Q320 earnings expectation refinements

Wheaton Precious Metals 12 October 2020 Update
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Wheaton Precious Metals

Q320 earnings expectation refinements

Q320e refinements

Metals & mining

12 October 2020

Price

C$63.48

Market cap

C$28.5bn

C$1.3186/US$

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

508.7

*Excluding US$3.8m lease liabilities

Shares in issue

449.0m

Free float

100%

Code

WPM

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

(7.3)

5.5

84.9

Rel (local)

(8.3)

(0.9)

82.9

52-week high/low

C$75.1

C$33.3

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

Q320 results

9 November 2020

4th quarterly dividend

9 November 2020

Q420/FY20 results

March 2021

Q121 results

May 2021

Analyst

Charles Gibson

+44 (0)20 3077 5724

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

Ahead of Wheaton’s (WPM’s) Q320 results, which are scheduled to be released on 9 November, we have refined our quarterly forecasts for the remainder of the year to take into account both updated precious metals prices and also the apparent delays in hitherto furloughed mines returning to pre-coronavirus levels of production. As a result, we have reduced our silver and gold production forecasts for Q320 by 11.0% and 5.1%, respectively, and our EPS forecast by 2.6c per share (or 7.5%), although this follows a 40% uplift in our forecasts after the Q220 results were announced in August. As a result, our FY20 forecast still remains close to the middle of the range of analysts’ expectations (see Exhibit 2). Our FY21 and longer-term forecasts remain, to all intents and purposes, intact however, as does our valuation.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

794.0

203.1

48

36

100.3

0.7

12/19

861.3

242.7

56

36

86.0

0.7

12/20e

1,127.3

526.9

115

43

42.0

0.9

12/21e

1,487.0

799.3

178

70

27.1

1.4

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

Not quite the status quo ante…yet

Six of WPM’s partners’ mines were directly affected by shutdowns and suspensions in Q220 – namely Constancia, Yauliyacu, Penasquito, San Dimas, Los Filos and Antamina. In addition, while not formally directly affected, Wheaton’s flagship asset, Salobo, in Brazil, experienced increased absenteeism which also had a negative effect on output. Whereas we had previously expected all of these mines to return to full production in Q3, after a better than expected Q2 generally, there is evidence that social distancing requirements and increased absenteeism at site have delayed achieving this goal at all operations with the possible exception of Penasquito (which reached pre-coronavirus record throughput rates by mid-June).

Valuation: Still C$69.03/share rising to C$98.27

In the absence of any material changes to FY21 and longer-term forecasts, our valuation of WPM remains unchanged, which is that, ordinarily, we would forecast a value per share of US$52.44, or C$69.03 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 of US$74.65 or C$98.27 per share. In the meantime, from a relative perspective, it is notable that WPM has a lower valuation than the average of its royalty/streaming ‘peers’ on all but one of six valuation measures (see Exhibit 4). On an individual basis, it is cheaper than its peers on at least 62% (15 out of 24) of the same valuation measures used if our estimates are adopted or 50% of them if consensus forecasts are adopted. Among other things, this could be indicative of the market having more conservative precious metal pricing expectations than Edison, although our forecasts are based on a continuation of current spot prices for the remainder of FY20 and only our FY21 silver price forecast is above the current spot price.

FY20e by quarter

In the light of the refinements to our assumptions discussed on page 1, our forecasts for FY20 silver and gold production of 21.6Moz and 375.6koz compare with guidance of 21.5–22.5Moz and 365–385koz, respectively. Our resulting detailed operational and financial forecasts for WPM for FY20, by quarter, are then as follows:

Exhibit 1: WPM FY20 forecast, by quarter*

US$000s
(unless otherwise stated)

FY19

Q120

Q220

Q320e
(previous)

Q420e
(previous)

FY20e
(previous)

Q320e
(current)

Q420e
(current)

FY20e
(current)

Silver production (koz)

22,562

6,704

3,650

5,926

5,926

22,207

5,275

5,926

21,555

Gold production (oz)

406,675

94,707

88,631

98,151

99,044

380,533

93,187

99,044

375,569

Palladium production (koz)

21,993

5,312

5,759

5,938

5,938

22,946

5,938

5,938

22,946

Silver sales (koz)

17,703

4,928

4,729

5,241

5,926

20,825

4,617

5,926

20,200

Gold sales (oz)

389,086

100,405

92,804

86,774

99,007

378,990

81,538

99,007

373,754

Palladium sales (oz)

20,681

4,938

4,976

5,230

5,914

21,058

5,177

5,914

21,004

Avg realised Ag price (US$/oz)

16.29

17.03

16.73

24.16

25.79

21.25

24.36

24.03

20.69

Avg realised Au price (US$/oz)

