Wheaton Precious Metals — Guidance changes already anticipated

Wheaton Precious Metals (CN: WPM)

Currency in CAD

Last close As at 26/01/2023

CAD62.21

1.08 (1.77%)

Market capitalisation

CAD27,628m

Research: Metals & Mining

Wheaton Precious Metals — Guidance changes already anticipated

Underlying net earnings in Q222 were 4.4% above our forecasts. In general terms, Wheaton Precious Metals (WPM) produced 162,569 gold equivalent ounces (GEOs) during the quarter, which was 4.0% below our prior forecast, but sold 170,371 GEOs (which was 11.6% above) as a result of a 27,412 GEO draw down in the number of ounces produced but not yet delivered. Although WPM reduced its output guidance for FY22 as a consequence of lower production at Salobo and Stillwater and the sale of its Keno Hill stream, this was only to levels that Edison had already broadly anticipated in its last note (681.5koz GEOs cf updated guidance of 640–680koz GEOs). Given intervening precious metals price movements, this has actually resulted in us modestly increasing our financial forecasts for FY22.

Lord Ashbourne

Written by

Lord Ashbourne

Director, Energy & Resources

Metals & Mining

Wheaton Precious Metals

Guidance changes already anticipated

Q222 results and analysis

Metals and mining

16 August 2022

Price

C$42.99

Market cap

C$19,411m

C$1.2784/US$, US$1.2085/£

Net cash (US$m) at end-June excluding US$2.7m in lease liabilities

448.6

Shares in issue

451.3m

Free float

100.0%

Code

WPM

Primary exchange

TSX

Secondary exchange

LSE, NYSE

Share price performance

%

1m

3m

12m

Abs

(0.6)

(14.6)

(21.3)

Rel (local)

(9.4)

(15.0)

(20.0)

52-week high/low

C$64.70

C$40.84

Business description

Wheaton Precious Metals (WPM) is the world’s pre-eminent ostensibly precious metals streaming company, with over 30 high-quality precious metals streams and early deposit agreements over mines in Mexico, Canada, Brazil, Chile, the US, Argentina, Peru, Sweden, Greece, Portugal and Colombia.

Next events

Q3 dividend record date

26 August 2022

Q322 results

3 November 2022

Q422/FY22 results

March 2023

Q123 results

May 2023

Analyst

Lord Ashbourne

+44 (0)20 3077 5724

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

Underlying net earnings in Q222 were 4.4% above our forecasts. In general terms, Wheaton Precious Metals (WPM) produced 162,569 gold equivalent ounces (GEOs) during the quarter, which was 4.0% below our prior forecast, but sold 170,371 GEOs (which was 11.6% above) as a result of a 27,412 GEO draw down in the number of ounces produced but not yet delivered. Although WPM reduced its output guidance for FY22 as a consequence of lower production at Salobo and Stillwater and the sale of its Keno Hill stream, this was only to levels that Edison had already broadly anticipated in its last note (681.5koz GEOs cf updated guidance of 640680koz GEOs). Given intervening precious metals price movements, this has actually resulted in us modestly increasing our financial forecasts for FY22.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/20

1,096.2

503.2

112

42

30.0

1.2

12/21

1,201.7

592.1

132

57

25.5

1.7

12/22e

1,135.2

538.4

120

60

28.1

1.8

12/23e

1,417.9

686.0

152

64

22.2

1.9

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

A profile for uncertain times

At a time of general economic uncertainty, WPM offers a diversified portfolio of precious metals assets with organic growth momentum, low and predictable costs and a cash flow linked dividend, as well as being a leader in sustainability.

Valuation: Barely changed with plenty of upside

Using a CAPM-type method to value WPM and applying a nominal discount rate of 9.0% to cash flows implies a ‘terminal’ valuation for WPM at end-FY26 of US$57.33 (C$73.29) per share, assuming zero subsequent long-term growth in real cash flows. Stated alternatively, we calculate that WPM’s current share price of C$42.99 discounts a long-term compound annual average growth rate in nominal cash flows per share of just 2.7% pa, which is lower than the equivalent average rate of US inflation since 1984. Otherwise, after the recent falls in precious metals prices and assuming no material purchases of additional streams in the foreseeable future (which we think unlikely), we forecast a value per share for WPM of US$36.02, or C$46.06 or £29.81 in FY22, based on a 30.1x historical multiple of contemporary earnings (ie all of the recent precious metal price declines appear to be already discounted in WPM’s share price) and US$58.28, or C$74.50 or £48.23 in FY26. In the meantime, WPM’s shares are trading on near-term financial ratios that are cheaper than those of its peers on at least 69% of common valuation measures, regardless of whether Edison or consensus forecasts are used. If WPM’s shares were instead to trade at the average level of its peers, then we calculate that its FY22 share price should be US$44.50, or C$56.89 or £36.82 (based on Edison forecasts). Alternatively, if precious metals return to favour, then we believe that a near-term US$58.50 (C$74.79 or £48.41) per share valuation is possible.

Q222 results

Underlying net earnings in Q222 were 4.4% above our forecasts. In general terms, gold production was slightly (13.2%) weaker than prior expectations; however, gold sales were slightly (15.5%) better, while silver outperformed in terms of both production and sales (by 10.8% and 12.0%, respectively), led by notably strong performances at Zinkgruvan, Yauliyacu, Neves-Corvo and Minto as well as, albeit to a slightly lesser extent, Antamina and San Dimas.

In summary, WPM produced 162,569 GEOs during the quarter, compared with our expectation of 169,297 (a negative variance of 4.0%), but sold 170,371 GEOs, compared with our expectation of 152,618 (a positive variance of 11.6%) as a result of a 27,412 GEO draw down in the number of ounces produced but not yet delivered to the company. As a consequence, sales were US$29.5m (or 10.8%) better than our prior expectation, although this was partially offset by a US$23.1m increase in the cost of sales to result in earnings from operations that were US$6.4m (or 4.1%) above our prior forecast for the quarter – a variance which was then broadly maintained to the bottom line, such that adjusted net EPS were 4.4% better than our prior forecast at US$0.331/share (cf US$0.317/share) and the third quarterly dividend for the year was maintained at US$0.15/share.

