Wheaton Precious Metals Is Counting on Gold to Drive Growth

Wheaton Precious Metals (WPM.TO) has been on a tearing run in the past few months thanks to the rising prices of gold and silver. The company’s latest results turned out to be yet another catalyst for the stock as Wheaton announced that it is on track to achieve record gold production this year.

This seems to have boosted excitement among investors as gold prices have been rising strongly of late and they are expected to scale new highs. Let’s take a closer look at Wheaton’s recent results and see if the company can deliver a better performance in the coming quarters because of its focus on gold.

Recent results were not very good

Wheaton’s revenue fell nearly 11% year over year to $189 million and missed Wall Street’s consensus estimate. This was because Wheaton’s silver output fell 19% year over year to 4.8 million ounces. The sales decline was even more pronounced with ounces sold coming in at 4.2 million ounces, down 29% from the prior-year period.

On top of that, the sales price per ounce of silver fell 9.6% from the prior-year period to $14.93 an ounce, while cash costs per ounce of silver increased 13.2% to $5.14. So, Wheaton’s silver profile was definitely not attractive and led to a deep decline in both its revenue and adjusted income.

The lower silver production was a result of two factors – the termination of the San Dimas silver stream and lower production at Penasquito, which was the result of an illegal blockade at the mine.

However, Wheaton was effusive in its praise of the way its gold business turned out. Gold production increased 11.3% year over year to 100,577 ounces, while sales price per ounce was up 1.1% to $1,320 an ounce.

So, the increase in gold production was strong enough to help Wheaton Precious Metals offset the negative impact of a weak silver production and sales profile. This is probably the reason why investors are still hopeful that the company will keep doing well in the coming quarters and scale new heights.

Wheaton is counting on gold output for growth

Wheaton is on track to achieve its full-year production forecast of 690,000 gold equivalent ounces, but it says that gold will now account for a greater portion of its output. According to CEO Randy Smallwood:

“Wheaton now expects to produce approximately 385,000 ounces of gold, up from 365,000 ounces, originally forecast due to stronger than anticipated production from Salobo and 22.5 million ounces of silver, down from 24.5 million ounces, again, as a result of the temporary issues at Peñasquito.”

As such, Wheaton is once again counting on stronger gold production to get itself out of the woods. The good part is that the strategy will work as the price of gold is now much higher than the average price Wheaton realized last quarter. As such, don’t be surprised to see Wheaton Precious Metals spring a surprise in the coming quarters thanks to its increased contribution from gold and rising prices of the yellow metal.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
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.

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