Canada's Silver Wheaton in $1.9-bn gold deal with Vale SA

Canadian silver mining company Silver Wheaton Corp yesterday said that it had signed a $1.9-billion deal with Vale SA to buy a share of the gold produced at some of the Brazilian mining giant's mines in Brazil and Canada.

Under the deal, Silver Wheaton will receive 25 per cent of the gold production from Vale's newly constructed and currently expanding Salobo mine in Brazil, and 70 per cent of the gold production its Sudbury mines located in Canada.

Silver Wheaton will pay Vale $1.90 billion in cash and 10 million of its warrants with a strike price of $65 and a term of 10 years. It wiil pay $1.33 billion  for 25 per cent of the gold production from Salobo, and $570 million for 70 per cent of the Sudbury gold production.

In addition, Silver Wheaton will make ongoing payments of the lesser of $400 subject to a 1 per cent annual inflation adjustment from 2016 for Salobo and the prevailing market price, for each ounce of gold delivered under the agreement.

The addition of Vale's output will increase Silver Wheaton's revenue generated from gold production over the next five years from an average of 12 per cent to a peak of around 25 per cent.

Vale's Salobo mine, located in the Pará state of Brazil, is the largest copper deposit ever found in Brazil.