Wheaton Precious Metals Corp (WPM)

[investora2z]

The reaction to the earnings will be seen over the next few days. The company achieved record attributable silver equivalent production of 8.6 million ounces (up 28%). Silver equivalent sales increased by 4% to 7.2 million ounces. The revenues declined by 17% to $166.9 million and the net earnings fell by 50% to $71.1 million. The operating cash flows also declined by 28% to $125.3 million. Importantly, the cash operating margin also declined from $25.01 per silver equivalent ounce in Q2 2012 to $18.28. The debt on books has increased over the last few quarters and the cash on June 30 was $36.3 million compared to $778.2 million on December 31, 2012 and $75 million on March 31, 2013. So, on the face of it, the performance is not too great. Meanwhile, the rise in silver and gold prices has led to a decent rally in mining / streaming company stocks over the last few sessions. Silver Wheaton has appreciated by more than 40% from the 52 week low made in June. Many analysts have mentioned cost of production & leverage as major factors in selecting stocks. An article on investing.com (Drilling for $1300/oz Gold: A look at Nevada's Investment Conundrum), highlights that the importance of reducing cost of production. Even Moody's had expressed similar sentiments about mining companies, wanting them to reduce costs. The outlook for the sector is improving, though things can change suddenly. There are positive signs with companies putting money in development stage companies. Pershing Gold (PGLC) was able to obtain $9 million funding (at market price of the stock) for starting production in 2014. The production cost for Pershing is likely to be around $700-$800 per ounce. For Silver Wheaton, reaction to the earnings will be the crucial factor in determining the immediate future. Hopefully, silver will continue to strengthen so that the mood improves.