A summary of WPM’s underlying financial and operating results in the context of both the preceding quarter and Edison’s prior expectations is provided in the exhibit below:

Exhibit 1: WPM underlying Q222 results cf Q122 and Q222e, by quarter*

US$000s
(unless otherwise stated)

Q220

Q320

Q420

Q121

Q221

Q321

Q421

Q122

Q222e

Q222a

Chg
**(%)

Variance
***(%)

Silver production (koz)

3,650

6,028

6,509

6,754

6,720

6,394

6,356

6,206

5,901

6,537

5.3

10.8

Gold production (oz)

88,631

91,770

93,137

77,733

90,290

85,941

88,321

79,087

78,728

68,365

(13.6)

(13.2)

Palladium production (koz)

5,759

5,444

5,672

5,769

5,301

5,105

4,733

4,488

4,750

3,899

(13.1)

(17.9)

Cobalt production (klbs)

1,161

380

370.5

381

234

347

136

(41.9)

(60.8)

Silver sales (koz)

4,729

4,999

4,576

6,657

5,600

5,487

5,116

5,553

5,223

5,848

5.3

12.0

Gold sales (oz)

92,804

90,101

86,243

75,104

90,090

67,649

79,622

77,901

73,030

84,337

8.3

15.5

Palladium sales (koz)

4,976

5,546

4,591

5,131

3,869

5,703

4,641

4,075

3,860

3,378

(17.1)

(12.5)

Cobalt sales (klbs)

132.3

395

131.2

228

511

297

225

(56.0)

(24.2)

Avg realised Ag price (US$/oz)

16.73

24.69

24.72

26.12

26.69

23.80

23.36

24.19

22.63

22.27

(7.9)

(1.6)

Avg realised Au price (US$/oz)

1,716

1,906

1,882

1,798

1,801

1,795

1,798

1,870

1,873

1,872

0.1

(0.1)

Avg realised Pd price (US$/oz)

1,917

2,182

2,348

2,392

2,797

2,426

1,918

2,339

2,091

2,132

(8.8)

2.0

Avg realised Co price (US$/lb)

22.19

19.82

23.78

28.94

34.61

34.92

34.01

(1.7)

(2.6)

Avg Ag cash cost (US$/oz)

5.23

5.89

5.51

6.33

6.11

5.06

5.47

5.10

5.17

5.61

10.0

8.5

Avg Au cash cost (US$/oz)

418

428

433

450

450

464

472

477

454

465

(2.5)

2.4

Avg Pd cash cost (US$/oz)

353

383

423

427

503

468

340

394

376

408

3.6

8.5

Avg Co cash cost (US$/lb)

4.98

4.41

5.15

4.68

5.76

6.29

6.86

19.1

9.1

Sales

247,954

307,268

286,213

324,119

330,393

268,957

278,197

307,244

273,426

302,922

(1.4)

10.8

Cost of sales

Cost of sales, excluding depletion

65,211

70,119

64,524

78,783

78,445

62,529

68,190

69,994

63,473

74,943

7.1

18.1

Depletion

58,661

60,601

59,786

70,173

70,308

54,976

59,335

57,402

54,092

65,682

14.4

21.4

Total cost of sales

123,872

130,720

124,310

148,956

148,753

117,505

127,525

127,396

117,565

140,625

10.4

19.6

Earnings from operations

124,082

176,548

161,902

175,164

181,640

151,452

150,672

179,848

155,861

162,297

(9.8)

4.1

Expenses and other income

– General and administrative

21,799

21,326

9,391

11,971

18,465

13,595

16,954

20,118

11,335

12,453

(38.1)

9.9

– Foreign exchange (gain)/loss

0

0

0

N/A

N/A

– Interest paid

4,636

2,766

2,196

1,573

1,357

1,379

1,508

1,422

1,220

1,389

(2.3)

13.9

– Other (income)/expense

234

391

850

420

136

(684)

(58)

229

(974)

(525.3)

N/A

Total expenses and other income

26,669

24,483

12,437

13,964

19,958

14,290

18,404

21,769

12,555

12,868

(40.9)

2.5

Earnings before income taxes

97,413

152,065

149,465

161,199

161,682

137,162

132,268

158,079

143,306

149,429

(5.5)

4.3

Income tax expense/(recovery)

59

58

24

67

56

75

36

72

250

144

100.0

(42.4)

Marginal tax rate (%)

0.1

0.0

0.0

0.0

0.0

0.1

0.0

0.0

0.2

0.1

N/A

(50.0)

Net earnings

97,354

152,007

149,441

161,132

161,626

137,087

132,232

158,007

143,056

149,285

(5.5)

4.4

Average no. shares in issue (000s)

448,636

449,125

449,320

449,509

450,088

450,326

450,614

450,915

451,500

451,524

0.1

0.0

Adjusted basic EPS (US$)

0.217

0.338

0.333

0.358

0.359

0.304

0.293

0.350

0.317

0.331

(5.4)

4.4

Adjusted diluted EPS (US$)

0.216

0.336

0.331

0.358

0.358

0.303

0.293

0.350

0.308

0.330

(5.7)

7.1

DPS (US$)

0.10

0.10

0.12

0.13

0.14

0.15

0.15

0.15

0.15

0.15

0.0

0.0

Source: WPM, Edison Investment Research. Note: *As reported by WPM, excluding exceptional items. **Q222 versus Q122. ***Q222 actual versus Q222 estimate.

From an operational perspective, San Dimas, Antamina, Minto and Neves-Corvo all outperformed our prior expectations in terms of production and/or sales for at least the third quarter in succession, while Penasquito performed in line. Production at Sudbury increased for the third quarter in succession as it continued to recover from the closure – albeit temporary – of the Totten mine (which accounts for approximately 15–20% of Sudbury’s production). Readers should note that Sudbury’s operator, Vale, reports that Totten has now resumed production and is in in the process of normalising. At the same time, production of gold and palladium at Sibanye-Stillwater’s Stillwater mine was adversely affected by floods in the region, which damaged two bridges and the access road to the mine and resulted in its being suspended for seven weeks until 29 July. However, access to the East Boulder mine and the Columbus metallurgical facility remained intact and both facilities continued to operate throughout the flooding. Production of cobalt at Voisey’s Bay was, meanwhile, down 42%, quarter-on-quarter, owing to lower throughput resulting from a scheduled maintenance shutdown coupled with lower grades during the transition period between the depletion of the Ovoid open-pit mine and ramp-up to full production of the Voisey’s Bay underground project. As per Vale’s Q222 Performance Report, physical completion of the Voisey’s Bay underground mine extension was 74% at the end of the second quarter and civil works are planned to be completed by the end of 2022. However, production from the Eastern Deeps is expected to start in H222.

