Wheaton unveils US$300 million Lumina gold stream

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Wheaton Precious Metals Corp.’s (WPM-TSX, WPM-NYSE) has struck a definitive deal with Lumina Gold Corp. [LUM-TSXV] to acquire a US$300 million gold stream on Lumina’s 100%-owned Cangrejos gold-copper project in Ecuador.

Cangrejos is expected to be a high-margin mine in the lowest half the cost curve with a 26-year mine-life. A pre-feasibility study envisages average annual production of 371,000 ounces of gold and 41 million pounds of copper.

“This study not only confirms the tremendous value of the Cangrejos Project, but also allows the company to commence negotiating terms for its investment projection agreement and begin the permitting process required for Cangrejos to begin construction,’’ said Lumina CEO Marshall Koval in a press released dated April 16, 2023. The study envisages an initial capital cost of $925 million and is based on probable gold reserves of 11.6 million ounces.

The copper-gold concentrate that makes up most of the project revenue will be trucked from an open pit mine to an Ecuadorian port approximately 40 kilometres away at Puerto Bolivar.

Under the streaming agreement, Wheaton will pay Lumina US$300 million in upfront cash. Of that amount US$48 million will be available for pre-construction. The remaining US$252 million will be payable in staged equal installments during construction, subject to certain conditions being satisfied.

Wheaton will purchase 6.6% of the payable gold from the project until 700,000 ounces has been delivered, at which point the stream will be reduced to 4.4% of the payable gold production for the life of the mine.

Wheaton also said it will make ongoing payments for the gold ounces delivered equal to 18% of the spot gold price until the uncredited deposit is reduced to nil and 22.0% of the spot price of gold thereafter.

“The Cangrejos Project is an excellent addition to Wheaton’s existing portfolio of high-quality, low-cost assets as it should provide accretive, long-term growth as well as significant exploration potential,’’ said Wheaton President and CEO Randy Smallwood.

Terms of the deal were announced after the close of trading on May 16, 2023, when Lumina  shares closed at 53 cents. The shares are currently trading in a 52-week range of 71 cents and 23 cents.

Wheaton Precious Metals is a leading precious metals streaming company. Unlike traditional mining companies, Wheaton makes upfront payments and in return it purchases a fixed percentage of the future silver and/or gold production from a mine at a predetermined price. It can then sell the metal in the open market. In many cases, these agreements are for the life of the mine.

The company has streaming agreements covering 20 operating mines and 12 development stage projects. These include Vale’s Salobo mine in Brazil, Glencore AG’s Antamina mine in Peru and Newmont Corp’s [NGT-TSX, NEM-NYSE] Penasquito mine in Mexico.

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