424

426

436

403

418

-4.1

3.7

15

Avg Pd cash cost (US$/oz)

254

247

271

321

402

343

353

-12.2

2.9

10

 

 

 

Sales

225,049

189,466

223,595

223,222

254,789

181,672

247,954

-2.7

36.5

66,282

Cost of sales

 

 

0

Cost of sales, excluding depletion

69,214

60,957

64,624

63,764

66,908

45,756

65,211

-2.5

42.5

19,455

Depletion

68,381

61,404

63,396

63,645

64,841

44,512

58,661

-9.5

31.8

14,149

Total cost of sales

137,595

122,361

128,020

127,408

131,748

90,268

123,872

-6.0

37.2

33,604

Earnings from operations

87,454

67,105

95,575

95,814

123,040

91,403

124,082

0.8

35.8

32,679

Expenses and other income

 

 

 

– General and administrative**

16,535

12,249

14,028

11,695

13,181

13,627

21,799

65.4

60.0

8,172

– Foreign exchange (gain)/loss

0

0

 

N/A

0

– Net interest paid/(received)

13,946

13,306

11,871

9,607

7,118

5,445

4,636

-34.9

-14.9

-809

– Other (income)/expense

(266)

(500)

(265)

814

-1,861

234

-112.6

N/A

234

Total expenses and other income

30,215

25,055

25,634

22,116

18,438

19,072

26,669

44.6

39.8

7,597

Earnings before income taxes

57,239

42,050

69,941

73,698

104,602

72,332

97,413

-6.9

34.7

25,081

Income tax expense/(recovery)

(110)

(2,758)

(2,751)

(3,447)

8,442

250

59

-99.3

-76.4

-191

Marginal tax rate (%)

(0.2)

(6.6)

(3.9)

(4.7)

8.1

0.3

0.1

-98.8

-66.7

-0.2

Net earnings

57,349

44,808

72,692

77,145

96,160

72,082

97,354

1.2

35.1

25,272

Average no. shares in issue (000s)

444,389

445,769

446,802

446,802

447,805

448,300

448,636

0.2

0.1

336

Basic EPS (US$)

0.13

0.10

0.16

0.17

0.215

0.161

0.217

0.9

34.8

0.06

Diluted EPS (US$)

0.13

0.10

0.16

0.17

0.214

0.160

0.216

0.9

35.0

0.06

DPS (US$)

0.09

0.09

0.09

0.09

0.10

0.10

0.10

0.0

0.0

0.00

Source: Wheaton Precious Metals, Edison Investment Research. Note: *As reported by WPM, excluding exceptional items. **Q220 vs Q120. ***Q220 actual vs Q220 estimate.

Six of Wheaton’s partners’ mines were directly affected by shutdowns and suspensions during the period. Whereas we had previously expected zero production and sales from each of these assets for the entirety of Q220, their performance was considerably better than our (albeit somewhat conservative) expectations:

Exhibit 2: Mines affected by COVID-19 performance in Q220

Name

Approximate percentage of ‘normal’ production achieved in Q220

Comment

Approximate percent of period available for production

Penasquito

47%

Production halted in early April in line with Mexican government decree; restarted at the beginning of June and reached pre-coronavirus record throughput rates by mid-June.

33%

San Dimas

67%

Production halted in early April in line with Mexican government decree; restarted again in late May. Delays in supply of parts and equipment for mill modernisation and optimisation programmes mean that installation of high intensity grinding mill will not occur until Q221.

38%

Antamina

53%

Production suspended in mid-April; restarted in late May after Peruvian government decreed mining to be an ‘essential’ industry.

50%

Constancia

*34–38%

Production furloughed at the end of March; resumed at full capacity in mid-May after Peruvian government deemed mining an ‘essential’ industry.

50%

Yauliyacu

48%

Shut 2 April; restarted mid-May after Peruvian government deemed the mining industry to be ‘essential’.

50%

Los Filos

19%

Production halted in early April in line with Mexican government decree; restarted 5 May.

67%

Source: Edison Investment Research, Wheaton Precious Metals. Note: *Underlying excluding contractual delivery of 2,005oz gold in respect of delay in mining Pampacancha deposit.

Although not directly affected by a suspension or a lockdown, Wheaton’s flagship asset, Salobo in Brazil, experienced increased absenteeism during the quarter attributable to COVID-19, which resulted in production 6,896oz Au (or 10.4%) below our prior expectations. However, this was more than made up for by a 15.9% over-sale of gold, as inventories were drawn down, to result in sales that were 2,487oz (or 3.8%) ahead of our expectation. According to Vale’s Q220 performance report, physical completion of the Salobo III mine expansion was at 54% (cf 47% at end-Q1, 40% at end-Q419 and 27% at end-Q319) and remains on schedule for start-up in H122.

Ounces produced but not yet delivered, aka inventory

Rather unusually – within the historical context – both WPM’s gold and silver divisions reported large over-sales of metal relative to production during the quarter, as inventories were drawn down. However, whereas the over-sale in gold could (effectively) be solely attributed to performance at Salobo, the material (29.6%) over-sale of silver relative to production could be attributed to all of its major silver producing assets and half of its minor ones as well.

Exhibit 3: Over(/under) sale of silver and gold as a % of production, Q112–Q220

Source: Edison Investment Research, Wheaton Precious Metals. Note: As reported.