Production at WPM’s flagship asset, Salobo in Brazil (also operated by Vale), was hampered by a delayed ramp-up in operations after planned and corrective maintenance to the plant’s mill liners (which was the subject of our note, Incorporating Salobo Q222 operating results, published on 27 July). However, at the same time, Salobo also recorded its second largest over-sale of gold relative to production, of 14,386oz, since Q113. In the meantime, according to Vale’s most recent performance report, physical completion of the Salobo III mine expansion was 95% at end-Q222, with commissioning activities commencing at both the primary crushing and the stockpile areas. The degree of advancement of the project over successive quarters is as shown in the table below:

Exhibit 2: Physical completion of Salobo III, by quarter, Q119–Q222

Q119

Q219

Q319

Q419

Q120

Q220

Q320

Q420

Q121

Q221

Q321

Q421

Q122

Q222

Physical completion (%)

7

15

27

40

47

54

62

68

73

77

81

85

90

95

Implied quarterly completion (%)

7

8

12

13

7

7

8

6

5

4

4

4

5

5

Source: Vale, Edison Investment Research.

As such, Salobo III is expected to be commissioned in H222 (albeit probably Q422) to be followed by a 15-month ramp-up to full capacity.

Ounces produced but not yet delivered

At 10.5% the degree of under-sale of silver during the quarter, relative to production, was in line with the long-run average of 12.0% since Q112 and exactly in line with the previous quarter. By contrast, at 23.4%, the over-sale of gold relative to production (90% of which was attributable to Salobo) was its second highest on record since Q112 and noticeably higher than the long-run average of a 7.2% per quarter under-sale of metal relative to production.

Exhibit 3: Over/(under) sale of silver and gold as a percentage of production, Q112–Q222

Source: Edison Investment Research, WPM. Note: As reported.

Gold and silver ounces produced but not yet delivered as at 30 June amounted to 61,198oz and 3.7Moz, respectively (cf 81,365oz and 3.9Moz at end-Q122). At the period end, we estimate that ounces produced but not yet delivered equated to 2.34 months and 1.86 months of gold and silver production for FY22, respectively (cf 2.80 months and 1.97 months as at end-Q122) and compares with WPM’s target of two to three months of gold and palladium production and two months of silver production:

Exhibit 4: WPM ounces produced but not yet delivered, Q316–Q222 (months of production)

Source: Edison Investment Research, WPM. Note: As reported.

Note that, for these purposes, the use of the term ‘inventory’ reflects ounces of gold and silver produced by WPM’s operating counterparties at the mines over which it has streaming agreements, but which have not yet been delivered to WPM. It in no way reflects the other use of the term in the mining industry, where it typically refers to metal in circuit and ore on stockpiles etc.

General and administrative expenses

At the time of its Q122 results, WPM provided guidance for non-stock general and administrative (G&A) expenses of US$47–49m or US$11.75–12.25m per quarter (cf US$42–44m or US$10.5–11.0m per quarter for FY21 and US$40–43m in FY20), including all employee-related expenses, charitable contributions, etc, but excluding performance share units (PSU) and equity settled stock-based compensation. In the event, at US$10.8m, non-stock G&A expenses in Q222 were 7.7% below the bottom of the range implied by guidance for the sixth quarter in succession:

Exhibit 5: WPM general and administrative expenses, Q220–Q222 (US$000s)

Item

Q220

Q320

Q420

FY20

Q121

Q221

Q321

Q421

FY21

Q122

Q222

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

4,095

4,037

4,466

16,733

4,709

4,634

4,283

4,618

18,244

5,345

5,061

Other (inc. depreciation, donations and professional fees)

6,302

5,488

5,957

22,013

5,632

5,852

5,173

6,818

23,475

4,871

5,784

Non-stock based G&A

10,397

9,525

10,423

38,746

10,341

10,486

9,456

11,436

41,719

10,216

10,845

Guidance

10,000–10,750

10,000–10,750

10,000–10,750

40,000–43,000

10,500–11,250

10,500–11,250

10,500–11,250

11,717–13,717

42,000–44,000

11,750–12,250

11,750–12,250

PSU* accrual

10,097

10,482

(2,336)

21,520

305

6,672

2,824

4,203

14,004

8,560

110

Equity settled stock-based compensation

1,305

1,319

1,305

5,432

1,325

1,307

1,315

1,315

5,262

1,342

1,498

Stock-based G&A

11,402

11,801

(1,031)

26,952

1,630

7,979

4,139

5,518

19,266

9,902

1,608

Total general & administrative

21,799

21,326

9,392

65,698

11,971

18,465

13,595

16,954

60,985

20,118

12,453

Total/Non-stock based G&A (%)

+109.7

+123.9

-9.9

+69.6

+15.8

+76.1

+43.6

+48.3

+46.2

+96.9

+14.8

Source: WPM, Edison Investment Research. Note: *Performance share units.

Given the performance of WPM’s shares, stock-based G&A expenses in Q222 were approximately US$2m above our prior estimate for the quarter (as shown in Exhibit 6, below), but were nevertheless within the ±US$2.9m error of estimation implied by the associated regression analysis.

Exhibit 6: Graph of historical share price move (US$/share) versus quarterly stock-based G&A expenses, Q419–Q222

Source: Edison Investment Research (underlying data: Bloomberg and Wheaton Precious Metals)

The analysis of stock-based G&A expenses over the past 11 quarters relative to the change in WPM’s share price (also in US dollars) continues to exhibit a relatively close Pearson product-moment (correlation) coefficient between the two of 0.78, which remains statistically significant at the 5% level for a directional hypothesis (ie there is less than a 5% probability that this relationship occurred by random chance) and this therefore continues to form the basis of quarterly and full-year forecasts for G&A expenses in Exhibit 8.

