Capitalizing on the recent run up in the market value of
In a private transaction, Silver Wheaton agreed to pay $3.03 per share for more than 4.8 million common shares of Bear Creek, representing a 15% stake, or 12.2% on a fully diluted basis.
MK Resources is currently merging with its controlling majority shareholder,
Since first announcing details of the merger on May 3, the market value of Bear Creek has increased substantially following the first couple batches of positive drill results from the junior’s Corani silver project in southeastern Peru.
MK Resources allowed its shareholders to benefit from any increase in the market value of the company’s investment in Bear Creek, which was worth US$2.8 million on May 2. To do this, MK’s board of directors declared a dividend of one valuation right per share. Based on the net proceeds from the Bear Creek sale and the currency exchange rate, MK shareholders of record as of Aug. 18, will receive about US24 for each deferred valuation right.
The arrangement between MK and Leucadia is expected to be completed in late August, at which point the sale of its 70% interest to Inmet for 5.6 million shares, representing an 11.8% stake in the base metal producer, will be wrapped up.
The Las Cruces copper project, 20 km northwest of Seville, Spain, is in the final stages of permitting and surface land acquisition. Development is planned as an open-pit mine, with copper cathode to be produced on-site using Outokumpu atmospheric leaching and conventional solvent extraction-electrowinning. Proven and probable ore reserves are estimated at 16 million tonnes grading 6.62% copper, with a waste-to-ore stripping ratio of 14.5-to-1. The project is expected to produce 66,000 tonnes copper cathode annually over 15 years at operating costs of 33 euros per lb. Capital costs are estimated at 308 million euros, not including 54 million euros in European Union subsidies.
Silver Wheaton (formerly known as Chap Mercentile) was transformed into a pure silver play in late 2004 by agreeing to purchase all of the silver production from
The Luismin deal, reached with Wheaton River Minerals, which has since merged with Goldcorp, included an upfront payment of $46 million (US$36.7 million) cash and 108 million Silver Wheaton shares, plus a per-oz. cash payment of the lesser of US$3.90 and the prevailing market price, subject to adjustment. The agreement covers the purchase of at least 120 million oz. refined silver over a period of 25 years.
The Luismin underground mines of San Dimas and San Martin have four years’ worth of proven and probable reserves outlined, containing 660,000 oz. gold and 40.3 million oz. silver in 3.5 million tonnes of 6.4 grams gold and 355 grams silver per tonne. Silver recoveries are currently around 90%. Historically, Luismin has sustained operations through the conversion of a high percentage of inferred resources to mineral reserves. Inferred resources hold another 1.6 million oz. gold and 146 million oz. silver in 15.8 million tonnes averaging 3.6 grams gold and 316 grams silver.
In December 2004, Silver Wheaton entered into an agreement with Lundin Mining to purchase 100% of the silver produced by the Zinkgruvan mine for an upfront payment of US$50 million in cash, 8 million shares and 30 million share purchase warrants, in addition to a per-oz. cash payment of US$3.90. The purchase arrangement covers at least 40 million oz. of silver over a 25-year period.
The Zinkgruvan zinc-lead mine in Sweden has been in operation since 1857. Lundin bought the underground operation from
During 2004, production from the underground mine totalled 61,547 tonnes zinc, 31,448 tonnes lead and a little more than 2 million oz. silver from the processing of 734,000 tonnes of ore. As a byproduct, silver represents about 20% of the value of Zinkgruvan’s production. At the end of 2004, proven and probable reserves stood at 8.8 million tonnes grading 9.9% zinc, 4.8% lead and 101 grams silver. Silver recoveries are averaging about 76%.
Additional measured and indicated resources total 2.1 million tonnes of 8.6% zinc, 2.5% lead and 58 grams silver, whereas inferred resources include 8.2 million tonnes averaging 9.9% zinc, 4.2% lead and 101 grams silver.
Based on a yearly throughput rate of 800,000 tonnes of ore, Lundin expects Zinkgruvan to have a remaining mine life of somewhere between 15 and 20 years.
For the first six months of 2005, Silver Wheaton posted net earnings of US$11.9 million (or 7 per share) from the sale of 5 million oz. silver at an average realized price US$7.08 per oz. The company is on track to sell 10 million oz. in 2005, of which 8 million oz. will come from the Luismin mines, with the balance from Zinkgruvan. Cash-on-hand at the end of June was US$33.3 million.
Silver Wheaton notes that the acquisition of a 15% interest in Bear Creek was done for investment purposes. “We’ve looked at all sorts of opportunities and we are very keen to grow the company,” explained Peter Barnes, Silver Wheaton’s executive vice-president, during a conference call addressing second quarter results.
In the meantime, Bear Creek has entered into a bought-deal, private placement financing worth $10.2 million. A syndicate of underwriters co-led by Haywood Securities, Canaccord Capital, and including Pacific International Securities, has agreed to purchase 3.1 million units priced at $3.25 apiece. Each unit consists of one share and half a warrant. A whole warrant will entitle the purchase of an additional share at $4.25 within two years.
The recent release of results from a second batch of nine drill holes targeting the Corani North Silver prospect in Peru highlights the potential for a major bulk-tonnage silver oxide resource. A first pass of diamond drilling has encountered multi-ounce silver values across intervals of up to 150 metres thick, starting at surface in each of the holes. The widely spaced drilling has now tested about a 1,600-metre strike length of a mineralized 4.5-km-long structural corridor that widens to at least 430 metres in places in the northernmost section of the silver zone. The weighted average grade in all of the holes (not including hole 10) is 120 grams (3.5 oz.) silver across an average thickness of 52 metres.
Rough back-of-the-envelope calculations by a number of mining analysts suggest the potential for 175-200 million oz. silver.
Hole 10, the southernmost hole drilled to date, intercepted 6 metres of 41 grams silver and 1.2 grams gold, starting at 8 metres down-hole. The hole was designed to test beneath trench 12, which returned 28 metres of 27.4 grams silver and 1.2 grams gold. Gold-silver ratios along the mineralized corridor increase to the south towards a weak porphyry copper system.
Additional trenching 500 metres east of t
he Corani Silver prospect has turned up 329 grams (9.6 oz.) silver and 2.1% lead across 86 metres in a new zone, called Corani Este. Trench 18 ends in 192 grams (5.6 oz.) silver mineralization on the northeast end and 99 grams (2.9 oz.) silver on the southwest end.
With about two-thirds of a first phase, 3,000-metre drilling program complete, Bear Creek is continuing to focus on testing the extent of the oxide silver mineralization using two rigs.
Be the first to comment on "Silver Wheaton pays $14.6M for Bear Creek shares"