Silver Wheaton Corp. is spending $800-million (U.S.) to boost its share of the gold production from a large Brazilian copper and gold mine.
The Vancouver-based company, which buys "streams' of future production from miners, will pay cash for rights to a further 25 per cent of the gold produced from the Salobo mine owned by a subsidiary of Vale SA.
Silver Wheaton already owns rights to 50 per cent of Salobo's gold production, so the deal means that three-quarters of the mine's gold production will now belong to the Canadian streaming company.
Salobo is expected to produce ore for the next 50 years, an important consideration in an industry where mines often have much shorter lives. It is now producing about 300,000 ounces of gold a year.
"The Salobo mine is a cornerstone asset for Silver Wheaton and should be for generations to come," Silver Wheaton chief executive officer Randy Smallwood said in a press release.
In addition to the $800-million upfront payment, Silver Wheaton will pay a cash amount for each ounce delivered under the deal. The price will be equal to whichever is less – $400 an ounce (inflation adjusted) or the prevailing market price.
Silver Wheaton will also sweeten the terms on 10 million warrants it previously issued to Vale. Each warrant entitles the holder to buy a Silver Wheaton share for a predetermined price. That strike price will be reduced to $43.75 a common share from $65 previously.
Silver Wheaton intends to finance the transaction by using cash on hand together with funds from its $2-billion revolving credit facility.