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(Reuters) - HudBay Minerals Inc HBM.TO has signed a $750 million deal under which Silver Wheaton Corp SLW.TO would help fund HudBay's Constancia project in exchange for a share of precious metal produced at the Peruvian mine and other considerations.
The Canadian company, whose shares rose 4.2 percent after the announcement on Wednesday, also said its board had approved the construction of the copper mine, which will produce silver and molybdenum as byproducts.
The project, costing an estimated $1.5 billion to build, is scheduled to start production in 2014, with full production by the second quarter of 2015.
As part of the financing deal, Silver Wheaton will pay HudBay $750 million up front in exchange for 100 percent of payable gold and silver from HudBay's 777 zinc mine in Canada until 2016 or the completion of Constancia.
Silver Wheaton will then get 50 percent of payable gold and 100 percent of silver for 777's remaining mine life, along with 100 percent of payable silver from Constancia.
The stream company will pay $400 per ounce of gold and $5.90 per ounce of silver at the time of production.
HudBay also said it is arranging a $600 million credit facility with a syndicate of banks to help finance the some $2 billion in capital spending remaining on its major development projects, including Constancia, and the Lalor and Reed projects in Canada.
The Toronto-based miner said it will use its $710 million in cash on hand, along with cash flows, to help finance its development pipeline.
Shares of HudBay rose 4.2 percent to C$9.40 after market open on Wednesday on the Toronto Stock Exchange. Shares of Silver Wheaton rose 3.5 percent to C$29.67.
Reporting by Julie Gordon