by Steve St. Angelo, SRS Rocco Report:
Looks like Silver Wheaton struck it rich with its newest silver streaming agreement with Glencore. According to the deal, Silver Wheaton paid Glencore $900 million for future silver production from its share of its Antamina copper mine in Peru. Silver Wheaton receives silver from this Glencore deal at 20% of the silver spot price.
Which means, Silver Wheaton currently pays about $2.85 per silver ounce at the current market price of $14.26. That’s not a bad deal, especially when your cost is only 20%. I would imagine any of the primary silver mining companies would die to produce silver at a 20% cost.
Peru’s copper Antamina mine (picture), is owned by Glencore (33.75%), BHP Billiton (33.75%), Teck Resources (22.5%) and Mitsubishi Corporation (10%). It produced a third of Peru’s copper production in 2013.
According to the Bloomberg article, Glencore Raises $900 Million By Selling Future Output:
Glencore Plc sold a share of its future silver output in a deal that includes a $900 million upfront payment, as the trading and mining company works to cut its $30 billion debt pile by about a third amid tumbling commodity prices.
The deal includes Silver Wheaton Corp. paying 20 percent of the spot price per delivered ounce, the Vancouver-based company said in a statement Tuesday. Silver Wheaton will receive an amount equal to 34 percent of silver production at the Antamina mine in Peru until the delivery of 140 million ounces and the equivalent of 23 percent of silver production thereafter, Baar, Switzerland-based Glencore said in a statement.
This newest silver streaming deal with Glencore provides Silver Wheaton with the cheapest price per ounce (based on the current market price) compared to all its other agreements. If we look at Silver Wheaton’s Silver & Gold Streaming Agreements below, we can see the different prices and time spans for these different agreements:
Silver Wheaton will receive 5.1 million oz (Moz) of silver from Glencore for the first several years at an estimated cost of $15.3 million a year based on a $15 market price of silver. They will sell that silver at $76.5 million, netting a cool $61 million margin. Of course, I am making this quite simple as there are more company costs involved, but this is how you take advantage of a company when the chips (and prices) are down.
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