Shares of Wheaton Precious Metals (NYSE: WPM) had surged more than 11% by 10:45 a.m. EST on Friday after the precious metals streaming company settled its Canadian tax dispute.
Wheaton Precious Metals reached a settlement with the Canada Revenue Agency (CRA) in their dispute for the tax years 2005 to 2010. The agreement stipulates that foreign income generated by Wheaton International isn't subject to tax in Canada. Meanwhile, the fee that Wheaton Precious Metals charges for services provided to Wheaton International will be adjusted to include capital-raising costs associated with funding streaming transactions at the latter and will increase the markup related to Wheaton's cost of services from 20% to 30%. That additional service fee will generate more income by Wheaton Precious Metals in Canada, which will be subject to tax. However, it does not anticipate paying any additional cash taxes for tax years 2005 to 2010 as a result of this settlement.
"The terms of the settlement are an excellent outcome for Wheaton and its shareholders," CEO Randy Smallwood said. He further noted that it "removes uncertainty with the use of our business model going forward and puts the tax issue behind." That will enable the company to focus on growing shareholder value.
With Wheaton's tax issue in the rearview mirror, the company can concentrate on finding new streaming deals that move the needle for shareholders. Its most recent transactions will diversify the company away from silver and gold into cobalt and palladium. That positions the company to realize more growth potential from metals that are going to be increasingly important to the auto industry.