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Silver Wheaton acquires new gold stream stake in Vale mine for $900mln

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Silver Wheaton (TSE:SLW), the world’s largest precious-metals finance firm, agreed to buy $900 million worth of gold from a Vale SA mine in Brazil, expanding a supply agreement signed two years ago.

It will buy an additional 25 percent of the production from Vale’s Salobo mine in northern Brazil, bringing the total to 50 percent, Vancouver, British Columbia-based Silver Wheaton said in a statement late yesterday. 

The royalty company, which resells precious metals bought from mining companies, will also make ongoing payments to Rio de Janeiro-based Vale of $400 an ounce or the prevailing gold price, whichever is lower.

Silver Wheaton typically offers upfront payments to help mining companies fund their operations in exchange for a discount on future silver and gold output. Expanding an agreement initially signed with Vale in February 2013 will increase the firm’s gold production by 70,000 ounces a year for the first 10 years, the company said.

Gold is currently trading at about $1,206 per ounce.

“The Salobo mine is one of Silver Wheaton’s cornerstone assets and we are fortunate to have the opportunity to double our gold production from this high-quality mine,” Silver Wheaton chief executive officer Randy Smallwood said in the statement.

“Salobo is certainly one of the best assets we have ever seen and one that readily lends itself to streaming.”

In a separate statement, Silver Wheaton said it agreed to sell about $800 million of stock to fund its purchase of the additional supply of gold from the Vale mine.

The $20.55-a-share stock sale, a so-called bought deal, is being fully underwritten by a group of banks led by Scotiabank, the company said.

The share offering will close on March 17.

Silver Wheaton’s shares fell 5.5 percent to C$25.15 at 10:03 a.m. in Toronto, expanding losses over the past year to 11.2 percent.

Quick facts: Wheaton Precious Metals

Price: 41.65 CAD

TSX:WPM
Market: TSX
Market Cap: $18.63 billion
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