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Wheaton Precious (WPM) Buys Gold Stream in Cangrejos Project

Wheaton Precious Metals WPM announced that its subsidiary, Wheaton Precious Metals International Ltd., acquired a gold stream in the Cangrejos gold-copper project — the largest primary gold deposit in Ecuador. Cangrejos is expected to be a high-margin mine with a life expectancy of 26 years and has strong exploration potential. This deal thus adds to WPM’s portfolio of high-quality, low-cost assets.

The Cangrejos project is fully owned by Vancouver, Canada-based Lumina Gold Corp., which is a precious and base metals exploration and development company. Lumina has been working to de-risk the project and advance it toward construction. Attributable annual production from the project is expected to be around 24,000 ounces of gold for the first ten years. It is projected to be more than 24,500 ounces of gold per year for the life of the mine. As per Lumina Gold’s preliminary feasibility study, Cangrejos is the 26th largest primary gold asset in the world.

Wheaton will purchase 6.6% of the payable gold from the project until 700,000 ounces of gold have been delivered. Once this level is achieved, the stream will be reduced to 4.4% of the payable gold production for the life of the mine.  The addition of the stream will increase WPM’s total estimated proven and probable gold reserves by 0.76 million ounces, measured and indicated gold resources by 0.25 million ounces and inferred gold resources by 0.16 million ounces.

Wheaton International will pay Lumina an upfront cash consideration of $300 million, of which $48 million is available pre-construction. Wheaton International will make ongoing payments for the gold ounces delivered, equal to 18% of the spot price of gold until the uncredited deposit is reduced to nil and 22.0% of the spot price of gold thereafter.

As of Mar 31, 2023, Wheaton Precious had approximately $800 million of cash on hand. This, combined with the liquidity provided by the available credit under the $2 billion revolving term loan and ongoing operating cash flows, positions the company well to fund the acquisition of the Cangrejos gold stream and fulfill all outstanding commitments and known contingencies. It also provides flexibility to acquire other lucrative mineral stream interests.

Price Performance

Shares of Wheaton have gained 18.9% in the past year against the industry’s 16.5% fall.

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Zacks Investment Research

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Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the basic materials space are Gold Fields Limited GFI, PPG Industries, Inc. PPG and Linde plc LIN, all of which carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Gold Fields’ fiscal 2023 earnings per share is pegged at $1.01. Earnings estimates have moved 6.3% north in the past 60 days. GFI has a trailing four-quarter earnings surprise of 7.7%, on average. Its shares have gained 35% in the past year.

The Zacks Consensus Estimate for PPG's current-year earnings has been revised 11.7% upward in the past 60 days. PPG Industries’ earnings beat the consensus estimate in three of the last four quarters while missing in one quarter. It has a trailing four-quarter earnings surprise of roughly 6.8%, on average. PPG has gained around 16% in a year.

The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 3.8% upward in the past 60 days. Linde beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 5.9%, on average. LIN’s shares have gained roughly 16% in the past year.

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PPG Industries, Inc. (PPG) : Free Stock Analysis Report

Gold Fields Limited (GFI) : Free Stock Analysis Report

Linde PLC (LIN) : Free Stock Analysis Report

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

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