Wednesday, August 8, 2012

Silver Wheaton (SLW) Acquires More Production

Silver Wheaton (NYSE: SLW) announced Wednesday it has entered an agreement with HudBay Minerals Inc. to buy all of the silver production at two of the company's mines.

The silver streaming company paid approximately $750 million for the production, as well as ongoing payments.

Silver production acquired from HudBay came from the 777 Mine in Canada and Constancia project located in southern part of Peru.

Also per the agreement, Silver Wheaton will also get all of the gold production from the 777 mine until Constancia passes a completion test, or until the close of 2016. Whichever of those two is later is how long Silver Wheaton gets the gold production from the mine.

Once that time arrives, Silver Wheaton will then get a reduction in gold production at 777, dropping to 50 percent for the remainder of the life of the mine.

The initial payout will be $500 million in cash at the close of the deal, and two more payments of $125 million each based upon specific capital spending requirements to be met at the Constancia project.

As for the ongoing payments, Silver Wheaton said that will be determined by the quantity of of gold and silver delivered, as well as the market prices at the time.

Silver Wheaton said it won't be using debt in any way to pay for any part of the deal, but rather pay it out of cash on hand. Per its other deals, the company said they won't be paying for any of the costs of exploration of other capital costs associated with the mines.

The deal will increase the amount of silver streamed by the company by an additional 4.9 million ounces a year.

Another deal has been anticipated by analysts and investors, as Silver Wheaton has been sitting on a pile of cash for some time, and much of the capital markets don't have a favorable view of the mining industry at this time, especially in Europe, where much of the investment capital for miners has come from.

Silver Wheaton closed Wednesday at $29.93, gaining $1.25, or 4.36 percent.

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