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

Tue Feb 5, 2013 7:30pm EST
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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.   Continued...