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Classified in: Mining industry, Business
Subject: TNM

Wheaton Precious Metals Acquires Cobalt Stream From Vale's Voisey's Bay Mine


VANCOUVER, June 11, 2018 /PRNewswire/ --

All $ are USD$

Wheaton Precious Metalstm Corp. ("Wheaton" or the "Company") (TSX: WPM)(NYSE: WPM) is pleased to announce that it has agreed to acquire from a subsidiary of Vale S.A. ("Vale") (NYSE:VALE) an amount of finished cobalt equal to a fixed percentage of cobalt production from the Voisey's Bay mine (the "Cobalt Stream"). Wheaton will pay Vale upfront cash consideration of US$390 million upon closing of the Cobalt Stream. In addition, Wheaton will make ongoing payments of 18% of the Metal Bulletin market price ("cobalt spot price") per cobalt pound delivered[1]. Also on June 11, 2018, Vale entered into a separate streaming agreement with Cobalt 27 Capital Corp. ("Cobalt 27"). In total, Wheaton and Cobalt 27 will provide Vale an aggregate of US$690 million in funding for the combined purchase of cobalt equal to 75% of Voisey's Bay cobalt production effective January 1, 2021.

TRANSACTION HIGHLIGHTS 

"While our focus has been, and always will be on precious metal streaming, we welcomed the opportunity to invest in another low-cost, long-life asset with a partner of Vale's calibre. Wheaton has built a portfolio of streams on high-quality mines, and Voisey's Bay has both the quality and the scale to make it an accretive addition to this portfolio," said Randy Smallwood, Wheaton's President and Chief Executive Officer. "We see numerous similarities between cobalt and silver, as both are primarily produced as by-products and both are integral to sustainable clean energy and electronics. In addition, given cobalt supply is concentrated in high political risk jurisdictions, Voisey's Bay is particularly attractive for cobalt production as it is located in Canada."

TRANSACTION TERMS 

FINANCING THE TRANSACTION 
The initial upfront cash payment of US$390 million will be paid by using amounts drawn from the Company's US$2 billion revolving credit facility. At March 31, 2018, the Company had approximately US$116 million of cash on hand and US$663 million outstanding under the revolving credit facility. With trailing four-quarter operating cash flow of just under $550 million[5], the Company believes it has ample capacity to service the additional debt resulting from 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 VOISEY'S BAY MINE 
The Voisey's Bay mine and concentrator is located on the north coast of Labrador, approximately 1,200 kilometres north of St. John's, Newfoundland. Production began in 2005 and open pit mining is expected to continue until 2022. There will be a gradual transition from open pit to underground mining beginning in 2021. 

In July 2015 Vale's Board of Directors sanctioned the development of the underground deposits at Voisey's Bay. The mine expansion project will focus on the development of two separate deposits, Reid Brook and Eastern Deeps. Once in operation, underground mining is expected to extend the life of the Voisey's Bay operation until at least 2034. At peak production, the underground mines are expected to produce about 45,000 tonnes per year of nickel-in-concentrate which will be shipped to Vale's processing facility in Long Harbour, Newfoundland for further processing into finished nickel. The mine also produces a copper concentrate which is shipped to third party smelters but does not contain payable cobalt.

The construction phase of the mine expansion began in 2016 and is expected to be completed in 2022. This will include the expansion of existing surface infrastructure at Voisey's Bay for increased power generation capacity, additional permanent accommodations, offices, warehousing and maintenance shops. The water and sewage treatment facilities will also be upgraded.

The development of the underground mines, which is the largest segment of the construction program, requires the development of declines from surface to access the ore bodies, and the construction and installation of supporting infrastructure including underground crushing and conveying, paste / backfill plant, maintenance facilities and underground mine ventilation systems.

Vale has entered into a development agreement with the Government of Newfoundland and Labrador in respect of the development and construction of the underground mines, including commitments as to the timing of completion of those underground mines. In addition, as Voisey's Bay is located in an area subject to land claims by both the Innu Nation and the Nunatsiavut Government, Vale has also entered into impacts and benefits agreements with both groups.

