Can you explain what factors contributed to the almost doubling of Wheaton Precious Metals’ (WPM) share price from March to May, despite the COVID-19 outbreak’s impact on production output?

The COVID-19 pandemic had a significant impact on WPM’s operations, particularly in Mexico and Peru, where national directives to limit the spread of the virus resulted in the temporary suspension of operations in March. However, preparations were made to restart production in late May, and at its peak, about 35% of WPM’s production was affected in the second quarter. Despite this setback, WPM had a strong Q1 2020 performance with over C$177 million generated in operating cash flow, representing a 50% year-over-year increase. Additionally, the success of Newmont’s Peñasquito mine, Vale’s Salobo mine’s continued outperformance, and a strong organic growth profile for the next five years contributed to investors’ positive sentiment towards WPM. Furthermore, WPM’s streaming model is beneficial as it provides investors with exposure to gold without the operating cost risk.

What is your perspective on the current sentiment surrounding the gold market?

The economic impact of the COVID-19 pandemic has not yet been fully realized, making it difficult to predict the market’s future. Governments’ solution to stimulate economies has been to print vast amounts of money, which is expected to devalue currencies. Thus, the current context is ideal for gold to perform and demonstrate its value as a store of value that has survived for thousands of years.

The gold/silver ratio has remained low for some time. Do you think it’s only a matter of time before silver experiences a surge in price, or will a lack of industrial demand hinder its value?

The current fundamentals of silver are even stronger than gold, making it an affordable precious metal. Historically, silver has always lagged behind gold before outperforming it. However, it also crashes harder during a bear market, making it challenging to identify the bottom. Silver’s value is driven by the retail market, and WPM expects recent investment in the gold space to transition to silver. Furthermore, silver is used for high-efficiency electronics and anti-bacterial applications, making its demand expected to remain strong. Although WPM is now over 60% gold, it remains bullish on silver.

What sets WPM apart from other players in the royalty and streaming space?

WPM’s focus is solely on streaming agreements, having developed the model in 2004, which the company understands well. The streaming model has many advantages over royalties, and this is why traditional royalty companies, such as Franco Nevada, have begun streaming. WPM’s success lies in its focus on high-quality assets, with 88% of the company’s production coming from the bottom half of the respective cost curve, making it an attractive investment option. Moreover, WPM was the first among royalty and streaming companies to direct a portion of its profits towards the communities surrounding the mine sites from which it receives precious metals. The company’s strong Community Investment Program sets it apart from its peers.

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