The Canadian company Wheaton Precious Metals (NYSE: WPM) released its first quarter 2021 results on May 5, 2022.
1 – A brief overview of the quarter
The company generated revenue of $307.24 million in 1Q22, down 5.2% year-over-year. The adjusted revenue was $158.01 million, or $0.35 per share.
CEO Randy Smallwood said on the conference call:
I am pleased to report that Wheaton is off to a strong start in 2022. Our portfolio continues to deliver strong results including strong revenue, earnings and cash flow for the first three months of 2022
2 – Stock market performance
Wheaton Precious Metals is part of my main long term streamer with Franco-Nevada (FNV). Here is the performance over one year.
WPM jumped 23% year-on-year, slightly underperforming rival Franco-Nevada.
3 – Investment thesis
WPM is one of my go-to long-term investments in the royalty and stream segment just below Franco Nevada (FNV).
The investment thesis has not changed this quarter, and the financial presentation below will clearly demonstrate why I recommend WPM over the long term.
However, a common recurring drawback in this industry is the lack of a decent dividend. The company can certainly afford to increase the actual dividend based on free cash flow.
Although I consider WPM to be a solid long-term investment, I always suggest regularly trading the short-term LIFO, 30% of your long-term position.
This split strategy has been my dominant strategy in my market, “The Gold and Oil Wedge”, and it is the most rewarding strategy while significantly reducing risk.
Wheaton Precious Metals: 1Q22 financials and production
|Total revenue in millions of dollars||324.12||330.39||268.96||278.20||307.24|
|Net income in millions of dollars||162.00||166.12||134.94||291.82||157.47|
|EBITDA in millions of dollars||232.41||237.37||192.19||352.35||215.96*|
|Diluted EPS in $/share||0.36||0.37||0.30||0.65||0.35|
|Cash flow from operating activities in millions of dollars||232.15||216.42||201.28||195.29||210.54|
|Capital expenditures in millions of dollars||
|Free cash flow in millions of dollars||
|Total cash in millions of dollars||191.16||235.45||372.45||226.05||376.16|
|Long-term debt in millions of dollars||0.0||0.0||0.0||0.0||0.0|
|Dividend per share in $||0.13||0.15||0.15||0.15||0.15|
|Shares outstanding (diluted) in millions||450.6||451.2||451.7||451.2||452.0|
|Production in gold equivalent K Oz GEO||190.4||194.1||184.9||186.4||171.4|
|Production in Silver Equivalent Oz SEO||13,706||13,978||13,314||13,421||12,853|
|Realized Gold Price $/Eq. Oz GEO||1,848||1,870||1,764||1,798||1,870|
|Realized Silver Price $/Eq. OzSEO||25.66||25.97||24.51||23.36||24.19|
|The gold/silver ratio||72.0||67.5||72.0||77.0||77.3|
Source: Company press release
* Estimated by Fun Trading
Footnote 1: Historical data (over four years) is only available to subscribers.
Footnote 2: The company has a $300 million ATM program, which has yet to be tapped. However, it is essential to be aware of its existence and the risk of dilution. In the press release:
Market Share Program The Company has implemented a market share program which allows the Company to issue up to $300 million of treasury common stock to the public from time to time, at the discretion of the Company and subject to regulatory requirements.
Analysis: revenue, profit details, free cash flow, debts and gold production details
1 – Revenue: Wheaton Precious Metals reported revenue of $307.24 million in 1Q22
Adjusted net income was $158.01 million, or $0.35 per share, compared to $161.13 million, or $0.36 per share in 1Q21. Cash costs were $477 per GEO, higher than $450 per ounce a year ago.
Lower attributable gold production was primarily due to lower production at Salobo and 777. This was partially offset by higher grade ore at Constancia.
Cash flow from operating activities for the fourth quarter of 2021 was $210.54 million, compared to $232.15 million a year earlier.
Below is revenue by metal for the last four quarters. Cobalt production started in 1Q21:
To note: During the quarter ended March 31, 2022, Wheaton received its fifth delivery of cobalt under the Voisey’s Bay Precious Metals Purchase Agreement.
