Silver Wheaton Chasing $700 Million New Deals in Metal Rout

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For Silver Wheaton Corp., it’s a great time to be in commodities.

The Vancouver-based company, which gives miners upfront payments in exchange for the right to precious metals it later sells, is in talks for new deals worth as much as $700 million and expects to announce transactions by year-end, Chief Executive Officer Randy Smallwood said in an interview.

So-called streaming companies are taking advantage of efforts by miners to strengthen their finances amid slumping prices. Barrick Gold Corp. announced last week an arrangement with a unit of Royal Gold Inc. for $610 million upfront, plus continuing payments for metal delivered under the deal.

“I’ve never seen a time as busy as this, where we have so many opportunities,” Smallwood, who is also one of the company’s founders, said on Wednesday in New York. “A lot of the big diversified companies have balance-sheet challenges.”

Silver Wheaton is looking for low-cost mines at both large and small silver and gold producers. Smallwood said he prefers silver because of growth in industrial uses for the metal. The company also would look at deals in platinum and palladium.

The company is in a “great position” to fund new deals with cash it generates from operations and $1.4 billion credit line capacity, he said in an e-mailed response to questions.

Precious metals could get a boost from China’s devaluation of the yuan, which is “setting the stage” for currency wars that would eventually press the U.S. to curtail the dollar’s gains to maintain competitiveness, Smallwood said.

A stronger dollar curbs demand for metals like gold.

Tax Proposal

Regarding a proposal from the Canada Revenue Agency to reassess as much as C$715 million ($562 million) in earnings from its foreign subsidiaries, Smallwood said he is “very confident that we will prevail.”

The agency probably won’t go forward with the measure as the implications could spread to other resource companies with foreign operations, he said.

Should Silver Wheaton get a tax reassessment notice, it would appeal in a process that would cost about $100 million and half of any penalties the agency assigns to the company.

“That’s well within our current capacity,” he said.

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