1,391

1,589

1,716

1,911

1,927

1,782

1,911

1,904

1,774

Avg realised Pd price (US$/oz)

1,542

2,298

1,917

2,070

2,062

2,085

2,172

2,375

2,199

Avg Ag cash cost (US$/oz)

5.02

4.50

5.23

5.52

5.58

5.23

5.49

5.51

5.19

Avg Au cash cost (US$/oz)

421

436

418

424

424

423

422

424

422

Avg Pd cash cost (US$/oz)

273

402

353

373

371

374

391

428

395

Sales

861,332

254,789

247,954

303,254

355,821

1,161,819

279,533

344,987

1,127,263

Cost of sales

Cost of sales, excluding depletion

258,559

66,908

65,211

67,709

77,305

277,132

61,801

77,215

271,134

Depletion

256,826

64,841

58,661

61,492

69,831

254,824

55,473

69,831

248,805

Total cost of sales

515,385

131,748

123,872

129,201

147,136

531,957

117,274

147,046

519,940

Earnings from operations

345,947

123,040

124,082

174,053

208,685

629,862

162,259

197,941

607,324

Expenses and other income

– General and administrative**

54,507

13,181

21,799

13,627

13,627

62,234

13,627

13,627

62,234

– Foreign exchange (gain)/loss

0

0

0

– Net interest paid/(received)

48,730

7,118

4,636

4,009

2,310

18,073

4,009

2,450

18,213

– Other (income)/expense

(217)

(1,861)

234

(1,627)

-1,627

Total expenses and other income

103,020

18,438

26,669

17,636

15,937

78,680

17,636

16,076

78,819

Earnings before income taxes

242,927

104,602

97,413

156,417

192,748

551,182

144,623

181,865

528,505

Income tax expense/(recovery)

(9,066)

8,442

59

250

250

9,001

250

250

9,001

Marginal tax rate (%)

(3.7)

8.1

0.1

0.2

0.1

1.6

0.2

0.1

1.7

Net earnings

251,993

96,160

97,354

156,167

192,498

542,181

144,373

181,615

519,504

Ave. no. shares in issue (000s)

446,021

447,805

448,636

448,636

448,946

448,428

448,636

448,946

448,428

Basic EPS (US$)

0.56

0.215

0.217

0.348

0.429

1.209

0.322

0.405

1.158

Diluted EPS (US$)

0.56

0.214

0.216

0.347

0.428

1.207

0.321

0.404

1.156

DPS (US$)

0.36

0.10

0.10

0.10

0.15

0.45

0.10

0.13

0.43

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 a 12.5% under-sale of both gold and silver, relative to production (cf 11.4% previously) to allow inventories to recover by an approximate 20,000oz gold equivalent. Otherwise, our updated basic EPS forecast of US$1.158/share for FY20 (cf US$1.209/share previously) is now just 7.2% above the consensus forecast of US$1.08/share (cf 23.4% above the consensus of US$0.98/share previously – see our note entitled Barely missing a beat, published on 18 August 2020) as the consensus has moved higher since Q2 results:

Exhibit 2: WPM FY20 consensus EPS forecasts, by quarter (US$/share)

Q120

Q220

Q320e

Q420e

Sum Q1–Q420

FY20e

Updated Edison forecasts

0.215

0.217

0.322

0.405

1.158

1.158

Previous Edison forecasts

0.215

0.217

0.348

0.429

1.209

1.209

Mean consensus

0.215

0.217

0.32

0.37

1.122

1.08

High consensus

0.215

0.217

0.39

0.44

1.262

1.26

Low consensus

0.215

0.217

0.24

0.27

0.942

0.94

Source: Refinitiv, Edison Investment Research. Note: As at 9 October 2020.

In the meantime, our US$1.78 basic EPS forecast for FY21 (see Exhibit 5) is ostensibly unchanged and compares with a consensus of US$1.43/share within a range of US$1.09–2.19/share (source: Refinitiv, 9 October 2020) and compares with a consensus of US$1.20 on 13 August 2020. In this case, our estimate is predicated on an average gold price during the year of US$1,892/oz and an average silver price of US$30.78/oz, which assumes, among other things, that the silver price will revert to the long-term correlation that it has exhibited with gold since the latter was demonetised in 1971. In the event that both metals remain at current levels however (US$24.21/oz Ag and US$1,909/oz Au at the time of writing), our forecast for WPM’s EPS in FY21 moderates to US$1.50 per share.

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 (cf 42.0x Edison or 44.5x Refinitiv consensus FY20e, currently – see Exhibit 4).