Below are Wheaton's attributable Mineral Reserves and Resources in respect of the Voisey's Bay mine.[6]

Attributable Mineral Reserves and Mineral Resources - Voisey's Bay, effective as of December 31, 2017 


   
              Tonnage Grade Contained
    Category    Mt    Co %   Co Mlbs
     Proven     4.6   0.14      13.9
    Probable    6.5   0.13      18.7
       P&P     11.1   0.13      32.6
    Measured      -      -         -
    Indicated   2.2   0.04       2.0
       M&I      2.2   0.04       2.0
    Inferred    3.9   0.10       8.6

ABOUT COBALT      
Cobalt derives its name from the Germanic word for goblin, kobold, a reference to cobalt's propensity to turn to black powder on smelting. Despite that early name, today, cobalt is known as the hard, lustrous metal whose high energy density, low thermal conductivity, ability to alloy, and ferromagnetism results in diverse commercial, industrial and military applications. 

The leading use of cobalt is in rechargeable batteries as cobalt significantly improves lithium ion batteries' ("LIB") performance by providing stability and prolonging battery life. Battery chemicals already consume just under half of the world's cobalt and that percentage is expected to grow by 57% in 2020 and 73% in 2025 with the broader adoption of electric vehicles. The EV industry is expected to lead the demand for cobalt-containing LIB as relative to the traditional lead-acid battery, LIB have higher charge density, power-to-weight ratio and a longer lifespan.[7]

The two main global supply risks for cobalt relate to its geographic concentration and its by-product nature. The top three producing countries account for two-thirds of supply, with most of the world's production coming from the African Copper Belt, mainly the Democratic Republic of Congo ("DRC"). The DRC is the world's largest producer of mined cobalt with a 55% global share, and the US Geological Survey estimates that half of global in situ reserves are in the DRC. Similar to silver, the vast majority of cobalt is produced as a by-product of other base metals. In cobalt's case, from copper and nickel, and as such, cobalt production is more tied to the economics of those two metals rather than any tightness in the cobalt market.

CONFERENCE CALL 
A conference call will be held on June 12, 2018, starting at 11:00 am (Eastern Time) to discuss this transaction. A presentation on the transaction will be available on the Company's website shortly before the conference call. To participate in the live call please use one of the following methods:

Dial toll free from Canada or the US: 888-231-8191
Dial from outside Canada or the US:   +1-647-427-7450
Pass code:                            7861228
Live audio webcast:                   www.wheatonpm.com

Participants should dial in ten to fifteen minutes before the call.

The conference call will be recorded and available until June 19, 2018 at 11:59 pm ET. The webcast will be available for one year. You can listen to an archive of the call by one of the following methods:

Dial toll free from Canada or the US: 855-859-2056
Dial from outside Canada or the US:   +1-416-849-0833
Pass code:                            7861228
Archived audio webcast:               http://www.wheatonpm.com

Mr. Neil Burns, Vice President of Technical Services for Wheaton, is a "qualified person" as such term is defined under National Instrument 43-101 and has reviewed and approved the technical disclosure in this news release including information on Mineral Reserves and Mineral Resources.

ADVISORS AND COUNSEL 
Scotiabank acted as financial advisor and Cassels Brock & Blackwell LLP acted as legal counsel to Wheaton.

END NOTES

[1] Production payment is set at 18% of cobalt spot prices, increasing to 22% upon the balance of upfront consideration being reduced to zero.
[2] Based on Wood Mackenzie est. of 2nd quarter of 2018 by-product cost curve for nickel mines.
[3] Production is defined as metal contained in concentrate and is based on mine plans provided by Vale and a gold to cobalt ratio based on $1,300 per ounce of gold and $40 per pound of cobalt.
[4] Operating cash flow is based on current market cobalt prices of approximately $40 per pound of cobalt, 2.6 million pounds of cobalt produced annually, a payable cobalt rate of 93.3%, production payment of 18%, and an assumed cobalt marketing fee. Statements as to estimated operating cash flow and EBITDA contain forward looking information and readers are cautioned that actual outcomes may vary.  Please see the "Cautionary Note Regarding Forward Looking-Statements" at the end of this news release for material risks, assumptions, and important disclosure associated with this information.
[5] Operating cash flow based on Q2, Q3, and Q4 of 2017, and Q1 2018
[6] Please refer to the Mineral Reserves & Mineral Resources table at the end of this news release for full disclosure of reserves and resources associated with Voisey's Bay including accompanying footnotes.
[7] Spender, Reg, Larry Hill, Eric Zaunscherb, Thomas Gallo and John Kratochwil. "Cobalt: Out of the shadows and into the spotlight" Specialty Minerals and Metals, Global Equity Research, Canaccord Genuity. 25-May-17.