Updated FY22 and five-year and 10-year guidance

In the light of lower short-term production from Salobo, as well as the sale of its Keno Hill stream in particular (which affects longer-term production expectations), WPM has provided updated guidance both for FY22 and the four- and nine-year periods thereafter. These changes, as well as Edison’s changes to its own shorter- and longer-term forecasts (including Marathon, Curipamba and Goose, but not yet Fenix) are summarised below:

Exhibit 7: WPM precious metals production – Edison forecasts cf guidance

FY22e

Implied *FY23–26 average

FY22–31 average

Prior Edison forecast

Silver production (Moz)

23.2

Gold production (koz)

327.4

Cobalt production (klb)

1,274

Palladium production (koz)

19

Gold equivalent (koz)

681.5

858

834

Current Edison forecast

Silver production (Moz)

23.8

Gold production (koz)

314.0

Cobalt production (klb)

958

Palladium production (koz)

17

Gold equivalent (koz)

669.3

854

853

WPM updated guidance

Silver production (Moz)

22.5–24.0

Gold production (koz)

300–320

Cobalt & palladium production (koz AuE)

35–40

Gold equivalent (koz)

640–680

860

870

WPM original guidance

Silver production (Moz)

23.0–24.5

Gold production (koz)

350–380

Cobalt & palladium production (koz AuE)

44–48

Gold equivalent (koz)

700–760

880

910

Source: WPM, Edison Investment Research forecasts. Note: *Edison forecasts include Salobo III from FY23e, Rosemont/Copper World from FY27e and Antamina extension from FY28.

WPM’s updated five-year and 10-year guidance is based on standardised pricing assumptions of US$1,800/oz Au, US$24.00/oz Ag, US$2,100/oz palladium and US$33.00/lb cobalt. Of note in this context is an implied gold/silver ratio of 75x, which compares with its current ratio of 87.6x and a long-term average of 61.5x (since gold was demonetised in August 1971). Self-evidently, at the standardised prices indicated, our gold equivalent production forecast of 669.3koz AuE for FY22e lies well within WPM’s updated guidance range of 640–680koz AuE.

Otherwise, readers will note that Edison’s medium-term production forecasts are within 1% of WPM’s (implied) guidance for the period FY23–26 and within 2% of its longer-term guidance for FY22–31 (albeit this estimate necessarily excludes potential future stream acquisitions).

Short-term organic growth opportunities

In the short term, First Majestic is in the process of increasing production at San Dimas by restarting mining operations at the past-producing Tayoltita mine to add another 300tpd (12%) to throughput. In addition, it is investigating installing a 3,000tpd high-intensity grinding mill circuit and an autogenous grinding mill to improve recoveries and reduce operating costs. Production of palladium and gold at Stillwater (operated by Sibanye-Stillwater) will similarly increase under the influence of the Fill-the-Mill project at East Boulder (although the Blitz project has now been delayed by two years, to 2024, following the suspension of growth capital activities owing to COVID-19). At the same time, the Voisey’s Bay underground project is expected to ramp up to full production.

Longer-term outlook

Salobo

On 24 October 2018, Vale announced the approval of the Salobo III brownfields mine expansion, intended to increase processing capacity at Salobo from 24Mtpa to 36Mtpa, with start-up at that point scheduled for H222 and an estimated ramp-up time of 15 months. According to its agreement with Vale, depending on the grade of the material processed, WPM will be required to make a payment to Vale for this expansion, which WPM estimates will be in the range US$550–670m in FY23, in return for which it will be entitled to its full 75% attributable share of expanded gold production. Note however that the timing of this payment is dependent upon Salobo III successfully navigating a 90-day completion test, based largely on throughput, the start of which is at Vale’s discretion. The payment also compares to WPM’s purchase of a 25% stream from Salobo in August 2016 for a consideration of US$800m (see our note Going for gold, published on 30 August 2016), the US$900m it paid for a similar stream in March 2015 (when the gold price averaged US$1,179/oz) and the US$1.33bn it paid for its original 25% stream in February 2013.

According to Vale’s Q222 performance report, the Salobo III mine expansion is now 95% complete (see Exhibit 2) and remains on schedule for start-up in H222 (probably Q422). Once Salobo III has been completed, however, WPM believes reserves and resources could support a further 33% capacity increase at Salobo, from 90ktpd to 120ktpd (denoted Salobo IV). In addition to its long-term underground potential, WPM believes such an expansion could nevertheless still be supported by open-pit mining alone. Under the terms of its agreement with Vale, there would be no additional payment due from WPM in respect of the Salobo IV expansion, although Vale could exercise a right to alter the timing of the incremental payment due for Salobo III.

Rosemont – also known as Copper World

Another major project with which WPM has a streaming agreement for attributable gold and silver production is Rosemont in Arizona (now part of the wider Copper World complex).

Rosemont/Copper World is near a number of large porphyry-type producing copper mines and will be one of the largest copper mines in the United States, with initial output of c 86,000t copper per year from mined sources, accounting for c 8% of total US copper production, rising to c 101,000tpa after 16 years. Total by-product production of silver attributable to WPM is estimated to be c 1.7Moz Ag pa for Phase I, followed by c 2.4Moz Ag pa for Phase II.

Rosemont/Copper World’s operator, Hudbay, received both a Mine Plan of Operations from the US Forest Service and a Section 404 Water Permit from the US Army Corps of Engineers in March 2019, which was effectively the final material administrative step before the Rosemont mine could start development. Subsequently, Hudbay indicated it would seek board approval to start construction work by the end of CY19, which would have enabled first production ‘by the end of 2022’. In the meantime, it started early works to run concurrently with financing activities (including a potential joint venture partner).

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

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

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

Hudbay responded by saying that it believed the ruling to be without precedent and that the court had misinterpreted federal mining laws and Forest Service regulations as they applied to Rosemont. It pointed out that the Forest Service issued its decision in 2017 after a ‘thorough process of 10 years involving 17 co-operating agencies at various levels of government, 16 hearings, over 1,000 studies, and 245 days of public comment resulting in more than 36,000 comments’ and with a long list of studies that have examined the potential effects of the proposed mine on the environment. Hudbay also pointed out that various agencies had accepted the company could operate the mine in compliance with environmental laws. As a result, Hudbay appealed the ruling to the Ninth Circuit Court of Appeals, which was delivered on 12 May 2022 to the effect that it affirmed the US District Court for the District of Arizona’s decision in July 2019. In the decision, the Court of Appeals agreed with the District Court’s ruling that the US Forest Service had relied on incorrect assumptions regarding its legal authority and the validity of Rosemont’s unpatented mining claims in the issuance of Rosemont’s Final Environmental Impact Statement. Hudbay is reviewing this decision. In the meantime, however, Hudbay has continued to explore in and around the area of the mine and, on 22 September 2021, announced the intersection of additional high-grade copper sulphide and oxide mineralisation predominantly located on its wholly owned patented mining claims (denoted Copper World). To date, seven deposits have been identified at Copper World with a combined strike length of over 7km and, on 15 December 2021, Hudbay announced a maiden mineral resource at Copper World of 272Mt in the indicated category and 142Mt in the inferred category, both at an average grade of 0.36% copper. The mineralisation consists of both skarn and porphyry copper sulphides with a significant oxidised component along a regional fault along the west side of the Rosemont, Bolsa and Broad Top Butte deposits known as the Backbone Fault. As a consequence of this exploration, it was determined that approximately 33Mt of inferred mineral resources at the Bolsa deposit, which were previously considered to be waste in the resource pit shell used for Rosemont’s NI 43-101 feasibility study, could now potentially be converted into reserves, which would result in less waste being mined at Rosemont, thereby reducing costs and energy consumption per tonne of ore mined. In addition, the Rosemont deposit also contains oxide mineralisation that was previously classified as waste, which could be processed with the oxide mineralisation at Copper World, and it is expected that further synergies will be identified as Hudbay continues to close the drilling gap between Bolsa and Rosemont. Note, the Copper World discovery is included in WPM’s area of interest under its precious metals purchase agreement (PMPA) with Hudbay.

