HudBay Minerals Inc. ("Hudbay" or the "company") today announced it has entered into an amended and restated precious metals stream agreement with Silver Wheaton Corp. ("Silver Wheaton") pursuant to which the company will receive an additional US$135 million deposit against delivery of 50% of payable gold from the Constancia project.
In addition to the deposit payment for gold, Hudbay will receive the lesser of the market price and US$400 per ounce for gold delivered to Silver Wheaton, subject to 1% annual escalation after three years. Hudbay is entitled to this US$135 million deposit amount once Hudbay has incurred and paid US$1.35 billion in capital expenditures at the Constancia project and satisfied certain other customary conditions precedent. Silver Wheaton has the option to make the deposit payment in cash or Silver Wheaton shares, with the number of shares calculated at the time the payment is made. Gold recovery for purposes of calculating payable gold will be fixed at 55% for gold mined from Constancia and 70% for gold mined from Pampacancha.
"This stream transaction provides us with additional, non-dilutive capital as we continue development of the Constancia and Lalor projects," said David Garofalo, president and chief executive officer. "Silver Wheaton's participation in this second precious metals stream at Constancia speaks to the significant progress our team has made at the project and we value them as a strategic partner."
In August 2012, Hudbay entered into the initial precious metals stream transaction with Silver Wheaton providing for upfront deposit payments of US$750 million in respect of (i) 100% of payable gold and silver from Hudbay's 777 mine until the later of December 31, 2016 and satisfaction of a completion test at Constancia, following which the obligation to deliver gold will be reduced to 50% of payable gold, and (ii) 100% of payable silver from Constancia. Hudbay has received an aggregate of US$625 million of the deposit payments under the initial precious metals stream transaction and the remaining US$125 million payment for silver production at Constancia will become payable once the company has incurred and paid US$1 billion in capital expenditures at the project.
Hudbay's financial advisors in the precious metals stream transaction were CIBC World Markets Inc. and Scotiabank.
Hudbay also announced it has closed the previously announced equipment financing facility with Caterpillar Financial Services Corporation ("Cat Financial"), pursuant to which Cat Financial will provide Hudbay with financing to purchase approximately US$130 million of the mobile fleet at Constancia. Hudbay expects to draw down on the facility in stages, beginning in the fourth quarter of 2013, as the equipment is delivered to site and assembled for use in accordance with the project schedule. Loans made pursuant to the facility will have a term of six years and are secured by the Constancia mobile fleet.