UPDATE 1-Silver Wheaton to pay $1.9 bln cash, warrants for deal with Vale

Wed Feb 6, 2013 12:30am GMT

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* Deal covers gold streams from Brazil mine, Canada projects

* Sees 2013 production of 33.5 mln silver equivalent ounces

TORONTO Feb 5 (Reuters) - Silver Wheaton Corp said on Tuesday it had signed a deal with Brazil's Vale SA to acquire a share of the gold produced at some of the mines owned by the diversified mining giant in Brazil and Canada for $1.9 billion in cash, and 10 million warrants.

The deal will immediately boost the Canadian company's production by adding expected average gold production of 110,000 ounces of gold per year over the next 20 years, or 5.9 million silver equivalent ounces.

Silver Wheaton will pay $1.33 billion for 25 percent of gold produced at the Salobo mine in Brazil over its mine life, and $570 million for 70 percent of gold produced over a 20-year period at some of Vale's mines in Sudbury, Ontario.

The move into gold is a departure for Vancouver-based Silver Wheaton, which has focused almost exclusively on silver stream financing deals.

"While we have traditionally focused on silver, we have never been averse to strategically adding 'the right' gold streams to our portfolio," said Chief Executive Randy Smallwood in a statement.

Smallwood added that while the company believes there are significant opportunities in the silver space, it is open to layering more high-quality gold streams into its portfolio.

In addition to the cash and warrants, Silver Wheaton, a precious metal streaming company, will pay a set amount, about $400 per ounce for gold, at the time of production. The warrants will have a strike price of $65 and a term of 10 years.

Gold was worth about $1,670 per ounce on Tuesday, while silver was worth about $32 per ounce.

Silver Wheaton now expects to produce some 33.5 million ounces of silver equivalent in 2013, up from some 28 million equivalent ounces in 2012. By 2017, production is expected to top 53 million silver equivalent ounces.

The company has secured a $1 billion revolving credit facility with a 5-year term and a $1.5 billion bridge financing facility with a 1-year term to finance the deal, which replace an existing $400 million revolving credit facility.

When combined with existing cash on hand, the company expects to fund the Vale deal while still pursuing other growth opportunities.

Shares of Silver Wheaton closed at $36.11 on Tuesday on the Toronto Stock Exchange.

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