Gold Establishing New Price Floor, Wheaton's Q2 Results

Randy Smallwood: Gold Establishing New Price Floor, Wheaton’s Q2

Strength in the US dollar is weighing on gold, but Randy Smallwood, president and CEO of Wheaton Precious Metals (TSX:WPM,NYSE:WPM), is encouraged to see the yellow metal putting in a new price floor.

“I really do think that we’ve established a new floor, a new basement for gold,” he told the Investing News Network, adding that he wouldn’t be surprised to see the precious metal move higher in the fairly near future.

“I think we’re setting ourselves up for a breakout sometime in the next couple of years for gold, where we can set some new record levels in terms of pricing,” he said. “The reasons for owning gold have never been stronger.”

Smallwood also spoke about Wheaton’s latest quarterly results, which were released on August 11.

Although the company’s cashflows and earnings were on track with what was expected, production was lower, and Wheaton has reduced its annual guidance to an estimated 640,000 to 680,000 gold equivalent ounces.

“One never likes to reduce guidance, and it’s the first time we’ve ever had to reduce guidance in our company I think all the way back to probably 2013,” Smallwood said during the interview. “But sometimes you just can’t capture all those contingencies and all those risks when you’re originally looking at it.”

Vale’s (NYSE:VALE) Salobo operation is the largest asset in Wheaton’s portfolio, and Smallwood pointed to its underperformance as the main reason for the company’s reduction in guidance. After a site visit, he feels confident that Vale will get the mine back on track, but he noted that there’s still a lot of work to be done.

Smallwood emphasized that Wheaton has a strong long-term growth profile, and said that in order to build on that the company will primarily be looking to do business with single-asset development companies.

“It doesn’t mean immediate production, but it means a very, very strong growth profile,” he explained, noting that asset quality is a key characteristic when it comes to doing deals.

“You’ve got to make sure there’s healthy enough margins,” he said. “That includes potential increases in taxation, potential inflationary increases. (It should) still be a good, profitable mine — that’s the most important criteria.”

Watch the interview above for more from Smallwood on Wheaton’s Q2 results.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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