ATTRIBUTABLE MINERAL RESERVES AND MINERAL RESOURCES FOR VOISEY'S BAY 


   

         Deposit      Category  Tonnage Grade Contained
                                  Mt    Co %   Co Mlbs
    Main & Mini Ovoid  Proven     0.3   0.18       1.3
      SE Extension     Proven     0.8   0.04       0.7
       Reid Brook      Proven     1.7   0.15       5.6
                      Probable    0.9   0.13       2.6
      Eastern Deeps    Proven     1.8   0.16       6.3
                      Probable    5.6   0.13      16.2
     Total Reserves    Proven     4.6   0.14      13.9
                      Probable    6.5   0.13      18.7
                         P&P     11.1   0.13      32.6
     Discovery Hill   Indicated   1.4   0.05       1.5
                      Inferred    1.4   0.05       1.6
      SE Extension    Indicated   0.8   0.03       0.5
       Reid Brook     Inferred    2.5   0.13       7.0
     Total Resources  Measured      -      -         -
                      Indicated   2.2   0.04       2.0
                         M&I      2.2   0.04       2.0
                      Inferred    3.9   0.10       8.6

Notes on Mineral Reserves and Mineral Resources 


CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS 
The information contained herein contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements with respect to:

Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "projects", "intends", "anticipates" or "does not anticipate", or "believes", "potential", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Wheaton to be materially different from those expressed or implied by such forward-looking statements, including but not limited to:

Forward-looking statements are based on assumptions management currently believes to be reasonable, including but not limited to:

Although Wheaton has attempted to identify important factors that could cause actual results, level of activity, performance or achievements to differ materially from those contained in forward-looking statements, there may be other factors that cause results, level of activity, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate and even if events or results described in the forward-looking statements are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, Wheaton. Accordingly, readers should not place undue reliance on forward-looking statements and are cautioned that actual outcomes may vary. The forward-looking statements included herein are for the purpose of providing investors with information to assist them in understanding Wheaton's expected financial and operational performance and may not be appropriate for other purposes. Any forward looking statement speaks only as of the date on which it is made. Wheaton does not undertake to update any forward-looking statements that are included or incorporated by reference herein, except in accordance with applicable securities laws.

Non IFRS Measures 
Wheaton has included, certain non-IFRS performance measures, including operating cash flow. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, management and certain investors use this information to evaluate the Company's performance. Operating cash flow is based on current market cobalt prices of approximately $40 per pound of cobalt, 2.6 million pounds of cobalt produced annually, a payable cobalt rate of 93.3%, production payment of 18%, and an assumed cobalt marketing fee. Non-IFRS measures do not have any standardized meaning prescribed by IFRS, and other companies may calculate these measures differently. The presentation of non-IFRS measures is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For more detailed information, please refer to Wheaton Management Discussion and Analysis available on the Company's website at http://www.wheatonpm.com  and posted on SEDAR at http://www.sedar.com.

Cautionary Language Regarding Reserves And Resources 
For further information on Mineral Reserves and Mineral Resources and on Wheaton more generally, readers should refer to Wheaton's Annual Information Form for the year ended December 31, 2017 and other continuous disclosure documents filed by Wheaton since January 1, 2018, available on SEDAR at http://www.sedar.com. Wheaton's Mineral Reserves and Mineral Resources are subject to the qualifications and notes set forth therein. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

Cautionary Note to United States Investors Concerning Estimates of Measured, Indicated and Inferred Resources: The information contained herein has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of United States securities laws. The terms "mineral reserve", "proven mineral reserve" and "probable mineral reserve" are Canadian mining terms defined in accordance with Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the "CIM Standards"). These definitions differ from the definitions in Industry Guide 7 ("SEC Industry Guide 7") under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"). Under U.S. standards, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Also, under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource" are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. "Inferred mineral resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Disclosure of "contained ounces" in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute "reserves" by SEC standards as in place tonnage and grade without reference to unit measures. Accordingly, information contained herein that describes Wheaton's mineral deposits may not be comparable to similar information made public by U.S. companies subject to reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder. United States investors are urged to consider closely the disclosure in Wheaton's Form 40-F, a copy of which may be obtained from Wheaton or from http://www.sec.gov/edgar.shtml.

Patrick Drouin, Senior Vice President, Investor Relations, Wheaton Precious Metals Corp., Tel: +1-844-288-9878, Email: [email protected], Website: http://www.wheatonpm.com


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