Wheaton Precious Metals — Q123 in line; looking to H2

Wheaton Precious Metals (TSX: WPM)

Last close As at 22/06/2024

CAD73.75

1.31 (1.81%)

Market capitalisation

CAD33,433m

More on this equity

Research: Metals & Mining

Wheaton Precious Metals — Q123 in line; looking to H2

Wheaton Precious Metals’ (WPM’s) net earnings for Q123 were US$2.6m (or 2.5%) better than our forecast. In general, production of precious metals was slightly higher than our expectations, but sales, costs and depletion were in line. Our forecasts for FY23 have therefore remained substantially unchanged. However, we note that the broader market appears to be reticent in incorporating higher precious metals prices into its earnings estimates.

Lord Ashbourne

Written by

Lord Ashbourne

Director of Content, Mining

Metals & Mining

Wheaton Precious Metals

Q123 in line; looking to H2

Q123 results

Metals and mining

9 May 2023

Price

C$69.60

Market cap

C$31,518m

C$1.3509/US$, US$1.2603/£

Cash (US$m) at end-March
(excluding US$1.8m in lease liabilities)

799.7

Shares in issue

452.8m

Free float

100.0%

Code

WPM

Primary exchange

TSX

Secondary exchanges

LSE, NYSE

Share price performance

%

1m

3m

12m

Abs

3.5

18.1

19.2

Rel (local)

3.6

21.1

24.8

52-week high/low

C$69.64

C$39.11

Business description

Wheaton Precious Metals 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

Ex-dividend date

18 May 2023

Q223 results

10 August 2023

Q323 results

9 November 2023

Q423/FY23 results

March 2024

Analyst

Lord Ashbourne

+44 (0)20 3077 5700

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

Wheaton Precious Metals’ (WPM’s) net earnings for Q123 were US$2.6m (or 2.5%) better than our forecast. In general, production of precious metals was slightly higher than our expectations, but sales, costs and depletion were in line. Our forecasts for FY23 have therefore remained substantially unchanged. However, we note that the broader market appears to be reticent in incorporating higher precious metals prices into its earnings estimates.

Year
end

Revenue
(US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/21

1,201.7

592.1

132

57

39.0

1.1

12/22

1,065.1

497.7

112

60

46.0

1.2

12/23e

1,119.4

569.4

132

60

38.9

1.2

12/24e

1,358.4

631.3

139

62

37.0

1.2

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

Material improvements expected in H223

Wheaton’s largest single asset, Salobo (accounting for c 33% of operating earnings and cash flows), continued to be affected by planned and corrective maintenance in Q123, which is anticipated to continue into Q223. Thereafter, we expect both production and sales to increase sharply (eg by 41% in Q4 cf Q1). We are also anticipating material improvements at Stillwater, Constancia and Voisey’s Bay.

Production to improve 38% in four years

FY23 will largely be a year of consolidation for Wheaton, after which it will benefit from the development of at least three new projects (Goose, Blackwater and Marathon) and the Salobo III expansion. In the longer term, in addition to future stream acquisitions, the company should benefit from the development of Rosemont/Copper World and a potential further 33% expansion at Salobo, denoted Salobo IV. Even the long-dormant (but potentially huge) Pascua-Lama project on the border between Chile and Argentina appears to have momentum behind it. As a consequence, we are forecasting that production at Wheaton will reach nearly 850k gold equivalent ounces in FY27 (cf 613koz in FY23).

Valuation: Peers imply US$56.92 or C$76.90

Using a capital asset pricing model (CAPM)-type method, whereby we discount cash flows at a nominal 9.0% per year, our ‘terminal’ valuation of WPM in FY26 is little changed at US$52.99 (C$71.58) per share, assuming zero subsequent long-term growth in real cash flows. Alternatively, assuming no purchases of additional streams (which we think unlikely), we calculate a value per share for WPM of US$54.06, or C$73.03 or £42.89 in FY26, based on a 30.4x historical multiple of contemporary earnings. In the meantime, WPM’s shares are trading on near-term financial ratios that are lower than those of its peers on at least 69% of common valuation measures if Edison forecasts are used or 63% if consensus forecasts are used. If WPM’s shares were instead to trade at the average level of its peers, we calculate that its FY23 share value would be US$56.92, or C$76.90 or £42.13 (based on Edison forecasts).

Q123 results summary

Wheaton’s financial results for Q123 were very close to both our prior expectations and (post tax) its performance in Q422. In general, production of precious metals was slightly higher than our expectations, but sales, costs and depletion were in line, as a result of an increase in ounces produced but not yet delivered to Wheaton from its streaming counterparties. As a result, the main (positive) variances between our forecasts and WPM’s actual results – in percentage terms (pre-tax) – were general and administrative costs (see page 4) and other income (predominantly interest received) to result in net earnings that were US$2.6m (or 2.5%) better than our prior expectations.

