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Wheaton Precious Metals Reports 1Q Profit, Deal With First Majestic

Kitco News

(Kitco News) - Wheaton Precious Metals Corp. (TSX, NYSE: WPM) late Thursday reported higher first-quarter adjusted earnings and also announced a new streaming agreement with First Majestic Silver Corp. (NYSE: AG; TSX: FR).

Excluding special items, adjusted net earnings were $70 million, or 16 cents per share, compared with $61 million, or 14 cents, for the same period in 2017.

Net earnings were $68 million, or 15 cents, up from $61 million, or 14 cents.

Revenue of $199 million was up from $198 million in the year-ago period, with the lift coming from a 21% increase in the number of silver ounces sold to 6.3 million and a 10% increase in the average realized gold price to $1,330 an ounce. This was partly offset by fewer gold ounces sold and 4% decline in the average silver price, the company said.

First-quarter production was 7.4 million ounces of silver, a year-on-year increase of 12%, Wheaton reported. This was primarily due to higher production from the San Dimas mine, partially offset with the expiry of the Cozamin silver-purchase agreement on April 4, 2017. Gold production totaled 79,657 ounces, a decrease of 4.9%, mainly due to lower production at the Minto and Sudbury mines.

As of the end of the third quarter, payable ounces attributable to Silver Wheaton produced but not yet delivered amounted to 4.8 million silver ounces and 84,800 gold ounces, the company said. A dividend of 9 cents per share will be paid to holders of record as of the close of business on May 25 and will be distributed around June 7.

“We are encouraged by the sharp rebound in production at San Dimas and welcome First Majestic as a partner,” said Randy Smallwood, president and chief executive officer. “With this strong foundation in place, we continue to advance a number of new opportunities for additional accretive growth that we believe will deliver long-term value to our shareholders.”

On Thursday, First Majestic Silver Corp. announced that it closed the previously announced acquisition of Primero Mining Corp. In connection with this, Wheaton has terminated the existing San Dimas silver-purchase agreement and entered into a new San Dimas precious-metal purchase agreement with First Majestic.

The precious-metals purchase agreement will cover 25% of gold production plus an additional amount of gold equal to 25% of silver production converted to gold at a fixed gold-to-silver exchange ratio of 70:1 from San Dimas. There are provisions to adjust the gold-silver ratio if the average moves above 90:1 or below 50:1 for a period of six months. Also, for each ounce of gold delivered, Wheaton International will pay to First Majestic a production payment equal to the lesser of $600 an ounce, subject to a 1% annual inflationary adjustment, and the prevailing market price.

First Majestic also issued nearly 21 million of its shares to Wheaton International.

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