Nick Hodge Finds Underground Profits at Wheaton

10/04/2019 5:00 am EST

Focus: COMMODITIES

Nick Hodge

Founder and President, Outsider Club

Streaming allows you to get into metals projects without some of the risks that come with owning those projects directly, explains resource sector expert Nick Hodge, editor of the industry-leading advisory, Wall Street's Underground Profits.

It also allows you to participate in the leverage that rising metals prices deliver in a way bullion and funds can’t. And if it’s good, a streaming company will also give you yield and growth. And so as the gold bull market unfolds, we’re going to buy another one.

The company profile is straightforward — it is one of the largest precious metals streaming companies in the world. Wheaton currently has streaming agreements in place with 19 operating mines and 9 development-stage projects primarily in North and South America, but also in Europe.

One of those 19 is a stream on Vale’s Salobo mine — the largest copper deposit ever found in Brazil. Wheaton gets 75% of the gold that comes out of it for life with none of Vale’s operation risk.

Wheaton Precious Metals’ consolidated production from Salobo is expected to average 180,000 ounces per year over the first 30 years, with higher production expected in the earlier years.

Another of its streams is on Newmont’s Peñasquito mine — Mexico’s largest open-pit mine. Wheaton gets 25% of the silver it produces for life.

Wheaton also gets 100% of Sibanye-Stillwater’s gold production at the Stillwater mine in Montana, as well as 4.5% of its palladium. And Wheaton gets 42.4% of the cobalt that comes out of Voisey’s Bay.

This year, over two thirds of its production will come from assets that have costs in the lowest-cash quartile. It is guiding toward 690,000 gold-equivalent ounces produced with cash costs below $430 per ounce.

Quarterly dividends are linked to operating cash flows, whereby 30% of the average of the previous four quarters’ operating cash flows are distributed to shareholders, with a minimum of $0.09 per share per quarter for 2019.

Wheaton gives you near-equal exposure to gold and silver, and has a bit of exposure to cobalt as well. It will be a go-to name in this gold bull market. Let’s go to it now.

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