As a result of these discoveries, Hudbay has adjusted its plan to develop the district. Among other things, it has now acquired a private land package totalling approximately 4,500 acres to support an operation on private lands. The initial technical studies for Copper World were incorporated into a preliminary economic assessment (PEA) investigating the development of the Copper World deposits in conjunction with an alternative plan for the Rosemont deposit, which was announced to the market on 8 June, and proposed a two-phase mine development plan. The first phase of the mine plan requires only state and local permits and reflects an approximate 16-year mine life. The second phase then extends the mine life to 44 years and incorporates an expansion onto federal lands to mine the entire Rosemont and Copper World deposits. The second phase of the mine plan would be subject to the federal permitting process and the company expects that it will be able to pursue the federal permits within the constraints imposed by the courts’ most recent legal decisions if any subsequent appeals are not successful.

Within this context, on 24 May, Hudbay received a favourable decision from the US District Court for the District of Arizona on all issues relating to the development of Copper World, including that Copper World and Rosemont are not connected under the National Environmental Policy Act (NEPA) and, therefore, that the Army Corps of Engineers (ACOE) does not have an obligation to include Copper World as part of its NEPA review of Rosemont. The District Court also granted Hudbay’s motion to dismiss the Copper World preliminary injunction request filed by the plaintiffs in the two lawsuits challenging the Section 404 Clean Water Act permit for Rosemont on the basis that the lawsuits were moot after the company surrendered its 404 permit back to the ACOE in April 2022. The ACOE has never determined that there are jurisdictional waters of the US on the Copper World site and Hudbay has independently concluded through its own scientific analysis that there are no such waters in the area. In this respect, Hudbay believes the District Court’s decision, together with the 12 May decision, clarifies the permitting path for Copper World, including the requirements to receive federal permits for the second phase only (ie years 16 to 44 of the project) under existing mining regulations.

Resources were reported to have expanded materially to 792Mt in the measured category, 381Mt in the indicated category and 262Mt in the inferred category at the time of Hudbay’s PEA at an average grade of 0.40% copper. In April 2022, the company commenced early works at Copper World with initial grading and clearing activities at site. It expects to advance a pre-feasibility study for Phase I of the Copper World project in H222, which will focus on converting the remaining inferred mineral resources to measured and indicated status and the evaluation of many of the project’s optimisation and upside opportunities. It will then complete a definitive feasibility study as well as receiving all required state and local permits during 2023, while simultaneously evaluating a variety of financing options, including a potential minority joint venture partner, prior to project sanction potentially as early as 2024. As a consequence, Edison is now forecasting production from Rosemont/Copper World attributable to WPM in FY27 (cf FY26 previously). However, readers should note that any acceleration in the process of being granted federal permits could allow Hudbay earlier access to higher grade areas of the orebody, especially at Rosemont. In the meantime, it is continuing exploration and technical work at site with seven drill rigs conducting infill drilling to support the feasibility studies.

Antamina

In April, Antamina announced a US$1.6bn investment that will lengthen the mine’s useful life from 2028 to 2036. Currently, the mine is carrying out a third and final ‘public participation’ with residents of the northern Andean region of Ancash, where the mine is located, and is awaiting a response from the local authority, Senace, regarding the company’s request to modify its environmental impact assessment to allow the mine to extend its operating life by eight years. Production and the mine’s operational footprint would remain the same. The mine, which is co-owned by Glencore, BHP, Teck and Mitsubishi Corp and which is Peru’s largest, and the world’s second-largest, copper mine, anticipates being granted approval for the extension from the country’s environmental authority either later this, or early next, year.

Pascua-Lama

WPM’s contract with Barrick provided for a completion test that, if unfulfilled by 30 June 2020, would result in WPM being entitled to the return of its upfront cash consideration of US$625m less a credit for any silver delivered up to that date from three other Barrick mines (at which point it would have no further streaming interest in the mine). Given the test was unfulfilled, WPM had the right to an estimated US$252.3m (the carrying value of Pascua-Lama in WPM’s accounts) repayment from Barrick in FY20. Given the long-term optionality provided by the Pascua-Lama project, however, WPM instead opted not to enforce the repayment of its entitlement and to instead maintain its streaming interest in the project (which was originally expected to deliver an attributable 1.7–12.0Moz silver pa, averaging 5.2Moz Ag pa, to WPM at a cost of US$3.90/oz inflating at 1% per year). A Chilean court ordered Pascua-Lama to close in 2020, but Barrick has raised the possibility that the orebody could be developed in a different manner, with an investment decision anticipated in 2024.

Other potential future growth opportunities

At the time of its Q222 results, WPM reported that its corporate development team was experiencing ‘healthy demand’ for streaming transactions, with development companies in the US$100–300m range. In general, it expects to be conducting due diligence processes on approximately 10–12 projects at any one time, which it expects to narrow to 3–4 target projects over the course of c 12 months. Most of the opportunities being evaluated by WPM are reported to be the precious metal by-product streams of base metal mines, although there are also reported to be some high-margin, purely precious metals mines involved in the process as well. In the first instance, WPM would fund any such transactions via the US$2bn available under its revolving credit facility, plus the US$448.6m in cash that it has on its balance sheet (at end-Q222) and, potentially, its US$300m at-the-market equity programme.

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

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

the 30% of the gold output at Constancia that is not currently subject to any streaming arrangement.

