CRAziness averted

Wheaton Precious Metals 18 December 2018 Long Update (4+ pages)
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Wheaton Precious Metals

CRAziness averted

Legal dispute with CRA settled

Metals & mining

 

18 December 2018

Price

C$25.34

Market cap

C$11,250m

C$1.3384/US$

Net debt* (US$m) at 30 September 2018 *Cum-dividend of US$39.9m

1,261.1

Shares in issue

444.0m

Free float

100.0%

Code

WPM

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

20.4

20.2

(8.0)

Rel (local)

27.0

34.6

2.8

52-week high/low

C$29.7

C$20.1

Business description

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

Next events

FY18/Q418 results

March 2019

First quarterly dividend announced

March 2019

Analyst

Charles Gibson

+44 (0)20 3077 5724

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

On 13 December, Wheaton Precious Metals (WPM) announced it had reached a ‘principled settlement’ for its tax dispute with the Canada Revenue Agency (CRA). Whereas the CRA had been seeking at least US$265m from WPM in taxes, penalties and interest in relation to its reassessment for the 2005–10 tax years with subsequent years left open to similar re-assessment, under the terms of the settlement WPM will actually pay the CRA cash taxes of US$5m for the 2011–17 tax years, US$15m in deferred tax and US$3–4m in interest. More importantly, the settlement creates a framework for both WPM and the CRA to assess tax in future years whereby foreign income on earnings generated by WPM’s international subsidiaries will not be subject to tax in Canada.

Year end

Revenue (US$m)

PBT* (US$m)

EPS* (c)

DPS (c)

P/E (x)

Yield (%)

12/16

891.6

269.8

62

21

30.5

1.1

12/17

843.2

277.4

63

33

30.1

1.7

12/18e

792.8

200.4

40

34

46.9

1.8

12/19e

844.6

208.8

47

32

40.4

1.7

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

‘Exceptional’ US$30m effect on Q418/FY18 earnings

The above taxes and interest are expected to be accounted for in WPM’s Q418 results and are now included in our ‘current’ Q418 and FY18 forecasts. However, readers should note that nothing else has changed in our forecasts and that, inasmuch as these effects may be considered one off or exceptional, our ‘previous’ forecasts (see Exhibit 1) effectively represent a valid representation of ‘normalised’ earnings, whereas our ‘current’ forecast effectively represents forecast, as reported, headline earnings excluding impairments (ie the gain relating to the Primero stream renegotiation, which is included in Exhibit 4).

Future effect c US$1m in additional Canadian tax pa

Using FY17 as a proxy for a typical year, WPM estimates the settlement will result in WPM’s recording an additional US$3–4m in income subject to Canadian income tax, resulting in an additional tax charge of c US$1m, per year.

Valuation: C$42.77 in FY20

Assuming no material purchases of additional streams (which we think unlikely), we now forecast a value per share for WPM of US$31.95, or C$42.77 in FY20 at average precious metals prices of US$25.95/oz Ag and US$1,482/oz Au (vs US$32.48, or C$42.97, previously). This valuation excludes the value of 20.9m shares in First Majestic held by WPM, with an immediate value of C$150.4m, or US$0.27 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 3 (see page 5), and the averages of the miners themselves in at least seven out of 12 of the same measures, despite being associated with materially less operating and cost risk.

WPM reaches principled settlement with CRA
Principles

On 13 December, WPM announced it had reached a ‘principled settlement’ with the CRA, which provides for a final resolution in relation to the CRA’s reassessment of WPM’s tax returns for the period 2005–10 and, in particular, its attempt to re-characterise income earned by WPM’s foreign subsidiaries ‘such that the income of Silver Wheaton [sic] subject to tax in Canada should be increased by an amount equal to substantially all of the income earned outside of Canada by the company’s foreign subsidiaries for the 2005–2010 taxation years’.

At the time of our last detailed note on the subject (Silver Wheaton, Q415e results, Cotabambas analysis and CRA, published on 15 February 2016), the CRA was claiming at least US$265m from WPM in taxes, penalties and interest in relation to its reassessment for the 2005–10 tax years, with the status of subsequent years left ‘open’ or ‘under audit’ with regard to the potential for similar reassessments.

In the event, WPM reached an agreement with the CRA whereby:

Foreign income on earnings generated by WPM’s overseas subsidiaries will not be re-characterised for the years 2005–10 and will therefore not be subject to Canadian tax.

The transfer pricing penalties in the reassessments for 2005–10 made by the CRA will be reversed and interest claimed adjusted accordingly (subject to some minor adjustments).

The transfer pricing principles established between WPM and the CRA for the years 2005–10 will also apply to all taxation years after 2010 and into the future.

