After A Drop of $100 Million, Why Is Wheaton Precious Metals Set To Add $160 Million To Its Revenues?

Wheaton Precious Metals (NYSE: WPM) witnessed a decline of about $98 million in revenues over the previous two years, as its total revenues declined from $892 million in 2016 to $794 million in 2018. However, Trefis expects this trend to reverse with the company projected to add close to $160 million over the next two years, with revenue reaching about $955 million by 2020. Higher revenue is expected to be driven by a sharp rise in gold revenues and addition of palladium as a new operating division in Q3 2018, partially offset by a decline in silver sales.

View the Trefis interactive dashboard – Wheaton Precious Metals Revenues: How Does Wheaton Precious Metals Make Money? – where we discuss, in detail, revenue performance of each of the company’s operating segments and what is driving the change.

WPM’s Business Model

What Does It Offer?

Wheaton Precious Metals Corporation is the world’s largest silver streaming company, with fourteen silver purchase agreements. WPM has also increased its share of gold production with new purchase agreements. The New San Dimas agreement has taken WPM’s gold revenues well beyond its silver sales. Palladium as a new addition to the company’s business in 2018, also offers product diversification benefits.

End Markets?

WPM’s Gold and Silver is used in jewelry, in electronics and other technology applications, as an investment, particularly as a hedge against inflation, and in times of political and economic uncertainty. Palladium is used in catalytic converters for cars. It is also used in jewelry and some dental fillings and crowns. It is used in the electronics industry in ceramic capacitors, and found in laptop computers and mobile phones.

Competition?

The company faces intense competition from global peers such as: Newmont Goldcorp, Freeport-McMoRan, Barrick Gold, Silver Standard Resources, Pan American Silver, Bear Creek Mining Corporation, Endeavor Silver, etc.

To understand how Wheaton Precious Metals’ revenue growth rate compares with major peers, view our interactive dashboard analysis.

Segment-wise Revenue Performance

Gold

• Gold revenue has seen modest growth of $30 million between 2016 and 2018.
• However, segment revenue is expected to witness a sharp increase in the near term, with it adding ~$175 million by FY2020.
• Shipments are expected to increase in 2019 and 2020, following the acquisition of a new gold stream at Stillwater, and the New San Dimas agreement under which silver production that was attributable to the company under the old agreement would now be converted to the equivalent gold volume.
• Price realization is set to improve from $1,264/ounce in 2018 to $1,450/ounce in 2020, driven by rise in global gold prices following higher retail and institutional investment in the yellow metal in the face of rising economic uncertainty.

Silver

• Silver revenues have seen a continuous decline due to lower production and fall in global silver prices.
• The trend is likely to continue in the near term with WPM expected to lose over $42 million of its silver revenue by 2020, led by volume declines.
• Silver price realization is expected to gradually increase from $15.81/ounce in 2018 to $16.75/ounce in 2020, due to an increase in prices of precious metals with an expected global economic slowdown. However, higher prices would be more than offset by lower silver production.

Palladium

To understand how is the company’s new Palladium division expected to perform, view our interactive dashboard analysis.

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