Wheaton tops up the till (August 24, 2004)

Wheaton River Minerals (WRM-T) has arranged a US$300 million acquisition facility with HVB Group, Germany’s second-largest private sector bank, to finance up to three separate acquisitions. The 15-month facility can be used to acquire exploration, development or producing assets.

Funds drawn down from the facility will bear interest annually at the rate of London Interbank Offer Rate (LIBOR; currently 1.7%) plus 2.25%, increasing over the term of the loan to 4.5% per year. Any draw down must be refinanced or repaid by Feb., 2006. Security will extend to the acquired assets and guarantees by the Wheaton subsidiary acquiring the assets.

Net proceeds from any debt refinancing or equity issue (not completed as part of an acquisition) and net proceeds from significant asset sales will be applied to repay amounts outstanding under the facility.

“This US$300 million facility, combined with a present cash balance of over US$100 million, will allow Wheaton to acquire precious metal assets and continue its growth path,” said Wheaton’s chief executive Ian Telfer in prepared statement.

During a recent second-quarter conference call, Telfer said that plans for his company’s silver spinoff, Silver Wheaton, included expanding the company via acquisitions, and that several potential targets had already been identified. He also said that Wheaton River would look to use it cash on hand to make acquisitions rather than pay a dividend.

Under the Silver Wheaton plan, Wheaton River will sell all the silver produced from its Luismin operations in Mexico to Chap Mercantile (CPC-V) for $262 million in cash and shares up front plus US$3.90 or the prevailing market price (whichever is less) for each ounce of silver delivered. Chap will subsequently be renamed Silver Wheaton.

Chap recently raised $70 million via the private placement of 175 million subscription receipts; the proceeds, less $1 million, will be applied to the Luismin acquisition. In the end, Wheaton River will hold about 75% of Silver Wheaton’s 724 million outstanding shares.

Telfer says the scheme gives Wheaton shareholders the valuation of 20 years of cash flow up front in cash and shares.

Sept. 9 is the deadline for the creation of Wheaton’s silver spinoff, Silver Wheaton. Meanwhile, a renewed takeover bid by Coeur d’Alene Mines (CDE-N) expires at the end of September. Coeur’s offer is unchanged from a previously scrapped bid, aside from the expiration date, and is open to Wheaton shareholders on both sides of the border. The previous bid was terminated on delays in offering it to Canadian investors.

Shares in Wheaton River were off a dime, or 2.8%, at $3.52 in afternoon trading in Toronto following the news on Aug. 24.