Precious metals prices bottoming

While relatively anecdotal, an analysis of Wheaton’s valuation multiples at Edison’s long-term prices, consensus long-term prices and current spot prices (see Exhibit 16) suggests that the equity market believes that precious metals prices have stopped falling and will remain flat until December 2028.

Valuation: Still trending up

Using a CAPM-type method, whereby we discount cash flows at a nominal 9% per year, we calculate a modestly increased terminal value for WPM of US$90.63 (or C$127.60) per share in FY30, assuming zero long-term growth in real cash flows thereafter (which is highly unlikely). If we instead assume 8.2% per year long-term growth in cash flows (ie the average CAGR in the price of gold from 1967 to 2025), our terminal value rises to US$619.78 ( C$872.65) per share and our current valuation to US$410.70 ( C$578.26) per share. At an implied growth rate of 6.1% per year therefore, WPM’s share price currently appears to be discounting future compound annual average increases in cash flows per share from FY30, well below historical levels (+17.1% CAGR since FY05), especially given that production is expected to deliver 9.1% per year organic growth between FY26 and FY30 alone. An alternative interpretation is that the market is assuming that current precious metals prices will prevail into FY30 with compound annual average increases in WPM’s cash flows per share thereafter of just 3.6% per year (ie below the long-term rate of US inflation). Otherwise, assuming no purchases of additional streams (also unlikely), we calculate a value per share of US$104.50 ( C$143.41, or £78.47) in FY27, based on a historical multiple of 31.1x contemporary earnings (albeit at a gold price of only US$2,239/oz and a silver price of only US$60.00/oz). At current prices, this value rises by 43.6% to US$150.01 (or C$205.87 or £112.64) per share.

Updated Q226 and FY26 forecasts

WPM’s Q226 financial results are being released on Thursday 6 August, after the bell in Toronto. Our last note on Wheaton was written on 11 May, when the gold price was 17.7% higher than today. This note updates our forecasts for Q226 and FY26 in the light of movements in metals prices as well as production numbers for Salobo, Sudbury, Voisey’s Bay, Neves-Corvo, Zinkgruvan, San Dimas, Blackwater and Penasquito for the quarter:

At the time of writing, primary production numbers are known for Sudbury, Salobo and Voisey’s Bay (all announced by Vale on 21 July), Neves-Corvo and Zinkgruvan (announced by Boliden also on 21 July), San Dimas (announced by First Majestic on 8 July), Blackwater (announced by Artemis on 13 July) and Penasquito (announced by Newmont on 23 July). Potentially the most consequential of these was the 52,800t copper produced at Salobo (cf 52,800t in Q126 and our prior expectation was of c 50,000t). The relationship between copper output at Salobo and gold production attributable to Wheaton is extremely close (see Exhibit 3), and this enables us to predict associated gold production attributable to Wheaton from Salobo to be 72,946oz (±3,480oz) in Q2. Since this is very close to our prior forecast of 70,000oz, we have left this assumption unchanged (as depicted in Exhibits 2 and 3).

Our silver production forecasts for Neves-Corvo and Zinkgruvan have changed by +9.2% and -8.1%, respectively, based on their output of copper and zinc during the quarter; however, this has a negligible effect on our forecasts for WPM, as do changes to our forecasts for Sudbury (-820oz Au) and Voisey’s Bay (-39klb Co). Actual production at Blackwater and San Dimas was very close to our prior expectations, although we note that First Majestic (the operator) has increased its output guidance for FY26, from 4.0–4.4Moz to 4.6–4.9Moz Ag and from 49–55koz to 52–56koz Au (of which Wheaton is entitled to 25% of the gold plus 25% of the silver converted into gold at a rate of 70 to 1).

