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Cash-strong Wheaton goes to the ATM

Canadian metals streamer Wheaton Precious Metals has announced a surprise at-the-market equity programme to issue up to $300 million of shares.
Cash-strong Wheaton goes to the ATM Cash-strong Wheaton goes to the ATM Cash-strong Wheaton goes to the ATM Cash-strong Wheaton goes to the ATM Cash-strong Wheaton goes to the ATM

WPM CEO Randy Smallwood is lining up finance options for something big on the base metals side

WPM intends to use the net proceeds as a potential source of funding for stream acquisitions and/or other general corporate purposes including to pay back debt.

However, the ATM programme has some observers scratching their heads, given the share bloodbaths of the past week and the company's strong liquidity.

The WPM share price is well below its 12-month peak at values around US$34 and it is hard to expect a major recovery in the near-term.

The programme remains subject to finalisation and filing a prospectus.

CEO Randy Smallwood said on a full-year results conference call continued access to capital was crucial to efficiently consummating any new transactions. "The opportunities we're looking at right now are very strong and sizeable deals. We need to ensure we're very nimble to close the deals," he said.

CFO Gary Brown said he was "very fond" of the ATM model, because it came at much reduced cost to shareholders.

The company has increased its quarterly dividend by 11% over 2019 to reduce volatility throughout the year. Under its new minimum dividend policy, the forecast annualised dividend for 2020 would represent an increase of more than 90% over a five-year period.

WPM said record 2019 gold and palladium sales volumes underpinned its strong financial performance for the year.

"WPM's portfolio of high-quality, long-life assets generated over $500 million in operating cash flow in 2019 with annual gold production and sales volumes achieving a new record," said Smallwood.

Total attributable output of 707,200 gold-equivalent ounces exceeded the company's production guidance for the eighth consecutive year.

In 2019, gold sales rose 11.4% to about 390,000oz, with silver sales down 18.5% to 17.7Moz and 20,681oz palladium. Gold-equivalent sales were essentially flat year-on-year at 628,447oz.

The company generated more than $131 million in operating cash flow in the fourth quarter, upping the full-year total to more than $500 million, a 5% improvement over 2018.

Revenue was up 8.5% at $861.3 million, generating 18% higher headline earnings at $252 million, or 56c a share, on the back of stronger gold sales, and gold and palladium prices.

WPM reported improved margins on its metal receipts, including $969/oz gold sold, $11.27/oz silver and $1,269/oz palladium.

The company used some of that cash to pay back $418 million in debt, leaving $875 million outstanding on the $2 billion revolver, combined with about $104 million cash on hand.

Output this year is expected to range between 685,000-725,000oz gold-equivalent, comprising 390,000-410,000oz gold, 22-23.5Moz silver and 23,000-24,500oz palladium.

Wheaton also provided a five-year production outlook, guiding for 750,000ozpa through 2024, not including production from Barrick Gold's Pascua-Lama project or Hudbay's Rosemont.

WPM shares (WPM:NYSE) have come under pressure with the market turmoil this week, falling nearly 14% and going as low as $22.01 early Thursday. But it closed at $26.50, valuing the company at $11.9 billion.