A complete analysis of WPM’s underlying financial and operating results relative to both Q422 and Edison’s prior expectations is provided in the exhibit below:

Exhibit 1: WPM Q123 results*

US$000s
(unless otherwise stated)

Q122

Q222

Q322

Q422

Q123e

Q123

Change

(%)

Variance

(%)

Silver production (koz)

6,206

6,537

5,883

5,352

4,723

4,927

-7.9

4.3

Gold production (oz)

79,087

68,365

73,508

70,099

66,014

73,037

4.2

10.6

Palladium production (oz)

4,488

3,899

3,229

3,869

3,276

3,705

-4.2

13.1

Cobalt production (klb)

234

136

226

128

113

124

-3.1

9.7

 

 

Silver sales (koz)

5,553

5,848

5,234

4,935

4,165

3,749

-24.0

-10.0

Gold sales (oz)

77,901

84,337

62,000

68,996

61,687

62,605

-9.3

1.5

Palladium sales (oz)

4,075

3,378

4,227

3,396

2,791

2,946

-13.3

5.6

Cobalt sales (klb)

511

225

115

187

104

323

72.7

210.6

 

 

Average realised Ag price (US$/oz)

24.19

22.27

19.16

21.52

22.55

22.85

6.2

1.3

Average realised Au price (US$/oz)

1,870

1,872

1,728

1,725

1,891

1,904

10.4

0.7

Average realised Pd price (US$/oz)

2,339

2,132

2,091

1,939

1,567

1,607

-17.1

2.6

Average realised Co price (US$/lb)

34.61

34.01

22.68

22.62

18.16

15.04

-33.5

-17.2

 

 

Average Ag cash cost (US$/oz)

5.10

5.61

5.59

5.00

5.00

5.07

1.4

1.4

Average Au cash cost (US$/oz)

477

465

474

475

472

496

4.4

5.1

Average Pd cash cost (US$/oz)

394

408

353

357

282

294

-17.6

4.3

Average Co cash cost (US$/lb)

5.76

6.86

7.21

***16.52

3.27

***3.30

-80.0

0.9

 

 

Sales

307,244

302,922

218,836

236,051

216,843

214,465

-9.1

-1.1

Cost of sales

 

 

Cost of sales, excluding depletion

69,994

74,943

60,955

61,730

51,109

51,964

-15.8

1.7

Depletion

57,402

65,682

55,728

53,140

46,087

45,000

-15.3

-2.4

Total cost of sales

127,396

140,625

116,683

114,870

97,196

96,964

-15.6

-0.2

Earnings from operations

179,848

162,297

102,153

121,181

119,647

117,501

-3.0

-1.8

Expenses and other income

 

 

– General and administrative**

20,118

12,453

9,843

19,773

21,557

18,874

-4.5

-12.4

– Foreign exchange (gain)/loss

0

 

 

– Interest paid/(received)

1,422

1,389

1,398

1,377

1,454

1,378

0.1

-5.2

– Other (income)/expense

229

-974

(3,003)

(3,935)

(5,492)

(7,387)

87.7

34.5

Total expenses and other income

21,769

12,868

8,238

17,215

17,520

12,865

-25.3

-26.6

Earnings before income taxes

158,079

149,429

93,915

103,966

102,128

104,636

0.6

2.5

Income tax expense/(recovery)

72

144

37

222

250

205

-7.7

-18.0

Marginal tax rate (%)

0.0

0.1

0.0

0.2

0.2

0.2

0.0

0.0

Net earnings

158,007

149,285

93,878

103,744

101,878

104,431

0.7

2.5

Average no. shares in issue (000s)

450,915

451,524

451,757

452,070

452,319

452,370

0.1

0.0

Basic EPS (US$)

0.350

0.331

0.208

0.229

0.225

0.231

0.9

2.7

Diluted EPS (US$)

0.350

0.330

0.208

0.229

0.224

0.230

0.4

2.7

DPS (US$)

0.15

0.15

0.15

0.15

0.15

0.15

0.0

0.0

Source: WPM accounts, Edison Investment Research. Note: Change is Q123 cf Q422. Variance is actual cf forecast. *Excluding impairments, impairment reversals and exceptional items. **Forecasts now include stock-based compensation costs. ***Cobalt inventory is held on WPM’s balance sheet at the lower of cost and net realisable value; cash cost per pound of cobalt sold during Q422 included an inventory impairment charge of US$1.6m, which resulted in an increase in cash costs of US$8.71/lb; cash cost per pound of cobalt sold during Q123 was net of the previously recorded inventory write-down of US$1.0m, which resulted in a decrease in cash costs of US$3.18/lb. Totals may not add up owing to rounding.

At the level of the individual mines, Zinkgruvan, Minto, Neves-Corvo, Constancia and Sudbury all outperformed our expectations in terms of production, while Los Filos, Antamina, San Dimas, Salobo and Voisey’s Bay performed in line. Penasquito reported a notable under-sale of silver, relative to production, albeit this was not entirely unexpected in the light of Newmont’s Q123 results, announced on 27 April. Compared with the prior year period, Salobo, Penasquito and Constancia experienced higher grades (albeit with lower recoveries in the cases of Salobo and Penasquito), while Constancia also experienced a higher rate of throughput. As previously announced by Vale, Salobo continued to be affected by planned and corrective maintenance, which is anticipated to continue into Q223. Antamina and Voisey’s Bay experienced lower grades compared with a year ago, albeit this too was expected.

