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Wheaton Precious Metals Corp (WPM) is a Vancouver, Canada-based diversified mining company with 20 operating mines and nine development projects under its portfolio.
WPM’s operating model is slightly different from others considering it is primarily a precious metals streaming company. Under this model, the company first identifies a potential opportunity and then makes an upfront payment (based on assumptions around appropriate discount rate, production profile and commodity price expectations) to its mining partners including Vale, Barrick and Glencore among others. In return, WPM gets to purchase a fixed percentage of production from its partners at a predetermined price. Investors benefit from the visibility of predictable commodity cost and also from the confidence of identifying the best potential opportunity that could improve cash flows.
Unlike its peers, WPM derives 100% of its revenue from precious metals, with gold driving more than 60% of its revenue, silver driving more than 30% revenue and other precious metals like palladium driving the remaining. The company has gold mines across Brazil, Canada and Guyana, while its silver mines are located across Mexico, Sweden, Peru, Greece, Canada, Portugal and Argentina. In terms of geographic mix, WPM derives nearly 40% of its revenues from Brazil, followed by Peru, Mexico, Europe and Canada.
WPM is known for its low-cost high-quality asset base, with nearly 70% of its production coming from assets falling in the lowest cost quartile. At present, the company’s portfolio of assets has more than 30 years of life based on the reserve analysis.
With certain mines resuming operation and the continued surge in gold prices, WPM was able to generate a record amount of operating cash flows in Q3 2020. Compared to Q2 2020, WPM’s revenue in Q3 2020 increased by nearly 37%, while operating cash flow surged by nearly 60%.
And given WPM’s unique dividend policy – wherein dividends equal to 30% of the previous four quarters’ operating cash flows – the company was able to boost its quarterly dividend by 20% from 10 cents to 12 cents, payable to shareholders of record as of November 25, 2020.
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