Wheaton’s Randy Smallwood talks about the company’s record year and the streaming model

For Wheaton Precious Metals (TSX: WPM; NYSE: WPM; LSE: WPM), 2021 has proven to be a spectacular year as the company reports record revenue, cash flows and sales volume in the first six months. In just the second quarter of this year, Wheaton saw net earnings rise 57% from the same time last year to US$166 million, and the company reports it is on track to achieve guidance of 720,000 to 780,000 gold-equivalent oz. this year.

Speaking to The Northern Miner, Wheaton’s president and CEO Randy Smallwood said these results reflect 17 years of growth as the company methodically built its streaming business model into an increasingly important financial tool for the mining industry. This is an edited and condensed version of a conversation conducted in mid-August.

The Northern Miner: What do these record results mean for Wheaton?

Randy Smallwood: It says we’re just on a good strong growth pattern. But what it also means is the mining industry is alive around the world, and they’re reinvesting back into the ground. And if the mining industry is investing back into the ground, it gives the streaming industry and streamers like Wheaton opportunities to help that mining industry grow. We supply capital. And we’re in a strong position, in terms of not only the existing portfolio doing very well, but a number of investments that we’ve made on future production now starting to come into play, and feed in. So, we’ve got a good strong growth profile [and] we’ve got incredibly long-life assets.

One of the things that really makes the streaming industry unique is that we get a lot of exposure to good, long-life metal projects. What’s a little bit unique within the precious metal space is that we’ve got gold streams from copper mines that have 40 year lives in front of them. There’s not many gold mines out there that have 40 year lives in front of them. But because we get gold from these copper mines and lead zinc operations and stuff like that, we’ve built a really good, strong portfolio.

TNM: How much were these results based on the rise in gold prices during the pandemic and what do you think will happen to the gold price when Covid-19 abates?

RS: Well, we also had record sales, right? But I’m going to step back and talk about the price of gold, because we have seen a continual uptrend in the price of gold starting in about 2001. We’ve had a number of, I’ll call them bumps, for lack of a better or more technical term. But with the pandemic bump last year, we hit record highs because the world was very, you know, taken by shock in terms of the pandemic and its impact.

Now, however, I do think that society is learning how to live with this pandemic. Look, if the pandemic disappeared tomorrow, I would expect a bit of a drop in precious metal prices, because the fear factor definitely does come off play. But I wouldn’t expect it to drop much below US$1700. I think we’ve already started to hit our bottoms or very close to the bottom.

Of course, at Wheaton we are always focused on the long term. We still see a very strong trend upwards for precious metals. And so much of it comes from the fact that you can’t talk about gold without talking about the U.S. dollar. And I don’t care what anyone says, the U.S. dollar is definitely the strongest currency in the world. And it will be the strongest currency for a very long time. But it doesn’t have good strong sound fundamentals for the preservation of value. And that’s why gold looks promising.

TNM: Is it important to go beyond just the dollars and cents of commodity prices when you’re looking at potential new additions to your portfolio?

RS: Oh, most definitely. There’s a graveyard of streaming and royalty companies out there that think that this is financial. Far and away the most important aspect of it is that this is not a financial game. The thing with streams is this is not an equity investment. We are investing into mines, this is technical, and the most important criteria is our own technical ability to review these things.

We have detailed reviews of probably 20 plus projects per year. We have quick paper reviews of probably 50 or 60, plus more projects beyond that. And then site visits, [which] in a normal year, without the pandemic, we probably visit about five to seven projects per year. So, it’s all about getting your hands dirty.

My background [is] I’m a geological engineer, and I come from a project evaluation stage. I’ve had the benefit of actually building a couple of mines, or being part of construction teams and successfully operating a couple of small scale but very profitable mines here in Canada. So, the older I get, the more I believe in my nose: it’s got to smell right. And that’s one of the things you get from the experience of actually visiting these mines on a regular basis. We have this overlying belief here that the stronger our partners are, the stronger we are. That’s incredibly important.

TNM: Are you still excited about mining?

RS: For precious metals? Definitely. You know, I think the mining industry has dramatically improved. We’ve still got a lot more work to do, there’s no doubt, and in the end what it’s going to be is a story of continuous improvement. But in terms of environmental impact, in terms of making sure that all stakeholders are part of the process, and doing your best to make sure that all stakeholders are benefiting from this, the mining industry has dramatically improved from where it was 30-40 years ago. I’m proud of the mining industry and the value that it delivers to so many stakeholders, not just the companies and the shareholders, but the communities [and] the governments that collect the taxation.

I’m going to step away from gold and just say the whole mining sector has the capacity to dramatically improve the standard of living in very, very remote and challenged locations. We’ve only got one planet, [so] we have to spend time making sure that it is the best use of the land at that time. I’m particularly passionate about here in Canada because I think that our standards are higher than just about anywhere else in the world. So, let’s lead by example. Yes, it’s very exciting times now.