Silver Wheaton (SLW) to Acquire Antamina Mine Assets in $900M+ Deal

Silver Wheaton (NYSE: SLW) announced that its wholly-owned subsidiary, Silver Wheaton (Caymans) Ltd. ("SWC"), has agreed to acquire from Anani Investments Ltd. ("Anani"), a wholly-owned subsidiary of Glencore plc ("Glencore") an amount of silver calculated by reference to silver produced at the Antamina mine, located in Peru. SWC will pay Glencore cash consideration of US$900 million for the silver stream. In addition, SWC will make ongoing payments of 20% of spot price per silver ounce delivered.

TRANSACTION HIGHLIGHTS

• Adds to Silver Wheaton's Existing High-Quality Portfolio
  • SWC will receive from Glencore an amount equal to 33.75% of the Antamina silver production until the delivery of 140 million ounces of silver and 22.5% of silver production thereafter for life of mine at a fixed 100% payable rate.1
  • Antamina is one of the lowest cost copper mines globally and is the eighth largest copper mine in the world.2 The low-costs are facilitated by the high grade reserves and resources as well as the wholly owned mining infrastructure.
  • With the addition of Antamina, approximately 84% of Silver Wheaton's 2019 production is forecast to come from mines operating in the first quartile of their respective cost curve.2
  • Subsequent to the closing of this acquisition, Silver Wheaton's estimated Proven and Probable silver reserves increase by 75 million ounces, Measured and Indicated silver resources increase by 56 million ounces, and Inferred silver resources increase by 126 million ounces.3
• Immediate production and cash flow
  • This acquisition immediately increases Silver Wheaton's production and cash flow profile by adding expected average silver production of 5.1 million ounces per year in 2016 and 2017, and 4.7 million ounces per year over the first 20 years.
  • Production expected in the fourth quarter: forecast to be around 1.0 to 1.5 million ounces of silver.
  • Sales expected in the fourth quarter: any silver in respect of which a delivery is made to an offtaker after September 30, 2015, is subject to the stream.
• Long-term production and exploration upside potential
  • As of now, declared current reserves are sufficient to support mining activities at Antamina until 2028, but this could be significantly extended should measured and indicated resources be converted and inferred resources upgraded based on historical trends at the mine.3
  • Exploration potential exists both regionally and at depth below the current resource pit.
• Increases Silver Wheaton's growth profile
  • Silver Wheaton is also pleased to announce its updated production guidance as a result of this streaming acquisition. For 2015, Silver Wheaton now forecasts 44.5 million ounces of silver equivalent production4 (including 230,000 ounces of gold), and growing to approximately 55 million ounces of silver equivalent production4 (including 325,000 ounces of gold) in 2019.

"Silver Wheaton has focussed on building a portfolio of streams on high-quality, low-cost mines. Antamina has both the quality and the scale to make it an ideal addition to this portfolio, as it is not only the eighth largest copper mine in the world, but it is also one of the lowest cost," said Randy Smallwood, Silver Wheaton's President and Chief Executive Officer. "In addition, we are pleased to partner once again with Glencore, a company with a long history of mining success. This transaction not only further strengthens our relationship with Glencore, but also provides almost immediate production and operating cash flow from a proven and well-established asset. As a reminder, given our unique dividend policy of paying out 20% of our cash flow, the additional cash flow starting in the fourth quarter from this acquisition should result in increased dividends, even in a flat commodity price environment."

TRANSACTION TERMS

• SWC has agreed to acquire from Glencore an amount of silver equivalent to 33.75% of silver production from the Antamina mine until the delivery of 140 million ounces of silver.5
• Once SWC has received 140 million ounces of silver, SWC will receive an amount of silver equivalent to 22.50% of the Antamina mine's silver production (two-thirds of Glencore's 33.75% stake).
• SWC will pay Glencore cash consideration of US$900 million for the silver stream as an advance payment against the purchase price for the sale of silver to SWC.
• The stream will be based on a fixed silver payable rate of 100% of Glencore's share of production.1
• The effective date of the transaction is September 30, 2015. Any silver in respect of which a delivery is made to an offtaker after September 30, 2015, is subject to the stream.
• SWC will make ongoing payments of 20% of spot price to Glencore, per silver ounce delivered.
• Silver deliveries will be the obligation of Anani, but will be guaranteed by Glencore and a debt free entity holding Glencore's interest in Antamina ("Holdco"). Holdco is limited in its ability to grant security interests over its assets or incur debt. Subject to certain exceptions, Holdco is restricted on making any distributions or other payments to affiliates if there is an event of default under the streaming agreement.
• Closing of the transaction is expected to occur prior to the end of November 2015 and is subject to the completion of certain corporate matters and customary conditions.

FINANCING THE TRANSACTION

The initial upfront cash payment of US$900 million will be paid by using cash on hand together with amounts drawn from the Company's $2 billion revolving credit facility. At September 30, 2015, the Company had approximately $81 million of cash on hand and $647 million outstanding under the revolving credit facility. Post this transaction, Silver Wheaton will have no further capital commitments required to reach its 2019 production guidance of 55 million silver equivalent ounces. With trailing four-quarter operating cash flow of just under $400 million6, additional cash flow associated with the Antamina transaction, forecast production growth of over 25% from 2015 to 2019, and no capital commitments7, the Company believes it has ample capacity to service the additional debt resulting with this transaction, especially given the low interest rate and flexible nature of the covenants under the revolving credit facility (minimum net debt to total net worth and minimum interest coverage tests).

ABOUT THE ANTAMINA MINE

The Antamina mine is a large copper and zinc mine that began producing in 2001. It is located in the Andes mountain range, 270 kilometres north of Lima, Peru, and the deposit is located at an average elevation of 4,200 metres. The mine is operated by Compania Miñera Antamina S.A. ("CMA"), a company jointly owned by subsidiaries of Glencore (33.75%), BHP Billiton Plc (33.75%), Teck Resources Limited (22.5%), and Mitsubishi Corporation (10%).

Antamina is one of the lowest cost copper mines in the world. It produces separate copper, zinc, molybdenum and lead/bismuth concentrates, with silver predominantly contained within the copper concentrates, and additional silver contained with the lead-bismuth concentrate. The mine is an open pit, truck/shovel operation. The ore is crushed in pit and conveyed through a 2.7 kilometre tunnel to the coarse ore stockpiles at the mill. It is then processed utilizing semi-autogenous grinding mills, followed by ball mill grinding and flotation. Concentrates are pumped via a 302 km pipeline to the Huarmey Port on the Pacific Coastline (300 km north of Lima) for shipping through port facilities which are wholly owned and operated by CMA. In 2014, Antamina produced approximately 345,000 tonnes of copper, 211,000 tonnes of zinc, 3.1 million pounds of molybdenum, and 12.0 million ounces of silver (with associated bismuth and lead).

Below are the total reserves and resources in respect of the Antamina mine as of December 31, 2014 (on a 100% basis)8:

See attributable reserves and resources at the end of this news release.

SILVER WHEATON ANNOUNCES NEW PRODUCTION GUIDANCE FOR 2019

Silver Wheaton is pleased to provide its updated five-year production guidance, which incorporates the life of mine silver stream on the Antamina mine. In 2015, Silver Wheaton's estimated attributable silver equivalent production is forecast to be 44.5 million silver equivalent ounces4, including 230,000 ounces of gold. In 2019, estimated annual attributable production is anticipated to increase over 24% compared to 2015 levels, growing to approximately 55 million silver equivalent ounces4, including 325,000 ounces of gold.

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