Silver Wheaton Increases Gold Stream From Salobo Mine

Tuesday August 02, 2016 09:10

Silver Wheaton Corp. (TSX, NYSE: SLW) says it has agreed to acquire from a Vale S.A. subsidiary an additional 25% of the life-of-mine gold production at the Salobo copper mine in Brazil. This is in addition to the 50% of Salobo gold production that Silver Wheaton is already entitled to receive. The deal immediately increases Silver Wheaton's consolidated production and cash-flow profile as Salobo gold production is expected to average approximately 300,000 ounces per year in total between 2016 and 2020, the company says. Silver Wheaton will pay upfront cash of $800 million for the increased gold stream and the 10 million Silver Wheaton common share purchase warrants previously issued to a subsidiary of Vale will be amended to reduce the strike price from $65 to $43.75 per share. In addition, Silver Wheaton will make ongoing payments of the lesser of $400 (subject to a 1% annual inflation adjustment starting in 2019 on the entire 75% stream) and the prevailing market price for each ounce of gold delivered under the agreement. “The Salobo mine is a cornerstone asset for Silver Wheaton and should be for generations to come,” says Randy Smallwood, Silver Wheaton’s president and chief executive officer. “We did not hesitate at the opportunity to increase our exposure to a mine with one of the lowest copper cash costs in the world, 50 years of mine life on reserves alone, and what we believe to be substantial exploration and expansion potential. As we have said on numerous occasions, Salobo is the ideal asset for the streaming model, as it is primarily a base-metal producer where precious metals represent only a relatively small portion of the mine’s overall revenues.”