Wheaton Precious Metals Corp (TSE: WPM) (NYSE: WPM) (FRA: SII) just announced that it has secured a major gold stream at a development-stage Nevada mine.
The Spring Valley project held by Solidus Resources is scheduled to enter the commercial production phase in 2028. Construction will begin next year.
Wheaton will be building a stronger relationship with Solidus and its privately-held parent company Waterton Gold through the newly signed precious metals purchase agreement. They previously partnered in a streaming deal at Arizona’s Mineral Park silver-copper mine in late 2023.
Waterton and Solidus will be receiving US$670 million from Wheaton in a series of installments. Wheaton has agreed to purchase 8 per cent of the mine’s payable gold until a total of 300,000 ounces has been delivered. Once that milestone has occurred, Wheaton will purchase 6 per cent for the remainder of Spring Valley’s production life.
The deal benefits Waterton by providing the company with access to immediate capital without taking on debt or selling equity. Meanwhile, Wheaton gets the opportunity to secure a significant portion of the mine’s future gold production at a low cost totalling only 20 per cent of the metal’s current spot price.
“I would argue that streaming is the most competitive and attractive source of capital to build assets,” said Wheaton CEO Randy Smallwood in an interview on Nov. 7 discussing Q3 earnings and the Waterton deal, “and with these gold prices we are seeing alot of gold projects moving forward.”
The total being purchased by Wheaton will consist of 29,000 ounces per annum in Spring Valley’s first five years and 25 kilo ounces annually thereafter. The mine is anticipated to produce a total of 348,000 ounces per year during the first half of its 10-year life and an average of 300,000 afterward. Conclusion of production will be proceeded by five years of reclamation work.
Solidus received a record of decision from the United States Bureau of Land Management for Spring Valley in July. Clearing this major regulatory hurdle was a major achievement for the company.
The Waterton subsidiary also got a letter of financing interest in the mail from the Export-Import Bank of the United States (EXIM) in May. It indicated that the American agency was considering financing the mine with up to US$835 million. No progress has been announced since and it is uncertain when or if the capital injection will materialize. The EXIM is known to have a stringent due diligence process.
Nonetheless, Waterton Executive Chairman Isser Elishis says the mine is now backed by US$1.3 billion in committed capital as a result of Wheaton’s commitment.
A feasibility study completed this year found that Spring Valley boasts an after-tax net present value of US$1.5 billion with a 5 per cent discount rate. It is anticipated to have a 28 per cent after-tax internal rate of return. In comparison, construction is expected to cost US$823 million.
Read more: NevGold edges closer to gold-antimony resource with latest Limousine Butte results
Wheaton’s Q3 revenue spikes from high gold price
Current precious metal pricing enabled Wheaton to rake in US$476 million last quarter. The sum represents a 54.5 per cent year-over-year increase.
Additionally, net earnings hit US$367 million — a 137 per cent year-over-year increase and sequential boost of 35 per cent.
“These strong results position us well to meet our annual production guidance of 600,000 to 670,000 gold equivalent ounces and underscores the streaming model’s ability to generate predictable levered cash flows in a rising precious metals price environment,” said Smallwood in a news release.
Wheaton generated approximately 58 per cent of its revenue from gold during the quarter. The company secured a new streaming deal at the Hemlo Mine during the three-month period. Barrick Mining Corp (TSE: ABX) (NYSE: B) (ETR: ABR0) recently owned the site but sold the operation to Carcetti Capital Corp. in September.
A major US$625-million-dollar streaming agreement at the Koné gold operation held by Montage Gold Corp (TSE: MAU) (OTCMKTS: MAUTF) (FRA: 5OO) is another of great importance of Wheaton.
Wheaton boosted its quarterly dividend by 6.5 per cent year-over-year in Q3 at US$0.165.
Read more: NevGold Expands Gold-Antimony Potential at Limousine Butte in Nevada
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