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Silver Wheaton (TSX: SLW) Strikes Gold Deal

Written By Brian Hicks

Posted February 7, 2013

Silver Wheaton Corp. (TSX: SLW) of Vancouver, Canada has stated that it has reached an agreement with a Vale SA (NYSE: VALE) subsidiary to acquire gold production from two of the company’s mines.

For the remainder of the operational lifetime of Vale’s Salobo mine in Brazil, Silver Wheaton will receive 25 percent of production, the Globe and Mail reports. It will also receive 70 percent of the production for the next twenty years from Vale’s Ontario mine.

Silver Wheaton is to pay $1.9 billion cash in addition to 10 million of the company’s warrants carrying a strike price of $65 for a 10-year term.

As well, it will pay $400 per gold ounce delivered, adjusting for inflation and market pricing.

The Globe and Mail reports:

“Partnering with Vale on two new gold streams represents a significant step forward for Silver Wheaton and for the streaming model as a whole,” Silver Wheaton president and chief executive officer Randy Smallwood said in a release.

The deal has yet to be approved by Vale’s board of directors, but Silver Wheaton has already updated its guidance moving forward.

For the present year, silver equivalent production is projected at 33.5 million silver equivalent ounces inclusive of 145 thousand ounces of gold, and for 2017, the numbers are expected to be 53 million silver equivalent ounces, inclusive of 180 thousand ounces of gold.