As at 30 June, payable ounces attributable to WPM produced but not yet delivered to WPM amounted to 3.1Moz silver and 79,518oz gold (vs an albeit restated level 4.9Moz silver and a fractionally restated 88,383oz gold at end-March). This ‘inventory’ equates to 1.67 and 2.51 months of FY20 forecast silver and gold production, respectively (cf 3.17 and 2.78 months as at end-Q120, as reported) and compares with WPM’s target level of two months of silver and two to three months of gold and palladium production, respectively. As a consequence, WPM believes that there is the potential for an inventory increase of approximately 20,000oz AuE in Q320, in particular, which Edison has rationalised (for the purposes of its forecasts in Exhibits 10 and 14) as a rise in silver inventories of 685koz and a rise in gold inventories of 11,377oz to take their levels back to 2.04 months and 2.87 months, respectively.

Exhibit 4: WPM ounces produced but not yet delivered, Q316–Q220 (months of production)

Source: Edison Investment Research, Wheaton Precious Metals. Note: As reported.

Note that, for these purposes, the use of the term ‘inventory’ reflects ounces produced by WPM’s operating counterparties at the mines over which it has streaming agreements, but which have not yet been delivered to WPM. It in no way reflects the other use of the term in the mining industry itself, where it typically refers to metal in circuit (among other things) and would therefore be considered to be a consequence of metallurgical recoveries in the plant.

Medium-term outlook

Prior to the coronavirus pandemic, WPM provided production guidance for FY20 of 390–410koz gold, 22.0–23.5Moz silver and 23.0–24.5koz of palladium to result in gold equivalent production of c 685–725koz (based on an assumed gold price of US$1,500/oz, an assumed silver price of US$18.00/oz and an assumed palladium price of US$2,000/oz). WPM suspended its production guidance on 1 April in response to the coronavirus crisis. As its partners’ previously furloughed mines have returned to production however, it has reinstated updated guidance, as shown in the exhibit below. Its long-term production forecast remains unchanged at 750,000oz gold equivalent per annum on average between 2020 and 2024. This compares with Edison’s current and previous forecasts, as follows:

Exhibit 5: WPM precious metals production – Edison forecasts vs guidance

FY19

FY20e

FY21e

FY22e

FY23e***

FY24e

Previous Edison forecast

Silver production (Moz)

21.7

20.2

20.7

20.5

17.4

17.3

Gold production (koz)

394

381

400

389

380

325

Cobalt production (klb)

0

0

2,100

2,100

2,100

2,814

Palladium production (koz)

21

23.125

27

27

30

30

Gold equivalent (koz)

*600

*781

*764

*713

*671

Current Edison forecast

Silver production (Moz)

22.2

20.7

20.5

17.4

17.3

Gold production (koz)

381

394

383

374

319

Cobalt production (klb)

0

2,100

2,100

2,100

2,814

Palladium production (koz)

22.946

27

27

30

30

Gold equivalent (koz)

669

777

761

707

657

Reinstated WPM guidance

Silver production (Moz)

**22.6

21.5–22.5

Gold production (koz)

**406.7

365–385

Cobalt production (klb)

**0

0

Palladium production (koz)

**22.0

23.0–24.5

Gold equivalent (koz)

655–685

750

750

750

750

Source: Wheaton Precious Metals, Edison Investment Research forecasts. Note: *At Edison’s prior gold and silver price forecasts; **Actual; ***Edison forecast includes a contribution from Salobo III in FY23e.

Readers should note that the major differences between Edison’s gold equivalent production forecasts and Wheaton’s can be attributed to the ratio of the gold price to the silver price. Whereas Wheaton assumes an 83.33x ratio (based on a gold price of US$1,500/oz and a silver price of US$18.00/oz), the current ratio is closer to 74.7x and Edison assumes that the ratio will revert closer to its long-term average of 61.5x from FY21. Note that, at WPM’s prices, Edison’s gold equivalent production forecast in FY20 is 678koz, rather than 669koz (which assumes a gold price of US$1,927/oz for the balance of the year and a silver price of US$25.79/oz). In addition, Edison is also expecting a production contribution from Salobo III from FY23 (albeit nothing from Rosemont).

In the medium term, First Majestic has announced plans to increase production at San Dimas by restarting mining operations at the past-producing Tayoltita mine and expects to ramp up production to add another 300tpd (12%) to throughput by the end of FY20. In addition, it intends to install a new 3,000tpd high-intensity grinding mill circuit and an autogenous grinding mill in Q221 (cf H220 previously) to further improve recoveries and reduce operating costs. Production of palladium and gold at Stillwater (operated by Sibanye-Stillwater) will similarly increase into FY21 under the influence of the Fill-the-Mill and Blitz projects.

By contrast, production is expected to remain at lower levels at Constancia, owing to delays in mining the Pampacancha satellite deposit (which hosts significantly higher gold grades than those mined hitherto). However, Hudbay reports that it has now secured the surface rights for the Pampacancha deposit and expects to begin mining ore from the satellite deposit in early FY21 (cf late FY20 previously). Nevertheless, in lieu of the delay, WPM is entitled to receive an additional 2,005oz gold per quarter from Hudbay during FY20 relative to its precious metals purchase agreement.

Marmato

On 22 June, WPM announced that it had signed a non-binding term sheet with Caldas Gold to enter into a precious metals purchase agreement (PMPA) for the Marmato project in Colombia. Under the terms of the proposed PMPA, WPM will acquire 6.5% of the gold production and 100% of the silver production of Marmato until 190,000oz gold and 2.15Moz silver have been delivered, after which the stream will drop to 3.25% of gold production and 50% of silver production for the remainder of the life of the mine. Under the proposed PMPA, WPM will pay Caldas a total cash consideration of US$110m, of which US$38m will be payable upon closing and the remainder during the construction of the Marmato Deep Zone project. In addition, WPM will make ongoing delivery payments equal to approximately 20% of spot prices over the life of the mine.

