Silver Wheaton (NYSE:SLW) announced on Tuesday a deal to acquire a portion of future silver output from Glencore’s (LON:GLEN) Antamina copper mine in Peru for $900 million cash.
As part of the streaming deal, Silver Wheaton will make ongoing payments of 20% of the spot price for silver for every ounce of metal delivered.
Silver Wheaton will receive from Glencore an amount equal to 33.75% of the Antamina silver production until the delivery of 140 million ounces of silver and 22.5% of silver production thereafter for life of mine at a fixed 100% payable rate according to a statement from the company.
The Vancouver-based silver and gold streaming company said the deal immediately increases its production and cash flow profile by adding expected average silver production of 5.1 million in 2016 and 2017, and 4.7 million ounces per annum over the first 20 years.
“Silver Wheaton has focussed on building a portfolio of streams on high-quality, low-cost mines. Antamina has both the quality and the scale to make it an ideal addition to this portfolio, as it is not only the eighth largest copper mine in the world, but it is also one of the lowest cost,” said Randy Smallwood, Silver Wheaton’s President and Chief Executive Officer.
TRANSACTION HIGHLIGHTS
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Adds to Silver Wheaton’s Existing High-Quality Portfolio
- SWC will receive from Glencore an amount equal to 33.75% of the Antamina silver production until the delivery of 140 million ounces of silver and 22.5% of silver production thereafter for life of mine at a fixed 100% payable rate.
- Antamina is one of the lowest cost copper mines globally and is the eighth largest copper mine in the world. The low-costs are facilitated by the high grade reserves and resources as well as the wholly owned mining infrastructure.
- With the addition of Antamina, approximately 84% of Silver Wheaton’s 2019 production is forecast to come from mines operating in the first quartile of their respective cost curve.
- Subsequent to the closing of this acquisition, Silver Wheaton’s estimated Proven and Probable silver reserves increase by 75 million ounces, Measured and Indicated silver resources increase by 56 million ounces, and Inferred silver resources increase by 126 million ounces.
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Immediate production and cash flow
- This acquisition immediately increases Silver Wheaton’s production and cash flow profile by adding expected average silver production of 5.1 million ounces per year in 2016 and 2017, and 4.7 million ounces per year over the first 20 years.
- Production expected in the fourth quarter: forecast to be around 1.0 to 1.5 million ounces of silver.
- Sales expected in the fourth quarter: any silver in respect of which a delivery is made to an offtaker after September 30, 2015, is subject to the stream.
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Long-term production and exploration upside potential
- As of now, declared current reserves are sufficient to support mining activities at Antamina until 2028, but this could be significantly extended should measured and indicated resources be converted and inferred resources upgraded based on historical trends at the mine.
- Exploration potential exists both regionally and at depth below the current resource pit.
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Increases Silver Wheaton’s growth profile
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Silver Wheaton is also pleased to announce its updated production guidance as a result of this streaming acquisition. For 2015, Silver Wheaton now forecasts 44.5 million ounces of silver equivalent production (including 230,000 ounces of gold), and growing to approximately 55 million ounces of silver equivalent production (including 325,000 ounces of gold) in 2019.
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