Wheaton Precious Metals hikes quarterly dividend 43% on sector-leading cash flow

VANCOUVER (miningweekly.com) – Metals-streaming pioneer Wheaton Precious Metals (WPM) has increased its quarterly dividend by 43% to $0.10 a share, as its strong cash flow of $250-million during the first half of the year, combined with ample liquidity, encouraged the board to return more cash to investors.

Under the company’s dividend policy, the quarterly dividend per common share will be equal to 30%, up from 20% in previous quarters, of the average cash generated by operating activities in the previous four quarters, divided by the company’s then outstanding common shares, all rounded to the nearest cent.

“As a result of our sector-leading cash flow, as well as ample access to capital to finance acquisitions through our revolving credit facility, we have taken the step today to increase the amount of capital we return to our shareholders with a significant increase to our dividend,” stated president and CEO Randy Smallwood in a press release Thursday.

The company also reported its financial results for the second quarter on Thursday, recognising operating cash flows of $125-million, or $0.28 a share, in the three months ended June, which reflected a 7% decline compared with $134-million, or $0.31 a share, in the comparable quarter of 2016.

Net earnings rose 12% year-on-year to $68-million, or $0.15 a share, beating market forecasts calling for earnings of $0.14 a share, based on expected revenues of $217.55-million. Revenues for the period came in at $200-million, down 6% year-on-year mainly owing to an 11% decrease in the number of silver ounces sold, which was partially offset by a 2% increase in the number of gold ounces sold.

As at June 30, the company had about $77-million of cash in the bank and $953-million outstanding under its $2-billion revolving term loan, which, combined with ongoing operating cash flows, positions WPM well to fund all outstanding commitments and known contingencies. It also allows for flexibility to acquire additional accretive precious metal stream interests, noted the company.

WPM reported attributable output of 7.2-million ounces of silver and 78 100 oz of gold, down 5% and up 10% year-on-year, respectively. Production was boosted by a 61% increase in attributable gold output from Vale’s Salobo mine, in Brazil, and a 71% increase in attributable silver output from Goldcorp’s Peñasquito mine, in Mexico.

Silver output was hurt by a 39% fall in silver production from Primero Mining’s San Dimas mine, also in Mexico, and continued material uncertainty regarding the operating future of the operation. In Sudbury, Ontario, attributable gold output from Vale’s operations fell 53% year-on-year to 7 000 oz, as scheduled expansion and maintenance work was implemented. Planned lower grades at Hudbay Minerals’ Constancia mine, in Peru, also resulted in a 30% and 50% drop in attributable silver and gold ounces produced to 500 000 oz and 2 300 oz, respectively.

WPM, which in 2004 was first to use the precious metals streaming model for funding mining development, by providing up-front capital funding in exchange for a future stream of typically ‘non-core’ metals – such as the silver from a lead/zinc mine, or the gold from a copper mine – expects to produce 28-million silver ounces and 340 000 oz of gold this year.

The company is looking towards annual attributable silver and gold output over the next five years (including 2017) of 29-million ounces silver and 340 000 oz/y of gold. This guidance does not include any production from Barrick Gold’s Pascua-Lama project, straddling the Chile/Argentina border, or Hudbay’s Rosemont project, in Arizona.

Meanwhile, WPM on Thursday announced that it had signed a nonbinding term sheet with Desert Star Resources to enter into a $65-million early-deposit precious metals purchase agreement for the Kutcho project, located in British Columbia.

The streaming model is considered not as restrictive as traditional financing, and it does not dilute the mining partner’s shareholders.