Exhibit 3: 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$1.78 in FY21 would ordinarily imply a potential value per share for WPM of US$52.44 or C$69.03 in that year (vs US$52.05, or C$68.71 previously). However, it is clearly apparent from the graph above that WPM’s current year multiple has been 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$1.78 in FY21 implies a potential value per share for WPM of US$74.65 or C$98.27 in that year (cf US$74.65 or C$98.27 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 4.

Note that neither of these valuations include the value of 20.2m shares in First Majestic currently held by WPM, with an immediate value (9 October) of C$262.5m, or US$0.44 per WPM share.

In the meantime, from a relative perspective, it is notable that WPM has a lower valuation than the average of its royalty/streaming ‘peers’ on all but one of six valuation measures. On an individual basis, it is cheaper than its peers on at least 62% (15 out of 24) of the valuation measures used in Exhibit 4 if our 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 our 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 4: 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

58.1

45.5

0.8

0.8

37.1

28.9

Royal Gold

34.9

32.7

1.0

0.9

18.0

17.4

Sandstorm Gold

68.2

46.8

0.0

0.0

23.0

18.5

Osisko

58.6

29.2

1.3

1.3

23.0

16.0

Average

54.9

38.5

0.7

0.7

25.3

20.2

WPM (Edison forecasts)

42.0

27.1

0.9

1.4

26.1

19.4

WPM (consensus)

44.5

33.7

0.9

1.2

28.7

23.1

Source: Refinitiv, Edison Investment Research. Note: Peers priced on 9 October 2020.

Exhibit 5: Financial summary

US$000

2012

2013

2014

2015

2016

2017

2018

2019

2020e

2021e

Year end 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

1,127,263

1,487,014

Cost of Sales

(117,489)

(139,352)

(151,097)

(190,214)

(254,434)

(243,801)

(245,794)

(258,559)

(271,134)

(306,538)

Gross Profit

732,071

567,120

469,079

458,473

637,123

599,414

548,218

602,773

856,129

1,180,476

EBITDA

 

 

701,232

531,812

431,219

426,236

602,684

564,741

496,568

548,266

793,896

1,118,242

Operating Profit (before amort. and except.)

600,003

387,659

271,039

227,655

293,982

302,361

244,281

291,440

545,090

805,096

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

549,053

805,096

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(41,187)

(48,730)

(18,213)

(5,753)

Profit Before Tax (norm)

 

 

600,003

381,576

268,762

223,565

269,789

277,368

203,094

242,710

526,878

799,343

Profit Before Tax (FRS 3)

 

 

600,791

370,374

198,781

(165,433)

193,807

56,817

442,983

77,072

530,841

799,343

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

514,646

798,343

Profit After Tax (FRS 3)

586,036

375,495

199,826

(162,042)

195,137

57,703

427,115

86,138

516,982

798,343

Average Number of Shares Outstanding (m)

353.9

355.6

359.4

395.8

430.5

442.0

443.4

446.0

448.4

448.6

EPS - normalised (c)

 

 

166

106

75

53

62

63

48

56

115

178

EPS - normalised and fully diluted (c)

 

165

105

74

53

62

63

48

56

115

178

EPS - (IFRS) (c)

 

 

166

106

56

(-41)

45

13

96

19

115

178

Dividend per share (c)

35

45

26

20

21

33

36

36

43

70

Gross Margin (%)

86.2

80.3

75.6

70.7

71.5

71.1

69.0

70.0

75.9

79.4

EBITDA Margin (%)

82.5

75.3

69.5

65.7

67.6

67.0

62.5

63.7

70.4

75.2

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

70.6

54.9

43.7

35.1

33.0

35.9

30.8

33.8

48.4

54.1

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

5,876,450

5,565,304

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

5,522,078

5,210,932

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

741,548

1,541,857

Stocks

966

845

26,263

1,455

1,481

1,700

1,541

43,628

2,024

2,670

Debtors

6,197

4,619

4,132

1,124

2,316

3,194

2,396

7,138

3,088

4,074

Cash

778,216

95,823

308,098

103,297

124,295

98,521

75,767

103,986

736,435

1,535,113

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)

(79,648)

(83,140)

Creditors

(20,898)

(21,134)

(16,171)

(12,568)

(19,057)

(12,143)

(28,841)

(63,976)

(78,924)

(82,416)

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

5,650,962

6,136,633

CASH FLOW

Operating Cash Flow

 

 

720,209

540,597

434,582

435,783

608,503

564,187

518,680

548,301

856,125

1,120,103

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(41,187)

(41,242)

(18,213)

(5,753)

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)

(194,462)

(312,672)

Net Cash Flow

(33,425)

(1,618,330)

212,896

(666,559)

295,298

398,537

(515,549)

419,462

632,449

798,677

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

142,317

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

142,317

(656,361)

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

1185 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

1185 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

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