Wheaton Precious Metals Earnings Preview

by Trefis Team
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Trefis
WPM
Wheaton Precious Metals
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Wheaton Precious Metals Corporation (NYSE: WPM) will release its third-quarter results on November 14, 2018, and conduct a conference call with analysts the following day. The market expects the company to report an EPS of $0.10 and revenue of $191 million, a decline from the last year’s EPS of $0.15 and revenue of $203.03 million respectively. Earnings for the streaming company, WPM, are expected to decline due to a decrease in silver sales volume and a lower prevailing spot-price of the metal. Though the trouncing miner realized higher prices for gold and silver in the second quarter, higher spot prices for the metal in the third quarter, which positions traditional miners in a better place, and lower silver sales volume are going to bring down revenues and earnings for the company.

We have a $21 price estimate for the company, which is substantially higher than the current market price. View our interactive dashboard –Our Outlook For Wheaton Precious Metals In 2018 – and modify the key assumptions/expectations to arrive at a price estimate of your own.

Outlook : 

Currently, the company has entered into 23 long-term agreements (3 of which are early deposit agreements) with 16 different mining companies, for the purchase of precious metals and cobalt (“precious metal purchase agreements” or “PMPA”) relating to 19 mining assets which are currently operating and 9 which are at various stages of development, located in 11 countries. Pursuant to the precious metal purchase agreements, Wheaton acquires metal production from the counterparties for an initial upfront payment plus an additional cash payment for each ounce or pound delivered which is fixed by contract, generally at or below the prevailing market price.

However, the company announced the restructuring of the agreement at San-Dimas mine earlier this year wherein it terminated its existing San Dimas purchase agreement and entered into a new purchase agreement with First Majestic with respect to San Dimas. The terms of the new agreement reduce the company’s silver output share from San Dimas and increase its access to the mine’s gold output.

The new agreement has remained beneficial for the company as a greater exposure to gold has enabled it to benefit from the prevalent higher gold prices. The company is expected to report a marginal increase in its realized gold prices and a substantial 20% increase in its gold sales volume when compared to the numbers posted a year ago. Higher gold prices are expected to remain beneficial for the company in the remainder of the year, while lower silver sales volume primarily due to lower production output at Antamina mine (11% of the stock price according to our estimates), is going to weigh on the upcoming results. The lower production at Antamina mine is due to lower silver grades resulting from mine sequencing in the open pit.

Further, the company expects to produce approximately 355,000 ounces of gold, 22.5 million ounces of silver, and 10,400 ounces of palladium in 2018. Going forward, the company expects to increase palladium production significantly in the next 2 years and starting in 2021, the company expects 2.1 million pounds of cobalt production per year.

 

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