Gold Miners Need To Keep Plugging Away To Regain Investor Trust - Randy Smallwood
(Kitco News)- Years after destroying shareholder value, the miningindustry, while on the right path, still has more work to do before regaininginvestor trust and bringing capital back into the sector, according to one miningCEO.
In an interview with Kitco News, Randy Smallwood, CEO ofWheaton Precious Metals (NYSE: WPM, TSX: WPM, said that companies have to continue to deliver valueto shareholders to make up for years of “overpromising and under delivering.”He added that while the sector as a whole is heading in the right direction,it’s a gradual process that should eventually pay off in the end.
“Companies have to continue to deliver to shareholders,” hesaid. “When there is a break in trust, you can’t just turn it back on; it issomething that has to be rebuilt over time. As we continue to deliver results,more investors will come back to the market.”
Smallwood’s comments come after Wheaton Precious Metals reportedhigher adjusted earnings for the first quarter of 2018. Last week, the companysaid that, excluding special items, adjusted net earnings were $70 million, or16 cents per share, compared with $61 million, or 14 cents, for the same periodin 2017.
Smallwood added that an amended streaming agreement withFirst Majestic Silver is an excellent example of how his company has learnedfrom the past to provide better results for its shareholders.
At the same time as the earnings announcement, Wheaton also revealeda new streaming agreement with First Majestic on its newly acquired San Dimasmine, which it bought from Primero Mining Corp. In the new deal, Wheaton willget 25% of the gold production projects and 25% off its silver production. Thecontract was amended from a 100% streaming agreement for the project’s silver.
“The steaming agreement with Primero was our first as acompany and we have learned a lot since then,” he said.
He said that the problem with the original streamingagreement was that Primero was focused more on gold than silver. Smallwoodexplained that it is better to have two smaller producing precious metalstreams than 100% of one.
Smallwood said that he is looking forward to seeing whatFirst Majestic does with its new project.
“We think that First Majestic is going to have great successwith San Dimas,” he said. “San Dimas will, by itself double First Majestic’sproduction. This is one of the best mines they have in their portfolio.”
Another issue that has weighed on Wheaton’s stocks is itsongoing tax dispute with the Canadian Revenue Agency. In its first-quarterearnings report, the company said that a trial date has been set formid-September 2019; however, he added that the company is still hoping to reacha settlement before the trail. He said that they are confident that they willbe able to settle with the Canadian government within the next year-and-a-half.
“We continue to work on clawing back some of that lostshareholder value from the lawsuit by continuing to deliver good operatingresults,” he said. “We don’t think there is much of a case on the government’sside; that is why we think a settlement makes sense.”
Not only are there proactive steps that companies can taketo create value for their shareholders, but Smallwood is also expecting morecapital to flow back into the sector as precious metals prices improve.
He added that he is still confused by silver’s lacklusterperformance, but said that at some point the market has to turn.
“It all comes down to the U.S. dollar and I don’t seeanything sustainable in the U.S. dollar,” he said. “The U.S. dollar can benefitfrom short-term fluff, but there is nothing sustainable. It all comes down towhat you see as a long-term store of value and to me, that is gold and silver.”
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.