Entering Q223:

Production at the Stillwater mine has recommenced after an incident during scheduled non-routine maintenance caused structural damage to the shaft headgear, winder house and winder rope, which resulted in production from the Stillwater West mine below the 50 level being suspended for approximately five weeks from 13 March.

Full mining activities have resumed in the Pampacancha pit at Constancia, with the mining of higher-grade ore now expected in Q223, concurrent with a period of higher stripping from March to June, which is reported (by Hudbay) to be progressing well.

Vale reports that physical completion of the Voisey’s Bay underground mine extension was 83% at the end of Q123. Vale achieved the first ore production from the Reid Brook deposit – the first of two underground mines to be developed in the project – in Q221. Eastern Deeps (the second deposit) has now started to extract development ore from the deposit as well and is scheduled to start its main production ramp-up in H223, after a period of planned maintenance in Q223.

Ounces produced but not yet delivered

At 14.3%, the degree of under-sale of gold in Q123, relative to production, was greater than the prior historical average of 6.6% (from Q112 until Q422). Similarly, the 23.9% under-sale of silver relative to production was greater than its prior historical average of 11.8%, indicating a degree of re-stocking by Wheaton’s counterparties in Q123 after the reverse process of ‘flushing through’ in Q422 (before the end of the financial year):

Exhibit 2: Over/(under) sale of silver and gold as a percentage of production, Q112–Q123

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

As a result, both gold and silver stocks increased, to 69,482oz and 3.2Moz, as at end-March (cf a marginally restated 62,602oz and 2.9Moz as at end-December), respectively.

Consequently, we calculate that gold and silver ounces produced but not yet delivered as at end-March now amount to 2.43 and 2.03 months of full-year production (cf 2.62 months and 1.41 months as at end-FY22), respectively, and compare with WPM’s target levels of two to three months for gold and palladium and two months for silver (see below).

Exhibit 3: WPM ounces produced but not yet delivered, Q316–Q123 (months of production)

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

General and administrative expenses

At the time of its Q422 results, WPM provided guidance for non-stock general and administrative (G&A) expenses of US$47–50m or US$11.75–12.50m per quarter for FY23 (cf US$47–49m in FY22, US$42–44m in 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$11.5m, non-stock G&A expenses in Q123 were below the bottom of the range implied by WPM’s official guidance for the ninth quarter in succession.

Exhibit 4: WPM general and administrative expenses, Q121–Q123 (US$000s)

Item

Q121

Q221

Q321

Q421

FY21

Q122

Q222

Q322

Q422

FY22

Q123

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

4,709

4,634

4,283

4,618

18,244

5,345

5,061

4,629

4,187

19,222

5,021

Other (inc. depreciation, donations and professional fees)

5,632

5,852

5,173

6,818

23,475

4,871

5,784

5,137

7,112

22,905

6,456

Non-stock based G&A

10,341

10,486

9,456

11,436

41,719

10,216

10,845

9,766

11,299

42,127

11,477

Guidance

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

11,750–12,250

11,750–12,250

47,000-49,000

11,750-12,500

PSU* accrual

305

6,672

2,824

4,203

14,004

8,560

110

(1,491)

7,035

14,214

5,855

Equity settled stock-based compensation

1,325

1,307

1,315

1,315

5,262

1,342

1,498

1,568

1,439

5,846

1,542

Stock-based G&A

1,630

7,979

4,139

5,518

19,266

9,902

1,608

77

8,474

20,060

7,397

Total general & administrative

11,971

18,465

13,595

16,954

60,985

20,118

12,453

9,843

19,773

62,187

18,874

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

+15.8

+76.1

+43.6

+48.3

+46.2

+96.9

+14.8

+0.8

+75.0

+47.6

+64.5

Source: WPM, Edison Investment Research. Note: *Performance share units. Totals may not add up owing to rounding.

Given the performance of WPM’s shares during the quarter, stock-based G&A expenses in Q123 were closely in line with our prior estimate for the quarter (as shown in Exhibit 5, below):

Exhibit 5: Graph of historical share price move (US$/share) versus quarterly stock-based G&A expenses, Q419–Q123

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

The analysis of stock-based G&A expenses over the past 14 quarters relative to the change in WPM’s share price (also in US dollars) continues to exhibit a 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 our quarterly and full-year forecasts for G&A expenses in Exhibit 8.

FY23 and five-year and 10-year guidance

At the time of its 21 February production and sales announcement, Wheaton also provided detailed production guidance for FY23 (for the first time), as well as for the five years from FY23–27 (inclusive) and the 10 years from FY23–32 (inclusive). These remain unchanged.

Following the acquisition of Sabina by B2Gold, however, the latter exercised its option to acquire 33% of the Goose stream under the terms of its precious metals purchase agreement (PMPA) with Wheaton in exchange for a cash payment of US$46m (resulting in a gain on partial disposal, inter alia, of US$5m). We have now updated our long-term production model to reflect this sale (see Exhibit 6, below). Note that both Wheaton’s guidance and Edison’s forecasts include the Marathon, Curipamba and Goose streams (but not yet the Fenix stream), but exclude the Keno Hill and Yauliyacu streams (which have now also been sold).

