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Wheaton Precious (WPM) 2020 Production Falls Y/Y, Meets Guidance

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Wheaton Precious Metals Corp. WPM produced 672,619 gold equivalent ounces (GEOs) in 2020, which came within its guidance of 655,000 GEOs to 685,000 GEOs. However, production came in 5% lower than the 706,900 GEOs produced in 2019. The company noted that all operations have been impacted by COVID-19 through the year with varying extent from mine to mine. The company projects production within 720,000 GEOs and 780,000 GEOs in 2021, which indicates year-over-year growth of 12% at the mid-point. This will be driven by higher gold production at Salobo, San Dimas, Constancia and higher silver ounces from the Cozamin acquisition.

In 2020, stronger-than-expected production from Peñasquito and Antamina were partially offset by weaker production from Salobo, Constancia and Stillwater. Gold production was down 9% year over year to 368,044 ounces but came within the guided range of 365,000 ounces to 385,000 ounces. Silver produced during the year was 22.5 million ounces, up 2% year over year and exceeded the company’s guidance of 21.5-22.5 million ounces. Palladium production inched up 1% year over year to 22,817 ounces, which failed to match the company’s guidance of 23,000 ounces to 24,500 ounces.

Expectations of Higher Production in 2021

The company’s guidance of 720,000-780,000 GEOs for 2021 is based on price assumptions of $1,800 per ounce for gold, $25 per ounce for silver, $2,300 per ounce for palladium and $17.75 per pound for cobalt. For the year, Wheaton Precious expects gold production to be within 370,000 ounces to 400,000 ounces. The mid-point of the guidance indicates a 5% year-over-year growth. This will primarily be driven by growth at Salobo, San Dimas and Constancia.

Silver production guidance for 2021 is at 22.5-24 million ounces, indicating 1% year-over-year growth at the mid-point. Additional ounces from Cozamin and Keno Hill are anticipated to be partially offset by slight decreases at Peñasquito due to expected mine sequencing. At Constancia, Hudbay Minerals Inc. HBM announced that it has completed the Consulta Previa process in accordance with Peruvian law and has been granted the final permit for the development and operation of the Pampacancha deposit, which is expected to commence production in 2021.

Production of Palladium & Cobalt is expected in the range of 40,000 GEOs to 45,000 GEOs in 2021. Palladium production is expected to remain stable in 2021. Per Sibanye-Stillwater's prior announcement, the Blitz project at Stillwater is expected to experience a two-year delay due to COVID-19. Notably, according to the company’s precious metals purchase agreement with Vale S.A VALE, effective Jan 1, 2021, Wheaton Precious has become eligible to start receiving cobalt production from Vale’s Voisey's Bay.

The company has also provided a five-year (2021-2025) guidance averaging 810,000 GEOs. Continued production growth from Salobo, Constancia, Peñasquito and Stillwater, and incremental ounces from the Marmato, Cozamin and Voisey's Bay streams will boost production. At Peñasquito, steady production is expected from 2023-2025 following a stripping campaign of the Chile Colorado pit.

Palladium and gold production from Stillwater is expected to increase with the continued ramp up of the Blitz project, which is expected to reach full capacity in 2024. The expansion at the Salobo mine, which will increase mill throughput capacity by 50%, will add to gold production in 2023. Wheaton Precious forecasts a 10-year (2021-2030) average annual production of 830,000 GEOs.

Wheaton Precious is scheduled to release its fourth-quarter 2020 and full year results on Mar 11, 2021, after the closing bell. The Zacks Consensus Estimate for the company’s fourth-quarter earnings is currently pegged at 36 cents, indicating year-over-year growth of 112%. The consensus mark for revenues stands at $320.7 million suggesting improvement of 43.7% from the prior-year quarter. For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $1.13 billion, suggesting year-over-year growth of 31.5%. The same for earnings stands at $1.13, indicating an improvement of 101.8% from year-ago reported figure.

Shares of Wheaton Precious have gained 39.2% over the past year, compared with the industry’s rally of 40.4%

Wheaton Precious currently carries a Zacks Rank #3 (Hold).

A Stock to Consider

A better-ranked stock in the basic materials space is Fortescue Metals Group Limited FSUGY, which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortescue has a projected earnings growth rate of 75.5% for the current fiscal year. The company’s shares have soared 146% in the past year.

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Wheaton Precious Metals Corp. (WPM) : Free Stock Analysis Report

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