FY22 guidance and forecasts

In the light of WPM’s Q222 results, updated guidance (see Exhibit 7), recent moves in metals prices, forex rates and WPM’s share price, Edison has updated its quarterly estimates for WPM for FY22 as follows:

Exhibit 8: WPM FY22 forecast, by quarter*

US$000s
(unless otherwise stated)

Q122

Q222

Q322e

(prior)

Q322e

Q422e

(prior)

Q422e

FY22e

(current)

FY22e

(prior)

Silver production (koz)

6,206

6,537

5,531

5,532

5,531

5,532

23,806

23,168

Gold production (oz)

79,087

68,365

79,312

76,266

90,264

90,264

313,981

327,391

Palladium production (koz)

4,488

3,899

4,750

4,325

4,750

4,750

17,462

18,738

Cobalt production (klb)

234

136

347

241

347

347

958

1,274

Silver sales (koz)

5,553

5,848

4,867

4,868

5,391

5,392

21,661

21,033

Gold sales (oz)

77,901

84,337

73,572

70,750

90,232

90,232

323,219

314,735

Palladium sales (oz)

4,075

3,378

3,860

3,515

4,731

4,731

15,699

16,527

Cobalt sales (klb)

511

225

297

207

347

347

1,289

1,452

Avg realised Ag price (US$/oz)

24.19

22.27

18.73

20.00

18.64

20.44

21.80

21.12

Avg realised Au price (US$/oz)

1,870

1,872

1,722

1,772

1,717

1,791

1,827

1,792

Avg realised Pd price (US$/oz)

2,339

2,132

2,000

2,160

2,014

2,263

2,232

2,109

Avg realised Co price (US$/lb)

34.61

34.01

23.58

22.93

22.68

21.52

29.13

29.58

Avg Ag cash cost (US$/oz)

5.10

5.61

4.94

5.43

4.97

5.49

5.41

5.04

Avg Au cash cost (US$/oz)

477

465

450

453

446

447

460

456

Avg Pd cash cost (US$/oz)

394

408

360

389

363

407

400

373

Avg Co cash cost (US$/lb)

5.76

6.86

4.24

4.13

4.08

3.87

5.18

5.16

Sales

307,244

302,922

232,562

235,064

272,800

289,980

1,135,210

1,086,032

Cost of sales

Cost of sales, excluding depletion

69,994

74,943

59,776

60,719

70,123

73,222

278,877

263,365

Depletion

57,402

65,682

52,414

54,688

63,641

68,580

246,352

227,549

Total cost of sales

127,396

140,625

112,190

115,407

133,764

141,802

525,229

490,914

Earnings from operations

179,848

162,297

120,372

119,657

139,037

148,178

609,981

595,118

Expenses and other income

– General and administrative**

20,118

12,453

15,319

16,264

16,965

17,265

66,099

63,738

– Foreign exchange (gain)/loss

0

0

– Net interest paid/(received)

1,422

1,389

1,220

1,357

1,210

1,357

5,525

5,072

– Other (income)/expense

229

-974

-527

-559

-1,831

229

Total expenses and other income

21,769

12,868

16,539

17,094

18,176

18,063

69,793

69,039

Earnings before income taxes

158,079

149,429

103,833

102,563

120,861

130,115

540,187

526,079

Income tax expense/(recovery)

72

144

250

250

250

250

716

822

Marginal tax rate (%)

0.0

0.1

0.2

0.2

0.2

0.2

0.1

0.2

Net earnings

158,007

149,285

103,583

102,313

120,611

129,865

539,471

525,257

Average no. shares in issue (000s)

450,915

451,524

451,500

451,524

451,500

451,524

451,372

451,354

Basic EPS (US$)

0.350

0.331

0.229

0.227

0.267

0.288

1.20

1.16

Diluted EPS (US$)

0.350

0.330

0.223

0.220

0.260

0.280

1.16

1.13

DPS (US$)

0.15

0.15

0.15

0.15

0.15

0.15

0.60

0.60

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

Our basic EPS forecast of US$1.20/share for FY22 is a 3.4% upgrade relative to our prior estimate of US$1.16/share and is 7.7% below the consensus forecast of US$1.30/share (source: Refinitiv, 12 August 2022). Within this context, it is worth noting that our gold and silver price forecasts for the remainder of the year are now US$1,791/oz and US$20.44/oz, respectively, which are those prevailing at the time of writing (cf US$1,717/oz and US$18.64/oz previously).

Exhibit 9: WPM FY22 consensus EPS forecasts (US$/share), by quarter

Q122

Q222e

Q322e

Q422e

Sum Q1–Q422e

FY22e

Edison forecasts

0.350

0.331

0.227

0.288

1.196

1.20

Mean consensus

0.35

0.33

0.30

0.32

1.30

1.30

High consensus

0.35

0.33

0.39

0.39

1.46

1.49

Low consensus

0.35

0.33

0.22

0.26

1.16

1.13

Source: Refinitiv, Edison Investment Research. Note: As at 12 August 2022.

Valuation

Absolute

WPM is a multi-asset company that has shown a willingness and desire to buy streams in the past to maintain production and maximise shareholder returns. As a result, rather than our customary method of discounting maximum potential dividends over the life of operations back to FY22, in the case of WPM (as with Newmont and Endeavour), we have introduced a new valuation methodology whereby we discount forecast cash flows back over five years from the start of FY22 and then apply an ex-growth terminal multiple to forecast cash flows in that year (ie FY26) based on an appropriate discount rate.

In this case, in the wake of Q222 results, our estimate of WPM’s ‘terminal’ pre-financing cash flow in FY26 is US$2.76/share (cf US$2.81/share previously as a result of our revised assumption that first material production attributable to WPM from Rosemont/Copper World will occur in FY27 cf FY26 previously), as shown below:

Exhibit 10: WPM cash flow per share and related valuation (US$/share), FY22–26

Source: Edison Investment Research. Note: Valuation line assumes ex-growth cash flow per share growth rate of 4.0% pa post-FY26 in nominal terms, which equals the average US rate of CPI inflation since 1972 (ie 0% per annum growth in real terms).

Assuming 4% growth in nominal cash flows beyond FY26 (ie 0% growth in real cash flows) and applying a discount rate of 9.0% (being the expected long-term required nominal equity return), our terminal valuation of the company at end-FY26 is US$57.33/share, which, when discounted back to FY22 in combination with intervening cash flows, results in a valuation at the start of FY22 of US$41.47/share, or C$53.01/share (cf US$43.49/share previously). However, this valuation is inherently conservative in that it is based on the assumption of zero growth in (real) cash flows beyond FY26. This is inconsistent with the gold price, which has risen at a compound average annual growth rate of 7.6% per annum since 1968 and at a simple average annual growth rate of 9.7% per annum (as depicted below).

