As one of the world’s top three companies in its sector, Wheaton Precious Metals (TO:WPM) aims to provide investors with significant exposure to precious metals, but with a lower risk profile than traditional mining companies and higher upside than other precious metals investments.
It’s an approach that’s worked well since the company developed the concept of precious metals streaming 15 years ago. Wheaton is now on course to produce on average an estimated 750,000 gold equivalent ounces annually over the next five years, up from 690,000 ounces in 2019.
The streaming model allows companies like Wheaton to enter into agreements with mining partners to purchase all or a portion of their production for an upfront cost and an additional payment on delivery, which is usually below the prevailing spot price for the metal. The streaming company then sells the metal at the prevailing spot price.
Wheaton president and CEO Randy Smallwood believes streaming represents the best of both worlds in precious metals investing, combining the low-risk, low-reward of bullion and ETFs with the high-risk, high-reward of shares in mining companies.
“Streaming provides cost confidence, especially in relation to capital and operating costs, and offers direct exposure to precious metals production,” says Mr. Smallwood. “You get the benefits of both organic growth and accretive growth, and you also get the leverage.”
But in an increasingly crowded precious metal streaming market, staying near the top requires more than just picking the right streaming partners, he adds.
Wheaton’s approach to partner selection is to focus on low-cost, long-life mines in politically stable jurisdictions. The company currently has streaming agreements with 20 operating mines and nine development stage projects.
However, while the quality of the asset is Wheaton’s primary consideration in choosing a streaming partner, it’s only part of the equation, says Mr. Smallwood. The company is also firmly committed to demonstrating leadership in social licence – the standard by which mining companies around the world are now being judged.
“We are a leader in sustainable re-investment in local communities. In collaboration with our mining partners, we share the benefits of mining through a multi-faceted community investment program that supports health, education, employment and other community benefits for the people and communities in which our partners operate,” he says.
Wheaton has also committed to the United Nations Global Compact on responsible business – the only streaming company so far to do so – and to the Responsible Gold Mining Principles of the World Gold Council.
“Maintaining a strong social licence is something that’s required by the industry as a whole, and I am proud that Wheaton is a leader in this space. We have demonstrated by example to other streaming companies that it’s the right course of action to contribute back to the communities where the metals are produced,” says Mr. Smallwood.
And while committing to the principles of responsible mining is the right thing to do, it also has a significant bearing on financial performance.
“If a company doesn’t take this seriously, it will eventually cease to exist. It’s something the world is getting more and more cognizant of,” he says.
It’s this combination of selecting high-quality assets underpinned by ethical business practices and concern for the interests of all stakeholders – the community, partners, shareholders and employees – that differentiates Wheaton from many of its streaming peers, adds Mr. Smallwood.
He is confident that it’s a solid platform on which to keep growing the company as it strives for the next big milestone – 1 million gold equivalent ounces of production annually.
For more information, visit wheatonpm.com
Produced by Randall Anthony Communications. The Globe’s editorial department was not involved in its creation.