Better Buy: Wheaton Precious Metals vs. Franco-Nevada

Wheaton Precious Metals [stock_market_widget type="inline" template="generic" color="default" assets="WPM.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] and Franco-Nevada [stock_market_widget type="inline" template="generic" color="default" assets="FNV.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] are different from traditional precious metals mining companies. They buy streams of silver, gold, and other precious metals through agreements with other mining companies that produce such precious metals as by-products. As a result, the likes of Wheaton and Franco-Nevada can source streams of gold and silver at low costs.

However, not all streaming companies are built equally. This is why we will take a closer look at Wheaton and Franco-Nevada in this article to see which one could be worth your money.

The Case for Franco-Nevada

Franco-Nevada’s production profile will improve significantly going forward. The company anticipates its royalty and streaming production to range between 465,000 to 500,000 gold equivalent ounces in 2019. For comparison, Franco-Nevada’s gold equivalent ounces sold fell to 447,902 last year as compared to 497,745 the previous year.

This is great news for the company’s investors as it seems to have found a way to boost its streams going forward. But what’s even more impressive is that Franco-Nevada’s production growth will hit a higher gear in subsequent years.

The company was struggling on account of weak grades at Candelaria in Latin America as well as lower production from the Guadalupe-Palmarejo mine where the operator’s mining activity at the areas covered under the streaming agreement was low.

But it is now looking at 570,000 ounces to 610,000 ounces of gold equivalent production by 2023, so it is not surprising to see why investors are excited about the company’s prospects going forward.

What About Wheaton Precious Metals?

Unlike Franco-Nevada, Wheaton’s operational profile going forward isn’t that attractive.

Unlike Franco-Nevada, Wheaton’s operational profile going forward isn’t that attractive. It is looking at 24.5 million ounces of silver production in 2019 along with 365,000 ounces of gold. The gold output for the year will be slightly higher than last year, while silver production will be roughly flat.

However, the company is trying hard to get its production growth back on track, which is why it struck a streaming agreement with Hudbay recently. Wheaton will pay $230 million upfront to Hudbay in exchange for silver and gold streams from the Rosemont copper mine. Wheaton will get all of the silver and gold produced as a by-product from Rosemont at a cash price of $3.90 per ounce of silver and $450 per ounce of gold.

This deal has the potential to boost Wheaton’s streams going forward, but investors shouldn’t get excited just yet. That’s because the Rosemont mine is yet to go into production, and when it does, it is expected to add more than 50,000 gold equivalent ounces to the company’s production profile. Now, that doesn’t look like a great addition at first, so investors will have to wait and see how this agreement pans out and impacts the company’s production.

The Bottom Line

Franco-Nevada is clearly the better pick of the two companies here as it can provide more clarity about its future production, while Wheaton Precious Metals tries to overcome the hurdles that it is facing. As such, it can safely be said that investors should consider putting their money in Franco-Nevada as it carries more upside potential.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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