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Wheaton Precious Metals Acquires Gold and Palladium Stream on Stillwater
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PR Newswire
VANCOUVER, July 16, 2018
TSX: WPM
NYSE: WPM
VANCOUVER, July 16, 2018 /PRNewswire/ - Wheaton Precious Metals™ Corp. ("Wheaton" or the "Company") is pleased to announce that its wholly-owned subsidiary, Wheaton Precious Metals International Ltd ("Wheaton International") has agreed to acquire from Sibanye Gold Limited ("Sibanye-Stillwater") (JSE: SGL; NYSE:SBGL) an amount of gold and palladium equal to a fixed percentage of production from the Stillwater and East Boulder mines, collectively "Stillwater" (the "Precious Metals Stream"). Wheaton International will pay Sibanye-Stillwater upfront cash consideration of US$500 million upon closing of the Precious Metals Stream. In addition, Wheaton will make ongoing payments equal to 18% of the spot gold price and spot palladium price until the reduction of the advanced payment to nil, and 22% of the spot gold price and spot palladium price thereafter. The Precious Metals Stream is effective July 1, 2018.
TRANSACTION HIGHLIGHTS
- Adds to Wheaton's existing high-quality portfolio
- Wheaton International will receive an amount of gold equal to 100% of the Stillwater gold production for the life of mine.
- Wheaton International will initially receive an amount of palladium equal to 4.5% of Stillwater palladium production, decreasing to 2.25% and then 1% based on defined delivery thresholds, for the life of mine.
- Stillwater is one of the lowest cost platinum group metals mines globally and is located in Montana in the United States.
- Subsequent to the closing of this acquisition, Wheaton's estimated Proven and Probable gold reserves increase by 410 thousand ounces ("Koz") and Inferred gold resources increase by 920 Koz. And, for the first time, Wheaton will have estimated Proven and Probable palladium reserves of 610 Koz and Inferred palladium resources of 430 Koz.1
- Adds long-term production and exploration upside potential
- For the 10 years starting in 2019, production is forecast to average approximately 14.5 Koz of gold and 29 Koz of palladium per year, or approximately 37 Koz of gold equivalent per year.2
- For the 20 years starting in 2019, production is forecast to average approximately 14.7 Koz of gold and 24 Koz of palladium per year, or approximately 33 Koz of gold equivalent per year.2
- Declared current reserves are sufficient to support mining activities at Stillwater until 2041, but this could be significantly extended should inferred resources be upgraded.3
- Significant exploration potential exists both regionally and at depth below current mineral reserves and resources. Of significance is the 12.2 kilometre undeveloped mineralized section between the currently producing Stillwater and East Boulder mines
- Immediate production and cash flow
- This acquisition increases Wheaton's production profile with attributable sales starting July 1, 2018 with expected production in the second half of 2018 forecast to be approximately 5.4 thousand gold ounces and 10.4 thousand palladium ounces.
"Stillwater is another accretive addition to Wheaton's portfolio of assets that is expected to contribute both production and cash flow for decades to come," said Randy Smallwood, Wheaton's President and Chief Executive Officer. "What mainly attracted us to this opportunity was the quality and size of the J-M Reef deposit, coupled with the ongoing expansion at the Blitz Project. There are over 12 kilometres of undeveloped mineralization associated with the J-M Reef between the two currently producing mines. With a mine life extending well into the foreseeable future, we believe Stillwater will be one of Wheaton's foundational assets for many years to come. Finally, the acquisition will be funded through our current revolving credit facility, which we are comfortable utilizing given our industry leading cash flow."
TRANSACTION TERMS
- The Precious Metals Stream is effective July 1, 2018.
- Wheaton International will be entitled to receive from Sibanye-Stillwater an amount of gold equal to 100% of Stillwater gold production for the life of mine.
- Wheaton International will be entitled to an amount of palladium equal to
- 4.5% of Stillwater palladium production until 375 Koz delivered to Wheaton;
- Thereafter, 2.25% of Stillwater palladium production until 550 Koz delivered to Wheaton; and,
- 1% of Stillwater palladium production thereafter for the life of mine.