In compensation, the service fee charged by WPM to Wheaton International will be adjusted to:

include capital-raising costs associated with Wheaton for the purposes of funding streaming transactions entered into by Wheaton International; and

increase the mark-up applied to Wheaton’s cost of providing services to Wheaton International, including capital raising costs, from the current 20% to 30%.

Practice

From a practical perspective, WPM estimates the effects of the effects of the settlement to be as follows:

Zero cash taxes for the period 2005–10, but perhaps a small interest charge.

Cash taxes of c US$5m payable for the period 2011–17.

An additional US$3–4m in interest charges for all past tax years, 2005–17, such that the overall cash outlay in direct relation to the dispute is less than US$10m.

US$15m in deferred taxes recognised in WPM’s income statement relating to capital raising costs, offset by a deferred tax recovery in its statement of equity.

An implied additional US$6–7m in Q418 relating to legal costs, such that the total effect on Q4 profit after tax is US$30m.

An estimate that the changes for a typical WPM year in the future (based on using FY17 as a proxy) will result in an additional US$3–4m in income subject to Canadian income tax, resulting in an additional tax charge of c US$1m per year.

Mechanics

From a mechanical perspective, WPM expects to:

receive a revised notice of reassessment for the 2005–10 tax years

re-file its returns for subsequent years on the new basis for the 2011–17 tax years

pay any additional taxes owing under the settlement

then receive notices of reassessment relating to the interest charges on the additional taxes relating to the 2011-17 tax years

Updated Q418 and FY18

All of the above are expected to be accounted for in WPM’s Q418 results and are now included in our ‘current’ Q418 and FY18 forecasts. However, nothing else has changed with respect to our forecasts other than the effects of the settlement between WPM and the CRA. Inasmuch as these effects may be considered one-off, or exceptional, however, our ‘previous’ forecasts effectively represent a valid representation of ‘normalised’ earnings, whereas our ‘current’ forecast effectively represents forecast, as reported, headline earnings excluding impairments (ie the gain relating to the Primero stream renegotiation, which is included in Exhibit 4).

Exhibit 1: Wheaton Precious Metals FY18 forecast, by quarter*

US$000s (unless otherwise stated)

Q118

Q218

Q318

Q418e

(previous)

Q418e

(current)

FY18e (previous)

FY18e (current)

Silver production (koz)

7,428

6,091

5,701

5,623

5,623

24,843

24,843

Gold production (oz)

79,657

85,292

101,552

89,516

89,516

356,017

356,017

Palladium production (oz)

0

0

8,817

5,200

5,200

14,017

14,017

Silver sales (koz)

6,343

5,972

5,018

5,627

5,627

22,960

22,960

Gold sales (oz)

69,973

87,140

89,242

89,914

89,914

336,269

336,269

Palladium sales (oz)

0

0

3,668

5,179

5,179

8,847

8,847

Avg realised Ag price (US$/oz)

16.73

16.52

14.80

14.32

14.32

15.66

15.66

Avg realised Au price (US$/oz)

1,330

1,305

1,210

1,213

1,213

1,261

1,261

Avg realised Pd price (US$/oz)

N/A

N/A

955

1,111

1,111

1,046

1,046

Avg Ag cash cost (US$/oz)

4.49

4.54

5.04

4.88

4.88

4.72

4.72

Avg Au cash cost (US$/oz)

399

407

418

415

415

410

410

Avg Pd cash cost (US$/oz)

N/A

N/A

169

200

200

187

187

Sales

199,252

212,400

185,769

195,403

195,403

792,824

792,824

Cost of sales

Cost of sales, excluding depletion

56,414

62,580

63,202

65,809

65,809

248,005

248,005

Depletion

57,265

62,494

64,684

71,579

71,579

256,022

256,022

Total cost of sales

113,679

125,074

127,886

137,388

137,388

504,027

504,027

Earnings from operations

85,573

87,326

57,883

58,015

58,015

288,797

288,797

Expenses and other income

- General and administrative**

9,757

11,972

8,779

8,750

15,250

39,258

45,758

- Foreign exchange (gain)/loss

(170)

26

0

(144)

(144)

- Net interest paid/(received)

5,591

5,659

12,877

14,970

18,470

39,097

42,597

- Other (income)/expense

2,757

466

1,301

4,524

4,524

Total expenses and other income

17,935

18,123

22,957

23,720

33,720

82,735

92,735

Earnings before income taxes

67,638

69,203

34,926

34,295

24,295

206,062

196,062

Income tax expense/(recovery)

(485)

(3,224)

905

20,000

-2,804

17,196

Marginal tax rate (%)

(0.7)

(4.7)

2.6

0.0

82.3

(1.4)

8.8

Net earnings

68,123

72,427

34,021

34,295

4,295

208,866

178,866

Ave. no. shares in issue (000s)

442,728

443,191

443,634

443,634

443,634

443,297

443,297

Basic EPS (US$)

0.15

0.16

0.08

0.08

0.01

0.47

0.40

Diluted EPS (US$)

0.15

0.16

0.08

0.08

0.01

0.47

0.40

DPS (US$)

0.09

0.09

0.09

0.07

0.07

0.34

0.34

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

Note that these forecasts compare with a consensus forecast of US$0.481/share (source: Bloomberg 17 December), within a range of US$0.41–0.52 per share.