The Marmato project comprises the existing producing underground gold and silver mine in the Upper Zone, including the right to mine the lower portion of the neighbouring Echandia licence area, the existing 1,200tpd processing plant and the area encompassing the Deeps Zone mineralisation, all located within the mining licence area referred to as Zona Baja. The area has been a centre for gold production for approximately 500 years and the current mine has been in operation since 1991. As at 31 July 2019, the project’s mineral resource inventory was estimated at 5.4Moz, of which 38%, or 2.0Moz, is in the measured and indicated categories. Among other things, it has excellent infrastructure, being located adjacent to the Pan American Highway with access to Medellin to the north and Manizales to the south and has access to the national electricity grid, which runs near the property.

A preliminary economic assessment (PEA) was completed on the project in 2019 and charts a path for expansion of mining operations at the Marmato Project to encompass both the existing Upper Zone operation and a new Deeps Zone operation, which sits directly below the Upper Zone vein system. Wheaton interprets the geology of the mine to be structurally controlled and believes that there is a high probability that the system coalesces into one ore body at depth, similar to other systems in the region. Wheaton’s agreement with Caldas is subject to receipt of required permits and licenses, sufficient financing having been obtained and other customary conditions. To date, Edison has not included any contribution from Caldas to its forecasts for WPM. On the basis of a PEA, filed by Caldas in February 2020 however, we have calculated the following potential cash flows to WPM based on the first 10 years of mining (out of a total of 19) as follows:

Exhibit 6: Marmato project production and estimated cash-flow, 2020–29

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

Gold streamed (oz)

1,194

2,566

2,300

7,633

10,866

12,023

11,306

9,838

8,907

8,749

Silver streamed (oz)

22,718

47,037

53,829

97,682

123,453

128,793

140,508

122,995

135,762

159,521

Gold price (US$/oz)

1,919

1,892

1,892

1,892

1,892

1,892

1,892

1,892

1,892

1,892

Silver price (US$/oz)

24.97

30.78

30.78

30.78

30.78

30.78

30.78

30.78

30.78

30.78

Revenue (US$000s)

2,858

6,303

6,009

17,449

24,358

26,712

25,716

22,400

21,030

21,462

Gold costs (US$/oz)

345.42

340.56

340.56

340.56

340.56

416.24

416.24

416.24

416.24

416.24

Silver costs (US$/oz)

4.50

5.54

5.54

5.54

5.54

6.77

6.77

6.77

6.77

6.77

Total cash costs (US$000s)

2,343

5,169

4,927

14,308

19,974

20,835

20,059

17,472

16,404

16,741

Capital costs (US$000s)

(38,000)

(36,000)

(36,000)

Net cash flow (US$000s)

(35,657)

(30,831)

(31,073)

14,308

19,974

20,835

20,059

17,472

16,404

16,741

Source: Caldas Gold technical report, SRK Consulting, Edison Investment Research

In crude terms therefore, WPM is acquiring an average annual positive cash flow of c US$15m (albeit front loaded) over 19 years for an upfront payment of US$110m. However, deeper drilling has indicated the potential for the mine to continue at depth beyond its official 19-year life and WPM envisages the potential for multiple additional drop downs once the PEA plan has been concluded.

A pre-feasibility study (PFS), which is currently in progress and expected to be completed in mid-2020, is focused on the development of the Deeps Zone mineralisation, construction of a new 4,000tpd plant and new dry stack tailings storage facilities. Mechanised mining, using an underground long-hole stoping method, is expected to commence in 2023 with an additional estimated 1.6Moz gold recovered over a 16-year mine life.

Longer-term outlook

Salobo

On 24 October 2018, Vale announced the approval of the Salobo III brownfields mine expansion, intended to increase processing capacity at Salobo from 24Mtpa to 36Mtpa, with start-up scheduled for H122 and an estimated ramp-up time of 15 months. According to its agreement with Vale, depending on the grade of the material processed, WPM will be required to make a payment to Vale in respect of this expansion, which WPM estimates will be in the range US$550–650m in FY23, in return for which it will be entitled to its full 75% attributable share of expanded gold production. Note: this compares to its purchase of a 25% stream in August 2016 for a consideration of US$800m (see our note, Silver Wheaton: Going for gold, published on 30 August 2016), the US$900m it paid for a similar stream in March 2015 (when the gold price averaged US$1,179/oz) and the US$1.33bn that it paid for its original 25% stream in February 2013.

According to Vale’s Q220 performance report, the Salobo III mine expansion is now 54% complete (cf 47% at the end of Q120, 40% at the end of Q419 and 27% at the end of Q319) and remains on schedule for start-up in H122.

Pascua-Lama

Wheaton’s contract with Barrick provides for a completion test that, if unfulfilled by 30 June 2020, results in WPM being entitled to the return of its upfront cash consideration of US$625m less a credit for any silver delivered up to that date from three other Barrick mines (at which point it would have no further streaming interest in the mine). As a result, Edison calculates that WPM has the right to an estimated US$252.3m (the carrying value of Pascua-Lama in WPM’s accounts) repayment from Barrick in FY20. Given the long-term optionality provided by the Pascua-Lama project however, Wheaton has indicated that it is unlikely to enforce the repayment of its entitlement and that it prefers instead to maintain its streaming interest in the project.

Rosemont

Another major project with which WPM has a streaming agreement for attributable gold and silver production is Rosemont copper in Arizona.

