Vancouver In a deal that more than doubles its production, Wheaton River Minerals (WRM-T) has agreed to purchase Rio Tinto‘s (RTP-N) Peak gold mine in Australia along with the major’s 25% stake in Argentina’s Bajo de la Alumbrera gold-copper operation for US$210 million.
The deal propels Wheaton River into the number eight slot among Canadian gold producer, increasing output to 458,000 oz of gold equivalent, up from its projected 190,000 oz slated for 2003.
“This acquisition fulfills our mandate of transforming Wheaton River into a premier mid-tier gold producer,” says the company’s Chief Executive Officer, Ian Telfer. “We have increased reserves, increased production and dramatically reduced our production costs.”
The move increases the company’s proven and probable reserves to more than 3.3 million oz. gold equivalent from 800,000-oz gold equivalent at the end of 2001.
The Bajo de la Alumbrera gold-copper mine began commercial production in February 1998 at a cost of US$1.2 billion. The mine is located in Catamarca province some 1,100 km northwest of Buenos Aires at an altitude of 2,500 metres. The Argentine state-owned mining company, Yacimientos Mineros de Agua de Dionisio (YMAD) awarded an international tender for the Alumbrera concession to International Musto Exploration in 1992. Minera Alumbrera was formed in February 1994 when Australian miner MIM Holdings bought a 50% operating interest. During 1995, North Ltd and Rio Algom acquired 98% of the shares in International Musto, and each eventually built up a 25% interest in the project. During 2000, Rio Tinto acquired North Ltd and Rio Algom was bought by Billiton, now BHP Billiton (BHP-N).
The deposit is a classic copper-gold porphyry with porphyritic dacite intruding volcanic andesite. At last report, the mine’s proven reserve base tallied 330 million tonnes grading 0.51% copper and 0.59 grams gold, plus 42 million tonnes in the probable category grading 0.55% copper and 0.64 grams gold.
The operation reached full target rates in the second quarter of 1999 when concentrator throughput averaged 82,000 tonnes per day. In the 2001-02 fiscal year, Alumbrera treated 29.5 million tonnes of material grading 0.74% copper and 1.04 grams gold. Production for the year ended June 30, 2002, totalled 759,360 oz. of gold and 199,550 tonnes of copper at a cash cost, including copper credits, of negative US$18 per gold oz. Over the next five years, the operation is expected to crank out 540,000 oz of gold and 180,000 tonnes of copper annually. Wheaton River’s share would come in at 135,000 oz of gold and 45,000 tonnes of copper per year.
The Peak gold mine in New South Wales is comprised of several underground mines, a small open pit mine, and a gold and copper concentrator. In 2001 production hit 100,800 oz of gold at a cash cost of US$189 per oz. In the nine months ended September 30, 2002, production totalled 77,100 oz of gold at a cash cost of US$203 per oz.
Future yearly output is expected to average 110,000 oz of gold annually at a cash cost of US$189 per oz until the end of the current mine life in 2007.
Combined the two operations are expected to average of 269,500 oz of gold annually at a cash cost of US$74 an oz from 2003-to-2005.
“Bajo de la Alumbrera and Peak are high quality mature mines operated by experienced management teams,” adds Telfer.
The deal, which is slated to close by the end of Feb., will reduce Wheaton River’s cash cost per gold equivalent oz to US$124 in 2003 from US$187 in 2002. Based on current metal prices, the company believes cash flow from existing operations and the acquired assets will put it in a positive net cash position by Dec. 31, 2004
Wheaton River can defer up to US$70 million of the US$210 million total purchase price for a period of 24 months.
The transaction is subject to Wheaton River and Rio Tinto reaching a definitive agreement
Wheaton River currently produces 100,000 oz of gold and 6 million oz of silver per year from the San Martin, San Dimas and La Guitarra operations in Mexico. The company picked up the Mexican assets last year from Minas Luismin, S.A. de C.V. for US$75 million and 9 million shares.
Wheaton River has 189 million shares outstanding; 262 million fully diluted, is debt free and as of Sept. 30, 2002 had US$19 million in cash.
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