What Are The Key Sources Of Revenue For Wheaton Precious Metals?

by Trefis Team
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Wheaton Precious Metals
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Wheaton Precious Metals (NYSE: WPM) is the world’s largest pure streaming company, with a production profile driven by a portfolio of high quality assets, including silver and gold streams. WPM provides necessary capital to other mining companies via an upfront payment to assist in the construction of mines. In return, WPM gets a portion of the gold or silver produced as a by-product for a specified period (generally for the life of a mine) at a fixed cost. On an average, WPM pays about $4-6 per ounce of silver procured from these mining companies, subject to inflationary changes. The company does not have to pay for any additional developments costs for any projects after the first payment. In this note, we discuss the major revenue streams for WPM. We expect a total revenue of $795 million in 2018 with net earnings of $283 million.

We have a price estimate of $21 per share for the company, which is in line with the market price. View our interactive dashboard – Wheaton Precious Metals Price Estimation And Revenue Break Up – and modify the key drivers to visualize the impact on its valuation.

 

Gold Streams(56%) 

  • Salobo Mine (38%) – WPM has recently increased its stake from 50% to a 75% in this mine. This agreement has significantly boosted the division’s shipments. The sharp rise in shipments will drive the revenue and value of this division. We expect $301 million revenues from this mine with an average realized price per ounce of $1,310 per ounce.
  • Other Gold Streams (13.5%) – Under this division, the company has made upfront payments for mines with a right on first production and equity stake thereafter. The division includes a 100% stake in Capstone mine, Stillwater mine, Rosemont mine, and 50% stake in the Constancia mine. Revenue from the division is expected to be $106 million in 2018.
  • Sudbury mines (4.5%) – Coleman mine, Copper cliff mine, Garson mine, Totten mine, Stobie mine, Creighton mine, and the Victor Project are collectively referred as the Sudbury mines. WPM hold rights to 70% of the gold production from these mines. We expect the mines to generate revenue of $36 million this year.

Silver Streams(44%) 

  • Other Silver Streams (13%) – WPM has acquired 100% production rights in 8 mines and a 50%, 25%, and 12.% production right in La negra mine, Keno hill project, Loma De La Plata, respectively. The division is expected to generate $104 million in revenues in 2018.
  • Penasquito Mine (12%) – WPM holds rights to 25% of silver production in Penasquito mine over its entire mine life. According to current production levels and contracts, the company will continue to receive silver from this mine over the next 25 years without any production issues. WPM made an upfront payment of $485 million for this mine and is expected to generate $97 million in revenue in 2018.
  • Antamina Mine (10.7%) – WPM entered into an agreement with Glencore to acquire 33.75% of silver production from the Antamina mine until the delivery of 140 million ounces and a 22.5% right in the silver production thereafter. The streaming agreement entitles WPM to 63.9 million ounces of silver reserves at this mine, for which the company paid $900 million. The division is expected to generate $85 million in revenues in 2018.
  • Yauliyacu Mine (5%) – The stream parameters for this mine are 100% of silver production up to 1.5 million ounces (Moz) and 50% of excess. WPM paid $285 million upfront for this agreement. This mine is expected to generate $39 million revenues in 2018.
  • San Dimas Mine (3.3%) – The stream parameters for this mine are 25% of gold production plus an additional amount of gold equal to 25% of silver production converted to gold at a fixed gold to silver exchange ratio of  70:1. We expect $27 million revenues from this mine. In Q2’18, WPM terminated the agreement with Primero and entered into the First Majestic precious metal purchase agreement (PMPA), with provisions to adjust the gold to silver ratio if the average moves above or below 90:1 or 50:1, respectively.

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