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Wheaton Precious Metals

Forecasts weighted to H2

Update | Mining | 25 May 2016

After four quarters in which the production of both gold and silver achieved successive new records, output attributable to Silver Wheaton (SLW) moderated in Q116 o albeit to only the second-best ever o with good quarterly performances (again) from Antamina and Salobo offset by headwinds at San Dimas and SLW's ‘other' assets. However, sales of material closely approximated production, with the result that inventories decreased by 0.9Moz AgE.

Wheaton Precious Metals

Kobold ex machina

Update | Mining | 21 Jun 2018

On 11 June, Wheaton Precious Metals (WPM) announced that it had entered into an agreement with Vale to acquire 42.4% of cobalt production from Voisey’s Bay from FY21 for an upfront cash consideration of US$390m. We estimate that this acquisition will increase WPM’s silver-equivalent production by 3.1Moz and 4.7Moz and its basic EPS by 4.7c and 9.3c in FY21 and FY24, respectively.

Wheaton Precious Metals

Serene start

Update | Mining | 18 May 2018

Wheaton Precious Metals’ (WPM) silver streams outperformed our expectations in Q118, while its gold streams performed closely in line. However, after demonstrating the traditional ‘flush through’ effect in Q417, sales of silver and gold in Q118 reverted to close to their long-term trends, with an (albeit temporary) 14.6% under-sale of silver and a 12.2% under-sale of gold relative to production. Nevertheless, adjusted net earnings of US$69.9m and EPS of 16 cents were within 10% of our previous expectations of US$77.0m and our forecasts for FY18 remain, to all intents and purposes, unchanged (see page 7).

Wheaton Precious Metals

Majestic

Update | Mining | 15 Feb 2018

On 12 January, First Majestic (FR, C$8.65) announced that it is to buy Primero Mining (the operator of the San Dimas mine, over which WPM holds a silver stream). As a result, the existing silver purchase agreement covering 100% (effectively) of the silver produced by the mine will be replaced by one covering 25% of gold production plus an additional amount of gold equal to 25% of silver production converted into gold at a fixed gold:silver ratio of 70:1. This has caused us to revise our FY18 EPS forecast from 67c to 63c on a like-for-like basis (vs a consensus of 64.5c, within a range 49-80c). In lieu of this, First Majestic will also issue to WPM 20.9m FR common shares with an aggregate value at the time of writing of US$145m (equivalent to US$0.33 per WPM share).

Wheaton Precious Metals

Never knowingly undersold

Update | Mining | 10 Nov 2017

Wheaton Precious Metals’ (WPM) Q317 results were characterised by improvements in production relative to the previous quarter, but a 24.2% under-sale of silver relative to production and a 13.9% under-sale of gold. As a result, financial results were very close to those in the preceding quarter. However, at least one quarter of inventory build is normal in a typical WPM year and allows for a bounce when it is then ‘flushed through’ in Q4. Once again, gold sales exceeded silver sales, in this case, in the ratio 52:48 (cf 46:54 in Q217).

Wheaton Precious Metals

Still shining

Outlook | Mining | 30 Aug 2017

Despite a second quarter in which ounces produced but not yet delivered to Wheaton Precious Metals (WPM) increased, earnings from operations were just US$2.8m (or 3.2%) below our earlier published estimate of US$85.7m. In addition, management formally changed its dividend policy, from 20% of average cash generated by operating activities to 30%, which thus allowed it to declare a relatively generous third quarter dividend of 10c/share compared with our prior expectation of 6c. Silver sales exceeded gold sales for the first time since Q316 (in the ratio 54:46). Finally, WPM also announced that it had entered into an “early deposit” agreement whereby it will advance US$65m to Desert Star in return for the right to purchase 100% of the silver and gold production from Kutcho in British Columbia at 20% of the spot price of the metals over the life of the mine.

Wheaton Precious Metals

Formerly Silver Wheaton (SLW)

Update | Mining | 18 May 2017

Wheaton Precious Metal's Q117 results were closely aligned with our prior expectations with the single exception that there was a 1.3Moz under-sale of silver relative to production, resulting in a temporary inventory build at the end of March. For the second quarter in succession, therefore, gold sales exceeded silver sales. Nevertheless, net earnings for the quarter were US$61.2m versus our expectation of US$61.4m.

Wheaton Precious Metals

What a difference a quarter makes

Update | Mining | 29 Mar 2017

A mixed performance at Silver Wheaton's (SLW) silver division was trumped by an exceptional performance at its gold division in Q416, such that the company's financial results materially outperformed our prior estimates for Q416 as well as SLW's own guidance at the time of its Q316 results. As a consequence, sales and cash flows derived by SLW from gold operations exceeded those from silver for the first time ever.

Wheaton Precious Metals

Q3 in perspective and Q4 preview

Update | Mining | 06 Dec 2016

Silver Wheaton’s (SLW) Q316 results were characterised by exceptionally strong production from its gold assets, supported by record quarterly output at Salobo and Minto and a strong performance at 777. Production from SLW’s silver assets was in line with our expectations. However, a 20.0% under-sale of silver relative to production (towards the upper end of the historical range) and a 22.1% under-sale of gold resulted in a return of inventory to more normal levels. This detracted from financial results, although PBT was still at its highest since Q113 (when silver and gold prices were US$29.89/oz and US$1,645/oz, respectively). Given broadly flat production expectations, however, plus the end-of-year ‘flush through’ effect, no repetition of this inventory build is expected in Q416.

Wheaton Precious Metals

Q3 results scheduled for 9 November

Update | Mining | 02 Nov 2016

Silver Wheaton's (SLW's) Q316 results are scheduled for release after market close on Wednesday 9 November. Our forecasts for Q316 have been adjusted to account for actual precious metals prices that were marginally higher in Q3 than previously predicted (eg US$19.60/oz vs US$19.44/oz Ag and US$1,335/oz vs US$1,333/oz Au), but production that we estimate to have been marginally lower (eg 13,355koz silver equivalent vs 13,657koz).

Wheaton Precious Metals

Going for gold

Update | Mining | 30 Aug 2016

Silver Wheaton's (SLW's) Q216 earnings were within 2.5% of our forecast and almost 50% better than the previous quarter (Q116). Performance was buoyed by record gold sales, driven by the continued ramp up at Salobo, a record production performance at Sudbury (which was almost 6,000oz ahead of our expectations), continued outperformance at Antamina (for a third consecutive quarter) and inventory drawdown (for a second consecutive quarter). As a result of increased precious metals' prices, as well as the purchase of an additional gold stream at Salobo (see below), we have increased our earnings expectations for Q316, Q416 and FY16 by 60.0%, 46.7% and 27.3%, respectively.

Wheaton Precious Metals

Buying future growth

Update | Mining | 18 Apr 2016

On 30 March, Silver Wheaton (SLW) announced a bought deal whereby a syndicate of underwriters would buy 30,125,000 common shares in the company at a price of US$16.60/share for aggregate gross proceeds of c US$500m plus an over-allotment option of a further 4,518,000 shares at the same price for proceeds of an additional c US$75m. One day later, on 31 March, the deal size was increased by 10% pro rata and it closed on 7 April (at which point SLW also took the opportunity to close its normal course issuer bid). On 11 April, the over-allotment option was exercised in full to bring total aggregate proceeds to US$632.5m. This note updates Edison's forecasts for FY16 by quarter and valuation in the light of the increased number of shares in issue and decreased forecast net debt.