Although its “gold equivalent” sales fell, 1.9% from the previous quarter (though up 5.6% from a year ago), its attributable production was nearly 8% more than sales, due to delays in cobalt deliveries from the Salobo mine, the first quarter of cobalt deliveries.
Although the gold price fell in the quarter, the realized price of silver and palladium both increased, more than offsetting the gold price decline. Similarly, gold sales fell by 13% while silver sales jumped 45%.
Overall, Wheaton’s revenues increased, by 13% relative to the prior quarter and by 27% compared with a year ago. The silver share of total revenues rose to 54%, while gold revenues fell from 57% to 42%.
Wheaton’s cash position remains virtually unchanged, at $191 million. During the quarter Wheaton acquired a new gold stream on Capstone’s Santo Domingo, and repaid debt of nearly $200 million.
Wheaton now is essentially debt free, with over $2 billion in available liquidity. Santo Domingo, a long-life copper mine in Chile, is expected to commence production in 2024, generating about 35,000 ounces per year for the first five years. This is the third small stream acquired by Wheaton over the past six months, for a total of $550 million.
The stock has rallied, up from under $36 in early March, though it has been a laggard since the sector peak last August. Compared with other major royalty companies, it is undervalued.
On the price-to-cash-flow metric, only Royal Gold is less expensive, but on price-to-free-cash-flow, it is by far the lowest valuation: 24 times, compared with 32x for Royal Gold (RGLD), 74x for Osisko Gold Royalties (OR) and 77x for Franco-Nevada (FNV). If you are underweighted in the sector, Wheaton would be the top buy now.