Silver Wheaton to Buy Gold From Vale Mines for $1.9 Billion

Silver Wheaton Corp., which resells precious metals bought from mining companies, agreed to acquire gold mined by Vale SA in Brazil and Canada for $1.9 billion in cash and 10 million share warrants.

Silver Wheaton will buy gold equal to 25 percent of the life-of-mine gold production of Vale’s Salobo project in Brazil, Vancouver-based Silver Wheaton said in a statement today. It will also get 70 percent of the gold output from mines in Sudbury, Ontario, over 20 years.

Silver Wheaton typically offers upfront payments to help mining companies fund their projects in exchange for a discount on the silver and gold output that it buys. Chief Executive Officer Randy Smallwood said Jan. 30 that some of the world’s largest miners have become more interested in the financing that his company has to offer.

“While we have traditionally focused on silver, we have never been averse to strategically adding ‘the right’ gold streams to our portfolio,” Smallwood said in today’s statement.

The warrants have a $65 strike price and a term of 10 years. Silver Wheaton said Scotiabank and BMO Capital Markets will arrange and underwrite two new credit facilities worth a combined $2.5 billion to replace an existing $400 million facility. The new facilities and the company’s cash on hand will fund the Vale deal, it said.

The deal increases Silver Wheaton’s gold production by 110,000 ounces annually for the next 20 years, the company said. It will also boost gold’s share of Silver Wheaton’s revenue to 25 percent during the next five years from 12 percent now.

Silver Wheaton will produce 33.5 million ounces of silver equivalent in 2013 including 145,000 ounces of gold, rising to 53 million silver equivalent ounces in 2017, it said.

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