However, the most consequential production and sales result for Q226 was from Penasquito (announced by Newmont on 23 July), which reported silver production during the three-month period of 7Moz (of which WPM’s share should be 1.75Moz relative to the terms of its stream) and sales of 6Moz (of which WPM’s pro rata share should be 1.5Moz). However, these compare with Penasquito’s announced production of 9Moz in Q126 (of which WPM’s pro rata share should have been 2.25Moz) and sales of 10Moz (of which WPM’s pro rata share should have been 2.5Moz, but was only reported as 1.4Moz). That is to say, WPM reported approximately 1Moz less in silver sales in Q1 than it might reasonably have expected to have done given the terms of its precious metals purchase agreement (PMPA) with Newmont. In addition, Newmont reported ‘Favourable accounts receivable movements of $461m, primarily at Penasquito and Cadia’ in Q226 – the implication being that a large stockpile of finished product inventory was built up at Penasquito in Q1, which was available for release in Q2. This was anecdotally supported, to some extent, by the 1.6Moz increase in silver ounces produced but not yet delivered reported by Wheaton in Q1.

In previous quarters in which there have been material under-sales of silver relative to production at Penasquito, the imbalance has typically been recovered within no more than two quarters to roughly the equivalent extent, as shown in the chart below:

Given the apparent 1Moz silver under-sale at Penasquito in Q1 therefore, we expect an almost 1Moz over-sale in Q2 to clear the inventory built up (also shown in Exhibit 4).

The change to our forecasts in the light of these adjustments is shown in Exhibit 1. Exhibit 5 compares our updated EPS forecasts with those of the market:

Readers should note the sometimes material discrepancies between FY26e EPS calculated as the sum of its four quarters and FY26e EPS stated as a single figure. Among other things, this suggests some analysts are forecasting Wheaton’s performance based on an annual financial model alone, rather than a quarterly one. In this case, it also suggests a wide range of precious metal and operational expectations for the remainder of the year, particularly at the upper end of the consensus range.

For the future, Hudbay announced, on 2 July, that its Constancia mine had received approval from the National Environmental Certification Service for Sustainable Investments in Perú to amend its environmental permit and further increase annual mill processing capacity from 31Mtpa to 34Mtpa. This will allow it to operate at 34Mtpa, while maintaining the standard operational flexibility to handle daily increases of up to 10% above permitted levels. It follows a similar permit approval in March 2026 to increase throughput capacity from 29.9Mtpa to 31.0Mtpa. The permit amendment also approves further optimisation of the mine plan, extends the operational life of Constancia and incorporates the implementation of additional infrastructure to improve tailings transport infrastructure and water management systems.

Although relatively small within the context of Wheaton, in June, Mexican federal authorities, state officials and Equinox Gold formalised land access agreements that pave the way for the restart of the Los Filos gold mine in Guerrero, ending more than a year of disrupted operations.

Ounces produced but not yet delivered

From a relatively balanced position in Q126, we expect gold sales to be 6.9% (or 6,780oz) below production, which is in line with the long-term average of 6.9% (±17.0% standard deviation) since Q112. However, on account of the anticipated inventory release at Penasquito, we expect silver sales to be almost exactly in line with production, which compares with a long-term quarterly rate of under-sales of 12.9% (±10.8% standard deviation), as shown in the chart below:

Consequently, we estimate that gold ounces produced but not yet delivered (PBND) to Wheaton may have increased to c 113,092oz, or 3.3 months of estimated FY26 production, which compares with WPM’s target levels of two to three months of PBND for gold and palladium production. We estimate that silver ounces PBND will be approximately flat at c 3,917koz, or 1.7 months of estimated FY26 production, which compares with WPM’s target level of two months for silver production.

General and administrative expenses

Relative to guidance of US$50–55m ( US$12.50–13.75m per quarter) for FY25, we estimate non-stock G&A expenses at Wheaton for FY26 in the order of US$60m. Beyond that, stock-based G&A expenses broadly correlate with movements in WPM’s share price (in US dollars) between quarters, and, given the movement in WPM’s shares, we would therefore estimate that these will be close to zero in Q226 (as shown by the oval in Exhibit 8, below):

Taken together, we therefore forecast a total G&A expense for Q226 of US$13.6m, which would be the lowest since Q124 of US$13.3m:

Guidance for FY26 and beyond

On 16 February, WPM provided detailed production guidance for FY26, FY30 and FY31–35. This guidance is reproduced below relative to Edison’s updated forecasts for the equivalent periods of time:

In the short term, increases in output will be driven by the newly acquired Antamina and Hemlo streams plus contributions from newly operating assets such as Blackwater, Mineral Park, Fenix, Goose and Platreef, partially offset by some moderation in output from Salobo as higher throughput levels are counteracted by modestly lower gold grades and from Constancia following the depletion of the Pampacancha pit in late December 2025.