Exhibit 11: Gold price annual performance, 1968–2021

Source: Edison Investment Research (underlying data: US Bureau of Labor Statistics, Bloomberg, kitco.com, South African Chamber of Mines).

It is also inconsistent with WPM’s longer-term historical performance, wherein operational cash flows have increased at a compound average annual growth rate of 23.2% pa for the 16 years between FY05 and FY21, while its operational cash flows per share have increased at compound average annual growth rate of 15.8% pa.

Stated alternatively, we can say that WPM’s current share price of C$42.99 discounts a long-term compound annual average growth rate in cash flows per share of 2.7%, which is less than the compound average annual increase in US consumer prices from 1984 to the end of 2021.

Exhibit 12: US consumer price inflation, 1965–2021 (%)

Source: US Bureau of Labor Statistics

Historical

Excluding FY04 (part-year), WPM’s shares have historically traded on an average P/E multiple of 30.1x current year basic underlying EPS, excluding impairments (cf 28.1x Edison or 25.9x Refinitiv consensus FY22e – see Exhibit 14).

Exhibit 13: WPM’s historical current year P/E multiples, 2005–21

Source: Edison Investment Research

Applying this 30.1x multiple to our EPS forecast of US$1.93 in FY26 (cf US$1.98 previously) implies a potential value per share for WPM of US$58.28 or C$74.50 in that year. However, the graph above suggests that the investing environment post-2017 has been able to support an enhanced WPM multiple relative to earlier years. We would ascribe this observation to macro-economic uncertainty and loose monetary policy combining to create a supportive environment for precious metals prices. As such, we believe that a multiple of 38.6x (the average of FY18–21) may still be supported in the event of a return to favour of precious metals and precious metals stocks. In this case, applying a 38.6x earnings multiple to our unchanged EPS forecast of US$1.52 in FY23 implies a potential value per share for WPM in that year of US$58.50 or C$74.79. Even at such share price levels however, a multiple of 38.6x would still put WPM’s shares on little more than par relative to those of Franco-Nevada (see Exhibit 14, below).

Relative

In the meantime, from a relative perspective, it is notable that WPM is cheaper than its peers on 75% (27 out of 36) of the valuation measures observed in Exhibit 14 if Edison estimates are used or 69% (25 out of 36) of the same valuation measures if consensus forecasts are used.

Exhibit 14: WPM comparative valuation versus a sample of operating and royalty/streaming companies

P/E (x)

Yield (%)

P/CF (x)

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Year 1

Year 2

Year 3

Royalty companies

Franco-Nevada

34.4

35.5

35.2

1.0

1.0

1.0

24.9

24.4

24.8

Royal Gold

28.5

24.5

25.3

1.4

1.4

1.5

15.6

13.3

13.8

Sandstorm Gold

37.8

37.8

38.4

0.0

0.0

0.0

12.6

13.0

12.0

Osisko

36.6

26.7

23.0

1.6

1.6

1.6

16.9

12.9

12.9

Average

34.3

31.1

30.5

1.0

1.0

1.0

17.5

15.9

15.9

WPM (Edison forecasts)

28.1

22.2

22.0

1.8

1.9

2.0

18.6

15.0

14.6

WPM (consensus)

25.9

25.0

24.8

1.7

2.0

2.4

18.0

16.7

16.0

Implied WPM share price (US$)*

41.01

47.17

46.63

60.89

63.32

66.89

31.61

35.50

36.67

Source: Refinitiv, Edison Investment Research. Note: Peers priced on 12 August 2022. *Derived using Edison forecasts and average consensus multiples.

Within this context, it is worth noting that Edison forecasts imply that WPM’s EPS, DPS and cash flow will increase in FY23 and FY24 (relative to FY22), not least under the influence of the company’s increasing production profile (see Exhibit 7). By contrast, consensus forecasts appear to indicate that the market expects WPM’s EPS, in particular, to be broadly unchanged in FY23 and FY24 relative to FY22, implying that it is either not expecting any production/sales increase, or that it is anticipating the degree of any production/sales increase to be offset by an approximately equal and opposite move in precious metals prices.

Financials: US$446.2m (US$0.99/share) in net cash

At 30 June, WPM had US$448.6m in cash on its balance sheet and no debt outstanding under its US$2bn revolving credit facility. As such (including a modest US$2.4m in leases), it had US$446.2m in net cash overall after generating US$206.4m in operating cash flow during the quarter, consuming US$18.2m in investing activities and paying two quarterly dividends amounting to US$117.1m.

Exhibit 15: WPM cash, net cash and operating cash flow, by quarter, Q420–Q222

(US$m)

Q420

Q121

Q221

Q321

Q421

Q122

Q222

Cash/(debt)

192.7

191.2

235.4

372.5

226.0

376.2

448.6

Net cash/(debt)

6.0

187.7

232.1

369.4

223.2

373.5

446.2

Operating cash flow

208.0

232.2

216.3

201.3

195.3

210.5

206.4

Source: Wheaton Precious Metals

In FY22 we estimate that WPM will generate US$814.2m from operating activities, before consuming US$383.4m in investing activities in the form of instalments relating to the acquisitions of the Santo Domingo, Blackwater, Goose, Curipamba and Marathon streams and paying out a forecast dividend of US$270.8m to leave it with net cash of US$518.1m as at end-FY22.

In FY23, we forecast that it will generate US$1,008.9m from operating activities, before consuming US$1,100.0m in investing activities, including significant instalments relating to Salobo III (although readers should note that the timing of this payment is dependent on a successful completion test and could slip), Rosemont/Copper World and also Kutcho and, potentially, Fenix. On this basis, we estimate that WPM will end FY23 with net cash on its balance sheet of US$139.0m, before resuming its upward trend once again thereafter.

Exhibit 16: Financial summary

US$'000s

2016

2017

2018

2019

2020

2021

2022e

2023e

2024e

Dec

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

891,557

843,215

794,012

861,332

1,096,224

1,201,665

1,135,210

1,417,928

1,454,874

Cost of Sales

(254,434)

(243,801)

(245,794)

(258,559)

(266,763)

(287,947)

(278,877)

(347,389)

(344,572)

Gross Profit

637,123

599,414

548,218

602,773

829,461

913,718

856,333

1,070,540

1,110,302

EBITDA

 

 

602,684

564,741

496,568

548,266

763,763

852,733

790,233

1,004,440

1,044,203

Operating Profit (before amort. and except.)

