Ignore Gold A Second, Wheaton Precious Metals Is Eying This Sector…
(Kitco News) - There is still plenty of opportunities in the mining sector, but prices just need to move higher.
And, according to mining juggernaut Randy Smallwood, that is exactly what is going to happen, especially in base metals.
In an interview with Kitco News, the president and chief executive officer of Wheaton Precious Metals said that a recovery in base metals is providing new opportunities for his company as more companies look to sell their precious metals by-products to raise construction capital.
Copper prices are near their highest level in nearly three years, zinc prices are near a 10-year high and nickel prices are near two-year highs; Smallwood said that this bullish momentum is encouraging mining companies to step up their construction plans.
For many of these base metals projects, silver and gold are produced as a byproduct, new potential growth for Wheaton Precious Metals.
“A lot of companies are firming up their construction plans and in talks with us. All that is needed are for prices to continue to climb,” he said.
In a sector that continuously needs capital, Smallwood said that streaming companies are in the best position to provide the much-needed funds.
“We think it makes sense for mine developers to sell a stream of their noncore assets to raise capital,” he said. “The other option is to raise money through equities but that is massively dilutive. A company increases the number of share by 10% has just diluted the shares of all their investors by 10%. That is not sustainable.”
Smallwood’s comments come after the company reported a smaller profit in the third quarter than a year ago and also trimmed its quarterly dividend by a penny. The lower profits were mainly due to lower metals prices and sales.
Thursday evening, the streaming company reported July-September net earnings hit $67 million, or 15 cents per share. This is down from $83 million, or 19 cents, in the same period a year ago.
However, the company noted its solid cash flow as it is on track to meet its 2017 guidance.
"Wheaton Precious Metals continues to generate strong operating margins from its portfolio of low-cost assets and remains on track to meet full year production guidance," said Smallwood in a press release.
As for the gold market, Smallwood said that he remains optimistic that prices will eventually break out of its narrow range.
“Gold needs to see continued weakness in the U.S. dollar and right now, I think the market is lining up and preparing for that moment,” he said.