Wheaton precious metals: A streamlined appproach to precious metal markets

“The best business is a royalty on the growth of others, requiring little capital itself.”

Warren Buffett

Judging by the amount of press coverage they have received, one could easily be forgiven for thinking that the investment universe of global stocks is restricted to the “Magnificent 7”, a group of United States (US) large-cap tech companies comprising Alphabet (parent company of Google), Amazon, Apple, Meta (formerly Facebook), Microsoft, Nvidia and Tesla. Never in history have we seen such dominant and profitable business models so unaffected by the burden of size.

To illustrate their dominance of the global equity market, at the beginning of June 2025 the MSCI World Index comprised 1,325 stocks with a combined market capitalisation of about $85 trillion.  The Magnificent 7’s combined market capitalisation was $18 trillion, around 22% of the index by weight. Despite significant investment in research and development, as well as capital expenditure, the Magnificent 7 businesses are still expected to cumulatively earn around $650 billion in net income in 2026.

However, this article will focus on one of the other 1,318 other companies in the index, which also has a unique and extremely profitable business model – Wheaton Precious Metals Corp.

Wheaton precious metals – a background

Wheaton Precious Metals, trading under the ticker WPM on the New York Stock Exchange and Toronto Stock exchange, was established in 2004, with its headquarters located in Vancouver, Canada. The company initially operated as Silver Wheaton, maintaining an exclusive focus on silver streaming agreements – where the company provides upfront capital to a silver mine, with the right to purchase a percentage of the mine’s future silver production at a predetermined, but discounted price. Over time, recognising broader opportunities within the precious metals sector, the company strategically diversified its portfolio. This evolution culminated in its rebranding to Wheaton Precious Metals in 2017, reflecting its expanded scope beyond just silver.

A significant aspect of Wheaton’s history is its pioneering role in the streaming concept itself. The company was instrumental in developing and popularising this financing model within the mining industry starting in 2004. This first-mover advantage has been a cornerstone of its success. Since its inception, Wheaton has executed over $12 billion in streaming transactions, contributing more than 40% of the total committed capital to the mining industry during this period. This historical and ongoing market share underscores foundational influence and leadership in the sector. The extensive institutional knowledge, established relationships, and refined operational processes, developed through this pioneering role, provide a substantial competitive advantage, making it challenging for newer entrants to replicate Wheaton’s scale and quality of agreements. Today Wheaton Precious Metals stands as the world’s preeminent precious metals streaming company, distinguished by its portfolio of high-quality, long-life, and low-cost assets.

The company’s client base comprises some of the world’s largest and most reputable mining companies. Key mining partners include major multinational corporations such as Vale, Newmont, Glencore and Barrick Gold. These partnerships with top-tier miners represent a strategic choice to align with large, established, and financially stable operators. Such partners typically possess robust balance sheets, superior operational expertise, and greater capacity to navigate complex regulatory and geopolitical challenges compared to smaller, less capitalised entities.

Wheaton’s portfolio is geographically diverse with streaming agreements covering mines in North America, Europe, South America and Africa, on 18 operating mines and 27 development-stage projects. The company’s extensive geographic and project diversification significantly reduces single-asset or single-jurisdiction risk, a common vulnerability for traditional mining companies. Furthermore, the portfolio boasts an estimated average “life of mine” of 28 years based on proven and probable reserves, with over 80% of its production originating from assets operating in the lowest half of their respective cost curves. This focus on low-cost assets ensures profitability and resilience even during periods of commodity price fluctuations, providing long-term, stable cash flows.

The company’s portfolio is predominantly exposed to gold, which in 2024 accounted for 62% of its revenue, silver about 36%, and palladium and cobalt, which are more recent additions, at 1% each. While gold and silver are traditional precious metals, palladium is crucial for automotive catalysts, and cobalt is a vital component in batteries used for electric vehicles and renewable energy storage.

Wheaton’s management’s focus to increase diversification extends Wheaton’s revenue streams beyond traditional safe-haven demand, signifying a forward-thinking strategy and positioning it to benefit from the broader global transition towards electrification and sustainable technologies. This strategy will see the company hedging against potential stagnation in pure safe-haven metal demand.

Wheatons’s unique business model

Wheaton operates on a unique and highly effective streaming business model. At its core, this involves providing upfront capital to mining companies. This initial payment serves as an advance for a portion of their future precious metals. A key aspect of Wheaton’s approach to these capital commitments is that most of the funds are often disbursed upon the completion of various stages of mine construction, which helps protect Wheaton in the event of project delays.

A crucial aspect of this model, especially for Wheaton, is that the metals involved in these streaming agreements are often by-products of the mining company’s primary operations. For instance, a mine might primarily focus on extracting base metals like copper, but in the process, it also produces gold or silver. These precious metals, while valuable, might be considered secondary or non-core assets by the primary miner.

This “by-product” dynamic creates a mutually beneficial scenario:

• For the Mining Partner: The mining company gains a non-dilutive and flexible source of capital by monetising these non-core assets. This upfront funding can be used for various strategic purposes, such as financing new acquisitions, distributing dividends to shareholders, supporting community programmes, building or expanding mines, or repaying debt. It allows them to unlock value from their diverse metal productions without diluting equity or incurring traditional debt obligations.
• For Wheaton Precious Metals: Wheaton benefits significantly by acquiring these metals at a substantial discount, often below the prevailing spot price. Since these by-products may be undervalued by the primary miner (whose focus is on the main commodity), Wheaton can secure even more favourable pricing, leading to consistently high cash operating margins. This model provides Wheaton with cost predictability and the ability to leverage any potential increases in precious metal prices, while largely mitigating inflationary cost pressures and operational risks that typically affect traditional miners.