The proposed Rosemont development is located near a number of large porphyry-type producing copper mines and would be one of the largest three copper mines in the US, with output of c 112,000t copper in concentrate per year and accounting for c 10% of total US copper production. Total by-product production of silver and gold attributable to WPM will be c 2.7Moz Ag pa and c 16,100oz Au pa.

Rosemont’s operator Hudbay has received both a Section 404 Water Permit from the US Army Corps of Engineers and a Mine Plan of Operations (MPO) from the US Forest Service. The Section 404 permit regulates the discharge of fill material into waterways according to the Clean Water Act and was effectively the final material administrative step before the mine could be developed. Subsequently, Hudbay indicated it would seek board approval to commence construction work by the end of CY19, which would have enabled first production ‘by the end of 2022’. In the meantime, it commenced early works to run concurrently with financing activities (including a potential joint venture partner).

On 31 July 2019 however, the US District Court for the District of Arizona issued a ruling relating to a number of lawsuits challenging the US Forest Service’s issuance of the Final Record of Decision effectively halting construction, saying that:

The US Forest Service ‘abdicated its duty to protect the Coronado National Forest’ when it failed to consider whether the mining company held valid unpatented mining claims; and

The Forest Service had ‘no factual basis to determine that Rosemont had valid unpatented mining claims’ on 2,447 acres and that the claims were invalid under the Mining Law of 1872.

In its reaction to the ruling, Hudbay said that it believed that the ruling was without precedent and that the court had misinterpreted federal mining laws and Forest Service regulations as they apply to Rosemont. It pointed out that the Forest Service issued its decision in 2017 after a ‘thorough process of ten years involving 17 co-operating agencies at various levels of government, 16 hearings, over 1,000 studies, and 245 days of public comment resulting in more than 36,000 comments’ and with a long list of studies that have examined the potential effects of the proposed mine on the environment. Hudbay also pointed out that various agencies had accepted that the company could operate the mine in compliance with environmental laws. As a result, Hudbay is in the process of appealing the ruling to the Ninth Circuit Court of Appeals.

At our updated precious metals prices (see ‘Precious Metals prices’, below), Edison estimates that Rosemont could contribute an average c US$0.19 per share (12.7%) to WPM’s basic EPS in its first nine years of its official 18-year life from FY22–30 for an upfront payment of US$230m (equivalent to US$0.513/share) in two instalments of US$50m and US$180m (of which neither has yet been paid). Nevertheless, in the light of the uncertainty about the timing and development of the project we have, for the moment at least, removed any contribution from Rosemont from our forecasts.

Other potential future growth

WPM is ostensibly a precious metals streaming company (plus one cobalt stream). Considering only the silver component of its investible universe, WPM estimates the size of the potential market open to it to be the lower half of the cost curve of the 70% of global silver production of c 856Moz in CY18 (down from 894Moz in CY15) that was produced as a by-product of either gold or base metal mines (ie approximately 300Moz pa silver vs WPM’s attributable production of 22.6Moz Ag in FY19). Inevitably, WPM’s investible universe may be further refined by the requirement for the operations to be located in good mining jurisdictions, with relatively low political risk. Nevertheless, such figures serve to illustrate the fact that WPM’s marketplace is very far from being either saturated or mature.

As a consequence, WPM reports that it is busy on the corporate development front, albeit with the caveat that COVID-19 has inevitably slowed the pace of progress. Whereas potential deals in FY19 were generally reported to be with development companies in the US$100–350m range, more recent overtures are reported to have been from producing companies looking to strengthen their balance sheets with mooted transactions in the >US$1bn range, which WPM would fund, in the first instance, via the US$1,359.5m available under its revolving credit facility, plus US$131.8m in cash and (potentially) from its ATM programme (see below).

While it is difficult, or impossible, to predict potential future stream acquisition targets with any degree of certainty, it is perhaps possible to highlight two that may be of interest to WPM in due course for which it already has strong, existing counterparty relationships:

the platinum group metal (PGM) by-product stream at Sudbury (operated by Vale); and

the 50% of the gold output at Constancia that is currently not subject to any streaming arrangement.

Otherwise, WPM also has streaming agreements with other potential producing mines, including (but not limited to) Navidad, Keno Hill (at which the operator, Alexco, has announced its intent to recommence mining operations from Q420) and Cotabambas. Note that during its most recent period in production, Keno Hill typically produced in the order of 150–200koz silver attributable to Wheaton per annum.

Precious metals prices

Gold is a traditional beneficiary of negative real interest rates (and therefore falling nominal interest rates, assuming constant inflation) and central bank balance sheet expansion either in the form of quantitative easing or otherwise. In our last note on the gold price (see A golden future, published on 11 June 2020), Edison argued that the recent, sharp increases in the total US monetary base might be expected to support a (nominal) gold price of US$1,892/oz and potentially as high as US$3,000/oz. While there is a historically strong and statistically significant correlation of 0.909 between the gold price and the total US monetary base from 1967 to 2018 however, there is very little visibility as to how, or to what extent, the total US monetary base may be expected to evolve. Currently, we know that it is expanding at a rate of approximately US$110bn per month, which equates to an expected increase in the gold price (using the historical correlation) of approximately US$500/oz per annum. Anecdotally, the total US monetary base may probably be expected to continue to increase for a time until the COVID-19 crisis has been managed and then to flatten off for a discrete period until a period of tapering is attempted by the Federal Reserve (in a similar fashion to the aftermath of the global financial crisis). However, neither the extent of any increases nor the extent of any subsequent tapering nor the timing of either is easy to judge. In consequence, Edison’s strategy now is to maintain a flat, nominal gold price of US$1,892/oz into the future from FY21. Note that this may be contrasted with our previous approach to gold price forecasts (see Portents of economic weakness: Gold – doves in the ascendant, published on 14 August 2019). Given their historical correlation, a flat nominal gold price of US$1,892/oz should support a silver price of US$30.78/oz (cf a spot price currently of US$25.79/oz and one of US$29.85/oz on 7 August 2020) – ie a gold/silver price ratio of 61.5x).

