Refining numbers

Wheaton Precious Metals 30 April 2020 Update
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Wheaton Precious Metals

Refining numbers

Q1 considerations

Metals & mining

30 April 2020

Price

C$56.06

Market cap

C$25bn

C$1.4049/US$

Net debt (US$m) at 30 December 2019

774.8

Shares in issue

447.8m

Free float

100%

Code

WPM

Primary exchange

TSX

Secondary exchange

NYSE

Share price performance

%

1m

3m

12m

Abs

42.2

47.4

93.6

Rel (local)

18.5

69.5

111.1

52-week high/low

C$56.06

C$26.56

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

Q120 results

6 May 2020

Q220 results

August 2020

Q320 results

November 2020

Analyst

Charles Gibson

+44 (0)20 3077 5724

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

Ahead of Wheaton’s Q120 results, which are scheduled to be released on Wednesday 6 May, after the bell, we have refined our forecasts. They now take account of four factors: 1) the anticipated outlook for gold production from Salobo during the period 2020–25, as disclosed in Wheaton’s release of a technical report on 30 March, 2) the timing of mine closures as a result of anti-coronavirus measures, in particular, in Peru and Mexico, 3) updated precious metals forecasts and 4) the possible effects of the recent rise in Wheaton’s share price on general and administrative expenses.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

794.0

203.1

48

36

83.1

0.9

12/19

861.3

242.7

56

36

71.2

0.9

12/20e

1,009.0

375.6

84

43

47.4

1.1

12/21e

1,175.7

503.6

112

53

35.5

1.3

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

Constancia closure timing

In our last note, we stated that, ‘We expect the mine closures in late March to have little effect on our Q1 forecasts as any closures will provide mines with the opportunity to sell metal out of inventory and should therefore lead to a drawdown in ounces produced but not yet sold.’ While that is, in general, true (especially regarding WPM’s partners’ Mexican mining operations), in the case of HudBay’s Constancia, in Peru, the mine was ramped down and closed over three days from 20 March, after Peru closed its borders on 16 March. In order to properly reflect the increased period during which Constancia is likely to have been non-producing, we have therefore reduced our gold and silver production forecasts attributable to WPM from Constancia by 11.1% each in Q120.

Salobo accelerates gold production

At the same time, on 30 March, WPM released a technical document outlining its expectations for production from Salobo in the five years from FY20 to FY25, during which time the 50% Salobo III capacity increase is to be implemented. While the total amount of gold expected to be mined from Salobo in the period FY20–25, inclusive, is little (-1.8%) changed compared with our prior forecasts, in general there is an acceleration of production forward into earlier years as a result of the expansion.

FY20 EPS forecast up 8c/share

The combination of higher prevailing precious metals prices and an assumption about potential total general and administrative costs (ie including stock-based compensation expenses in the light of Wheaton’s rising share price so far in FY20) has resulted in us reducing our Q120 basic EPS forecast by 1c to 22c/share. However, we have increased our forecasts for Q2–Q420 by 2–3c each to result in an 8c increase in our EPS forecast for the full-year, from 76c/share to 84c/share (cf a consensus of 86c/share).

Updated FY20 forecasts by quarter

In this note, we have refined our forecasts for Wheaton Precious Metals (WPM) for FY20 for four factors:

The anticipated outlook for gold production from Salobo during the period 2020–25, as disclosed in Wheaton’s technical report on Sedar released on 30 March.

The timing of mine closures as a result of anti-COVID-19 measures, in particular in Peru and Mexico.

Updated precious metals forecasts.

The possible effects of the recent rise in Wheaton’s share price on general and administrative expenses.

Each of these is considered in turn, below.

Long-term Salobo production guidance

On 30 March, WPM released a technical document on Sedar outlining its expectations for production from Salobo in the five years from FY20 to FY25. It is the first technical document to be released since the development of Salobo III was sanctioned in October 2018.

The expansion of Salobo III involves a 50% increase in processing capacity, from 24Mtpa to 36Mtpa, from H122. As a result, our new expectations for gold production from Salobo are shown in Exhibit 1 (with WPM’s 75% share also shown), relative to our prior expectations.

Exhibit 1: Long-term Salobo gold production guidance (koz)

2020

2021

2022

2023

2024

Total

Updated Salobo production guidance (koz)

352

316

325

367

292

1,652

WPM 75% share (koz)

264

237

244

275

219

1,239

Previous Edison estimate of WPM share (koz)

246

223

211

264

317

1,261

Change (%)

+7.2

+6.3

+15.4

+4.2

-30.9

-1.8

Source: Wheaton Precious Metals, Edison Investment Research

Whereas Edison had previously simply increased its forecast gold output in FY23 and FY24 pro rata with the increase in milling capacity, the new production numbers have now refined these estimates with the added benefit of greater accuracy (and therefore less associated risk). From Exhibit 1, it can be seen that, while the total output of gold over the five-year period is little changed compared with our prior estimate (-1.8%), in general production is now anticipated to be higher in earlier years and lower in later ones.