Exhibit 6: WPM precious metals production – Edison forecasts cf guidance

FY23e

FY23–27 average*

FY23–32 average

Previous Edison forecast

Silver production (Moz)

18.9

Gold production (koz)

335.9

Cobalt production (klb)

721

Palladium production (koz)

14.5

Gold equivalent (koz)

602.5

777

792

Current Edison forecast

Silver production (Moz)

19.1

Gold production (koz)

342.9

Cobalt production (klb)

732

Palladium production (koz)

15.0

Gold equivalent (koz)

612.7

773

788

WPM guidance

Silver production (Moz)

20.0–22.0

Gold production (koz)

320–350

Cobalt & palladium production (koz AuE)

22–25

Gold equivalent (koz)

600–660

810

850

Source: WPM, Edison Investment Research forecasts. Note: *Edison forecasts include Salobo III from FY23, Rosemont/Copper World from FY27 and Antamina extension from FY28.

WPM’s updated five-year and 10-year guidance is based on standardised pricing assumptions of US$1,850/oz gold, US$24.00/oz silver, US$1,800/oz palladium and US$18.75/lb cobalt. Of note in this context is an implied gold/silver ratio of 77.1x, which compares with its current ratio of 78.8x, but a long-term average of 61.5x (since gold was demonetised in August 1971). At the standardised prices indicated, our gold equivalent production forecast of 612.7koz gold equivalent (AuE) for FY23e lies well within WPM’s guidance range of 600–660koz AuE.

Otherwise, readers will note that Edison’s medium-term production forecasts are within 5% of WPM’s guidance for the period FY23–27 and within 8% of its longer-term guidance for FY23–32. However, we regard this as within an acceptable range of variance, especially given WPM’s traditional under-sale of metal relative to production of this order of magnitude. In addition, these estimates necessarily exclude potential future stream acquisitions.

Growth opportunities

Short-term opportunities

In the short term, production of palladium and gold at Stillwater (operated by Sibanye-Stillwater) will increase under the influence of the Fill-the-Mill project at East Boulder (although the Blitz project has now been delayed to 2024, following the suspension of growth capital activities owing to COVID-19). Similarly, the Voisey’s Bay underground project is ramping up to full production, while First Majestic is 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 has been investigating the installation of a 3,000tpd high-intensity grinding mill circuit and an autogenous grinding mill to improve recoveries and reduce operating costs.

Medium-term opportunities

In the medium term, Wheaton has four projects that are progressing on their route to production:

B2Gold has reaffirmed Sabina’s formal construction decision for the Goose project with the intention of achieving first production in 2025. In the meantime, it has initiated an exploration programme to further define untapped potential and unlock further opportunities for growth.

On 9 March, Artemis announced the approval of its BC Mines Act Permit for the Blackwater project, which was the last major permit required ahead of major construction work. It also closed the associated US$385m project loan facility. In 2022, the company announced the start of site preparation work at the plant site, including site clearing, bulk earthworks and sediment/erosion control. Since then, it has executed an order for construction equipment, with the initial fleet expected to be delivered in Q423 and to be ‘shovel ready’ in H224.

In November, Generation Mining received the final environmental approvals for its Marathon palladium-copper project in northern Ontario. This year, it is aiming to secure key provincial permits, related to species at risk, tree harvesting and water quality, etc, so that early construction works can commence. More recently, it has announced positive results on an updated feasibility study for the project, presenting an optimised design with increased process plant throughput. It has also finalised an offtake term sheet with Glencore for copper concentrate and executed a mandate letter to arrange a senior secured project finance facility of up to US$400m, with a syndicate including Export Development Canada, together with ING Capital and Societe Generale acting as the mandated lead arrangers. This last arrangement represents a key milestone in the financing process for the development of the project. The start of construction is anticipated in Q323 and production in Q3–Q425, to which end it has already purchased an unused, surplus SAG mill and a ball mill.

Adventus Mining signed the investment contract for the Curipamba project with the Ecuadoran government in December and is planning for the start of formal construction of the project.

Long-term opportunities

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 at the time, depending on the grade of the material processed, WPM was to have made a payment to Vale for this expansion, subject to a 90-day completion test, which WPM estimated was to have been in the range US$550–670m in FY23–25, in return for which it was to be entitled to its full 75% attributable share of expanded gold production.

After the end of Q422 however, Wheaton and Vale agreed to amend the Salobo PMPA to adjust the expansion payment terms to provide increased flexibility for the ramp-up of the expansion, while also maintaining an incentive for Vale to maximise grade on an annual basis. The expansion payment will now be phased, with Wheaton making an initial payment once actual throughput is expanded above 32Mtpa and a second payment if actual throughput is expanded above 35Mtpa by 1 January 2031. The total cumulative payments will range from US$283m to US$552m, dependent on Vale’s timing for each of the production increases. Where before Edison had been forecasting that Wheaton would make total payments to Vale of US$552m in FY23 and FY24, we are now forecasting that it will make the whole payment (of US$530m) in FY24. In addition, Wheaton will be required to make annual payments of between US$5.1m and US$8.5m for a 10-year period following payment of the expansion payments if the Salobo mine maintains a high-grade mine plan.