In the absence of more general deflation however, a flat, nominal gold price of US$1,892/oz is, self-evidently, a declining gold price in real terms, which is an unlikely long-term scenario, given that the gold price has historically increased by 2.0% per annum in real terms from 1914 to 2018 (see Portents of economic weakness, Gold: Doves in the ascendant). During the period 2013–18, the gold price was relatively flat, averaging US$1,270/oz. Its average price in 2018 was also US$1,271/oz and this might therefore be considered an appropriate floor price from which to grow the gold price in real terms. A second long-term gold price scenario might therefore be inflating the real price of gold from US$1,271/oz in 2018. All other things being equal, these two scenarios cross between 2025 and 2026 (see Exhibit 8) and, from that point, Edison therefore assumes that both the gold and silver prices will rise with US inflation (ie flat in real terms). These scenarios may be plotted graphically into the future, for both gold and silver, in both nominal and terms, as follows:

Exhibit 7: Edison updated nominal gold and silver price forecasts (US$/oz)

Exhibit 8: Edison updated real gold price pricing scenarios and forecasts (US$/oz)

Source: Edison Investment Research.

Source: Edison Investment Research.

Exhibit 7: Edison updated nominal gold and silver price forecasts (US$/oz)

Source: Edison Investment Research.

Exhibit 8: Edison updated real gold price pricing scenarios and forecasts (US$/oz)

Source: Edison Investment Research.

Consequently, and in the absence of much immediate visibility as to the evolution of the total US monetary base, Edison’s new gold price scenario for valuation purposes is for the gold price to remain at US$1,892/oz in flat nominal terms (ie declining in real terms) until the price (in real terms) crosses with the increased US$1,271/oz real 2018 price. At that point we assume that the price will flatten out in real terms (at US$1,494/oz) and rise with US inflation in nominal terms.

In the meantime, in common with Edison’s stated practice, we use prevailing prices (ie US$1,927/oz Au (cf US$1,691/oz previously), US$25.79/oz Ag (cf US$15.03/oz previously) and US$2,062/oz Pd (cf US$1,814/oz previously)) to generate our forecasts for the remainder of the current financial year.

General and administrative expenses

WPM reiterated its guidance for non-stock general & administrative (G&A) expenses of US$40–43m (or US$10.0–10.75m per quarter) in FY20, compared to a range of US$33–36m in FY19 (reduced from an earlier estimate of US$36–38m), an actual FY19 outcome of US$31.6m and guidance of US$34–36m in FY18 cf an actual outcome of US$36.7m, including all employee-related expenses, charitable contributions, etc, but excluding performance share units (PSUs) and equity settled stock based compensation. It is notable, within this context, that WPM’s non-stock G&A expense for Q220 fell within this range (see Exhibit 9) and that the extent to which actual all-in G&A costs exceeded our forecasts could be entirely attributed to performance share unit accruals and a US$2.0m increase in donations, in particular.

Investors are reminded that, since April this year, stock-based compensation costs and PSUs have been included in Edison’s financial forecasts in Exhibits 10 and 14 notwithstanding their somewhat unpredictable nature. Excluding stock-based effects however, it is clear that non-stock expenses are trending towards the bottom end of Wheaton’s guided range of US$40–43m, notwithstanding higher donations.

Exhibit 9: WPM FY19 general and administrative expense (US$000s)

Item

Q220

Q120

Q419

FY19

G&A excluding PSU* and equity settled stock-based compensation

4,095

4,135

7,434

31,642

Other (inc. depreciation, donations and professional fees)

6,302

4,266

Sub-total

10,397

8,401

7,434

31,642

PSU* accrual

10,097

3,277

2,830

17,174

Equity settled stock-based compensation

1,305

1,503

1,432

5,691

Total general & administrative

21,799

13,181

11,696

54,507

Source: Wheaton Precious Metals, Edison Investment Research. Note: *Performance share units.

FY20e by quarter

Our updated forecasts for WPM for FY20 are as shown in Exhibit 10, below. The forecasts assume that operations will continue throughout the remainder of the year without major interruptions, which is, self-evidently, a risk. Apart from precious metals prices, the principal remaining risk to our forecasts relates to the extent to which sales differ from production and therefore, by extension, the extent to which inventory (in the form of ounces produced but not yet delivered to Wheaton) either increases or decreases during the year.