 

 

293,982

302,361

244,281

291,440

519,874

597,940

543,882

685,116

691,923

Exceptionals

(71,000)

(228,680)

245,715

(156,608)

4,469

162,806

751

0

0

Other

(4,982)

8,129

(5,826)

217

387

190

1,831

0

0

Operating Profit

218,000

81,810

484,170

135,049

524,730

760,936

546,463

685,116

691,923

Net Interest

(24,193)

(24,993)

(41,187)

(48,730)

(16,715)

(5,817)

(5,525)

933

250

Profit Before Tax (norm)

 

 

269,789

277,368

203,094

242,710

503,159

592,123

538,357

686,048

692,173

Profit Before Tax (FRS 3)

 

 

193,807

56,817

442,983

86,319

508,015

755,119

540,938

686,048

692,173

Tax

1,330

886

(15,868)

(181)

(211)

(234)

(716)

(1,000)

(1,000)

Profit After Tax (norm)

266,137

286,383

181,400

242,746

503,335

592,079

539,471

685,048

691,173

Profit After Tax (FRS 3)

195,137

57,703

427,115

86,138

507,804

754,885

540,222

685,048

691,173

Average Number of Shares Outstanding (m)

430.5

442.0

443.4

446.0

448.7

450.1

451.4

451.5

451.5

EPS - normalised (c)

 

 

62

63

48

54

112

132

120

152

153

EPS - normalised and fully diluted (c)

 

 

62

63

48

54

112

131

116

148

149

EPS - (IFRS) (c)

 

 

45

13

96

19

113

168

120

152

153

Dividend per share (c)

21

33

36

36

42

57

60

64

69

Gross Margin (%)

71.5

71.1

69.0

70.0

75.7

76.0

75.4

75.5

76.3

EBITDA Margin (%)

67.6

67.0

62.5

63.7

69.7

71.0

69.6

70.8

71.8

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

33.0

35.9

30.8

33.8

47.4

49.8

47.9

48.3

47.6

BALANCE SHEET

Fixed Assets

 

 

6,025,227

5,579,898

6,390,342

6,123,255

5,755,441

6,046,427

6,048,476

6,829,124

6,878,706

Intangible Assets

5,948,443

5,454,106

6,196,187

5,768,883

5,521,632

5,940,538

5,942,587

6,723,235

6,772,817

Tangible Assets

12,163

30,060

29,402

44,615

33,931

44,412

44,412

44,412

44,412

Investments

64,621

95,732

164,753

309,757

199,878

61,477

61,477

61,477

61,477

Current Assets

 

 

128,092

103,415

79,704

154,752

201,831

249,724

529,894

152,982

483,978

Stocks

1,481

1,700

1,541

43,628

3,265

12,102

2,671

3,336

3,423

Debtors

2,316

3,194

2,396

7,138

5,883

11,577

6,220

7,769

7,972

Cash

124,295

98,521

75,767

103,986

192,683

226,045

521,003

141,876

472,583

Current Liabilities

 

 

(19,057)

(12,143)

(28,841)

(64,700)

(31,169)

(29,691)

(43,262)

(50,019)

(49,741)

Creditors

(19,057)

(12,143)

(28,841)

(63,976)

(30,396)

(28,878)

(42,449)

(49,206)

(48,928)

Short term borrowings

0

0

0

(724)

(773)

(813)

(813)

(813)

(813)

Long Term Liabilities

 

 

(1,194,274)

(771,506)

(1,269,289)

(887,387)

(211,532)

(16,343)

(16,343)

(16,343)

(16,343)

Long term borrowings

(1,193,000)

(770,000)

(1,264,000)

(878,028)

(197,864)

(2,060)

(2,060)

(2,060)

(2,060)

Other long term liabilities

(1,274)

(1,506)

(5,289)

(9,359)

(13,668)

(14,283)

(14,283)

(14,283)

(14,283)

Net Assets

 

 

4,939,988

4,899,664

5,171,916

5,325,920

5,714,571

6,250,117

6,518,765

6,915,744

7,296,599

CASH FLOW

Operating Cash Flow

 

 

608,503

564,187

518,680

548,301

784,843

851,686

820,422

1,008,983

1,043,636

Net Interest

(24,193)

(24,993)

(41,187)

(41,242)

(16,715)

(5,817)

(5,525)

933

250

Tax

28

(326)

0

(5,380)

(2,686)

(503)

(716)

(1,000)

(1,000)

Capex

(805,472)

(19,633)

(861,406)

10,571

149,648

(404,437)

(248,401)

(1,099,973)

(401,861)

Acquisitions/disposals

0

0

0

0

0

0

0

0

0

Financing

595,140

1,236

1,279

37,198

22,396

7,992

0

0

0

Dividends

(78,708)

(121,934)

(132,915)

(129,986)

(167,212)

(218,052)

(270,823)

(288,070)

(310,318)

Net Cash Flow

295,298

398,537

(515,549)

419,462

770,274

230,869

294,958

(379,127)

330,707

Opening net debt/(cash)

 

 

1,362,703

1,068,705

671,479

1,188,233

774,766

5,954

(223,172)

(518,130)

(139,003)

Other

(1,300)

(1,311)

(1,205)

(5,995)

(1,462)

(1,743)

0

0

0

Closing net debt/(cash)

 

 

1,068,705

671,479

1,188,233

774,766

5,954

(223,172)

(518,130)

(139,003)

(469,710)

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 £60,00 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 2022 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

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

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

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 £60,00 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 2022 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

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

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

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

More on Wheaton Precious Metals

View All

Latest from the Metals & Mining sector

View All Metals & Mining content

Research: TMT

Dentsu Group — Edging forecasts to higher end of range

Dentsu has had a strong Q222, reporting organic revenue growth of 8.2% (7.9% including Russia). Customer Transformation & Technology (CT&T) is the main engine of growth and represents 32.3% of group net revenue, up from 31.5% in Q122. We would expect this segment to be more resilient should a deteriorating H222 macro environment stall advertising momentum. Management is now guiding to the top end of the previously cited 4–5% revenue growth range and we have edged our forecasts ahead, with earnings also set to benefit from a lower tax charge than expected. The shares have outperformed the peer set in the year-to-date, narrowing the discount at which they trade to 12% on current year EV/EBITDA.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free