These payments compare 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.

As at the end of Q123, the Salobo III mine expansion was reported to be complete:

Exhibit 7: Physical completion of Salobo III, by quarter, Q219–Q123

Q219

Q319

Q419

Q120

Q220

Q320

Q420

Q121

Q221

Q321

Q421

Q122

Q222

Q322

Q422

Q123

Physical completion (%)

15

27

40

47

54

62

68

73

77

81

85

90

95

98

99

100

Change (%)

8

12

13

7

7

8

6

5

4

4

4

5

5

3

1

1

Source: Vale, Edison Investment Research

According to Vale, the project successfully commenced at the end of 2022 and is expected to achieve full capacity in Q424. Once full capacity at Salobo III has been completed, however, WPM believes that reserves and resources at the mine could support a further 33% capacity increase, 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.

Rosemont/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.

The evolution of the project from Rosemont to Copper World

In March 2019, 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 (ACOE), 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).

A legal challenge, lunched in July 2019, has since delayed the project. 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 explores the gap between Bolsa and Rosemont. Note, the Copper World discovery is included in WPM’s area of interest under its PMPA with Hudbay.

A new development plan

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 2022, 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 will 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.

In this context, on 24 May 2022, 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 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 United States 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 2022 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.

PEA completed and PFS underway ahead of potential project sanctioning in 2024

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 and, in January, it received an approved right-of-way from the Arizona State Land Department that will allow for infrastructure such as roads, pipelines and powerlines to connect the properties in the company’s private land package. Subsequent to the end of the quarter, it also announced the receipt of confirmation from the Army Corps of Engineers that its previous surrender of the Section 404 Clean Water Act permit for the former Rosemont project had been formally accepted and revoked, as requested. Clearing and grading work to prepare the Copper World site, including the construction of roads and other facilities, is continuing. In the meantime, main facility engineering has been completed and metallurgical test work is being analysed as part of concentrate leaching trade-off evaluations.

Hudbay expects to conclude a pre-feasibility study for Phase I of the Copper World project in the middle of this year. Among other things, this 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 over the next 12 months, 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 such, Edison is continuing to forecast production from Rosemont/Copper World attributable to WPM in FY27. 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 to support its feasibility studies.

Antamina

In April 2022, 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 and it hopes to achieve mine extension approval in the middle of this year. The mine, which is co-owned by Glencore, BHP, Teck and Mitsubishi Corp, is Peru’s largest, and the world’s second-largest, copper mine.

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 (WPM’s carrying value of Pascua-Lama) 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 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.

However, Barrick is advancing a high-level study into Pascua-Lama, which it reports to be nearing completion. The study is understood to be focusing on the fact that a substantial portion of the resource could be processed by leaching or agitated leaching, which would require only modest modifications to the circuit already built. This raises the possibility that the orebody could be developed in a different manner and Barrick’s goal is to demonstrate a viable project to both the Chilean and Argentinian governments. If successful, it would then pursue permitting options (and, in particular, water permits) and build out a new model for the project’s development, in which case an investment decision on Pascua-Lama could be forthcoming as early as 2024.

Other potential future growth opportunities

Wheaton reports that its development team remains ‘exceptionally busy’ evaluating new opportunities. In general, WPM expects to be conducting due diligence processes on approximately 10–12 projects at any one time, which it expects to narrow to three to four target projects over approximately 12 months. Most of the opportunities currently 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 included in the evaluation process. In the first instance, WPM would fund any such transactions via the US$2bn available under its revolving credit facility, plus the US$799.7m in cash that it has on its balance sheet (at end-Q123) 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, being:

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

the 30% of the gold output at Constancia (operated by Hudbay) that is not currently subject to any streaming arrangement.

FY23 guidance and forecasts

In the light of WPM’s FY23 guidance, and recent moves in metals prices, forex rates and WPM’s share price, Edison has updated its quarterly forecasts for Wheaton for FY23 as follows:

Exhibit 8: WPM FY23 forecast, by quarter*

US$000s
(unless otherwise stated)

Q123

Q223e

(prior)

Q223e

Q323e

(prior)

Q323e

Q423e

(prior)

Q423e

FY23e

FY23e

(prior)

Silver production (koz)

4,927

4,723

4,723

4,723

4,723

4,723

4,723

19,097

18,894

Gold production (oz)

73,037

85,746

85,746

87,149

87,149

97,005

97,005

342,937

335,914

Palladium production (koz)

3,705

3,514

3,514

3,871

3,871

3,871

3,871

14,961

14,532

Cobalt production (klb)

124

201

201

204

204

204

204

732

721

Silver sales (koz)

3,749

4,723

4,153

4,723

4,723

4,723

4,723

17,349

18,336

Gold sales (oz)