Exhibit 10: Wheaton Precious Metals FY20 forecast, by quarter*

US$000s
(unless otherwise stated)

FY19

Q120

Q220

Q320e

Q420e

FY20e
(current)

FY20e
(previous)

Silver production (koz)

22,562

6,704

3,650

5,926

5,926

22,207

20,150

Gold production (oz)

406,675

94,707

88,631

98,151

99,044

380,533

381,482

Palladium production (koz)

21,993

5,312

5,759

5,938

5,938

22,946

23,125

Silver sales (koz)

17,703

4,928

4,729

5,241

5,926

20,825

18,374

Gold sales (oz)

389,086

100,405

92,804

86,774

99,007

378,990

387,071

Palladium sales (oz)

20,681

4,938

4,976

5,230

5,914

21,058

22,679

Avg realised Ag price (US$/oz)

16.29

17.03

16.73

24.16

25.79

21.25

15.57

Avg realised Au price (US$/oz)

1,391

1,589

1,716

1,911

1,927

1,782

1,664

Avg realised Pd price (US$/oz)

1,542

2,298

1,917

2,070

2,062

2,085

1,943

Avg Ag cash cost (US$/oz)

5.02

4.50

5.23

5.52

5.58

5.23

4.75

Avg Au cash cost (US$/oz)

421

436

418

424

424

423

419

Avg Pd cash cost (US$/oz)

273

402

353

373

371

374

347

Sales

861,332

254,789

247,954

303,254

355,821

1,161,819

974,286

Cost of sales

Cost of sales, excluding depletion

258,559

66,908

65,211

67,709

77,305

277,132

257,335

Depletion

256,826

64,841

58,661

61,492

69,831

254,824

251,007

Total cost of sales

515,385

131,748

123,872

129,201

147,136

531,957

508,342

Earnings from operations

345,947

123,040

124,082

174,053

208,685

629,862

465,944

Expenses and other income

– General and administrative**

54,507

13,181

21,799

13,627

13,627

62,234

54,061

– Foreign exchange (gain)/loss

0

0

0

– Net interest paid/(received)

48,730

7,118

4,636

4,009

2,310

18,073

19,686

– Other (income)/expense

(217)

(1,861)

234

-1,627

(1,861)

Total expenses and other income

103,020

18,438

26,669

17,636

15,937

78,680

71,887

Earnings before income taxes

242,927

104,602

97,413

156,417

192,748

551,182

394,057

Income tax expense/(recovery)

(9,066)

8,442

59

250

250

9,001

9,192

Marginal tax rate (%)

(3.7)

8.1

0.1

0.2

0.1

1.6

2.3

Net earnings

251,993

96,160

97,354

156,167

192,498

542,181

384,865

Ave. no. shares in issue (000s)

446,021

447,805

448,636

448,636

448,946

448,428

448,176

Basic EPS (US$)

0.56

0.215

0.217

0.348

0.429

1.209

0.859

Diluted EPS (US$)

0.56

0.214

0.216

0.347

0.428

1.207

0.857

DPS (US$)

0.36

0.10

0.10

0.10

0.15

0.45

0.42

Source: Wheaton Precious Metals, Edison Investment Research. Note: *Excluding impairments and exceptional items. **Forecasts now include stock-based compensation costs. Totals may not add up owing to rounding.

Readers should note the slightly uncharacteristic Edison assumption in Q3 that there will be an 11.4% under-sale of both gold and silver, relative to production to allow inventories to recover by an approximate 20,000oz gold equivalent, as pre-figured by WPM management. Altogether, our basic EPS forecast of US$1.209/share for FY20 (cf US$0.859/share previously) for FY20 is 23.4% above the consensus forecast of US$0.98/share (source: Refinitiv, 14 August 2020) and (now) right at the top of the range of expectations, of US$0.86–1.19 per share quoted for the period:

Exhibit 11: WPM FY20 consensus EPS forecasts (US$/share)

Q120

Q220

Q320e

Q420e

Sum Q1–Q420

FY20

Edison forecasts

0.215

0.217

0.348

0.429

1.209

1.209

Mean consensus

0.215

0.217

0.26

0.28

0.97

0.98

High consensus

0.215

0.217

0.35

0.36

1.14

1.19

Low consensus

0.215

0.217

0.20

0.22

0.85

0.86

Source: Refinitiv, Edison Investment Research. Note: As at 13 August 2020.

Our US$1.77 basic EPS forecast for FY21 (cf US$1.12 previously) compares with a consensus of US$1.20 (source: Refinitiv, 13 August 2020) within a range US$0.93–1.60 and is materially higher than the equivalent figures of US$0.88 within a range US$0.76–1.15 of mid-March (source: Refinitiv, 19 March 2020). As discussed previously, this estimate is predicated on an average gold price during the year of US$1,892/oz (cf US$1,509/oz previously) and an average silver price of US$30.78/oz (cf US$24.76/oz previously), which assumes, among other things, that the gold/silver price will revert to the long-term correlation that it has exhibited with gold since the latter was demonetised in 1971. If both metals remain at current levels however (US$25.79/oz Ag and US$1,927/oz Au at the time of writing), we would then forecast that WPM would instead earn US$1.58 per share in FY21.

Valuation

Excluding FY04 (part-year), WPM’s shares have historically traded on an average P/E multiple of 29.5x current year basic underlying EPS, excluding impairments (vs 44.3x Edison or 51.7x Refinitiv consensus FY20e, currently – see Exhibit 13).

Exhibit 12: WPM’s historical current year P/E multiples, 2005–19

Source: Edison Investment Research

Applying this 29.5x multiple to our updated EPS forecast of US$1.77 in FY21 implies a potential value per share for WPM of US$52.05 or C$68.71 in that year (vs US$33.08, or C$46.59 previously). However, it is clearly apparent from the graph above that WPM’s current year multiple has been trading higher for some time and the last two years would suggest that a multiple in excess of 40x earnings could be sustainable – notwithstanding the fact that these years were not subject to the extraordinary trials and tribulations being experienced in FY20. In this case, applying a 42.0x earnings multiple (the average of FY18 and FY19) to our updated EPS forecast of US$1.77 in FY21 implies a potential value per share for WPM of US$74.10 or C$97.81 in that year (cf US$47.10 or C$66.32 previously) and/or for as long as precious metals prices remain at higher levels and/or the current coronavirus crisis persists. Even at such elevated levels however, a multiple of over 42.0x would still leave WPM’s shares at a noticeable discount to those of its obvious peers (ie Franco-Nevada and Royal Gold), as demonstrated in Exhibit 13.