Our forecasts for FY19 (see Exhibits 3 and 4), which are based on precious metals’ prices of US$1,263/oz and US$15.30/oz for gold and silver, respectively, compare with a consensus forecast of US$0.525/share (source: Bloomberg 17 December) within a range of US$0.37–0.69 per share.

Valuation

Excluding FY04 (part-year), WPM’s shares have historically traded on a contemporary average P/E multiple of 27.6x current year basic underlying EPS, ie excluding impairments (cf 40.2x Edison underlying earnings with the settlement’s taxes, interest and legal fees considered as ‘exceptional’ or 39.4x Bloomberg consensus FY18e, currently – see Exhibit 3).

Exhibit 2: WPM’s historical current year P/E multiples

Source: Edison Investment Research

Applying this multiple to our updated EPS forecast of US$1.16 in FY20 (cf US$1.18 previously to reflect an assumed additional US$1m in Canadian tax in the intervening years) implies a potential value per share for WPM of US$31.95, or C$42.77 in that year (vs US$32.48, or C$42.97 previously). Note this valuation excludes the value of 20.9m shares in First Majestic held by WPM, with an immediate value of C$150.4m, or US$0.27 per WPM share (priced as at 15 November).

In the meantime, from a relative perspective, it is notable that WPM is cheaper than its royalty/streaming ‘peers’ in at least 70% (17 out of 24) of the valuation measures used in Exhibit 3 and on multiples that are cheaper than the averages of the miners themselves in seven out of 12 of the same valuation measures (effectively irrespective of whether Edison or consensus forecasts are used), despite being associated with materially less operational and cost risk (as WPM’s costs are contractually predetermined).

Exhibit 3: 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

61.8

56.1

1.3

1.4

28.1

24.9

Royal Gold

47.9

34.8

1.3

1.4

17.4

15.5

Sandstorm Gold

75.0

47.3

0.0

0.0

16.4

14.6

Osisko

102.9

63.6

1.9

1.9

19.3

16.9

Average

71.9

50.5

1.1

1.2

20.3

18.0

WPM (Edison forecasts)

40.2

39.0

1.8

1.8

17.0

17.0

WPM (consensus)

39.4

36.1

1.9

1.7

17.6

16.2

Gold producers

Barrick

33.1

29.6

1.0

1.0

7.5

8.3

Newmont

27.5

27.3

1.7

1.6

9.1

8.6

Goldcorp

152.0

24.4

0.9

0.9

7.8

5.3

Newcrest

23.1

17.6

1.2

1.5

9.3

8.1

Kinross

36.4

29.4

0.0

0.0

4.2

3.8

Agnico-Eagle

220.4

68.3

1.1

1.2

14.5

12.1

Eldorado

N/A

N/A

0.3

0.5

6.0

4.0

Yamana

22.3

17.1

0.9

0.9

4.0

3.7

Randgold Resources

30.7

24.8

3.2

4.1

15.1

12.2

Average

68.2

29.8

1.2

1.3

8.6

7.3

Silver producers

Hecla

 N/A

328.6

0.4

0.4

7.7

6.8

Pan American

31.2

23.7

0.9

1.4

11.2

8.9

Coeur Mining

N/A

30.1

0.0

0.0

8.4

4.0

First Majestic

N/A

64.3

0.0

0.0

14.2

8.6

Hocschild

78.5

33.4

1.9

2.1

4.6

5.4

Fresnillo

9.9

9.5

2.8

2.8

9.9

9.5

Average

39.9

81.6

1.0

1.1

9.3

7.2

Source: Bloomberg, Edison Investment Research. Note: Peers priced on 17 December 2018.

Exhibit 4: Financial summary

US$000s

2012

2013

2014

2015

2016

2017

2018e

2019e

Dec

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

849,560

706,472

620,176

648,687

891,557

843,215

792,824

844,565

Cost of Sales

(117,489)

(139,352)

(151,097)

(190,214)

(254,434)

(243,801)

(248,005)

(262,755)

Gross Profit

732,071

567,120

469,079

458,473

637,123

599,414

544,819

581,810

EBITDA

 

 

701,232

531,812

431,219

426,236

602,684

564,741

499,061

536,052

Operating Profit (before amort. and except.)