62,605

85,725

79,977

87,128

87,128

96,984

96,984

326,694

331,524

Palladium sales (oz)

2,946

3,500

3.161

3,856

3,856

3,856

3,856

13,818

14,002

Cobalt sales (klb)

323

201

201

204

204

204

204

931

712

Avg realised Ag price (US$/oz)

22.85

25.16

25.62

25.19

25.90

25.19

25.90

25.17

24.58

Avg realised Au price (US$/oz)

1,904

2,006

2,002

2,006

2,000

2,006

2,000

1,982

1,985

Avg realised Pd price (US$/oz)

1,607

1,606

1,470

1,635

1,452

1,635

1,452

1,489

1,614

Avg realised Co price (US$/lb)

15.04

15.84

15.84

15.84

15.84

15.84

15.84

15.56

16.18

Avg Ag cash cost (US$/oz)

5.07

5.12

5.11

5.12

5.13

5.13

5.14

5.11

5.10

Avg Au cash cost (US$/oz)

496

463

462

461

461

457

4.57

467

462

Avg Pd cash cost (US$/oz)

294

289

265

294

261

294

261

269

291

Avg Co cash cost (US$/lb)

3.30

2.85

2.85

2.85

2.85

2.85

2.85

3.01

2.91

Sales

214,465

299,664

274,359

303,291

305,417

323,062

325,128

1,119,368

1,142,859

Cost of sales

Cost of sales, excluding depletion

51,964

65,404

59,623

66,086

65,976

70,248

70,137

247,701

252,847

Depletion

45,000

59,625

53,874

60,945

60,184

65,882

64,948

224,006

232,538

Total cost of sales

96,964

125,029

113,497

127,031

126,160

136,130

135,085

471,707

485,386

Earnings from operations

117,501

174,635

160,862

176,260

179,256

186,931

190,043

647,661

657,474

Expenses and other income

– General and administrative**

18,874

18,627

18,837

17,488

17,396

17,488

17,396

72,503

75,159

– Foreign exchange (gain)/loss

0

0

– Net interest paid/(received)

1,378

1,454

1,454

1,454

1,454

1,454

1,454

5,741

5,817

– Other (income)/expense

(7,387)

(4,676)

(7,968)

(3,347)

(7,567)

(2,575)

(8,101)

(31,023)

(16,090)

Total expenses and other income

12,865

15,405

12,324

15,595

11,283

16,366

10,749

47,221

64,886

Earnings before income taxes

104,636

159,230

148,538

160,665

167,973

170,565

179,294

600,440

592,588

Income tax expense/(recovery)

205

250

250

250

250

250

250

955

1,000

Marginal tax rate (%)

0.2

0.2

0.2

0.2

0.1

0.1

0.1

0.2

0.2

Net earnings

104,431

158,980

148,288

160,415

167,723

170,315

179,044

599,485

591,588

Average no. shares in issue (000s)

452,370

452,319

452,838

452,319

452,838

452,319

452,838

452,721

452,319

Basic EPS (US$)

0.231

0.351

0.327

0.355

0.370

0.377

0.395

1.32

1.31

Diluted EPS (US$)

0.230

0.350

0.326

0.353

0.369

0.375

0.394

1.32

1.30

DPS (US$)

0.15

0.15

0.15

0.15

0.15

0.15

0.15

0.60

0.60

Source: WPM accounts, 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 fractionally improved basic EPS forecast of US$1.32/share for FY23 is 10.0% above the largely unchanged consensus forecast of US$1.20/share (source: Refinitiv, 3 May 2023), potentially indicating that the market is being reticent in incorporating the recent rises in precious metals prices into its WPM estimates. In this context, it is worth noting that our gold and silver price forecasts for the remainder of the year are US$2,000/oz and US$25.90/oz, respectively, which are those prevailing at the time of writing.

Exhibit 9: WPM FY23 consensus EPS forecasts (US$/share), by quarter

Q123

Q223e

Q323e

Q423e

Sum Q1–Q423e

FY23e

Edison forecasts

0.231

0.327

0.370

0.395

1.323

1.32

Mean consensus

0.231

0.30

0.33

0.33

1.191

1.20

High consensus

0.231

0.37

0.39

0.39

1.381

1.48

Low consensus

0.231

0.21

0.25

0.25

0.941

1.01

Source: Refinitiv, Edison Investment Research. Note: As at 3 May 2023.

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 FY23, in the case of WPM (as with Newmont and Endeavour), we discount forecast cash flows back over four years from the start of FY23 and then apply an ex-growth terminal multiple to forecast cash flows in that year (ie FY26) based on an appropriate discount rate.

Our estimate of WPM’s ‘terminal’ pre-financing cash flow in FY26 is ostensibly unchanged at US$2.56/share (cf US$2.58/share previously), as shown below:

Exhibit 10: WPM cash flow per share and related valuation (US$/share), FY23–26

Source: Edison Investment Research. Note: Valuation line assumes 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).