- Wheaton International will pay Sibanye-Stillwater cash consideration of US$500 million upon closing of the Precious Metals Stream.
- Wheaton International will make ongoing payments equal to 18% of the spot gold price and spot palladium price until the reduction of the advanced payment to nil, and 22% of the spot gold price and spot palladium price thereafter.4
- Payable rates for gold and palladium have been fixed at 99.0% and 99.6%, respectively.
- Gold and palladium deliveries will be the obligation of Sibanye-Stillwater but will be guaranteed by certain Sibanye-Stillwater subsidiaries, including Stillwater Mining Company (the owner of Stillwater).
- The Precious Metals Stream includes a completion test on the development of the Blitz Project, including completion of underground development, critical surface infrastructure and concentrator production output.
- The stream area of interest is defined as the area inclusive of all patented and unpatented claims at the Stillwater mining operations.
- Closing of the transaction is expected to occur shortly following announcement and is subject to the completion of certain corporate matters and customary conditions.
ABOUT STILLWATER
Stillwater is the only US-based mine for platinum group metals ("PGM"s) and the largest primary producer of PGMs outside of South Africa and the Russian Federation. Located in Montana, US, Stillwater's operations consist of two underground PGM mines (the Stillwater Mine and East Boulder Mine), the Blitz Project and the Columbus metallurgical complex. The mining assets are located in the front range of the Beartooth Mountains with elevations exceeding 1,500 metres above mean sea level.
The Stillwater Mine and East Boulder Mine have been in operation since 1986 and 2002, respectively. The mines produce from the J-M Reef, the world's highest-grade PGM deposit. Each mine has its own milling and concentrator infrastructure on site. The Blitz Project, part of the Stillwater mine, started ore production in 2017 and is expected to ramp up to full production in 2021.
The Columbus metallurgical complex is a state-of-the-art operation that is capable of providing smelting and refining processes for mine concentrates. The complex produces a PGM-rich filter cake that is shipped to a third-party precious metal refinery.
Below are Wheaton's attributable Mineral Reserves and Resources in respect of the Stillwater mine.
Attributable Mineral Reserves and Mineral Resources – Stillwater, effective as of December 31, 2017
| Category | Streamed | Tonnage Mt | Grade Au g/t | Grade Pd g/t | Contained Au Moz | Contained Pd Moz |
| Proven | Gold | 5.0 | 0.31 | | 0.05 | |
| Probable | 36.8 | 0.31 | | 0.36 | | |
| Proven | Palladium | 0.2 | | 13.2 | | 0.08 |
| Probable | 1.3 | | 12.6 | | 0.53 | |
| Total P&P | Gold | 41.8 | 0.31 | | 0.41 | |
| Palladium | 1.5 | | 12.7 | | 0.61 | |
| Inferred | Gold | 92.5 | 0.31 | | 0.92 | |
| Palladium | 1.0 | | 12.9 | | 0.43 |
FINANCING THE TRANSACTION
The initial upfront cash payment of US$500 million will be paid by using amounts drawn from the Company's US$2 billion revolving credit facility. At March 31, 2018, the Company had approximately US$116 million of cash on hand and US$663 million outstanding under the revolving credit facility. The Company recently acquired a cobalt stream from Vale S.A.'s Voisey's Bay mine, which was also funded using the revolving credit facility. Net debt for the company, including the acquisition costs of streams on Stillwater and Voisey's Bay will be approximately $1.4 billion. With trailing four-quarter operating cash flow of just under $550 million5, the Company believes it has ample capacity to service the additional debt resulting from this transaction, especially given the low interest rate and flexible nature of the covenants under the revolving credit facility (minimum net debt to total net worth and minimum interest coverage tests).
PALLADIUM – A PRECIOUS METAL WITH A PURPOSE6
Palladium is a PGM and is generally considered a precious metal and offers significant practical application as it is considered to be integral to reducing emissions caused by gasoline-powered internal combustion engines.
