Capstone signs U$290 million Wheaton streaming deal

Wheaton Precious Metals Corp. [WPM-TSX, NYSE] on Thursday March 25 announced the acquisition of a gold stream from Capstone Mining Corp.‘s [CS-TSX] Santo Domingo Project in Chile.

Already the world’s leading precious metals streaming company, Wheaton has entered into a definitive agreement that will see it purchasing 100% of the payable gold production from Santo Domingo until 285,000 ounces has been delivered.

After that point, Wheaton’s share will drop to 67% of the payable gold production for the life of the mine. Under the deal, Wheaton will make an upfront cash payment to Capstone of US$290 million, of which US$30 million is payable on closing, with the remainder due to be paid during the construction of the Santo Domingo Project.

The agreement is subject to certain customary conditions being satisfied including Capstone attaining sufficient funding to cover the total expected capital costs. In addition, Wheaton will make continuing payments for gold ounces delivered equal to 18% of the spot gold price.

On Thursday, Wheaton shares eased 1.02% or 49 cents to $47.23 on volume of 221,240 and trade in a 52-week range of $76.69 and $37.44.

Capstone shares declined on the news, easing 3.7% or $0.14 to $3.61 on volume of 649,030. The shares trade in a 52-week range of $4.18 and 36.5 cents.

Capstone holds a 70% interest in Santo Domingo, a large scale, fully-permitted, copper-iron-gold project in Region 111, Chile, in partnership with Korea Resources Corp.

“Santo Domingo is an exceptional project that provides Wheaton with an additional near-term growth opportunity,” said Wheaton President and CEO Randy Smallwood. “This project is forecast to be a first quartile copper producer with a long mine life, making it an ideal fit for Wheaton’s existing high-quality portfolio.”

Attributable gold production at Santo Domingo is expected to average 35,000 to 40,000 ounces annually for the first full five years of production and 25,000 to 30,000 for the first 10 full years of a projected 18-year mine-life.

Capstone expects major construction to commence in late 2021, with the first full year of production forecast for 2024.

Wheaton has streaming agreements covering 20 operating mines and nine development stage projects. The Santo Domingo Project will increase Wheaton’s proven and probable gold reserves by 510,000. The project offers exploration upside a no exploration drilling has been completed since Capstone acquired the project in 2011.