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Wheaton's (WPM) Arm to Acquire Silver Stream From Capstone

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Zacks Equity Research
·3 min read
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Wheaton Precious Metals Corp.’s WPM wholly-owned subsidiary, Wheaton Precious Metals International Ltd., recently entered into an agreement with Capstone Mining Corp. to purchase silver stream from the latter’s Cozamin Mine located in Zacatecas, Mexico.

Per the above-mentioned agreement, Wheaton International will purchase 50% of the mine’s silver production until 10 million ounces have been delivered. Following this, the company will purchase 33% of the silver production for the life of the mine. Wheaton International will pay Capstone a total cash consideration of $150 million upon the deal’s closure. Apart from this, Wheaton International will make payments for 10% of the silver spot price for all payable silver ounces delivered. This precious metals stream agreement came into effect from Dec 1, 2020.    

Wheaton will draw from its revolving credit facility of $2 billion for the initial cash payment. As of Sep 30, 2020, the company had cash balance of approximately $210 million and $1.5 billion available under its revolving credit facility. Wheaton has ample capacity to pay down debt related to this transaction given its solid cash position, sales volume, revenues and strong operating cash flows combined with existing credit capacity. These also provide flexibilities to acquire additional accretive precious metals.

Wheaton is focused on boosting its production capacity from high-quality accretive metals. It is active on the corporate development front and focused on growing high-quality portfolio of assets. On Nov 5, Wheaton entered into a precious metals purchase agreement with Caldas Gold Corp. to acquire 6.5% of the gold production and 100% of the silver production from the Marmato Project located in Colombia.

The company generates revenues primarily from the sale of gold, silver and palladium. Gold prices have been up 21.1% so far this year, fueled by the coronavirus pandemic. Going forward, the combination of lower mined gold supply and higher demand, and geopolitical tensions are likely to drive prices north. This bodes well for Wheaton. Silver prices have also flared up 34.3%, year to date, on recovery in industrial activity as governments continue relaxing restrictions. Given the bullish precious metal markets and high-quality portfolio of assets, Wheaton is focused on creating sustainable value for shareholders.

Price Performance

The company’s shares have appreciated 48.5% over the past year, outperforming the industry’s growth of 22%.

Zacks Rank & Other Stocks to Consider

Wheaton currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the basic materials space are Bunge Limited BG, BHP Group Limited BHP, and Rayonier Advanced Materials Inc. RYAM. While Bunge sports a Zacks Rank #1, BHP Group and Rayonier Advanced Materials carry a Zacks Rank of 2, at present.

Bunge has a projected earnings growth rate of 43% for the current year. The company’s shares have gained around 18.1% in a year’s time.

BHP Group has an expected earnings growth rate of 32.4% for fiscal 2021. Shares of the company have appreciated 30.8% over the past year.

Rayonier Advanced Materials has an estimated earnings growth rate of 92% for 2020. Over the past three months, the stock has soared nearly 164%.

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