Wheaton Precious Metals CEO: The driving force on gold is strong demand in Asia
Randy what is your theory as to the key driver of gold right now well driving force on gold right now is just a really strong demand out of Asia both from central banks and on the retail side we’re seeing uh strong strong um I think what we’re seeing is a lot of the retail population in in Southeast Asia of China and and other parts of Southeast Asia um are shifting uh shifting some of their net worth from property into gold feeling a lot more confident about gold than uh than property in the term so we’re seeing a real big pick up in retail demand and then on top of that Central Bank demand uh particularly the Bank of China but uh the central bank and China but but a lot of other banks in that area also driving demand for gold so kind of two questions on that one do we know why they’re buying so much gold in Asia and do we know how much longer it will continue well I think it’s uh I mean I’m going to just make a comment on the on the on the on the Chinese Central Bank in the in the sense that I I think what they’re trying to do is just build up some strength behind their own currency to to try and compete with the US dollar uh you know right now the the Chinese Central Bank has as reported about two and a half thousand tons of gold backing it the United States has about 8 and a half th000 tons so uh how long they they still need another 6,000 tons to truly compete with the US dollar that that uh that that could go for quite a while Randy when um when when viewers ask what is the trend in production cost what’s the easiest way to understand that over the past few years well production costs I mean we’re a streaming company so our costs are defined by contract but even we’ve uh been able to drop our costs our last quarter end here we had a 10% drop in cost year over year and so our margins are even higher than probably near record highs that we’ve ever had there’s no doubt higher prices has driven some profitability and we are starting to see some movement starting to see a bit of a wake up in the equity space of of the gold mining companies the streaming companies um you know this these higher prices will will provide that support costs of course inflationary pressures are challenging especially in remote locations and some of these jurisdictions uh are very very tough to uh to to keep a handle on that but higher prices always help can you explain the difference between a streaming and a mining company and why you’re getting better margin than the traditional miners right now yeah we uh we only have 40 employees we don’t own mines we actually invest into mines but we’re very selective about what we invest into and what we invest into as a streaming company is a portion of the production and so for instance valet one of the largest mining companies in the world well known for its iron or production has a huge copper mine in Northern Brazil and we get 75% of the gold from that mine at a fixed cost of about 400 and I think it’s about $425 an ounce $430 an ounce they deliver 75% of whatever gold they produce to us we turn around sell it into the market at the spot price and then pay them $400 and some odd dollars an ounce that’s a stream and uh it means that we don’t we’re not people heavy we don’t have a lot of as I said we’ve got a total of 40 employees in the company but because we’ve invested into good assets what we provide to shareholders is is uh is low risk investing into the precious metal space would you argue that owning actual mines is is too high risk well there’s definitely more risk associated with it now in a rising environment that risk equals leverage and leverage in a rising environment sometimes helps if you invest in to the right asset I think uh where I would put streaming is is is a much lower risk way and I think to be honest everyone’s portfolio should have a bit of a diversified approach some higher risk approach into some of the miners but as a good stable exposure to Precious Metals you you definitely need to have some streamers in your portfolio are there are there a lot to choose from now I know you’ve done some recent deals in uh Africa for instance but are there a lot a lot more choices well there is we’ve uh last year was a record year for us we added eight new assets and so uh uh you know our growth uh we’ve got about 40 to 50% growth in production expected over the next four to five years and so there’s there’s a lot to choose from in terms of uh assets we uh we were very well funded of course we’re generating very strong cash flows we had about a 20% beat on uh on the market census over our first quarter that cash is going back into the ground to look for New Opportunities and streaming is very attractive for the mining companies as a source of capital so we’re uh we we’re going to be continuing to grow
Wheaton Precious Metals CEO Randy Smallwood joins CNBC’s ‘Money Movers’ to discuss commodities, gold prices, mergers & acquisitions in gold mining, and more.
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