Readers should note that the increase in cash flows predicted in FY23 and the corresponding decline in cash flows forecast in FY24 relative to our last two notes has arisen almost solely as a result of our revised forecast that Wheaton will make a payment of US$530m to Vale in respect of the Salobo III expansion in FY24, rather than a payment of US$552m split across both FY23 and FY24.

Otherwise, 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$52.99/share (cf US$53.37/share previously), or C$71.40/share. However, readers should note that this valuation is inherently conservative in that it assumes 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 7.4% per annum from 1967 to 2022 and at a simple average annual growth rate of 9.6% per annum (as depicted below):

Exhibit 11: Gold price annual performance, 1968–2022

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 21.0% pa for the 17 years between FY05 and FY22, while its operational cash flows per share have increased at compound average annual growth rate of 14.1% pa.

Historical

Excluding FY04 (part-year), WPM’s shares have historically traded on an average P/E multiple of 30.4x current year basic underlying EPS, excluding impairments (cf 38.9x Edison or 42.5x Refinitiv consensus FY23e – see Exhibit 13).

Exhibit 12: WPM’s historical current year P/E multiples, 2005–22

Source: average share price data Bloomberg, Edison Investment Research calculations

Applying this 30.4x multiple to our (ostensibly unchanged) EPS forecast of US$1.78 in FY26 (cf US$1.80 previously) implies a potential value per share for WPM of US$54.06 or C$73.03 in that year.

Relative

From a relative perspective, it is notable that WPM is cheaper than its peers on at least 69% (25 out of 36) of the valuation measures observed in Exhibit 13 if Edison estimates are used or 63% (23 out of 36) of the same valuation measures if consensus forecasts are used.

Exhibit 13: 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

43.6

39.5

40.9

0.8

0.9

0.9

30.9

28.5

29.2

Royal Gold

33.7

31.8

31.9

1.0

1.0

1.1

20.3

18.4

17.9

Sandstorm Gold

69.0

52.8

37.2

1.0

1.0

1.0

15.9

14.6

11.6

Osisko

45.7

41.5

36.1

0.9

0.9

0.9

23.8

22.1

20.7

Average

48.0

41.4

36.5

0.9

0.9

1.0

22.7

20.9

19.9

WPM (Edison forecasts)

38.9

37.0

30.3

1.2

1.2

1.4

27.8

24.0

20.8

WPM (consensus)

42.5

36.8

36.4

1.1

1.1

1.2

29.7

25.3

25.5

Implied WPM share price (US$)*

63.57

57.62

62.18

65.15

67.10

73.41

42.04

44.88

49.27

Source: Refinitiv, Edison Investment Research. Note: Peers priced on 3 May 2023. *Derived using Edison forecasts and average consensus multiples.

Stated alternatively, were Wheaton to trade at the average multiples of its peers, we calculate that its share price in FY23 would be US$56.92, or C$76.90.

Financials: US$797.9m (US$1.76/share) in net cash

As at 31 March, WPM had US$799.7m in cash on its balance sheet and no debt outstanding under its US$2bn revolving credit facility. As such (including a modest US$1.8m in leases), it had US$797.9m in net cash overall after generating US$135.1m in operating cash flow during the quarter.

Exhibit 14: WPM cash, net cash and operating cash flow, by quarter, Q420–Q123

(US$m)

Q420

Q121

Q221

Q321

Q421

Q122

Q222

Q322

Q422

Q123

Cash/(debt)

192.7

191.2

235.4

372.5

226.0

376.2

448.6

494.6

696.1

799.7

Net cash/(debt)

6.0

187.7

232.1

369.4

223.2

373.5

446.2

492.5

694.1

797.9

Operating cash flow

208.0

232.2

216.3

201.3

195.3

210.5

206.4

154.5

172.0

135.1

Source: Wheaton Precious Metals

In addition, WPM has long-term investments, in the form of equity share- and warrant-holdings, in listed companies in the sum of US$309.1m as at 31 March, or US$0.68/share.

In FY23 we estimate that WPM will generate US$838.0m from (net) operating activities, before consuming US$425.9m (cf US$1,004.0m previously – lower on account of the deferral of the Salobo III payment) in investing activities and paying out up to US$272.1m in forecast dividends to leave the company with net cash of US$834.1m on its balance sheet as at end-FY23. However, investors should note that the timing of payments relating to the Salobo III, Santo Domingo, Blackwater, Goose, Curipamba, Marathon and Rosemont/Copper World streams is uncertain and inasmuch as investments are delayed, we calculate that it is possible that Wheaton could register a larger cash balance on its balance sheet by the year end. Either way, in the absence of any major new asset acquisitions, we do not expect that Wheaton will require recourse to its debt facilities in the foreseeable future (all other things being equal).

Exhibit 15: Financial summary

$000s

 

2020

2021

2022

2023e

2024e

2025e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,096,224

1,201,665

1,065,053

1,119,368

1,358,440

1,548,641

Cost of Sales

(266,763)

(287,947)

(267,621)

(247,701)

(314,563)

(353,037)

Gross Profit

829,461

913,718

797,432

871,667

1,043,877

1,195,604

EBITDA

 

 

763,763

852,733

735,245

799,164

971,374

1,123,100

Operating profit (before amort. and excepts.)

