Wheaton Precious Metals shares soar with V-shaped recovery hitting new highs

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

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by Ellsworth Dickson

During May 2019, shares of streaming company Wheaton Precious Metals Corp. [WPM-TSX, NYSE] were trading at about $27, then more or less flat-lined around $37 a share between last September and February 2020. Like many a company’s stock, Wheaton’s shares were then hit by the fallout from the COVID-19 pandemic and dropped sharply back to $27 in mid-March. Then, like the phoenix bird rising from the ashes in Ancient Greek folklore, the company’s shares took off and passed $40 a share in just a few days and kept rising – another $2.59 on May 15 – to close at $64.33 a share.

This striking recovery that wouldn’t let up was due to the rising price of gold, a positive investor sentiment and the company’s excellent financial results for the first quarter of 2020.

Wheaton Precious Metals is not a mining company per se; instead it has streaming agreements with 20 operating mines and nine development projects. In return for a cash infusion, Wheaton has the right to buy precious metals from its partners at a discount and, should it wish to do so, sell them at the global price.

The company’s streaming partners reads like a who’s who of mining: Vale, Glencore, Newmont, Barrick, Lundin, HudBay, Eldorado, Pan American, First Majestic, Equinox, and others.

“Wheaton had a strong start to 2020 with over $177 million generated in operating cash flow in the first quarter. Given our strong financial position and the immediate needs created by the COVID-19 pandemic, Wheaton launched a $5 million fund designed to support our local communities and those around the mines from which we receive precious metal, more than doubling our budget for community support. At this time, our top priority is the health and safety of our employees and the communities in which we and our partners operate.” said Randy Smallwood, President and CEO. “With one of the highest quality portfolios in the precious metals space, we remain confident in the strength and sustainability of our business model through this pandemic, and our ability to continue delivering shareholder value. We hope everyone stays safe and well.”

First Quarter Highlights:

Attributable gold equivalent production was over 180,000 ounces in the first quarter partially driven by record attributable silver production at Penasquito. Over $177 million in operating cash flow was generated in the quarter, an increase of over 50%. Net debt was reduced by $182 million with Wheaton ending the first quarter in a net debt position of $589 million. The declared quarterly dividend was $0.10 per common share.

At the Constancia Mine in Peru, Hudbay announced the formal approval of the surface rights agreement for the higher-grade Pampacancha satellite deposit.

Wheaton River also launched a $5 million Community Support and Response Fund combatting COVID-19.

For the first quarter of 2020, sales of precious metals were US $254,789,000 compared to US $225,049,000 in Q1 2019. Net earnings were US$94,896,000 or US$0.212 per share compared to US$57,349,000, or US$0.129 per share. During Q1 2020, attributable gold equivalent production (gold, silver, palladium) was 182,241 ounces compared to 169,098 ounces in Q1 2019. As of March 31, 2020, Wheaton had $127 million of cash and over $1.3 billion of capacity under the $2 billion revolving credit facility. Due to the consequences of the COVID-19 pandemic, the company has withdrawn its guidance for 2020.

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