Mexican and Peruvian mine closure timings

In our last note on WPM (Swings and roundabouts, published on 3 April), we said, ‘We expect the mine closures in late March to have little effect on our Q1 forecasts as any closures will provide mines with the opportunity to sell metal out of inventory and should therefore lead to a drawdown in ounces produced but not yet sold.’ While that is, in general, true (for example, the order closing Mexico’s mines was finalised on 31 March and was effective on 30 March), Constancia was ramped down and closed over three days by its operator (Hudbay Minerals) from 20 March, after Peru closed its borders on 16 March and implemented a night-time curfew from 18 March. Note that the state of emergency in Peru has since been extended to 10 May, although, self-evidently, it is possible that it could be extended once again as it already has been on at least two occasions previously. Nevertheless, to reflect the increased period during which Constancia is likely to have been non-producing (and also unlikely to deliver metal), we have reduced our gold and silver production forecasts attributable to WPM from Constancia by 11.1% each in Q120.

Updated precious metals prices

In common with its traditional practice, Edison has also updated its forecasts for precious metals for the remainder of the year to those prevailing at the time of writing, as shown below:

Exhibit 2: Updated FY20 precious metals prices (US$/oz)

Q120

Q220

Q320

Q420

Previous

Silver

16.89

14.17

14.17

14.17

Gold

1,581

1,591

1,591

1,591

Palladium

2,296

2,296

2,296

2,296

Current

Silver

16.89

15.05

15.02

15.02

Gold

1,581

1,696

1,704

1,704

Palladium

2,296

1,988

1,923

1,923

Change (%)

Silver

u/c

+6.2

+6.0

+6.0

Gold

u/c

+6.6

+7.1

+7.1

Palladium

u/c

-13.4

-16.2

-16.2

Source: Edison Investment Research.

Note that, while the effect of these changes is, generally, to increase prices over the course of the remainder of the year, they remain unchanged for Q1 specifically.

Stock-based G&A expenses

While it has historically been Edison’s policy to forecast WPM’s results exclusive of stock-based general and administrative expenses, it is very clear from history that a rising share price has an effect on total G&A expenses in the form of both equity settled stock-based compensation expenses and performance share unit (PSU) accruals related to the anticipated fair value of the PSUs issued. As a result, in FY19 (during a period of a steadily rising WPM share price in both Canadian dollar and US dollar terms) total G&A expenses amounted to US$54.7m, compared with US$31.6m (excluding stock-based compensation expenses and PSUs) and guidance of US$36–38m for non-stock G&A expenses. Exhibit 3 demonstrates the potential magnitude of this effect, by quarter:

Exhibit 3: Historical WPM share price changes vs total quarterly G&A expenses

Q418

Q119

Q219

Q319

Q419

Q120

Current

WPM share price at period end (C$)

26.65

31.81

31.67

34.74

38.64

38.73

55.73

Change (%)

+19.4

-0.4

+9.7

+11.2

+0.2

+43.9

WPM share price at period end (US$)

19.56

23.80

24.19

26.24

29.77

27.30

39.64

Change (%)

+21.7

+1.6

+8.5

+13.5

-8.3

+45.2

Total quarterly G&A expense (US$000s)

21,142

16,535

12,249

14,028

11,695

Pro rata mid-range non-stock G&A guidance (US$000s)

8,750

9,250

9,250

9,250

9,250

9,750

Premium of actual vs mid-range guidance (%)

+141.6

+78.8

+32.4

+51.7

+26.4

Source: Edison Investment Research, Wheaton Precious Metals

WPM’s non-stock G&A guidance for FY20 is US$38–40m. However, in the light of WPM’s ostensibly flat share price in Q120 in Canadian dollar terms (potentially analogous to Q219) and its strongly higher share price to date in Q220, we believe that it is likely that stock-based compensation expenses will add to the total in at least these quarters.

While a precise estimate is hard to make without knowing the exact details of the PSUs and other stock-based compensation schemes, in order to allow for this effect, for the moment, Edison has assumed that total G&A in Q1–Q420 will equal the quarterly average in FY19 – ie US$13.627m per quarter – compared to non-stock G&A guidance of US$38–40m for the 12-month period (or an average of US$9.75m per quarter).

Updated FY20 forecasts

In the light of the four factors considered above, our updated forecasts for WPM for FY20 are as shown in Exhibit 4, below. As before, our forecasts assume that Yauliyacu, Constancia, Penasquito, San Dimas and Los Filos all remain closed for the entirety of Q220. Clearly, there exists risk associated with both the potential lifting of existing lockdowns in this respect (upside) or the imposition of new lockdown restrictions (downside). 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 course of the year.