Note that neither of these valuations include the value of 20.2m shares in First Majestic currently held by WPM, with an immediate value (13 August) of C$318.8m, or US$0.54 per WPM share.

In the meantime, from a relative perspective, it is notable that WPM has a lower relative valuation than its royalty/streaming ‘peers’ on at least 70% (17 out of 24) of the valuation measures used in Exhibit 13 if Edison estimates are adopted or 50% of the same valuation measures if consensus forecasts are adopted; among other things, this could possibly indicate the market has more conservative precious metal pricing expectations than Edison (albeit Edison’s forecasts are based on a continuation of current spot prices for the remainder of the year and only our FY21 silver price forecast is above its spot price, currently).

Exhibit 13: WPM comparative valuation vs a sample of operating and royalty/streaming companies

P/E (x)

Yield (%)

P/CF (x)

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

Royalty companies

Franco-Nevada

65.0

52.3

0.7

0.7

41.5

33.0

Royal Gold

40.9

39.6

0.8

0.8

21.4

20.3

Sandstorm Gold

72.0

54.2

0.0

0.0

25.5

21.7

Osisko

58.5

32.5

1.3

1.3

22.3

16.4

Average

59.1

44.6

0.7

0.7

27.7

22.9

WPM (Edison forecasts)

44.3

30.1

0.8

1.3

27.7

21.5

WPM (consensus)

51.7

41.0

0.8

1.1

32.1

26.6

Source: Refinitiv, Edison Investment Research. Note: Peers priced on 18 August 2020.

Financials: Solid equity base

As at 30 June 2020, WPM had US$131.8m in cash cum-dividend (cf US$126.7m in Q120 and US$104.0m in Q419) and US$640.5m of debt outstanding (cf US$715.5m in Q120, US$874.5m in Q419 and US$1,017.1m at end-Q319) under its US$2bn revolving credit facility (which attracts an interest rate of Libor plus 120–220bp and now matures in February 2025), such that (including a modest US$3.8m in leases) it had net debt of US$512.5m (cf US$592.7m in Q120, US$774.8m in Q419 and US$865.5m in Q319) overall, after US$151.8m of cash generated by operating activities during the quarter (cf US$177.6m in Q120 and US$131.9m in Q419). Relative to the company’s balance sheet equity of US$5,238.2m, this level of net debt equates to a financial gearing (net debt/equity) ratio of 9.5% (cf 11.3% in Q120, 14.5% in Q419 and 16.6% in Q319) and a leverage (net debt/[net debt+equity]) ratio of 8.6% (cf 10.2% in Q120, 12.7% in Q419 and 14.2% in Q319). Self-evidently, such a level of debt is well within the tolerances required by its banking covenants that:

net debt should be no more than 0.75x tangible net worth; and

interest should be no less than 3x covered by EBITDA (we estimate that it was covered 11.3x in FY19 and that it will be covered 45.5x in FY20).

All other things being equal and subject to its making no further major acquisitions (which is unlikely in our view), on our current cash flow projections WPM will be net debt free early in FY21 (even after anticipated dividend payments).

At-the-market equity programme

WPM has initiated an at-the-market equity programme that allows it to issue up to US$300m of common shares from treasury to the public, from time to time, at the prevailing market price or other prices through the Toronto Stock Exchange, the New York Stock Exchange or any other marketplace on which its shares are traded. The volume and timing of distributions under the programme, if any, will be determined at the company’s sole discretion, subject to applicable regulatory limitations. WPM intends that the proceeds from the programme, if any, will be available as one potential source of funding for stream acquisitions and/or other general corporate purposes, including the repayment of indebtedness. Owing to inherent uncertainties as to price and size, for the moment, at least, Edison has excluded from its forecasts the assumption of any such issues of shares under the programme.

Exhibit 14: Financial summary

US$'000s

2012

2013

2014

2015

2016

2017

2018

2019

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

849,560

706,472

620,176

648,687

891,557

843,215

794,012

861,332

1,161,819

1,478,584

Cost of Sales

(117,489)

(139,352)

(151,097)

(190,214)

(254,434)

(243,801)

(245,794)

(258,559)

(277,132)

(305,021)

Gross Profit

732,071

567,120

469,079

458,473

637,123

599,414

548,218

602,773

884,687

1,173,563

EBITDA

 

 

701,232

531,812

431,219

426,236

602,684

564,741

496,568

548,266

822,453

1,111,330

Operating Profit (before amort. and except.)

