On Jun 10, we issued an updated research report on Wheaton Precious Metals Corp. WPM. The company is poised to gain from investments in mine expansions, solid financial position and higher gold prices.
Mine Expansions to Aid Growth
Wheaton benefits from its mine exploration and expansion activities. The company expects higher production of silver grade at the Penasquito mine in 2020. At Constancia, Hudbay Minerals Inc. HBM has secured the surface rights for the Pampacancha deposit and anticipates to begin mining the satellite deposit later this year. At the Stillwater mine, palladium and gold production will likely increase with the continued ramp-up of the mill projects. These projects will likely act as growth drivers in the coming years.
Wheaton’s low-risk, high-margin nature of business is well placed to navigate through the current market conditions and commodity-price uncertainty. Around 88% of the company’s production comes from lower cost mines with higher margins. Hence, in the current lower base metal price scenario, Wheaton’s partner operations are well poised to run with low commodity-price cycles.
Wheaton’s partner operations are currently running, with the exception of Voisey's Bay, Constancia, Yauliyacu, San Dimas, Los Filos, Antamina and Peñasquito mines due to the temporary ramp down of operations at some of its partner mines. The company is implementing measures to minimize any possible impact of the coronavirus outbreak on its business.
Higher Gold Prices & Strong Financial Position Drive Growth
Gold prices have been up 14.3% so far this year on the slowdown in manufacturing activity, rate cuts, geopolitical tensions, and apprehensions regarding the coronavirus pandemic. The combination of lower mined gold supply and higher demand, and geopolitical tensions are likely to drive prices north in the days to come.
Wheaton's solid cash position, operating cash flows, combined with available credit capacity of more than $1.1 billion, under the revolving facility of $2 billion, helps the company invest in growth opportunities as well as sustain its dividend policy. These also provide flexibilities to acquire additional accretive precious metals. Moreover, the company’s efforts to reduce its debt levels are encouraging.
The Zacks Consensus Estimate for Wheaton’s 2020 earnings is currently pegged at 91 cents per share, indicating a year-over-year surge of 62.5%. The same for 2021 earnings is pinned at $1.04, suggesting year-over-year growth of 15.2%.
Wheaton Precious Metals Corp. Price and Consensus
Wheaton Precious Metals Corp. price-consensus-chart | Wheaton Precious Metals Corp. Quote
Zacks Rank & Other Stocks to Consider
Wheaton currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the basic materials space are Newmont Corporation NEM, and Barrick Gold Corporation GOLD, both currently carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Newmont has an expected earnings growth rate of 90.2% for 2020. The company’s shares have surged 103.6% in the past year.
Barrick Gold has an estimated earnings growth rate of 60.8% for the ongoing year. Its shares have soared 112.7% over the past year.
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