Silver Wheaton extended silver stream for Pascua-Lama project in Chile and Argentina

2014-8-25 Silver Mining

Silver Wheaton Corp. ("Silver Wheaton" or the "Company") (TSX:SLW) (NYSE:SLW), through its wholly owned subsidiary Silver Wheaton (Caymans) Ltd., has amended the silver streaming agreement with Barrick Gold Corporation regarding the Pascua-Lama project, extending both the completion test date and the silver production entitlement from the Lagunas Norte, Pierina, and Veladero mines. Silver Wheaton has also agreed with Nyrstar Mining Ltd. and certain of its affiliates to the cancellation of the Campo Morado silver stream in exchange for cash consideration of US$25 million.

Pascua-Lama

Silver Wheaton has amended the silver streaming agreement with Barrick Gold Corporation ("Barrick") regarding the Pascua-Lama project. As per Silver Wheaton's news release dated October 31, 2013, the Company had been entitled to production, through the end of 2016, from three of Barrick's currently producing mines — the Lagunas Norte, Pierina, and Veladero mines (collectively "Barrick's Other Mines") — to the extent of any production shortfall at Pascua-Lama, until Barrick satisfies the completion test. As part of the newly revised agreement with Barrick, Silver Wheaton will now be entitled to the production from Barrick's Other Mines until March 31, 2018.

The original contract with Barrick provided Silver Wheaton with a completion test, requiring Barrick to complete Pascua-Lama to at least 75% of design capacity by December 31, 2015. The contract has been amended several times, and currently has a completion test deadline of December 31, 2017. In exchange for the extension of the entitlement of the production from Barrick's Other Mines, Silver Wheaton has agreed to extend the completion test deadline to June 30, 2020. According to the silver purchase agreement, if the requirements of the completion test have not been satisfied by the amended completion date, the agreement may be terminated by Silver Wheaton. In such an event, Silver Wheaton will be entitled to the return of the upfront cash consideration of US$625 million less a credit for any silver delivered up to that date. As of September 30, 2014, the Company had received approximately 12.0 million ounces of silver related to Barrick's Other Mines under the agreement, generating cumulative operating cash flow of approximately US$275 million. As a result, the cash obligation owed to Silver Wheaton should Barrick not satisfy the completion test, was approximately US$350 million as of September 30, 2014.

"Silver Wheaton believes in maintaining strong relationships with all of our partners," said Randy Smallwood , Silver Wheaton's President and Chief Executive Officer. "The extension of the completion test deadline gives Barrick additional time to develop the world-class Pascua Lama project, and Silver Wheaton receives 15 months of additional production from Barrick's Other Mines. We believe this is the most beneficial outcome for both Silver Wheaton and Barrick shareholders, and we look forward to continuing to work with Barrick in advancing this world class asset."

Silver Mining