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Silver Wheaton Acquires Life Of Mine Precious Metals Streams From Hudbay's 777 Mine And Constancia Project

Stocks in this article: HBM SLW

"Silver Wheaton's balance sheet remains very strong. After the initial upfront payment of US$500 million, we still have over US$500 million in cash on hand, a fully undrawn US$400 million revolving credit facility and strong forecast operating cash flows, including immediate cash flows from 777. As a result, we remain exceptionally well-positioned to continue our growth via new precious metal streams, and are pursuing numerous additional growth opportunities."

TRANSACTION TERMS

Silver Wheaton has agreed to acquire 100% of the life of mine silver and gold production from Hudbay's 777 mine, as well as 100% of the silver production from its Constancia Project. Silver Wheaton's share of gold production at 777 will remain at 100% until the later of the end of 2016 or the satisfaction of a completion test relating to the Constancia Project, after which it will be reduced to 50% for the remainder of the mine life. Silver Wheaton will pay Hudbay total cash consideration of US$750 million, of which US$500 million is payable upon closing, with a further payment of US$125 million to be made once US$500 million in capital expenditures has been incurred at Constancia, and a final payment of US$125 million to be made once US$1 billion in capital expenditures has been incurred. In addition, Silver Wheaton will make ongoing payments of the lesser of US$5.90 per ounce of silver and US$400 per ounce of gold (both subject to an inflationary adjustment of 1% beginning in the fourth year) or the prevailing market price per ounce of silver and gold delivered. Silver Wheaton will not share in any ongoing capital or exploration expenditures at the mines.

The Constancia Project completion test requires Hudbay to complete the Constancia processing plant to at least 90% of expected throughput and recovery by December 31, 2020. If Hudbay fails to satisfy the requirements of the completion test, Silver Wheaton would be entitled to a proportionate return of the upfront cash consideration relating to Constancia.

Hudbay has granted Silver Wheaton a right of first refusal on any future streaming agreement, royalty agreement, or similar transaction related to the production of silver or gold from Constancia or 777.

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