Wheaton's (WPM) Arm to Buy Gold & Silver Stream in Curipamba
Wheaton Precious Metals Corp.’s WPM wholly-owned subsidiary, Wheaton Precious Metals International Ltd., entered into a Precious Metal Purchase Agreement (“PMPA”) agreement with Alliance Metals International, a subsidiary of Adventus Mining Corporation. Per this agreement Wheaton International will acquire gold and silver streams from Adventus Mining’s Curipamba Project based in Ecuador. Curipamba is expected to be a high-quality, low-cost copper-gold mine with a 10-year mine life.
Wheaton International will acquire 50% of the payable gold production from Curipamba until 150,000 ounces have been delivered under the Adventus PMPA. Following this, the company will acquire 33% of payable gold production for the life of the mine. Wheaton will receive 75% of the payable silver production from the mine until 4.6 million ounces of refined silver have been delivered, thereafter reducing to 50% for the life of mine.
Wheaton will make a total upfront cash payment of $175.5 million to Adventus, out of which the company will pay $13 million on an early deposit basis before construction and $0.5 million will be used to support certain local community development initiatives around Curipamba. The remaining amount will be paid in four staged installments during construction, subject to the clearance of certain customary conditions.
Wheaton will make ongoing payments for the gold and silver ounces delivered at 18% of the spot prices until the difference between the value of gold and silver delivered and the production payment, is equal to the upfront consideration of $175.5 million. Once this is achieved, the production payment will rise to 22% of the spot prices.
Adventus Mining expects construction activities to begin in the latter part of 2022, with commissioning and commencement of mine operations starting in early 2024. Following the closing of this acquisition, the Curipamba Project will add to Wheaton's estimated proven and probable gold reserves by 0.26 million ounces and silver by 7.1 million ounces. Measured and indicated gold resources would increase by 0.06 million ounces and silver by 2.2 million ounces. Inferred gold resources will go up by 0.02 million ounces and silver by 0.7 million ounces. Wheaton’s annual attributable production is forecast to average between 17,000 ounces of gold and 551,000 ounces of silver for the first five years of production.
The latest buyout further strengthens Wheaton’s diversified portfolio of low-cost, high-quality, long-life mines. The company expects that Curipamba Project has significant exploration potential with the recent discovery of the Agua Santa near El Domo mine. As of Sep 30, 2021, the company had nearly $372 million of cash in hand with no outstanding debt. It had a revolving credit facility of $2 billion with immediate liquidity of $2.4 billion. This provides flexibility to acquire additional accretive precious metals.
Wheaton is focused on adding additional production capacity from high-quality accretive metals. Its business model focuses on reducing risk while leveraging higher commodity prices. The company remained active on the corporate development front and focused on growing a high-quality portfolio of assets. Recently, the company entered into an arrangement with Generation Mining Limited to acquire gold and platinum from the Marathon Project in Canada for a cash payment of $240 million ($187.2 million).
Price Performance
Wheaton’s shares have declined 0.9% in the past year against the industry’s growth of 4.9%.
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Zacks Rank & Stocks to Consider
Wheaton currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Commercial Metals Company CMC, Haynes International, Inc. HAYN and AdvanSix Inc. ASIX. While Commercial Metals and Haynes sport a Zacks Rank #1 (Strong Buy), AdvanSix carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Commercial Metals has an expected earnings growth rate of 10.5% for the current fiscal year. The Zacks Consensus Estimate for CMC’s current-year earnings has been revised 6.6% upward in the past 60 days.
Commercial Metals’ earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average being 7.4%. CMC has gained 69% over a year.
Haynes has an expected earnings growth rate of 298.6% for fiscal 2022. The Zacks Consensus Estimate for fiscal 2022 earnings has been revised 53.2% upward in the past 60 days.
Haynes’ bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters, the average surprise being 83.1%. HAYN has rallied 76.7% over a year.
AdvanSix has an expected earnings growth rate of 194.5% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 14.1% north in the past 60 days.
AdvanSix’s bottom line beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 47%. ASIX has soared 127.6% over a year.
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