Goldcorp sells Silver Wheaton stake for $1.57B

Goldcorp (G-T, GG-N), one of the world’s biggest gold miners, has found buyers for its entire 48% stake in the unique pure silver play, Silver Wheaton (SLW-T), leaving the company with a windfall of nearly $1.57 billion in cash.

On a bought deal basis, the company will sell 108 million Silver Wheaton shares for $14.50 apiece, to a syndacte of underwriters in a move that will help simplify its corporate structure and strengthen its balance sheet.

Goldcorp will use the money to fund development projects over the next five years, during which time the company wants to increase production by 50% to 1.65 million oz. gold.

Goldcorp already plans to spend more than $3.9 billion on developing the Penasquito project in Mexico, Eleonore in the James Bay region of Quebec, and Cerro Blanco in Guatamala, to provide sustaining capital to its other operations. The company is also looking to develop its Pueblo Viejo project in the Dominican Republic, now under feasibility study, with 60% joint venture partner Barrick Gold (ABX-T, ABX-N).

BMO Capital Markets analyst David Haughton says it was likely Silver Wheaton’s success over the past few years that drove Goldcorp to capitalize on its stake.

“At some stage you do have to think about whether you want to be consolidating Silver Wheaton into your own financial statements, as they do, or whether you would like to step back,” Haughton says.

Silver Wheaton, which listed on the TSX in October 2004, has watched its share price surge as high as $19 per share from under $4. The company gets all of its revenue from silver it purchases through contracts with five separate mines. In 2007, Silver Wheaton expected to sell 13 million oz. of silver and plans to sell 25 million oz silver per year by 2010.

Haughton says the deal was also good from a Silver Wheaton standpoint because Goldcorp’s interest in the pure silver player created uncertainty for the company.

“The stake that Goldcorp has could have been considered an overhang on Silver Wheaton,” Haughton says. “Silver Wheaton’s been very successful perhaps they’ve outgrown the relationship they’ve had with Goldcorp.”

On a bought deal basis, a syndicate of underwriters led by Macquarie Capital Markets Canada, Genuity Capital Markets and GMP Securities. The offering will close on Feb. 14 and still needs to get the necessary approvals.

Silver Wheaton shares fell 3% by mid-day, or 43, to $15.04 each on a trading volume of nearly 11.7 million shares.

Goldcorp shares slipped almost 2%, or 79 each, to $36.67 on a trading volume of 2.7 million shares.