600,003

387,659

271,039

227,655

293,982

302,361

243,039

259,340

Intangible Amortisation

0

0

0

0

0

0

0

0

Exceptionals

0

0

(68,151)

(384,922)

(71,000)

(228,680)

245,715

0

Other

788

(11,202)

(1,830)

(4,076)

(4,982)

8,129

(4,380)

0

Operating Profit

600,791

376,457

201,058

(161,343)

218,000

81,810

484,374

259,340

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(42,597)

(50,522)

Profit Before Tax (norm)

 

 

600,003

381,576

268,762

223,565

269,789

277,368

200,442

208,818

Profit Before Tax (FRS 3)

 

 

600,791

370,374

198,781

(165,433)

193,807

56,817

441,777

208,818

Tax

(14,755)

5,121

1,045

3,391

1,330

886

(17,196)

(1,000)

Profit After Tax (norm)

586,036

375,495

267,977

222,880

266,137

286,383

178,866

207,818

Profit After Tax (FRS 3)

586,036

375,495

199,826

(162,042)

195,137

57,703

424,581

207,818

Average Number of Shares Outstanding (m)

353.9

355.6

359.4

395.8

430.5

442.0

443.3

443.6

EPS - normalised (c)

 

 

166

106

75

53

62

63

40

46.8

EPS - normalised and fully diluted (c)

 

165

105

74

53

62

63

40

47

EPS - (IFRS) (c)

 

 

166

106

56

(-41)

45

13

96

47

Dividend per share (c)

35

45

26

20

21

33

34

32

Gross Margin (%)

86.2

80.3

75.6

70.7

71.5

71.1

68.7

68.9

EBITDA Margin (%)

82.5

75.3

69.5

65.7

67.6

67.0

62.9

63.5

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

70.6

54.9

43.7

35.1

33.0

35.9

30.7

30.7

BALANCE SHEET

Fixed Assets

 

 

2,403,958

4,288,557

4,309,270

5,526,335

6,025,227

5,579,898

6,215,876

6,011,164

Intangible Assets

2,281,234

4,242,086

4,270,971

5,494,244

5,948,443

5,454,106

6,090,084

5,885,372

Tangible Assets

1,347

5,670

5,427

12,315

12,163

30,060

30,060

30,060

Investments

121,377

40,801

32,872

19,776

64,621

95,732

95,732

95,732

Current Assets

 

 

785,379

101,287

338,493

105,876

128,092

103,415

3,596

3,830

Stocks

966

845

26,263

1,455

1,481

1,700

1,423

1,516

Debtors

6,197

4,619

4,132

1,124

2,316

3,194

2,172

2,314

Cash

778,216

95,823

308,098

103,297

124,295

98,521

0

0

Other

0

0

0

0

0

0

0

0

Current Liabilities

 

 

(49,458)

(21,134)

(16,171)

(12,568)

(19,057)

(12,143)

(504,256)

(236,019)

Creditors

(20,898)

(21,134)

(16,171)

(12,568)

(19,057)

(12,143)

(24,486)

(25,941)

Short term borrowings

(28,560)

0

0

0

0

0

(479,770)

(210,078)

Long Term Liabilities

 

 

(32,805)

(1,002,164)

(1,002,856)

(1,468,908)

(1,194,274)

(771,506)

(771,506)

(771,506)

Long term borrowings

(21,500)

(998,136)

(998,518)

(1,466,000)

(1,193,000)

(770,000)

(770,000)

(770,000)

Other long term liabilities

(11,305)

(4,028)

(4,338)

(2,908)

(1,274)

(1,506)

(1,506)

(1,506)

Net Assets

 

 

3,107,074

3,366,546

3,628,736

4,150,735

4,939,988

4,899,664

4,943,710

5,007,469

CASH FLOW

Operating Cash Flow

 

 

720,209

540,597

434,582

435,783

608,503

564,187

508,322

537,273

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(42,597)

(50,522)

Tax

(725)

(154)

(204)

(208)

28

(326)

(2,196)

(1,000)

Capex

(641,976)

(2,050,681)

(146,249)

(1,791,275)

(805,472)

(19,633)

(892,000)

(72,000)

Acquisitions/disposals

0

0

0

0

0

0

0

0

Financing

12,919

58,004

6,819

761,824

595,140

1,236

0

0

Dividends

(123,852)

(160,013)

(79,775)

(68,593)

(78,708)

(121,934)

(149,820)

(144,059)

Net Cash Flow

(33,425)

(1,618,330)

212,896

(666,559)

295,298

398,537

(578,291)

269,692

Opening net debt/(cash)

 

 

(761,581)

(728,156)

902,313

690,420

1,362,703

1,068,705

671,479

1,249,770

HP finance leases initiated

0

0

0

0

0

0

0

0

Other

0

(12,139)

(1,003)

(5,724)

(1,300)

(1,311)

0

0

Closing net debt/(cash)

 

 

(728,156)

902,313

690,420

1,362,703

1,068,705

671,479

1,249,770

980,078

Source: Company sources, Edison Investment Research

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Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

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 Edison analyst 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 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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