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Wheaton Enters Precious Metals Purchase Agreement with Sabina

Wheaton Precious Metals (TSE: WPM), a multinational precious metals streaming company, announced Tuesday that it has entered into a definitive precious metals purchase agreement with Sabina Gold & Silver (TSE: SBB).

Acquisition of Gold Stream

Under the agreement, Wheaton will acquire gold stream from Goose Project, which is part of the Back River Company wholly owned by Sabina Gold District located in Nunavut, Canada.

The Goose Project is expected to be a high-margin mine in the lower half of the gold cost curve with a 15-year mine life.

Wheaton agreed to pay Sabina an upfront payment of $125 million during construction of the project.

The company will be entitled to receive 4.15% of payable gold production from the mine, falling to 2.15% after delivery of 130,000 ounces of gold and falling 1.5% after delivery of 200,000 ounces of gold.

Gold production attributable to the Goose Project is expected to average 11.7 koz/year for the first five full years of production and 10.7 koz/year for the first 10 full years. Sabina expects production to begin in the first quarter of 2025.

CEO Commentary

Wheaton president and CEO Randy Smallwood said, “The Goose Project in the Back River Gold District in Nunavut provides Wheaton with an exceptional opportunity to expand our portfolio into one of Canada’s strongest and fastest-growing mining jurisdictions. Underscored by a respectful development approach and calculated de-risking through sound environmental and social responsibility mandates, we are proud to partner with Sabina on the advancement of this project.” 

10-Year Production Guidance Raised

Following the agreement and the planned addition of attributable production from the Goose Project, Wheaton is increasing its 10-year production guidance to 910,000 gold equivalent ounces (GEOs) from 900,000 GEOs.

The 2022 and five-year forecasts remain unchanged at 700,000 to 760,000 GEO in 2022s and 850,000 GEOs on average for the next five years.

Wall Street’s Take

On February 7, BMO Capital analyst Jackie Przybylowski kept a Buy rating on WPM and raised its price target to $51 (C$64.64). This implies 22.7% upside potential.

Overall, consensus on the Street is that WPM is a Strong Buy based on nine Buys and two Holds. The average Wheaton Precious Metals price target of C$65.68 implies 24.7% upside potential to current levels.  

TipRanks’ Smart Score

WPM scores a 6 out of 10 on TipRanks’ Smart Score rating system, indicating that its stock has a good chance of performing in line with the overall market.

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