Capstone unveils US$150 million streaming deal with Wheaton

Capstone Mining Corp. [CS-TSX] on Friday December 11 unveiled a US$150 million streaming agreement with Wheaton Precious Metals Corp. [WPM-TSX, NYSE] covering 50% of the silver production at Capstone’s Cozamin Mine in Mexico.

Under the agreement, Wheaton will make an up-front cash payment of US$150 million upon closing for 50% of the silver production until 10 million ounces has been delivered.

At that point, Capstone’s delivery commitment drops to 33% of silver production for the life of the mine.

Capstone shares advanced on the news, rising 6% or $0.12 to $2.10 on volume of 1.67 million. The shares trade in a 52-week range of $2.05 and 33 cents.

Wheaton advanced slightly, rising 0.6% or 31 cents to $52.39 on volume of 328,849. The shares are currently trading in a 52-week range of $76.69 and $26.99.

“This deal is transformational, giving Capstone one of the lowest debt positions amongst base metal producers at a time when we are expecting significant copper production and cash flow growth,” said Capstone President and CEO Darren Pylot.

“The US$150 million for 50% of Cozamin’s silver is a strong validation of the ultimate mine life potential we expect to demonstrate through further resource and reserve conversion and ongoing exploration,'” he said.

The company recently attributed its better-than-expected third quarter results to the performance of the Cozamin mine, which reported the lowest quarterly cash cost (US$0.36 per pound) in its operating history.

During the third quarter, the mine benefitted from an optimized mine plan focused on higher copper grades (1.77%), and higher throughput (3,090 tonnes per day), resulting in higher production (10.6 million pounds), higher by-product credits on strong silver prices in addition to higher silver grades (46.5 g/t) and recoveries of 79%, as well as lower cash costs from reduced operation development metres.

In the third quarter, Capstone produced 38.5 million pounds of copper at a consolidated cash cost of US$1.82 per payable pound produced.

The company’s year to date consolidated production of 112.5 million pounds of copper and consolidated cash costs of US$1.91 per pound is on track with Capstone’s full year guidance of 140-155 million pounds at cash costs of US$1.85-US$2.00 per pound.