Once the mine begins production, the operating company delivers the agreed-upon proportion of metals to Wheaton. At this point of delivery, Wheaton makes an additional predetermined “delivery payment” per unit, which is generally set at a fixed, deeply discounted price relative to the prevailing spot market price of the metal. Wheaton then sells these acquired metals at the market spot price, generating its revenue. This strategic focus on by-product streams, combined with the structured payment timing, allows Wheaton to access high-quality production with a lower risk profile, as it avoids the direct operational responsibilities and associated capital expenditures of running a mine.

In short Wheaton positions itself as a hybrid between a financier and a miner—without exposure to operational risks.

Wheatons vs. traditional mining companies

Table 1 summarises what we see as the most important differences between Wheaton and traditional mining companies. Across various operational and financial criteria, the streaming model is superior, allowing investors to capture significant commodity price leverage while avoiding some of the inherent risks associated with traditional mining. Generally, we avoid investing in commodity companies when looking for global investment opportunities for several reasons. While commodity prices can be volatile and may experience sharp rallies, companies face persistent challenges such as rising operating costs, capital expenditure requirements, regulatory and geopolitical risks, and the need to manage complex supply chains.

Table 1: Major differences between streaming and traditional mining business models

Figure 1 illustrates the strength of Wheaton’s business model more clearly. Over the last 20 years an index of gold mining companies has significantly underperformed both spot gold and silver prices. Wheaton, by virtue of its unique business model, which explicitly avoids these risks has consistently outperformed.

The investment case

When looking for investment opportunities, being able to get exposure to various positive idiosyncratic drivers (factors that affect price or performance of an asset) is ideal. We see Wheaton as an effective hedge, which diversifies our equity exposure, while also allowing us to benefit from key industrial trends. In summary, we see the following as key arguments for the investment case:

• Benefitting from safe-haven demand:Ongoing geopolitical conflicts, trade disputes, and global economic uncertainty contribute to an environment of risk aversion. In such times, investors often flock to safe-haven assets like gold and silver, driving up demand and prices.
• Preserving value during fiscal instability and financial risk:Gold demand rises sharply during periods of fiscal instability, as investors and central banks seek a safe-haven asset that is free from counterparty risk and immune to currency devaluation or sanctions. This strategic shift has led to record gold purchases in recent years, with gold’s unique ability to preserve value and provide security making it a preferred hedge against mounting government debt, inflation, and systemic financial risks.
• Increased gold prices due to central bank buying: China, India, and Turkey have maintained near-record levels of gold bullion purchases for the third consecutive year, acquiring over 1,000 tons annually, and accounting for about 20% of global gold demand. This sustained buying spree is driven by central banks’ efforts to hedge against inflation, enhance financial stability, and diversify their reserves, providing a significant tailwind for higher gold prices. In addition, Basel III Endgame is the final phase of regulatory reforms by the Basel Committee, requiring banks to strengthen capital ratios and adjust risk calculations, with implementation expected soon in the US. Gold will be classified as a Tier 1 Asset under these new rules, likely boosting demand for the precious metal by major banks and supporting higher gold prices.
• Capitalising on increasing industrial demand: Beyond their investment appeal, precious metals like silver, platinum, and palladium have significant industrial applications, particularly in burgeoning sectors like renewable energy (solar panels), electric vehicles (catalytic converters), and electronics. The global push towards decarbonisation and technological advancement is expected to drive sustained industrial demand for these metals.
• Hedging against supply constraints: New discoveries of high-grade, easily accessible precious metal deposits are becoming increasingly rare and challenging to develop. This structural supply constraint, coupled with rising costs for traditional miners, provides a fundamental support for higher precious metal prices over the long term.
• Protection through portfolio diversification: One way to measure portfolio diversification benefit is to look at historical correlations. As Figure 2 shows the rolling 12-month correlation between Wheaton and the MSCI World Index is generally low with an average correlation of 0.35 and in times of stress like the Global Financial Crisis, the European debt crisis, and the COVID-19 pandemic, the correlation falls rapidly as the company acts as a very effective hedge.

Figure 2: Rolling 12-month correlation of Wheaton versus the MSCI World Index (correlation coefficient: -1 = inversely correlated, 0 = not correlated, +1= positively correlated)

As Figure 2 shows the rolling 12-month correlation between Wheaton and the MSCI World Index is generally low with an average correlation of 0.35 and in times of stress like the Global Financial Crisis, the European debt crisis, and the COVID-19 pandemic, the correlation falls rapidly as the company acts as a very effective hedge.

Conclusion

Wheaton Precious Metals stands as a compelling investment opportunity within the precious metals sector, offering a unique combination of high-margin profitability, diversified growth, and mitigated operational risk, through its pioneering streaming model. The company’s robust financial position, strategic asset selection, and commitment to shareholder returns, underscore its long-term viability and attractiveness.