Palladium mine supply is highly concentrated, with approximately 80% of annual supply coming from just two countries: South Africa and Russia. Disruption in either country has potential for outsized market influence. In addition, palladium is mined overwhelmingly as a by-product, which results in mine supply being relatively price-inelastic (i.e. the economics of mine supply is driven primarily by consideration of other metals). Half of mine supply comes from nickel-copper mines, 40% comes from primary platinum mines and just under 10% comes from primary palladium mines.
The automobile industry became the biggest end-user of PGMs in the late-1970s. PGMs in autocatalytic converters help reduce harmful emissions caused by internal combustion engines. Palladium resists oxidation, high temperature corrosion and is particularly effective in scrubbing hydrocarbon emissions. Its application by the industry began to accelerate in the late-1990s and has in the intervening years replaced its cousin – platinum – in gasoline-powered vehicles. A spate of recent government announcements from around the world regarding diesel-powered vehicles strongly suggests that gasoline-based engines – and thus palladium – is expected to be gaining market share at the expense of diesel for the foreseeable future.
Fully-electric vehicles do not use PGMs; however, vehicles that are the intermediate stage between combustion and pure battery power (e.g. hybrids, plug-in hybrids) do use PGMs. While it is reasonable to expect combustion-vehicles to lose market share over the coming decades, the rise of overall vehicle sales and higher loadings per vehicle are anticipated to maintain demand for PGMs. Though North American and European markets are saturated, the analyst community expects vehicle growth in China and India to raise the overall global total. Tightening emission targets around the world add further support for the long-term necessity of palladium. While the pie slice may eventually shrink, the overall pie is growing and there will be more palladium per slice (and that's delicious).
UPDATED FIVE-YEAR PRODUCTION GUIDANCE
Wheaton is pleased to provide its updated five-year production guidance, which now includes both palladium and cobalt production estimates, in the table below. Given the timing of the effectiveness of the Stillwater and Voisey's Bay streams, palladium and cobalt production are given as average annual production as of 2019 and 2021, respectively. Average annual gold production is inclusive of gold from Stillwater from 2019 to 2022 as gold production from Stillwater in 2018 is only for half of the year. For context, on a gold equivalent ounce ("GEO") basis, five-year average annual production is approximately 730 thousand GEOs based on gold, silver and palladium, or approximately 800 thousand GEOs if cobalt is included as well.7
| Forecast Average Annual Production | |||||
| Metal Streamed | Average Annual Production | ||||
| 2018E | 2019E | 2020E | 2021E | 2022E | |
| Gold | 385 thousand ounces / year8 | ||||
| Silver | 25 Million ounces / year | ||||
| Palladium | 10.4 koz | 27 thousand ounces / year | |||
| Cobalt | | 2.1 million pounds / year | |||
ABOUT SIBANYE-STILLWATER
Stillwater was purchased by Sibanye-Stillwater in May 2017. Sibanye-Stillwater is the third largest producer of platinum and palladium and features amongst the world's top gold producing companies with operations in two main regions: South Africa and the United States. Sibanye-Stillwater has over the years developed several safety initiatives, including the creation and investment in "Digimine," a joint venture between Sibanye-Stillwater, academic institutions and other stakeholders. This initiative prioritizes the use of digital technology for enhanced safety applications including focus areas of seismicity and pro-active monitoring of underground environmental conditions. Wheaton is pleased to have the opportunity to support Sibanye-Stillwater's initiatives through further investment linked to Digimine, facilitating the fast tracking of certain technology prototypes into Sibanye-Stillwater's underground environment.
CONFERENCE CALL
A conference call will be held on July 16, 2018, starting at 11:00 am (Eastern Time) to discuss this transaction. A presentation on the transaction will be available on the Company's website shortly before the conference call. To participate in the live call please use one of the following methods:
| Dial toll free from Canada or the US: | 888-231-8191 |
| Dial from outside Canada or the US: | 647-427-7450 |
| Pass code: | 9391518 |
| Live audio webcast: Werbung Mehr Nachrichten zur Wheaton Precious Metals Aktie kostenlos abonnieren
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