Silver Wheaton Buys into Barrick Silver Production

Barrick Gold and Silver Wheaton closed a transaction on September 22, 2009, whereby Silver Wheaton will acquire 25% of the life-of-mine silver production from Barrick’s cross-border Pascua-Lama goldsilver project in Chile and Argentina. Silver Wheaton is also acquiring 100% of the silver production from Barrick’s Lagunas Norte and Pierina mines in Peru and its Veladero mine in Argentina until project completion at Pascua-Lama. Silver production from these three mines is expected to average about 2.4 million oz/y over that period of time.

Pascua-Lama is scheduled to begin production during 2013. Silver Wheaton’s 25% share of Pascua-Lama’s silver production is expected to average about 9 million oz/y over the first five years of mine operations at full production.

Silver Wheaton will pay Barrick $625 million in cash over three years for the silver it is acquiring, as well as ongoing payments of the lesser of $3.90/oz (subject to an annual inflation adjustment) and the prevailing market price for silver for each ounce of silver delivered under the agreement.

Barrick has provided Silver Wheaton with a completion guarantee, requiring Barrick to complete Pascua-Lama to at least 75% of design capacity by December 31, 2015. During 2014 and 2015, Silver Wheaton will be entitled to the silver production from the currently producing mines to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies the completion guarantee.

Pascua-Lama has a projected mine life of more than 25 years based on proven and probable reserves of 17.8 million oz of gold and 718 million oz of silver contained within gold reserves.

Commenting on Barrick’s agreement with Silver Wheaton, Barrick President and CEO Aaron Regent said, “The transaction enhances Pascua-Lama’s economics. The upfront cash consideration increases returns and represents an attractive source of financing for the project while still maintaining Barrick’s upside on 100% of the gold and 75% of silver production at Pascua-Lama.”

As featured in Womp 2009 Vol 08 -