600,003

387,659

271,039

227,655

293,982

302,361

244,281

291,440

567,629

798,184

Intangible Amortisation

0

0

0

0

0

0

0

0

0

0

Exceptionals

0

0

(68,151)

(384,922)

(71,000)

(228,680)

245,715

(165,855)

2,336

0

Other

788

(11,202)

(1,830)

(4,076)

(4,982)

8,129

(5,826)

217

1,627

0

Operating Profit

600,791

376,457

201,058

(161,343)

218,000

81,810

484,170

125,802

571,592

798,184

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(41,187)

(48,730)

(18,073)

(4,792)

Profit Before Tax (norm)

 

 

600,003

381,576

268,762

223,565

269,789

277,368

203,094

242,710

549,555

793,392

Profit Before Tax (FRS 3)

 

 

600,791

370,374

198,781

(165,433)

193,807

56,817

442,983

77,072

553,518

793,392

Tax

(14,755)

5,121

1,045

3,391

1,330

886

(15,868)

9,066

(13,859)

(1,000)

Profit After Tax (norm)

586,036

375,495

267,977

222,880

266,137

286,383

181,400

251,993

537,323

792,392

Profit After Tax (FRS 3)

586,036

375,495

199,826

(162,042)

195,137

57,703

427,115

86,138

539,659

792,392

Average Number of Shares Outstanding (m)

353.9

355.6

359.4

395.8

430.5

442.0

443.4

446.0

448.4

448.9

EPS - normalised (c)

 

 

166

106

75

53

62

63

48

56

120

177

EPS - normalised and fully diluted (c)

 

165

105

74

53

62

63

48

56

120

176

EPS - (IFRS) (c)

 

 

166

106

56

(41)

45

13

96

19

120

177

Dividend per share (c)

35

45

26

20

21

33

36

36

45

70

Gross margin (%)

86.2

80.3

75.6

70.7

71.5

71.1

69.0

70.0

76.1

79.4

EBITDA margin (%)

82.5

75.3

69.5

65.7

67.6

67.0

62.5

63.7

70.8

75.2

Operating margin (before GW and except.) (%)

70.6

54.9

43.7

35.1

33.0

35.9

30.8

33.8

48.9

54.0

BALANCE SHEET

Fixed Assets

 

 

2,403,958

4,288,557

4,309,270

5,526,335

6,025,227

5,579,898

6,390,342

6,123,255

5,870,431

5,559,285

Intangible Assets

2,281,234

4,242,086

4,270,971

5,494,244

5,948,443

5,454,106

6,196,187

5,768,883

5,516,059

5,204,913

Tangible Assets

1,347

5,670

5,427

12,315

12,163

30,060

29,402

44,615

44,615

44,615

Investments

121,377

40,801

32,872

19,776

64,621

95,732

164,753

309,757

309,757

309,757

Current Assets

 

 

785,379

101,287

338,493

105,876

128,092

103,415

79,704

154,752

765,492

1,558,386

Stocks

966

845

26,263

1,455

1,481

1,700

1,541

43,628

2,086

2,655

Debtors

6,197

4,619

4,132

1,124

2,316

3,194

2,396

7,138

3,183

4,051

Cash

778,216

95,823

308,098

103,297

124,295

98,521

75,767

103,986

760,223

1,551,680

Other

0

0

0

0

0

0

0

0

0

0

Current Liabilities

 

 

(49,458)

(21,134)

(16,171)

(12,568)

(19,057)

(12,143)

(28,841)

(64,700)

(80,240)

(82,990)

Creditors

(20,898)

(21,134)

(16,171)

(12,568)

(19,057)

(12,143)

(28,841)

(63,976)

(79,516)

(82,266)

Short term borrowings

(28,560)

0

0

0

0

0

0

(724)

(724)

(724)

Long Term Liabilities

 

 

(32,805)

(1,002,164)

(1,002,856)

(1,468,908)

(1,194,274)

(771,506)

(1,269,289)

(887,387)

(887,387)

(887,387)

Long term borrowings

(21,500)

(998,136)

(998,518)

(1,466,000)

(1,193,000)

(770,000)

(1,264,000)

(878,028)

(878,028)

(878,028)

Other long term liabilities

(11,305)

(4,028)

(4,338)

(2,908)

(1,274)

(1,506)

(5,289)

(9,359)

(9,359)

(9,359)

Net Assets

 

 

3,107,074

3,366,546

3,628,736

4,150,735

4,939,988

4,899,664

5,171,916

5,325,920

5,668,296

6,147,293

CASH FLOW

Operating Cash Flow

 

 

720,209

540,597

434,582

435,783

608,503

564,187

518,680

548,301

885,117

1,112,644

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(41,187)

(41,242)

(18,073)

(4,792)

Tax

(725)

(154)

(204)

(208)

28

(326)

0

(5,380)

(9,001)

(1,000)

Capex

(641,976)

(2,050,681)

(146,249)

(1,791,275)

(805,472)

(19,633)

(861,406)

10,571

(2,000)

(2,000)

Acquisitions/disposals

0

0

0

0

0

0

0

0

0

0

Financing

12,919

58,004

6,819

761,824

595,140

1,236

1,279

37,198

0

0

Dividends

(123,852)

(160,013)

(79,775)

(68,593)

(78,708)

(121,934)

(132,915)

(129,986)

(199,806)

(313,395)

Net Cash Flow

(33,425)

(1,618,330)

212,896

(666,559)

295,298

398,537

(515,549)

419,462

656,237

791,457

Opening net debt/(cash)

 

 

(761,581)

(728,156)

902,313

690,420

1,362,703

1,068,705

671,479

1,188,233

774,766

118,529

HP finance leases initiated

0

0

0

0

0

0

0

0

0

0

Other

0

(12,139)

(1,003)

(5,724)

(1,300)

(1,311)

(1,205)

(5,995)

0

0

Closing net debt/(cash)

 

 

(728,156)

902,313

690,420

1,362,703

1,068,705

671,479

1,188,233

774,766

118,529

(672,928)

Source: Company sources, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Wheaton Precious Metals and prepared and issued by Edison, in consideration of a fee payable by Wheaton Precious Metals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Wheaton Precious Metals and prepared and issued by Edison, in consideration of a fee payable by Wheaton Precious Metals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues