Market Overview

UPDATE: Silver Wheaton to Buy Gold Streams from Vale's Salobo-Sudbury for $1.9B, 10M Warrants

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Silver Wheaton Corp. (NYSE: SLW) is pleased to announce that it has entered into a binding term sheet to acquire from a subsidiary of Vale S.A. ("Vale") (NYSE: VALE) an amount of gold equal to 25% of the life of mine gold production from its Salobo Mine, located in Brazil, as well as 70% of the gold production, for a 20-year term, from certain of its Sudbury Mines located in Canada.

The Company will pay Vale total cash consideration of US$1.90 billion, plus 10 million Silver Wheaton warrants with a strike price of US$65 and a term of 10 years^1. US$1.33 billion will be paid for 25% of the gold production from Salobo, while US$570 million will be paid for 70% of the Sudbury gold production. In addition, Silver Wheaton will make ongoing payments of the lesser of US$400 (subject to a 1% annual inflation adjustment from 2016 for Salobo) and the prevailing market price, for each ounce of gold delivered under the agreement.

TRANSACTION HIGHLIGHTS

* Provides immediate cash flow and enhances Silver Wheaton's growth profile

* Silver Wheaton will receive 25% of the gold production from Vale's newly constructed and currently expanding Salobo mine, and 70% of the gold production from certain of its Sudbury mines;

* This immediately increases Silver Wheaton's production and cash flow profile by adding expected average gold production of 110 thousand ounces per year over the next 20 years (5.9 million silver equivalent ounces^2), which includes approximately 60 thousand ounces per year from Salobo and approximately 50 thousand ounces per year from Sudbury.

* Excellent expansion and exploration potential exist for both Salobo, which currently has an extensive reserve base and good depth and strike potential, and Sudbury, which currently has the Totten mine in start-up and the Victor development project.

* Significantly increases Silver Wheaton's exposure to gold

* The addition of the Vale streams will increase Silver Wheaton's percentage of revenue generated from gold production over the next five years from an average of 12% to a peak of around 25%.

* Adds another world-class partner and further endorses the competitiveness of Silver Wheaton's streaming model

* Vale is the world's largest producer of iron ore and one of the largest mining companies in the world, having a market capitalization of over $100 billion.

* The use of precious metal streaming by Vale further validates the benefits of streaming in unlocking the value of by-product precious metals production.

* Increases Silver Wheaton's organic growth profile

* With the addition of these streams, Silver Wheaton is also pleased to announce its updated production guidance. In 2013, Silver Wheaton forecasts 33.5 million ounces of silver equivalent production^2 (including 145 thousand ounces of gold). In 2017, the Company forecasts 53 million ounces of silver equivalent production^2 (including 180 thousand ounces of gold), which represents an increase of over 80% from 2012.

Posted-In: News M&A

 

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