In a March 31 research note, CIBC analyst Cosmos Chiu reported that Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) released an updated technical report for the Salobo copper-gold project in Brazil. "The update reiterates the Salobo gold stream's position as Wheaton's cornerstone asset and a key driver for the company's near-term production growth outlook," he commented. Wheaton holds a 75% gold stream there.
Chiu pointed out the changes between the previous technical report in 2017 and the recently updated one. The new report updated the mine plan, which now outlines an increase in average annual gold production through 2024 of about 330,000 ounces versus 300,000 ounces previously.
The plan also calls for annual throughput expansion at the Salobo III mill to 36 from 24 million tons and the processing of lower-grade material to feed the mill. However, Chiu indicated, "Additional upside exists if Salobo proceeds with a higher cut-off grade strategy, which would bring higher grade material forward in the production plan."
Given the mill expansion, which is expected to be finished in 2022, Salobo's open-pit operations now are expected to end sooner, in 2044 versus 2045, and the duration of stockpiling will decrease, to 7 years from 12.
The updated technical report also reflected that 292 million tons of reserves at the mine were reclassified as Probable from Proven "due to back analysis of drill spacing data," wrote Chiu.
Once the new processing line is completed at Salobo, Wheaton is obligated to make an expansion payment, the amount of which will depend on the completion date, the expansion size and the copper cutoff grade. Wheaton now estimates the payment will be around $570 million, but, Chiu noted, if the mine plan calling for the higher cutoff grade gets implemented, it would be more like $670 million.
Finally, CIBC expects that during 2020 Wheaton will consider additional asset acquisitions, particularly since the recent weakness in base metals prices creates opportunities for buying byproduct streams.
CIBC has an Outperformer rating and a US$36 per share target price on Wheaton, whose stock is trading now at about US$29.39.
[NLINSERT]Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures from CIBC, Wheaton Precious Metals Corp., Earnings Update, March 31, 2020
Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.
Important Disclosure Footnotes for Wheaton Precious Metals Corp. (WPM.N)
• 2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from
these companies in the next 3 months: Wheaton Precious Metals Corp.
For important disclosure footnotes for companies mentioned in this report that are covered by CIBC World Markets Inc., click here: Disclaimers & Disclosures.