Exhibit 4: Wheaton Precious Metals FY20 forecast, by quarter*

US$000s
(unless otherwise stated)

FY19

Q120e

Q220e

Q320e

Q420e

FY20e

(current)

FY20e

(previous)

Silver production (koz)

22,562

5,851

2,578

5,926

5,926

20,282

20,357

Gold production (oz)

406,675

96,410

86,688

101,563

101,563

386,223

373,544

Palladium production (koz)

21,993

5,938

5,938

5,938

5,938

23,750

23,750

Silver sales (koz)

17,703

5,851

2,578

5,926

5,926

20,282

20,357

Gold sales (oz)

389,086

96,373

86,651

101,526

101,526

386,078

373,399

Palladium sales (oz)

20,681

5,914

5,914

5,914

5,914

23,655

23,655

Avg realised Ag price (US$/oz)

16.29

16.89

15.05

15.02

15.02

15.56

14.96

Avg realised Au price (US$/oz)

1,391

1,581

1,696

1,704

1,704

1,671

1,588

Avg realised Pd price (US$/oz)

1,542

2,296

1,988

1,923

1,923

2,032

2,296

Avg Ag cash cost (US$/oz)

5.02

5.15

5.14

5.10

5.10

5.12

5.09

Avg Au cash cost (US$/oz)

421

425

403

425

425

420

420

Avg Pd cash cost (US$/oz)

273

413

358

346

346

366

413

Sales

861,332

264,771

197,480

273,386

273,386

1,009,023

951,998

Cost of sales

Cost of sales, excluding depletion

258,559

73,550

50,327

75,452

75,452

274,782

270,365

Depletion

256,826

70,808

55,376

73,330

73,330

272,844

268,537

Total cost of sales

515,385

144,358

105,703

148,783

148,783

547,626

538,902

Earnings from operations

345,947

120,412

91,777

124,604

124,604

461,397

413,097

Expenses and other income

– General and administrative**

54,507

13,627

13,627

13,627

13,627

54,507

39,000

– Foreign exchange (gain)/loss

0

0

0

– Net interest paid/(received)

48,730

7,830

7,830

7,830

7,830

31,320

31,320

– Other (income)/expense

(217)

0

0

Total expenses and other income

103,020

21,457

21,457

21,457

21,457

85,827

70,320

Earnings before income taxes

242,927

98,955

70,321

103,147

103,147

375,570

342,777

Income tax expense/(recovery)

(9,066)

250

250

250

250

1,000

1,000

Marginal tax rate (%)

(3.7)

0.3

0.4

0.2

0.2

0.3

0.3

Net earnings

251,993

98,705

70,071

102,897

102,897

374,570

341,777

Ave. no. shares in issue (000s)

446,021

447,500

447,800

447,800

447,800

447,725

446,802

Basic EPS (US$)

0.56

0.22

0.16

0.23

0.23

0.84

0.76

Diluted EPS (US$)

0.56

0.22

0.16

0.23

0.23

0.84

0.76

DPS (US$)

0.36

0.10

0.11

0.10

0.12

0.43

0.43

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

If desired, comparisons between current and past forecasts for individual quarters may be made by comparing the figures in Exhibit 4 with those of Exhibit 1 in our last note, Swings and roundabouts, published on 3 April 2020.

Our updated production forecasts of 20.3Moz silver and 386.2koz gold compare to WPM’s prior production guidance (now withdrawn) of 22.0–23.5Moz silver and 390–410koz gold and our prior forecasts of 20.4Moz silver and 373.5koz gold. Our production forecast for palladium remains unchanged. At annual average prices for the year, our updated production forecasts now equate to 605.1koz of gold equivalent production (cf 599.7koz previously). At WPM’s nominal prices of US$18.00/oz silver, US$1,500/oz gold and US$2,000/oz palladium, they equate to 661.3koz (cf 649.5koz previously and a prior guidance range of 685–725koz).

Our updated basic EPS forecast of US$0.84/share for FY20 is 2.3% below the consensus forecast of US$0.86/share (source: Refinitiv, 28 April 2020) within a range of US$0.76–0.98 per share. On a quarterly basis, our forecasts compare to consensus as follows:

Exhibit 5: WPM FY20 and FY21 consensus EPS forecasts cf Edison (US$/share)

Q1

Q2

Q3

Q4

Sum Q1–Q4

FY20

FY21

Current Edison

0.22

0.16

0.23

0.23

0.84

0.84

1.12

Previous Edison

0.23

0.14

0.20

0.20

0.76

0.76

1.14

Mean consensus

0.22

0.19

0.21

0.22

0.84

0.86

0.99

High

0.24

0.25

0.25

0.25

0.99

0.98

1.28

Low

0.20

0.14

0.17

0.17

0.68

0.76

0.77

Source: Refinitiv, Edison Investment Research. Note: At 28 April 2020.

