Silver Wheaton Corp. has entered into an agreement with a subsidiary of mining giant Vale S.A. (VALE - Free Report) to acquire gold production from mines in Brazil and Sudbury, Canada.
As per the agreement, Silver Wheaton will receive 25% of the life of mine gold produced from Vale’s Brazilian Salobo mine as well as 70% of the production from its Sudbury Mines for a period of 20 years.
Within 10 business days from the agreement date, Silver Wheaton will pay Vale $1.9 billion in cash. It has also issued 10 million Silver Wheaton warrants with a strike price of $65 and a term of 10 years. It will also pay up to $400 for each ounce of gold delivered, subject to inflation adjustments and the current market price.
Silver Wheaton will gain immensely through this deal. The partnership will significantly increase the company’s access to percentage of revenues generated from gold production by an average of 12% and a peak of 25% over the next 5 years.
It will also immediately increase Silver Wheaton’s production and cash flow profile by adding expected average gold production of 110,000 ounces per year over the next 20 years. Silver Wheaton expects to increase its organic growth profile with this acquisition.
Silver Wheaton has also entered into two new unsecured credit facilities, comprising a $1 billion revolving credit facility having a 5-year term (the "Revolving Facility"); and a $1.5 billion bridge financing facility having a 1-year term (the "Bridge Facility"). The Revolving Facility and Bridge Facility replaced the $400 million Revolver Loan and the Term Loan, with the latter being repaid in full on Feb 22, 2013.
Silver Wheaton is the largest precious metals streaming company in the world. The company’s industry-leading growth profile is driven by its portfolio of low-cost and long-life assets.
Silver Wheaton currently retains a Zacks Rank #3 (Hold).
Other mining companies having favorable Zacks Rank are Sandstorm Gold Ltd. (SAND - Free Report) and Banro Corporation with both having a Zacks Rank #2 (Buy).