Wheaton's Arm to Buy Precious Metals Stream From Caldas Gold

Wheaton Precious Metals Corp.’s WPM wholly-owned subsidiary, Wheaton Precious Metals International Ltd., has entered into an agreement to purchase precious metals stream from Caldas Gold Corp. for developing the Marmato Project in Colombia. Per the agreement, Wheaton International will purchase 6.5% of the gold production and 100% of the silver production until 190,000 ounces of gold and 2.15 million ounces of silver have been delivered. Following this, the company will purchase 3.25% of the gold production and 50% of the silver production for the life of the project.

Wheaton International will pay a total cash consideration of $110 million, out of which $38 million is payable upon closing the deal while the remaining amount is payable during the construction of the project. Apart from this, Wheaton International will make payments for 18% of the gold and silver spot price until the uncredited balance of the upfront payment is reduced to zero. Thereafter, the company will pay 22% of the spot gold and silver price for all payable gold and silver delivered.

Caldas Gold's Marmato Project includes an Upper Mine operation and the development of Marmato Deeps Zone (“MDZ”), both of which are covered by the precious metals stream. In 2019, the Upper Mine produced 25,750 ounces of gold and 39,560 ounces of silver.

Wheaton focuses on delivering the high-quality precious metals production portfolio to stakeholders through its top-level asset base, strong organic growth and acquisition of accretive precious metal stream interests. Despite the coronavirus pandemic-induced crisis, the company remains active on the corporate developmental front.

The company is poised to benefit from mine explorations and expansion activities. It expects higher production of a silver grade at its Penasquito mine in the current year. At Constancia, Hudbay Minerals Inc. HBM has secured the surface rights for the Pampacancha deposit and expects to begin mining the satellite deposit late this year. At the Stillwater mine, palladium and gold productions are likely to increase with the continued ramp-up of the mill projects. These projects are anticipated to be growth drivers in the years to come.

The company generates revenues primarily from the sale of gold, silver and palladium. Gold prices have been up 15.5% so far this year, fueled by the slowdown in manufacturing activities, rate cuts, geopolitical tensions and uncertainties related to the coronavirus pandemic. The combination of lower-mined gold supply and higher demand, and geopolitical tensions are likely to drive prices in the days to come. Moreover, silver prices have started to gain momentum, triggered by anticipations of an economic recovery, which is likely to revive demand for the white metal, given its wide usage in industrial applications.

Price Performance

The company’s shares have surged 69.9% over the past year against the industry’s decline of 8.1%.

Zacks Rank & Other Stocks to Consider

Wheaton currently carries a Zacks Rank #2 (Buy).

A few other similar-ranked stocks in the Basic Materials sector are Agnico Eagle Mines Limited AEM and B2Gold Corp. BTG. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Agnico Eagle has an estimated earnings growth rate of 53.6% for the current year. The company’s shares have rallied 20.6% in the past year.

B2Gold has an expected earnings growth rate of 221.4% for the ongoing year. Its shares have surged 80.7% in the past year.

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Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
 
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