Wheaton Precious Metals poised to raise $300 million

Sibanye-Stillwater’s Stillwater Mine in Montana. Source: Sibanye-Stillwater.

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Wheaton Precious Metals Corp. [WPM-TSX, NYSE], the world’s leading precious metals streaming company, generated strong operating cash flow on the back of record gold production and sales volumes in 2019.

Total production of 707,300 gold equivalent ounces in 2019 exceeded production guidance for the eighth consecutive year, the company said.

Wheaton’s estimated attributable production in 2020 is expected to be between 685,000 and 725,000 gold equivalent ounces. That consists of 390,000 to 410,000 gold ounces, 22.0 to 23.5 million silver ounces, and 23,000 to 24,500 palladium ounces.

“Wheaton’s portfolio of high-quality, long-life assets generated over $500 million in operating cash flow in 2019 with annual gold production and sales volumes achieving a new record,” said Wheaton President and CEO Randy Smallwood.

“For the first time in company history, Wheaton produced over 400,000 ounces of gold, and that is in addition to over 22.5 million ounces of silver, and 22,000 ounces of palladium,” Smallwood said.

Wheaton Precious Metals shares eased 2.9% or $1.11 to $37.10 on volume of 2.4 million. The shares are currently trading in a 52-week range of $26.50 and $45.

Unlike traditional mining companies, Wheaton makes upfront payments and in return it purchases a fixed percentage of the future silver and/or gold production from a mine at a predetermined price. It can then sell the metal in the open market. In many cases, these agreements are for the life of the mine.

The company has streaming agreements covering 20 operating mines and nine development stage projects. These include Vale’s Salobo Mine in Brazil, Glencore AG’s Antamina Mine in Peru and Newmont Goldcorp Corp.’s [NGT-TSX, NEM-NYSE] Penasquito Mine in Mexico.

Smallwood has said it’s a business model that shelters investors from some of the risks associated with traditional mining because after making the up-front payment, Wheaton typically has no ongoing capital or exploration costs.

It means that people who invest in Wheaton Precious metals do not have to consider variables that affect traditional mining companies such as capital costs that are needed to produce a specific metal, the operating cost of the mine and forecasts about the quantity of metal produced.

A streaming company such as Wheaton, with 35 employees, differentiates itself from a company that owns royalty interests in mining projects because it tends to play a management role, particularly when the original streaming agreements need to be adjusted for any reason.

For example, following an ownership change, Wheaton said it had terminated a silver purchasing agreement covering the San Dimas Mine in Mexico and announced a new one with First Majestic Silver Corp. [FR-TSX; AG-NYSE; FMV-FSE] in January, 2018, after its acquisition of the mine’s former owner Primero Mining Corp.

Wheaton reported fourth quarter, 2019 adjusted earnings per share of $0.17, which was in line with consensus estimates on pre-reported gold equivalent production of 187,000 ounces. Wheaton finished the year with $104 million in cash and $875 million drawn on its $2.0 billion revolving facility (average effective interest rate 3.62%). The company also announced that it will initiate an ATM (at-the-market) equity program to raise up to $300 million following the filling of a prospectus supplement.

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