Many companies that were once focused on producing silver have been increasingly including gold in their production mix. Wheaton Precious Metals (NYSE: WPM) is one such company. But there's more going on at Wheaton than just adding more of the yellow metal, and the last two streaming deals signed by the company show its diversification efforts go beyond just one precious metal.

Here's why Wheaton's latest move makes it an attractive pick for investors.

Big on silver

Before changing its name in 2017, Wheaton Precious Metals was known as Silver Wheaton. That made sense because the company's core business was providing cash up front to miners in exchange for the right to buy byproduct silver, at reduced prices, from mines focused on other metals. This is known as streaming.

A person in a hard hat standing at the mouth of a mine with the sun behind

Image source: Getty Images.

The focus on silver was almost exclusive, with just a single streaming deal devoted to gold. That deal accounted for just 3% of Wheaton's silver equivalent ounce production. However, in recent years, silver hasn't performed as well as gold, so the company decided to diversify a little bit more, just like many silver-focused miners. By the end of 2017, gold made up around half of the company's production, with silver accounting for the rest. Although that was a big change, it still leaves Wheaton with more exposure to silver than peers Royal Gold, Inc. and Franco-Nevada Corporation (TSX:FNV), which are more heavily focused on gold.   

The last two streaming deals Wheaton inked, however, have been different and make the company a far more interesting precious metals investment.

A lot more change

In June Wheaton announced that it had purchased a cobalt stream from giant miner Vale S.A. (NYSE:VALE) for an up-front payment of $390 million. Starting in 2021 Wheaton will receive 42.4% of the Voisey's Bay mine's cobalt production until certain production targets are met, at which point it will receive half that amount. Wheaton's cost will be pegged at 18% of the spot price for cobalt until certain financial targets are met, and will become 22% thereafter. Cobalt is a byproduct at this mine, which primarily produces nickel. Vale is using the cash to expand the mine, with a production ramp-up expected in 2021. 

Roughly one month later, Wheaton announced that it had inked a $500 million streaming deal with Sibanye Gold Limited (NYSE:SBSW) to acquire gold and palladium streams from the miner's Stillwater and East Boulder mines. Wheaton will receive 100% of gold production for the life of the Stillwater mine (gold is the byproduct metal) and 4.5% of the palladium until certain production targets are met, at which point its share will drop to 2.25% and, eventually, 1%. Wheaton will pay 18% of the spot price for gold and palladium until certain financial targets are met, and 22% thereafter. This stream is already active.   

Notably, these two streaming deals expand Wheaton's metals mix to include cobalt, which is used in batteries, and palladium, which has various industrial uses including in automobile emissions control equipment. 

Wheaton estimates that after the two streaming deals are both up and running (the Vale deal won't result in any cobalt until 2021), silver will account for just 46% of its production -- down from nearly 100% in 2010. Gold will be around 49%. Cobalt and palladium will make up the difference. Yes, that's only 5%, but the direction change is material in that it diversifies Wheaton's portfolio in a way that the company hasn't attempted before.   

Wheaton has stated that it intends to remain focused on gold and silver. However, the willingness to think beyond gold and silver suggests its business has matured to the point where the company will be more opportunistic in its streaming efforts across a broader list of commodities. And while 5% is likely to have a minor impact on revenue and earnings, the additional diversification is noteworthy.

To see how beneficial a little diversification can be, consider streaming peer Franco-Nevada.

FNV Normalized Diluted EPS (Quarterly) Chart

FNV Normalized Diluted EPS (Quarterly) data by YCharts.

Franco-Nevada's gold production fell roughly 12% in the first half of the year and is projected to drop as much as 11% for all of 2018 as it waits for mine investments to pan out. However, its investment in oil and natural gas wells, opportunistically made during the oil industry downturn, are ramping up strongly. Revenue from these energy streams is expected to grow as much as 60% in 2018. Through the first half of the year, despite the gold production decline, net income was higher than in the first half of 2017, in large part because of the strength of its diversifying oil investments (which accounted for around 14% of second quarter revenues). Diversification clearly has its benefits.   

Diversification is a good thing

Wheaton's efforts to broaden its diversification beyond silver and gold should create a stronger overall portfolio. And unlike peers Franco-Nevada and Royal Gold, which both have a much-heavier reliance on gold, Wheaton's mix of silver, gold, and other metals makes it an increasingly interesting option for long-term investors looking to the broader metals space for diversification. If you haven't considered Wheaton before because you thought of it as a silver company, now might be a good time for a deep dive to understand just how much the business has changed.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.