In the longer term, production is forecast by Wheaton (and, effectively, Edison as well) to increase by approximately one-third from FY26 levels to 1,200,000 gold equivalent ounces (GEOs) by 2030, owing to growth from multiple operating assets, including Antamina, Blackwater, Aljustrel, Marmato, Hemlo, Constancia (on account of its mill capacity increase approval) and Goose, development assets that are in construction and/or various stages of ramp-up, including Koné, Fenix, Kurmuk, Platreef, Mineral Park and El Domo, and pre-development assets (all of which have received their major permits), including Spring Valley, Copper World and Santo Domingo.

From 2031 to 2035, attributable production is then forecast to be maintained at c 1,200,000 GEOs annually with additional incremental production from pre-development assets including Cangrejos, Kudz ze Kayah and Marathon, in addition to the Mt Todd and Black Pine royalties. Not included in Wheaton's long-term forecast, and instead classified as 'optionality', is potential future production from 11 other assets including El Alto, Navidad and Toroparu as well as the potential expansion of Salobo beyond the Salobo III mine expansion project and future stream purchases.

WPM’s guidance for FY26 and beyond is based on standardised pricing assumptions of US$4,800/oz gold, US$80.00/oz silver, US$1,500/oz palladium, US$2,000/oz platinum and US$25.00/lb cobalt. Of note is the implied gold/silver ratio of 60.0x, which is closely in line with the 60.1x that this ratio has averaged since gold was demonetised in August 1971, but slightly removed from the 70x ratio at which the two metals are currently trading:

At the updated standardised prices indicated, Edison’s production forecast of 898koz GEO (or AuE) for FY26 is close to the middle of Wheaton’s guidance range of 860–940k GEOs. However, our sales forecast is slightly more conservative, at 833k GEOs (representing a sales shortfall of 7.2% relative to production, which is fractionally below the average annual under-sales rate of 10.1% (±4.8%) since Q121).

Within this context, readers will note that our longer-term production forecasts for FY30 and FY31–35 are within 6.2% of WPM’s longer-term guidance.

Valuation

Absolute valuation

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 FY26, in the case of WPM, we discount forecast cash flows back over five years to the start of FY26 and then apply an ex-growth terminal multiple to forecast cash flows in that year (FY30) based on the appropriate discount rate.

In this case, our estimate of WPM’s terminal cash flow in FY30 remains virtually unchanged at US$4.39/share. Assuming 4.0% growth in nominal cash flows beyond FY30 (ie 0.0% growth in real cash flows) and applying a discount rate of 9% (being the expected long-term required nominal equity return), our terminal valuation of the company at end-FY30 is US$90.63, or C$127.60, per share. On this basis, our current valuation of the company would be US$66.79, or C$94.03, per share.

However, this valuation is inherently conservative in that it assumes (nominal) gold and silver prices of US$2,274/oz and US$35/oz, respectively, in FY30 and zero growth in (real) cash flows thereafter. This is inconsistent with the gold price, which has risen at a compound average annual growth rate of 8.2% per year from 1967 to 2025, a simple average annual growth rate of 10.4% per year (cf a compound average inflation rate over the same period of 4.0%) and a compound average real annual growth rate of 4.1% per year.

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 23.1% for the 20 years between FY05 and FY25, while its operational cash flows per share have increased at a compound average annual growth rate of 17.1%.