 

 

519,874

597,940

503,293

575,158

629,792

770,812

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

4,469

162,806

164,214

(6,960)

0

0

Other

387

190

7,680

31,023

0

0

Operating Profit

524,730

760,936

675,187

599,221

629,792

770,812

Net Interest

(16,715)

(5,817)

(5,586)

(5,741)

1,501

1,054

Profit Before Tax (norm)

 

 

503,159

592,123

497,707

569,417

631,293

771,866

Profit Before Tax (FRS 3)

 

 

508,015

755,119

669,601

593,480

631,293

771,866

Tax

(211)

(234)

(475)

(955)

(1,000)

(1,000)

Profit After Tax (norm)

503,335

592,079

504,912

599,485

630,293

770,866

Profit After Tax (FRS 3)

507,804

754,885

669,126

592,525

630,293

770,866

Average Number of Shares Outstanding (m)

448.7

450.1

451.6

452.7

452.8

452.8

EPS - normalised (c)

 

 

112

132

112

132

139

170

EPS - normalised and fully diluted (c)

 

 

112

131

112

132

139

170

EPS - (IFRS) (c)

 

 

113

168

148

131

139

170

Dividend per share (c)

42

57

60

60

62

72

Gross Margin (%)

75.7

76.0

74.9

77.9

76.8

77.2

EBITDA Margin (%)

69.7

71.0

69.0

71.4

71.5

72.5

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

47.4

49.8

47.3

51.4

46.4

49.8

BALANCE SHEET

Fixed Assets

 

 

5,755,441

6,046,427

6,039,813

6,241,748

6,840,346

6,494,857

Intangible Assets

5,521,632

5,940,538

5,753,111

5,955,046

6,553,644

6,208,155

Tangible Assets

33,931

44,412

30,607

30,607

30,607

30,607

Investments

199,878

61,477

256,095

256,095

256,095

256,095

Current Assets

 

 

201,831

249,724

720,093

844,870

597,947

1,390,366

Stocks

3,265

12,102

13,817

2,634

3,196

3,644

Debtors

5,883

11,577

10,187

6,134

7,444

8,486

Cash

192,683

226,045

696,089

836,102

587,307

1,378,236

Other

0

0

0

0

0

0

Current Liabilities

 

 

(31,169)

(29,691)

(30,717)

(30,023)

(33,229)

(35,073)

Creditors

(30,396)

(28,878)

(29,899)

(29,205)

(32,411)

(34,255)

Short term borrowings

(773)

(813)

(818)

(818)

(818)

(818)

Long Term Liabilities

 

 

(211,532)

(16,343)

(11,514)

(11,514)

(11,514)

(11,514)

Long term borrowings

(197,864)

(2,060)

(1,152)

(1,152)

(1,152)

(1,152)

Other long term liabilities

(13,668)

(14,283)

(10,362)

(10,362)

(10,362)

(10,362)

Net Assets

 

 

5,714,571

6,250,117

6,717,675

7,045,081

7,393,550

7,838,636

CASH FLOW

Operating Cash Flow

 

 

784,843

851,686

749,429

844,730

972,707

1,123,455

Net Interest

(16,715)

(5,817)

(5,586)

(5,741)

1,501

1,054

Tax

(2,686)

(503)

34

(955)

(1,000)

(1,000)

Capex

149,648

(404,437)

(44,750)

(425,941)

(940,179)

(6,800)

Acquisitions/disposals

0

0

0

0

0

0

Financing

22,396

7,992

10,171

0

0

0

Dividends

(167,212)

(218,052)

(237,097)

(272,079)

(281,824)

(325,780)

Net Cash Flow

770,274

230,869

472,201

140,013

(248,795)

790,929

Opening net debt/(cash)

 

 

774,766

5,954

(223,172)

(694,119)

(834,132)

(585,337)

HP finance leases initiated

0

0

0

0

0

0

Other

(1,462)

(1,743)

(1,254)

0

0

0

Closing net debt/(cash)

 

 

5,954

(223,172)

(694,119)

(834,132)

(585,337)

(1,376,266)

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 £60,000 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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 £60,000 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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Wheaton Precious Metals

View All

Latest from the Metals & Mining sector

View All Metals & Mining content

Research: TMT

CLIQ Digital — Bundled content driving sales and profit growth

CLIQ Digital had a very strong start to FY23, with a 58% y-o-y revenue uplift in Q123 (to €83m) and an EBITDA margin of 15.4% (Q122: 15.8%). Raised levels of marketing spend continue to drive momentum, generating growth in both the lifetime value of the customer base (LTVCB) and in the number of paid members. CLIQ is inherently highly cash generative and net cash was €10.9m at the quarter-end. Management has reiterated both FY23 and mid-term 2025 sales guidance, and our forecasts are unchanged, underpinned by the strong Q123 performance. CLIQ’s valuation remains at a significant discount to peers on EV/sales and EV/EBITDA multiples, with substantial potential upside to the current share price on current estimates, in our view.

Continue Reading
Hello - cliq

Subscribe to Edison

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

Sign up for free