VANCOUVER, CANDADA (Commodity Online): What is silver streaming? Is it a technical term or a business model? Or precisely, what does the world’s largest silver streaming company- Silver Wheaton Corp with a 2009 forecast sales of 16-18 mn ounces of silver,17,000 ounces of gold do?

What Silver Wheaton does is to buy upfront 25-30% of the by-product silver production of a mine which it does not own or operate. In some mines the agreement may be for 100% of the output. The price that Silver Wheaton pays for future silver production is pre-determined in the agreements, typically US$3.90 per ounce with a small inflationary adjustment, which ensures costs are fixed.

This allows Silver Wheaton to avoid variations in operating costs, reducing downside risk, while providing the upside of significant leverage to the price of silver. As well, other than the initial up-front payment, no additional capital expenditures or exploration costs are required; yet, Silver Wheaton benefits from the production and exploration growth of its partners. This often translates into significant value creation for Silver Wheaton’s shareholders.

Since approximately 70% of all silver production occurs as a by-product of base or precious metals production, there are numerous potential opportunities for further growth with this business model. With the recent acquisition of Silverstone Resources Corp., the Company also has the right to purchase the life-of-mine gold production from the Minto mine located in Canada for US$300 per ounce of gold with a small inflationary adjustment.

A silver stream allows a mine operator that produces silver as a by-product, such as a base metal company, to immediately monetize the value of their non-core silver production. Mine operators typically receive the upfront payment in the form of cash which can be used to continue growing their company, through exploration, capital or production expansions, or by making acquisitions.

Alternatively, the proceeds can be used to strengthen their capital structure by paying down debt. In short, Silver Wheaton helps mining companies grow their businesses by offering a very attractive financing alternative over traditional sources of capital such as debt or equity.

Streaming Update
The construction of the first sulphide process line (Line 1) at Goldcorp’s world-class gold-silver-lead-zinc Penasquito mine in Zacatecas, Mexico is complete and production, shipment of first concentrates is targeted for H2 2009. It will produce around 30 mn ounces of siler annually over an initial 22 year mine life, of which Silver Wheaton will receive 25% or in excess of seven million ounces of silver annually.

The primary crusher and Line 1 grinding circuit are complete with the Line 1 lead and zinc flotation circuits essentially complete. The mining rate is averaging in excess of 500,000 tonnes per day and a stockpile of 4.2 million tonnes of sulphide has been established ahead of the primary crusher. The coarse ore stockpile contains 230,000 tonnes of crushed ore in preparation for initial milling.

Construction of the second sulphide process line (Line 2) is well underway and progressing toward planned completion in the third quarter of 2010. Many of the components are already on site and the mill shells for both the SAG and ball mills are currently en-route to site. Throughput from the two process lines is expected to reach 130,000 tonnes per day in the fourth quarter of 2010.
Trading platform that even a 5 year old can trade. Join now

To create additional value, Goldcorp continues to advance several mine optimization initiatives including an independent power plant and in-pit crushing and conveying, a press release said.

"We are extremely pleased with Goldcorp's progress at Penasquito," said Peter Barnes, President and Chief Executive Officer of Silver Wheaton. "With the first line complete and the second line advancing on schedule, Silver Wheaton's stakeholders will begin to recognize significant value from what is soon to be Mexico's largest open pit mine. Since our silver stream acquisition in April of 2007, Penasquito has grown considerably, and we anticipate the trend of increased silver reserves and production growth to continue well into the future, including further definition of the vast underground potential."

Silver Wheaton established in 2004 and forecast 2009 sales are 16 to 18 million ounces of silver and 17,000 ounces of gold, for total sales of 17 to 19 million silver equivalent ounces, growing to approximately 30 million ounces of silver and 20,000 ounces of gold, for total sales of approximately 31 million silver equivalent ounces, by 2013.

Some of the major mines in which Silver Wheaton has stakes include Luismin (Goldcorp Inc, Mexico, 100%, 25 years, 2009 silver sales forecast 5.7 to 6.2 mn ounces), Zinkgruvan (Lundin Mining Co, Sweden, 100%, Life of mine 1.8 to 2.1 mn ounces), Yauliyacu(Glencore Intl AG, Peru 100%, 20 years, 2.9 to 3.5 mn ounces sales for 2009),Penasuito (Goldcorp Inc, Mexico, 25%, Life of Mine, 1.4 to 1.7 mn ounces sale in 2009), Stratoni(European Goldfields Ltd, Gree, 100%, Life of Mine, sales 1.6 to 1.7 mn ounces sales and Cozamin (Capstone Mining, Mexico 100%, Until 2017, 0.8 mn ouces sales in 2009). (Courtesy: PRNewswire)

Post your comment  (0)

Connect:

Post to Twitter

Post to Facebook