Our US$1.12 basic EPS forecast for FY21 (vs US$1.14/share previously, see also Exhibit 6) remains, to all intents and purposes, essentially unchanged and compares with a consensus of US$0.99 (source: Refinitiv, 28 April 2020), within a range of US$0.77–1.28. This estimate is predicated on unchanged average gold and silver prices during the year of US$1,509/oz and US$24.76/oz, respectively, which, in the latter case, is 64.8% above the current spot price. One of the central assumptions behind our silver price forecast is that it will, at some point, revert to the long-term correlation that it has exhibited with gold since 1971. If both metals remain at current levels, however (US$15.02/oz Ag and US$1,704/oz Au at the time of writing), we forecast that WPM will instead earn US$0.88 per share in FY21.

Exhibit 6: Financial summary

US$'000s

2012

2013

2014

2015

2016

2017

2018

2019

2020e

2021e

Dec

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

1,009,023

1,175,686

Cost of Sales

(117,489)

(139,352)

(151,097)

(190,214)

(254,434)

(243,801)

(245,794)

(258,559)

(274,782)

(293,905)

Gross Profit

732,071

567,120

469,079

458,473

637,123

599,414

548,218

602,773

734,241

881,782

EBITDA

 

 

701,232

531,812

431,219

426,236

602,684

564,741

496,568

548,266

679,734

827,275

Operating Profit (before amort. and except.)

600,003

387,659

271,039

227,655

293,982

302,361

244,281

291,440

406,890

514,129

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)

0

0

Other

788

(11,202)

(1,830)

(4,076)

(4,982)

8,129

(5,826)

217

0

0

Operating Profit

600,791

376,457

201,058

(161,343)

218,000

81,810

484,170

125,802

406,890

514,129

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(41,187)

(48,730)

(31,320)

(10,555)

Profit Before Tax (norm)

 

 

600,003

381,576

268,762

223,565

269,789

277,368

203,094

242,710

375,570

503,573

Profit Before Tax (FRS 3)

 

 

600,791

370,374

198,781

(165,433)

193,807

56,817

442,983

77,072

375,570

503,573

Tax

(14,755)

5,121

1,045

3,391

1,330

886

(15,868)

9,066

(1,000)

(1,000)

Profit After Tax (norm)

586,036

375,495

267,977

222,880

266,137

286,383

181,400

251,993

374,570

502,574

Profit After Tax (FRS 3)

586,036

375,495

199,826

(162,042)

195,137

57,703

427,115

86,138

374,570

502,573

Average Number of Shares Outstanding (m)

353.9

355.6

359.4

395.8

430.5

442.0

443.4

446.0

447.7

447.8

EPS - normalised (c)

 

 

166

106

75

53

62

63

48

56.5

83.7

112.2

EPS - normalised and fully diluted (c)

 

 

165

105

74

53

62

63

48

56

83

112

EPS - (IFRS) (c)

 

 

166

106

56

(-41)

45

13

96

19

84

112

Dividend per share (c)

35

45

26

20

21

33

36

36

43

53

Gross Margin (%)

86.2

80.3

75.6

70.7

71.5

71.1

69.0

70.0

72.8

75.0

EBITDA Margin (%)

82.5

75.3

69.5

65.7

67.6

67.0

62.5

63.7

67.4

70.4

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

70.6

54.9

43.7

35.1

33.0

35.9

30.8

33.8

40.3

43.7

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

5,852,411

5,541,265

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

5,498,039

5,186,893

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

622,222

1,200,868

Stocks

966

845

26,263

1,455

1,481

1,700

1,541

43,628

1,812

2,111

Debtors

6,197

4,619

4,132

1,124

2,316

3,194

2,396

7,138

2,764

3,221

Cash

778,216

95,823

308,098

103,297

124,295

98,521

75,767

103,986

617,646

1,195,536

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)

(80,008)

(81,894)

Creditors

(20,898)

(21,134)

(16,171)

(12,568)

(19,057)

(12,143)

(28,841)

(63,976)

(79,284)

(81,170)

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

5,507,238

5,772,852

CASH FLOW

Operating Cash Flow

 

 

720,209

540,597

434,582

435,783

608,503

564,187

518,680

548,301

741,232

828,405

Net Interest

0

(6,083)

(2,277)

(4,090)

(24,193)

(24,993)

(41,187)

(41,242)

(31,320)

(10,555)

Tax

(725)

(154)

(204)

(208)

28

(326)

0

(5,380)

(1,000)

(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)

(193,252)

(236,960)

Net Cash Flow

(33,425)

(1,618,330)

212,896

(666,559)

295,298

398,537

(515,549)

419,462

513,660

577,890

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

261,106

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

261,106

(316,784)

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

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