Wheaton Precious Metals Corp. WPM is benefitting from the recent pick-up in the prices of gold and silver. The company’s diverse portfolio of high-quality assets and its solid business model is driving growth amid headwinds from market volatility and the impacts of the recent termination of its silver stream.
Shares of Wheaton, with a Zacks Rank #3 (Hold), have gained 0.1% in the past year against the industry’s fall of 27.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Wheaton is poised to benefit from the exploration and expansion activities undertaken by the mineoperators. In October 2020, Vale S.A VALE invested in the Salobo III mine expansion to include a third concentrator line. The completion of the Salobo expansion will increase the mill throughput capacity by 50% and will add to gold production in 2023. The Salobo mine project has started commissioning activities at the primary crushing and stockpile areas. At Vale’s Voisey’s Bay operation, the physical completion of the Voisey’s Bay underground mine expansion (Reid Brook and Eastern Deeps underground mines) was 81% completed at the end of the fourth quarter of 2022.
The commencement of ore production from the Pampacancha satellite deposit at HudBay Minerals‘ HBM Constancia mine will significantly boost the mine’s gold production and fixed gold recoveries.
Wheaton is focused on adding additional production capacity from high-quality accretive metals. Its business model focuses on reducing risk, while leveraging higher commodity prices. Wheaton has been active on the corporate development front and focused on growing a high-quality portfolio of assets.
Moreover, Wheaton remained debt-free as of Dec 31, 2022. The company added a sustainability-linked element in connection with the extension to its existing undrawn $2-billion revolving credit facility, underscoring Wheaton’s commitment to sustainability initiatives. The company extended this undrawn credit facility till Jul 18, 2027. At the end of 2022, it had $696 million of cash in hand.
Wheaton’s board declared a quarterly dividend of 15 cents per share, payable to shareholders of record as of Apr 6, 2023.
The company is well-positioned to fund all outstanding commitments and known contingencies, while allowing for the acquisition of additional accretive mineral stream interests.
In 2022, the gold price was majorly affected by persistently high inflation and interest rates. Silver prices have also been negatively impacted, weighed down by the stronger U.S. dollar, rising interest rates and sluggish growth.
However, the signs of easing U.S. inflation and the expectations of less aggressive monetary tightening from the Federal Reserve have fueled gold and silver prices this year. Currently, the gold price is around $1,968 per ounce, and the silver price is around $23 per ounce. This pick-up in the price of gold and silver is likely to improve Wheaton’s results in the upcoming quarters.
In the fourth quarter of 2022, the company reported a year-over-year decline in quarterly production of gold, silver and palladium. Total revenues also fell from the prior year, driven by a decline in the average realized gold-equivalent price and a decrease in Gold Equivalent Ounces sold.
Wheaton has terminated its silver stream at Glencore‘s GLNCY Yauliyacu Mine in Peru for a cash payment of $150 million. Since 2006, WPM has generated a cash flow of more than $485 million from the stream, which, combined with the termination payment, will yield an absolute return of more than 220% of its original investment. This move will help Glencore facilitate the sale of the Yauliyacu Mine. However, the termination may impact the WPM’s top-line and margin performances.
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