Wheaton buys all gold, some palladium from Sibanye US mines

Canada’s Wheaton Precious Metals (TSX:WPM), the world's No.1 silver streaming company, said Monday it was buying all of the gold production and part of the palladium output from Sibanye’s (JSE: SGL) (NYSE:SBGL) Stillwater and East Boulder mines, located in Montana, US.

The Vancouver-based firm will pay the South African precious metal miner $500 million in cash upfront, followed by subsequent payments equal to 18% of the spot gold and palladium prices until the reduction of the advanced payment to nil. After that, Wheaton will pay Sibanye 22% of the spot gold and palladium prices.

Wheaton will buy all of Stillwater's gold production for the life of the mine and receive 4.5% of total palladium output initially.

In return, Wheaton will receive 100% of the Stillwater gold production for the life of mine and an initial amount of palladium equal to 4.5% of Stillwater palladium production, decreasing to 2.25% and then 1% based on defined delivery thresholds, for the life of mine.

Sibanye’s chief executive Neal Froneman said the streaming deal – receiving an upfront payment in exchange for future production – represented a long-term financing instrument with no repayment of any of the upfront cash received and no minimum delivery obligations.

He also said the cost was lower than the company’s alternatives in international capital markets.

“Importantly the transaction results in a significant reduction in group leverage, improving flexibility and reducing financing costs and risk,” Froneman said in the statement.

After the acquisition, Wheaton's estimated proven and probable gold reserves increase by 410 thousand ounces and its inferred gold resources will rise by 920 thousand ounces. For the first time, Wheaton will have estimated proven and probable palladium reserves of 610 thousand ounces and inferred palladium resources of 430 thousand ounces.

Wheaton's announcement follows a similar deal it signed last month with Brazil's Vale (NYSE: VALE) to buy cobalt mined after 2021 as a by-product from its Voisey’s Bay mine, in Canada's northern Labrador region.