Gold price increased sequentially to $1,850 per GEO or $1,870 per Au Oz, while silver price also increased up to $24.67 per SEO or $24.19 per Ag Oz. Please see the table below:
2 – Free cash flow was an estimated loss of $164.54 million in 1Q22
As of March 31, 2021, the 12-month FCF was estimated at $406.89 million and the first quarter of 2022 at $164.54 million.
The Board of Directors declared a quarterly dividend of $0.15 per common share or a yield of 1.36%.
To note: Wheaton Precious Metals is a Canadian company and dividends are subject to Canadian tax (15%) taken directly for non-Canadian investors, which reduces the amount paid out to US investors.
3 – Available capital, no debt and liquidity
As of March 31, 2022, Wheaton Precious Metals had cash and cash equivalents of $376.163 million and no debt outstanding under its revolving facility, which is excellent support from a business perspective. a long-term investor.
The company has a $2 billion revolver facility that has been extended for a year (see below). Total liquidity of nearly $2.4 billion.
The graph below shows a significant reduction in debt:
Wheaton’s metal production was:
- 79,087 Au ounces.
- 6,206 ounces AgK.
- 4,488 Pd oz.
- 234 million pounds of cobalt.
5 – 2021 reserves (Total Proved and Probable) and 2021 guidance and recent acquisitions
5.1 – Reserves 2021
As stated in my previous article, the total mineral reserves of P1+P2 are 14.01 Moz of gold, 567.9 Moz of silver, 0.63 Moz of palladium, 0.17 Moz of platinum and 31.4 Moz of Cobalt.
5.2 – The 2022 guidance is unchanged from the previous one.
Gold production for 2022 is expected to be lower than 2021. However, the company expects gold equivalent production of 700K to 760K for 2022.
With the 5-year annual average from 2023 to 2026, WPM guides an average of 850,000 GEOs per year. The company also indicates a 10-year annual average from 2022 to 2031, which is expected to average 910,000 GEO.
5.3 – Aris Gold’s Marmato project
Under the amended terms of Marmato’s PMPA, the Company has agreed to provide Aris Gold with total funding of $175 million. WPM has already spent $53 million and $50 million is to be paid during the construction of the lower mine.
Technical analysis and commentary
Note: Chart is adjusted for dividend.
The WPM is forming an ascending channel pattern with resistance at $52 and support at $44. The trading strategy is to sell around 30% of your position between $51.75 and $52.25. However, the WPM has fallen significantly over a short period of time, and it is essential to watch the medium-term resistance/support line at $48. I recommend taking partial profits at this level and seeing if the WPM can break out and hit the $52 resistance.
I think it is prudent to build up WPM below $44. However, if the stock breaks down, the next lower support is $39.75. I suggest buying slowly using comparable buys (about four potentials), assuming a retest of lower support.
The price of gold has fallen recently with the recent Fed hike and a potential 75 bp hike in June. However, the decline was modest and slowed by the conflict between Russia and Ukraine.
The dominant strategy that I regularly promote in my market, “The Gold and Oil Wedge”, is to hold a long-term basic position and use around 30% to trade LIFO while waiting for a higher final price target. high for your heart in the long run. position between $60 and $70.
Trading LIFO allows you to sell your most recent purchases, assuming a profit while holding your position long term until your position has appreciated enough to consider selling.
To note: The LIFO method is prohibited by International Financial Reporting Standards (IFRS), although it is permitted in the United States under generally accepted accounting principles (GAAP). Therefore, only US traders can apply this method. Those who cannot trade LIFO can use an alternative by setting up two different accounts for the same security, one for long term and one for short term trading.
Warning: The TA table must be updated frequently to be relevant. This is what I do in my stock tracker. The table above has a possible validity of approximately one week. Remember that the TA chart is a tool only to help you adopt the right strategy. This is no way to predict the future. Nobody and nothing can.
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