If we instead assume that cash flows per share increase at a compound average annual growth rate of 8.2% (ie the average compound average annual growth rate in the gold price from 1967 to 2025, cf 4.0% above), then our terminal valuation of WPM increases manyfold to US$619.78/share, or C$872.65/share, and our current valuation to US$410.70/share, or C$578.26/share.

Stated alternatively, WPM’s current share price of C$155.39 appears to be discounting future compound annual average increases in cash flow per share of just 6.1% per year from FY30, which is only modestly higher than the long-term average rate of US inflation of 4.0% per year from 1967 to 2025 (inclusive).

A summary of these valuations with respect to their cash flow growth rate assumptions is as follows:

An alternative interpretation is that the market is assuming currently prevailing precious metals prices up to and including FY30, in which case WPM’s share price of C$155.39 could be interpreted as discounting compound annual average increases in cash flows per share of just 3.6% per year thereafter (ie less than the long-term rate of US CPI-U inflation).

Historical valuation

Excluding FY04 (part-year), WPM’s shares have historically traded on an average P/E multiple of 31.1x current year basic underlying EPS, excluding impairments (cf 25.5x Edison and 22.6x LSEG Data & Analytics consensus for FY26 currently, see Exhibit 15).

Applying this 31.1x multiple to our broadly unchanged EPS forecast of US$3.36 in FY27 (cf US$3.33/share previously) implies a potential value per share for WPM of US$104.50 or C$143.42 in that year. However, it is notable that Edison’s forecast metals prices in that year are only US$2,239/oz Au and US$60.00/oz Ag. At current prices, our EPS forecast of US$3.36/share in FY27 rises to US$4.82/share, in which case our corresponding valuation rises to US$150.01, or C$205.87, per share (either that or WPM’s P/E would fall to 22.9x – see Exhibit 16, below). Moreover, as can be observed from the graph above, during periods of precious metal price appreciation, WPM can command current year P/E multiples that average 38.0x (eg between 2018 and 2024) and can rise as high as 45.0x (eg 2019).

Relative valuation

Relative to the multiples of its peers, WPM is maintaining its premium rating, as shown in Exhibit 16, below:

Readers will note Edison’s relatively high year 2 and year 3 P/E ratios, which arises from our relatively low precious metals forecasts of US$2,239/oz Au and US$60.00/oz Ag and US$2,098/oz Au and US$55.00/oz Ag, respectively. As noted previously, if metals prices remain at current levels, our FY27 and FY28 EPS estimates rise to US$4.82/share and US$5.19/share, respectively, in which case the corresponding P/E ratios drop to 22.9x and 21.3x, which are broadly in line with multiples based on consensus estimates. In combination with the relative flatness of consensus multiples, this implies that the market is anticipating broadly flat precious metals prices over the next two and a half years.

Financials: US$2,164.5m in net cash at end Q1

As at 31 March, WPM had US$2,164.5m in cash on its balance sheet and no debt outstanding under its US$2bn revolving credit facility. Including a modest US$7.7m in lease liabilities, it therefore had US$2,156.8m in net cash after generating US$765.8m in operating cash flows and a further net US$323.4m from the sale of long-term investments and disbursing a net US$61.2m in investing activities.

In Q226, we estimate that WPM will have generated c US$659m in operating cash flows, before disbursing at least c US$4.3bn in investing activities (for its BHP Antamina stream), making global minimum tax (GMT) payments of c US$120m and paying two dividends of US$89m each to leave it with c US$1,852m in net debt.

In FY26 as a whole, we estimate that WPM will generate US$2,737m from operating activities (cf US$1,905m in FY25), before consuming a net US$4,578m (cf US$1,239m in FY25) in investing activities and paying out an increased US$354m in forecast dividends (cf US$296m in FY25) under its new, progressive dividend policy. However, readers should be aware that the timing of PMPA payments is uncertain to the extent that investments may be advanced or delayed (especially relating to Marmato, El Como, Spring Valley, Koné and/or Jervois), and it is possible that WPM could register either a larger or smaller net cash position on its balance sheet than that forecast.