Wheaton Precious Metals™ Corp’s wholly owned subsidiary Wheaton Precious Metals International Ltd has agreed to a new precious metals purchase agreement (the First Majestic PMPA) relating to the San Dimas mine, in conjunction with the proposed transaction under which First Majestic Silver Corp will acquire Primero Mining Corp pursuant to a plan of arrangement. Wheaton International has agreed to terminate the existing San Dimas silver purchase agreement with Primero and enter into the First Majestic PMPA, which includes the following terms:
- 25% of gold production plus an additional amount of gold equal to 25% of silver production converted to gold at a fixed gold to silver exchange ratio of 70:11 from San Dimas
- For each ounce of gold delivered, Wheaton International will pay to First Majestic a production payment equal to the lesser of $600/oz, subject to a 1% annual inflationary adjustment, and the prevailing market price
- First Majestic to provide a corporate guarantee; security to be limited to San Dimas assets
- Area of interest that is subject to the First Majestic PMPA remains unchanged from the Existing SPA
As part of the transaction, in addition to the new stream Wheaton International will receive 20,914,590 First Majestic common shares reflecting an aggregate value of $151 million.
“San Dimas has operated for over 130 years and is the mine Wheaton was founded on in 2004. With the new streaming arrangement being linked to a combination of gold and silver production, we believe San Dimas will continue to deliver significant value to Wheaton for many years to come while also providing economic and social opportunities to the community of Tayoltita,” said Randy Smallwood, President and Chief Executive Officer of Wheaton. “First Majestic has a long history of operating in Mexico and an expertise in mining narrow vein underground deposits similar to San Dimas. Given their experience and a renewed focus on mining the entire deposit, including the silver rich areas, we are excited to welcome First Majestic as a partner.”
The termination of the Existing SPA and the effectiveness of the First Majestic PMPA remain subject to a number of conditions, including completion of the Arrangement. The First Majestic Shares will represent approximately 11% of First Majestic’s current issued and outstanding shares and will be subject to a six month hold period (subject to certain exceptions) with volume selling restrictions thereafter.
In addition, at the time of closing of the Arrangement, Wheaton International has agreed to release the guarantee previously provided by Goldcorp Inc under the Existing SPA in consideration for a payment of $10 million from Goldcorp to Wheaton International. Furthermore, the $0.50/oz penalty for each ounce less than 215 Moz delivered by 2031 will be extinguished.
In order to facilitate the closing of the Arrangement, Wheaton also has agreed to extend the guarantee previously provided by Wheaton and certain of its subsidiaries under Primero’s existing revolving credit facility to the earlier of April 30, 2018, and the completion or termination of the Arrangement.
The silver stream on San Dimas represented on average approximately 10% of Wheaton’s total historical production over the past three years at approximately 5.4 Moz/y silver. Under the First Majestic PMPA, San Dimas is expected to contribute on average some 40,000 to 45,000 oz of gold production annually to Wheaton’s total production over the next five years. The company will update its five-year average annual guidance for both silver and gold when it releases its fourth quarter and full year results for 2017.
Mineral Reserves and Resources will be updated under due course in the first half of 2018 and include any changes due to the amendments to the stream subject to the successful closing of the Arrangement.