Silver Wheaton Corp. is pleased to announce that its wholly-owned subsidiary, Silver Wheaton (Caymans) Ltd., has agreed to acquire from a subsidiary of Vale S.A. an amount of gold equal to 25% of the life of mine gold production from its Salobo mine, located in Brazil.
This acquisition is in addition to the 25% of the Salobo gold production that Silver Wheaton acquired in 2013. The Company will pay Vale cash consideration of US$900 million for the increased gold stream. In addition, Silver Wheaton will make ongoing payments of the lesser of US$400 (subject to a 1% annual inflation adjustment commencing in 2017) and the prevailing market price for each ounce of gold delivered under the agreement. The original gold purchase agreement, dated February 28, 2013, has been amended to provide for the additional 25% stream.
TRANSACTION HIGHLIGHTS
- Provides immediate production and cash flow
- Silver Wheaton will receive an additional 25% of the gold production from Vale's Salobo mine, entitling the Company to a total of 50% of the life-of-mine gold production from the mine.
- This immediately increases Silver Wheaton's production and cash flow profile by adding expected average gold production of 70,000 ounces per year for the first 10 years and 60,000 ounces per year over the first 30 years (5.0 million and 4.3 million silver equivalent ounces1, respectively).
- Significant expansion and exploration potential exists at Salobo, which currently has an extensive reserve base and good depth potential.
- Subsequent to the closing of this acquisition, Silver Wheaton's estimated Proven and Probable gold reserves increase by 3.3 million ounces, Measured and Indicated gold resources increase by 0.8 million ounces, and Inferred gold resources increase by 0.4 million ounces.
- Over the next five years, gold as a percentage of Silver Wheaton's forecasted production is estimated to grow to over 40%.
- Increases Silver Wheaton's growth profile
- Silver Wheaton is also pleased to announce its updated production guidance, which includes the additional stream from Salobo. In 2015, Silver Wheaton forecasts 43.5 million ounces of silver equivalent production (including 230,000 ounces of gold) growing to 51 million ounces of silver equivalent production (including 325,000 ounces of gold) in 2019.
"The Salobo mine is one of Silver Wheaton's cornerstone assets and we are fortunate to have the opportunity to double our gold production from this high-quality mine," said Randy Smallwood, Silver Wheaton's President and Chief Executive Officer. "Since we founded our company ten years ago, we have had a clear vision of the characteristics of our ideal asset. To start, the asset is managed by a strong operating partner and is located in a low political-risk jurisdiction. Furthermore, it is primarily a base metal producer where precious metals represent only a relatively small portion of the mine's overall economics. Vale's Salobo mine possesses all of these characteristics, while also offering over 40 years of defined mine life as well as the potential for significant exploration and expansion upside. Salobo is certainly one of the best assets we have ever seen and one that readily lends itself to streaming."
"With over 70% of global silver production sourced as by-product, we continue to believe that the silver market represents the largest market for streaming opportunities. However, Silver Wheaton has never been averse to strategically layering additional gold into the streaming mix when the right opportunity presents itself."
Source: http://www.silverwheaton.com/