Wheaton Precious Metals ( WPM ) reported a weak third quarter owing to a fall in silver sales volume and lower average price realization for precious metals.
Both silver and gold shipment volume remained low mainly due to a significant widening of Wheaton’s metal payable balances which were not delivered to the company. For the third quarter 2017, approximately 1.1 million payable silver ounces and 8200 payable gold ounces were produced but not delivered to Wheaton. Additionally, a significant fall in gold output was realized which was in line with the company’s expectation. The fall was attributable to the reduction of the company’s stake in mine 777 from 100% to 50% since Jan ’17. The company has otherwise maintained its outlook of producing 28 million ounces of silver and 340,000 ounces of gold for 2017.
Average realized gold and silver prices were 4% and 14% lower, respectively, compared on a Y-O-Y basis. Prices of precious metals had hit record highs during Q3 last year due to the increasing macroeconomic uncertainty in the wake of the UK’s June EU referendum and global economic weakness. Precious metals have otherwise averaged out at a nominal level for 2017 owing to the uncertainty pertaining to North Korea’s nuclear agenda. Realized gold and silver prices were 2% and 1% higher respectively, when compared on a quarterly basis.
Wheaton announced a dividend of $0.09 a share payable to shareholders of record on November 27, 2017. The company aims to remain the highest dividend payer in the precious metal streaming sector and aims to achieve this through its high operating cash flows.
The company didn’t provide any update on the status of the company’s tax dispute with the Canadian Revenue Agency (CRA). The CRA is reassessing the taxes on the income earned by Wheaton Precious Metals’ foreign subsidiaries for the period 2005-2010 and has argued that this income should be subject to taxes in Canada even though they are operational in tax haven jurisdiction (Cayman Islands). The ongoing dispute has created an atmosphere of uncertainty regarding the implications on the company’s future operations even though the company’s management remains confident of the validity of its tax position. More clarity on this front will shed some light on the road ahead for Wheaton Precious Metals.
We have a $19 price estimate for the company which is 5% below the market price.
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