“I don’t have any problem envisioning gold over US$2,000 an ounce,” said Smallwood, who is president and CEO of Wheaton Precious Metals.
As governments around the world rush to stem the impact of the coronavirus, what’s the potential for precious metals prices?
“During the the last global financial crisis back in 2008, 2009, 2010, when we talked about quantitative easing it was always measured in billions. This time round it’s measured in trillions — there’s a lot of billions in trillions, and so I am incredibly bullish on precious metals as a store of value,” he said.
Smallwood expects to see further stimulus efforts, which makes him believe that there’s no better time to be in precious metals. “I don’t have any problem envisioning gold over US$2,000 an ounce,” he said.
He also spoke about what makes royalty and streaming companies a safe bet — even in the current market, where so many mining companies have been impacted by COVID-19.
“The real benefit to shareholders, to investors in the precious metals space, from a streaming company is the fact that you get full exposure to the commodity price and to the expansion and exploration potential, but you don’t get the cost risk that comes with a traditional mining company investment.”
He continued, “And that’s the real key thing — no capital cost risk, no operating cost risk. You know what our costs are going to be — they’re predictable on a go-forward basis, both on the capital and operating side.” That means a royalty and streaming company can ensure that it has a strong balance sheet.
Aside from those points, Smallwood believes Wheaton Precious Metals has an advantage right now in terms of possible acquisitions as most of the company’s partners are base metals operations looking to offload their precious metals by-products.
“If you look at the base metal space, especially with the impacts of this pandemic, the consumer, the demand side for base metals, has taken a hit, and we’ve seen commodity prices of copper and lead and zinc and nickel all drop as a result of this pandemic,” he explained.
That’s likely to stress the balance sheets of some base metals companies, meaning they may be on the hunt for capital. “We’re very bullish on the opportunity. In fact, we’ve already had some activity in terms of companies approaching us to look for additional sources of funding and capital as we go forward.”
Watch the interview above for more from Smallwood on Q1 results from Wheaton Precious Metals, plus additional thoughts on royalty and streaming companies and the overall precious metals space.
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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.